PROJECT MANAGEMENT: 
CHAPTER 3
Proposed Solutions


 

PROPOSAL MARKETING 

People and organizations are not necessarily aware of their needs.  Helping them to understand their needs (what salespeople do for a living) can lead to a solution  - in the form of an unsolicited proposal. 


BID/NO BID DECISION 

Contractors prepare and submit if they believe that there is a reasonable probability of being selected as the winning bid.  Some factors that a contractor might consider include: 
 

  • competition

  • Are other contractors are also submitting proposals?  Do they have any competitive advantage? 
     
  • risk

  • Are there any uncertainties that could lead to failure, such as technological and financial? 
     
  • mission

  • Is the proposed contract consistent with the contractors core business? 
     
  • extension of capabilities

  • Might the proposed contract lead to other opportunities? 
     
  • reputation

  • Has the contractor successfully done business with this customer in the past? 
     
  • customer funds

  • Is the customer really likely or able to follow through with the project? 
     
  • proposal resources

  • Does the contractor have the time and other resources to develop a potentially winning proposal? 
     
  • project resources

  • Does the contractor have the resources to carry out the contract if the proposal is selected?

A WINNING PROPOSAL 

  • understands what the customer wants
  • can carry out the proposed project
  • will complete the project within budget and on schedule
  • will provide the greatest value to the customer
  • is the best contractor to solve the problem

PROPOSAL CONTENTS 

TECHNICAL SECTION 
 

  • problem statement

  • state what needs to be solved in a way that shows an understanding of the customer's problem

  • proposed approach or solution

  • description of how data would be collected, analyzed, and evaluated 
    description of methods used ot evaluate alternative solutions 
    rationale for proposed approach or solution 
    confirmation that  that the proposed solution would meet the requirements of the RFP

  • benefits to the customer

  • state how the customer will receive more value than from competing proposals

MANAGEMENT SECTION 

  • description of work tasks

  • definition and description of each major task

  • deliverables

  • tangible items that will be provided during the project 
  • e.g., reports, drawings, equipment, etc.

  • project schedule

  • e.g., Gannt chart

  • project organization

  • description of how resources will be organized 
    e.g., names of people or subcontractors responsible for each task

  • related experience

  • list of similar projects completed by the contractor

  • equipment and facilities

  • list of unique or specialized equipment which the contractor has to use in the project

COST SECTION 

  • labor

  • classification, hours, hourly rate, salary, etc.

  • materials

  • materials required to complete the project

  • subcontractors and consultants

  • additional expertise that is hired by the contractor

  • rental of equipment and facilities
    special machinery, tools, storage buildings, etc.

  • travel
    costs to travel outside of the local area, including car rental or air fare, hotel rooms, meals, etc.

  • documentation

  • printing manuals, reports, etc.

  • overhead

  • indirect costs of doing business, such as insurance, depreciation, etc.

  • escalation

  • funds to counter changes in costs across long time periods

  • contingency

  • funds to cover unexpected or overlooked items

  • fee or profit

  • the difference between the above costs and the final price


 
CONSIDERATIONS IN PRICING A PROPOSED PROJECT 
 
  •  reliability of the cost estimates
    a ballpark estimate of costs is more risky than costs based on recent similar projects, prices out of catalogs, and detailed estimates

  • risk
    contingency should be included for endeavors which have never been undertaken, for projects associated with variables that cannot be estimated with high certainty, for projects in which many variables are unknown, etc.

  • value of the project to the contractor
    projects which gain the contractor experience, contacts or a reputation, projects which keep employees on the payroll during slow times, and such, might be worth a lower monetary price

  • competition
    a competitor might submit a low price based on value other than price (issues above)

  • customer's budget
    a cost above the customer's budget is less likely to be accepted, so knowledge of the customer's willingness or ability to pay some amount would increase the likelihood of acceptance



PROPOSAL SUBMISSION AND FOLLOW-UP
 
  • include contact information - name, address, phone, etc.
  • include required number of copies
  • ensure that proposals arrive on time
  • call to confirm that the proposal was received complete and on time



CUSTOMER EVALUATION OF PROPOSALS
 
  • proposals with the lowest prices often make the first cut for further consideration

Other evaluative criteria include (see A Winning Proposal above):
 
  • compliance with the requirements of the RFP
  • understanding of the customer's problem or need
  • practicality of the proposed solution, implementation, and schedule
  • contractor's experience and success
  • reasonableness and completeness of costs
The result of evaluation will often be a short list of three or four proposals for more substantive evaluation.
 



TYPES OF CONTRACTS
 
  • fixed-price contract
    price remains the same unless the customer and contractor agree on changes; appropriate for contracts that involve little risk to the contractor

  • cost-reimbursement contract
    customer pays for actual costs plus some agreed-upon profit; appropriate for contracts that involve risk to the contractor



MISCELLANEOUS CONTRACT PROVISIONS
 
  • misrepresentation of costs
  • notice of cost overruns or schedules
  • approval of subcontractor
  • customer-furnished equipment or information
  • patents
  • disclosure of proprietary information
  • international considerations
  • termination
  • terms of payment
  • bonus / penalty payments
  • changes