MEC3611 Project Management

CHAPTER

Dr. Mohamed Mostafa Mahmoud Hassan

Chapter Concepts
• Building relationships with customers and partners
• Proposal marketing strategies
• Decision making to develop a proposal
• Creating winning proposals
• The proposal preparation process
• Elements that may be included in a proposal
• Pricing considerations
• Customer evaluation of proposals
• Types of contracts between the customer and the
contractor
• Measuring the success of proposal efforts

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Learning Outcomes

• Develop relationships with customers and partners

• Decide whether to prepare a proposal in response to
a customer's RFP
• Create a credible proposal
• Determine a fair and reasonable price for a proposal
• Discuss how customers evaluate proposals
• Explain types of contracts and various terms and
conditions
• Measure the success of proposal efforts

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Project Management Project Procurement
Knowledge Areas from
PMBOK® Guide
Management

4
1. Building Relationships
with Customers and Partners
• Foundation for successful funding and opportunities
• Requires good listening and constant learning
• Frequent and regular contact; express appreciation for
the client's time
• Trust is key and ethics are imperative
• First impression is important
• Problem solving and credibility grows with good
performance
• Partner with several key individuals in an organization

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2. Pre-RFP/Proposal Marketing

• Begin developing the relationship before RFP is prepared

• Can help client identify needs
• Better position to win the contract
• Develop a more clearly focused response to RFP
• Pre-RFP and pre-proposal efforts are business development
• No cost to the customer
• Help build the relationship
• Unsolicited proposals and uncompetitive contracts
* Result of identified needs and problem solving
• Eliminates preparation of an RFP and soliciting process

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3. Decision to Develop a Proposal

• Development is costly and time consuming

• Contractors must be realistic about their probability
of winning a contract
• Evaluate bid/no-bid decision
• Many non-winning proposals hurt reputation
• May be hard to decide to no-bid an RFP
Bid or No-Bid?

• Factors to consider
• Competition
• Risk
• Mission
• Extension of capabilities
• Reputation
• Customer funds
• Proposal resources
• Project resources

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Bid or No-Bid Project T jt |e:
Bid/No-Bid Checklist

Supervisory Training Program________________________________________

Checklist Customer ACE Manufacturing. Inc.____________

Score each factor as High, Medium, or Low

D u e D a tc ; _____ 5/31_____________

Factor Score Comments

Local university has been providing most

1. Competition H
of the training to ACE In the past

2. Risk L Requirements m RFF are well defined

3. Consistent w ith our mission H Training is our business

4. Opportunity to extend our Some tasks require videoconferencing,

capabilities
H which we haven't done before

5. Reputation w ith customer Have not done any training for ACE
L
before

6. Availability o f funds H ACE has funds budgeted to Implement

the training

7. Resources avadable to prepare M Lynn will have t o reschedule her vacation.

quality proposal Will probably need to work over Memorial
Day weekend to finish proposal
8. Resources available to perform Will have to hire subcontractors fo r several
project M
specific training topics
Our advantages, strengths, or distinct capabilities:
• Good t rack record In supervisory training— we have many repeat customers
• More flexible than loca 1university In meeting ACE's need for on-site training
during 2nd and 3rd s h ift operations

Our weaknesses:

• M ost o f our customers have been In the service sector, such as hospitals. ACE Is a
manufacturer
• President o f ACE Is a graduate o f local university and a large contributor to It
4. Creating a Winning Proposal

• Selling document A JA C K S
I n fo r m a tio n S e rv ic e s C o m p a n y

• The best idea to solve the

problem
• Highlight unique factors
• Emphasize benefits to the
customer A P ROPOSAL T O :

ACE Manufacturing, Inc

• Be simple and concise

• Addresses requirements
from RFP
• Be realistic

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5. Proposal Preparation

• Proposal team
• Can be one person or many
• Various skills and expertise
• Proposal manager for large proposals
• Proposal development
• Time for writing, review, and management approval
• Length dependent upon the RFP requirements
• Cost of proposal development is part of normal business
costs

