Chapter 3 Proposed Solutions

1. Chapter 3Proposed Solutions

2. Learning Objectives • Second phase • starts when the RFP becomes available • ends when an agreement is reached with a contractor • Proposal marketing strategies • Bid/no-bid decision • Development of a winning proposal • proposal preparation process and elements that may be included in a proposal • pricing considerations • The evaluation of proposals • Types of contracts 2

3. Real World Example • Vignette:Volunteers Clean Up Mount Fuji • Mount Fuji, Japan’s tallest mountain, is covered in garbage. Mt Fuji attracts thousands of tourists each day, houses religious organizations, golf courses and a safari park • In 1995, the United Nations Education, Scientific and Cultural Organization visited Mt. Fuji, but could not grant it as a World Heritage Site. They recommended a management plan to clean up Mt. Fuji • Toyohiro Watanabe, an environmentalist, established the Fujisan Club to lead clean up efforts and encourage volunteerism • So far, volunteers have removed 900 pounds of garbage from Mt. Fuji • Watanabe and the Fujisan club have changed the environment of Mt. Fuji through community activism and strong leadership 4

4. Real World Example • Vignette: Helping Those in Need • Pura Vida Partners, using the brand name Fair Trade, sell organic, shade grown coffee • Fair Trade targets college students because they tend to be high volume coffee drinkers, and because they are aware of and interested in social issues. 55 college campuses have Fair Trade coffee • The company is non-profit, and run by John Sage and Chris Dearnley. 100% of profits go to poor farming communities in coffee growing regions • Fair working conditions are guaranteed for the farmers who produce the coffee • Profits fund programs for at-risk children and families in Costa Rica • Using the creative and critical thinking abilities developed in large corporate settings, Sage and Dearnley have helped to fulfill the vision of Pura Vida Partners by acting as agents for social change 4

5. Proposed Solutions In many situations an RFP does not involve soliciting competitive proposals from external contractors, and the second phase of the project life cycle may be completely bypassed. 5

6. Pre-RFP/Proposal Marketing • Should not wait until formal RFP solicitations are announced before starting to develop proposals • Develop relationships with potential customers • Maintain frequent contacts with past and current customers 6

7. Pre-RFP/Proposal Marketing (Cont.) • Be familiar with a customer’s needs and requirements • Consider this marketing or business development; no cost to the customer • May prepare an unsolicited proposal • Efforts are crucial to the foundation for winning a contract 7

8. Bid/No-Bid Decision • Factors to consider: • competition • risk • mission • extension of capabilities • reputation • customer funds • proposal resources • project resources 8

9. Bid/No-Bid Decision (Cont.) • Be realistic about probability of winning the contract • A lot of non-winning proposals can hurt a contractor’s reputation 9

10. Developing a Winning Proposal • A selling document – not a technical report • Convince the customer that you are the best one to solve the problem • Highlight the unique factors that differentiate you from competing contractors • Emphasize the benefits to the customer • Write in a simple, concise manner • Address requirements as laid out in the RFP • Be realistic in scope, cost, and schedule 10

11. Proposal Preparation • Can be a straightforward task performed by one person or a resource-intensive effort requiring a team • May designate a proposal manager • Schedule must allow time for review and approval by management • Can be a few pages or hundreds of pages • Customers do not pay contractors to prepare proposals 11

12. Proposal Contents Proposals are organized into three sections: • Technical Section • understanding of the problem • proposed approach or solution • benefits to the customer 12

13. Proposal Contents (Cont.) • Management Section • description of work tasks • deliverables • project schedule • project organization • related experience • equipment and facilities 13

14. Proposal Contents (Cont.) • Cost Section • labor • materials • subcontractors and consultants • equipment and facilities rental • travel • documentation • overhead • escalation • contingency or management reserve • fee or profit 14

15. Pricing Considerations • Be careful not to overprice or underprice the proposed project • Consider: • reliability of the cost estimates • risk • value of the project to the contractor • customer’s budget • competition 15

16. Proposal Submission and Follow-Up • Submit proposals on time • Hand deliver expensive proposals or send 2 sets by different express mail services, if necessary • Continue to be proactive even after submission 16

17. Customer Evaluation of Proposals • Some look at the prices and select only from the three lowest-priced proposals • Some screen out prices above budget or whose technical section doesn’t meet all the requirements • Some create a proposal review team that uses a scorecard • May submit a best and final offer (BAFO) 17

18. Customer Evaluation of Proposals (Cont.) • Criteria that might be used in evaluating: • compliance with SOW • understanding of the problem or need • soundness of the proposed approach • contractor’s experience and past success • experience of key individuals • management capability • realism of the schedule • price – reasonableness, realism, and completeness 18

19. Types of Contracts A contract is: • A vehicle for establishing customer-contractor communications and arriving at a mutual understanding and clear expectations • An agreement between the contractor, who agrees to provide a product or service, and the customer, who agrees to pay • Must clearly spell out the deliverables • Two types of contracts: fixed price and cost reimbursement 19

20. Types of Contracts (Cont.) Fixed-price contract • Price remains fixed unless the customer and contractor agree • Provides low risk for the customer • Provides high risk for the contractor • Is most appropriate for projects that are well defined and entail little risk 20

21. Types of Contracts (Cont.) Cost-reimbursement contract • Provides high risk for the customer • Provides low risk for the contractor • Is most appropriate for projects that involve risk • Customer usually requires that the contractor regularly compare actual expenditures with the proposed budget and reforecast cost-at-completion 21

22. Contract Provisions Miscellaneous provisions that may be included in project contracts: • Misrepresentation of costs • Notice of cost overruns or schedule delays • Approval of subcontractor • Customer-furnished equipment or information • Patents 22

23. Contract Provisions (Cont.) • Disclosure of proprietary information • International considerations • Termination • Terms of payment • Bonus/penalty payments • Changes 23