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6. Proposal Contents

• Three sections
• Technical
• Management
• Cost
• Detail level
• Depends on complexity of the project
• Requirements from the RFP

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Technical Section

• Understand the need

• Proposed approach or
solution
• Benefits to the
customer

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Management Section

• Description of major
tasks
• Deliverables
• Project schedule
• Project organization
• Related experience
• Equipment and facilities

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Cost Section
• Include estimated costs
• Labor
• Materials
• Equipment
• Facilities
• Subcontractors and
consultants
• Travel
• Documentation
• Overhead
• Escalation
• Reserve
• Fee or profit

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7. Pricing Considerations
• Competition
• Price
• Not overpriced or
underpriced
• Factors
• Reliability of cost estimates
• Risk
Value of project to the
contractor
Customer's budget
Competition level

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7. Pricing Considerations (continued)
1/8/12 1/15/12 1/22/12 1/29/12 2/5/12 2/12/12 2/19/12
Consumer Market Study
Questionnaire
Design
Identify Target Consumers $780.00
Develop Draft Questionnaire $520.00 $1,300.00 $780.00
Pilot-Test Questionnaire $820.00 $2,050.00 $2,050.00 $2,050.00
Review Comments & Finalize Questionnaire
Develop Software Test Data
Responses
Print Questionnaire
Prepare Mailing Labels
Mail Questionnaire & Get Responses
Report
Software
Develop Data Analysis Software
Test Software
Report
Input Response Data
Analyze Results
Prepare Report
Total $1,300 00 $1,300.00 $1,600 00 $2.050 00 $2,050 00 $2,050 00

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Simplified Project Proposal

Complex Simplified
* Large number of pages • Statement of the customer's
need
• Defined sections
• Assumptions
• Charts and figures • Project scope
• Tables of information • Deliverables
• Resources
• Schedule
• Price
• Risks
• Expected benefits

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Proposal Submission and Follow-up

Submission Follow-up
• On time • Be proactive
• Formatted properly • Professional manner
• Sent in manner required • Follow RFP guidelines
Hard copies
• E-mail
• Electronic form
• Two sets by different
delivery methods

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8. Customer Evaluation of Proposals
H G U R e 3 .1 E w p m i b a X im u a k o t a r d

• Customer sets criteria AJACKS In fo rm a tio n Services C o m p a ny

Proposal E va lu a tio n

• Customer may request

»oj«a -nta: recrnicai nrcrtnasm Needs of Manufacturers

cm Mita <5a*®V Market Research Inc.

a best and final offer Score ;ll criteria on a V A P from 1 <ITW tn 10 (high)

Evaluation Crrtedi Weight

A
Scare
e
Paints
A MB
to rm e nts

(BAFO) 1. Approach 30 A 120

S h a lew d e c c r^ tlo n
o f re th o d d e g y

L t t b experience with
Z Experience 30 a SO

• Helps to have common

m arufacturlrw firms

Lowest pnee Ud
3. Prize 30 9 270
S upported try details

comparison criteria z Schedide

kra
1O

100
5 50

530
Schedule Is overly
CptlrHGfJC

Advantages of ™ proposal:
• This- Is th e lowest p ic a proposal recohed It appears the salaries o f G J j> y s e ta ff
aro low compared t o th o s e o f o th e r proposers.

Concerns about this proposal:

• G a^xy nwy n o t fullyccanp t l e id th e r ^ j t c m c i i l v
• Low salaries h Its budget may roftast low tovcis o f experience o f the s ta ff
G a^xy p a n s to jee.
• ftrJ m is tir. schedule (3 m onths) to co rn p ie te p ro jectm a y indicate Gah>y doesn’t
fu lly comprrhend th e work «cope

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Some Criteria of Evaluating Proposals

• Compliance with the customer's statement of work and

requirements in the RFP.
• Contractor's understanding of the customer's need or
problem.
• Soundness and practicality of the contractor's proposed
approach to solving the problem.
• Contractor's experience and success with similar projects.
• The experience of key individuals who will be assigned to
work on the project.

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9. Contracts

Agreement
• Contract must be signed before starting work
• Establishes communication
Agreement of deliverables for a certain price

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9. Contracts

Types

• Fixed Price
• Price remains fixed
• Low risk for customer
♦ High risk for contractor
• For well-defined projects with little risk
• Cost-Reimbursement
• Price for actual costs
• High risk for customer
• Low risk for contractor
• For higher risk projects

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Contract Terms and Conditions
• Misrepresentation of costs
• Notice of cost overruns or schedule delays
• Approval of subcontractor
• Customer furnished equipment of information
• Patents
• Disclosure of proprietary information
• International considerations
• Termination
• Terms of payments
• Bonus/penalty payments
• Changes
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10. Measuring Proposal Success

Measures
• Win ratio
• Number won/number submitted
• All proposals weighted equally
• Total dollar value
Value won/value submitted
More weight to larger values

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10. Measuring Proposal Success (continued)

Strategies

• Submit many to win fair share

• Increase chances of winning
May be viewed negatively
• Bid on potential successes
Respond where better than average chance to win
• Must have bid/no-bid process

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Critical Success Factors
• Customers and partner organizations prefer to work with people they know and
trust. Relationships establish the foundation for successful funding and contract
opportunities.
• Establishing and building trust is key to developing effective and successful
relationships with clients and partners.
• The first impression one makes on a client is pivotal to developing a continuing
and fruitful relationship.
• Pre-RFP/proposal efforts are crucial to establishing the foundation for eventually
winning a contract from the customer.
• Do not wait until formal RFP solicitations are announced by customers before
starting to develop proposals. Rather, develop relationships with potential
customers long before they prepare their RFPs.
• Working closely with a potential customer puts a contractor in a better position to
be selected as the winning contractor. Learn as much as possible about the
customer's needs, problems, and decision-making process during pre-
RFP/proposal marketing.

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Critical Success Factors (continued)
• Becoming familiar with the customer's needs, requirements, and expectations will
help in preparing a more clearly focused proposal.
• Be realistic about the ability to prepare a quality proposal and about the
probability of winning the contract. It is not enough just to prepare a proposal;
rather, the proposal must be of sufficient quality to have a chance of winning.
• A proposal is a selling document, not a technical report. It should be written in a
simple, concise manner and should use terminology with which the customer is
familiar.
• In a proposal, it is important to highlight the unique factors that differentiate it
from competitors' proposals.
• Proposals must be realistic. Proposals that promise too much or are overly
optimistic may be unbelievable to customers, and may raise doubt about whether
the contractor understands what needs to be done or how to do it.
• When bidding on a fixed-price project, the contractor must develop accurate and
complete cost estimates and include sufficient reserve.

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Summary
• Interested contractors develop proposals in response to a customer's RFP.
♦ Relationships establish the foundation for successful funding and contract opportunities.
Relationship building requires being proactive and engaged.
• Contractors should develop relationships with potential customers long before customers
prepare an RFP.
• Because the development and preparation of a proposal take time and money, contractors
interested in submitting a proposal in response to an RFP must be realistic about the
probability of being selected as the winning contractor.
• It is important to remember that the proposal process is competitive and that the proposal is
a selling document that should be written in a simple, concise manner. In the proposal, the
contractor must highlight the unique factors that differentiate it from competing contractors.
• Proposals are often organized into three sections: technical, management, and cost.
• Customers evaluate contractors' proposals in many different ways.
• Once the customer has selected the winning contractor, the contractor is informed that it is
the winner, subject to successful negotiation of a contract: fixed-price and cost
reimbursement are the two types of contracts.
• Contractors measure the success of their proposal efforts by the number of times their
proposals are selected by customers and/or by the total dollar value of their proposals that
are selected.

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