Seven Key Formulas for Winning Cost Proposals

In a highly competitive environment with tight budget constraints, your cost proposition solution must not only be compliant, but also responsive, competitive, and compelling.

From a cost point of view, it is almost impossible to have an impact on the technical proposal. But you can follow seven key basics that will go a long way toward making your next proposal a winning cost proposition, too.

1. Have available and make use of current customer information: Know the market factors that drive the price.

Knowing what your customer is about is the first step. You are simply guessing about the customer with no knowledge of their past purchase history, budget pressures, authorized program funding, deductions for program support, customer staff, and reservations, as well as their independent cost estimate and if they are. price or performance oriented. You must obtain your intelligence in an ethical way.

2. Know what it costs your company to do business.

We have often heard from many companies that they cannot figure out how much it costs to do the job until the final RFP is published. That’s silly. With a draft RFP, you can make an early estimate of what the job costs to do. Without a draft RFP, you must have enough intelligence about the acquisition to estimate what it will cost, even if it is a wide-ranging estimate. Remember this is not an exact science and you will get more precision as you get closer to the actual RFP. Knowing the costs in advance will help you get creative in the last step. If you wait until the final RFP comes out, it is too late to make a creative difference in your price (other than cost) because you are too busy guessing what the real costs are. With early knowledge of your costs, you can make many creative decisions to win.

3. Know what your competitors’ costs are to do the same business.

Without competitive information, you are only guessing what it takes to win. This information is available through GSA Advantage, Internet searches, FOIA requests, and underwritten search services such as EZGovOpps and GovWin. Find out who your competing teammates are and how they will bid by looking at the past victories of your competition and your teammates. Gather information on the corporate investments they are likely to make in the project and what their possible approaches to the bidding are. Discover the little tricks your competitors use to get lower prices, like changing workplaces to a lower base, incorporating improved productivity tools, green staff. Businesses tend to do the same over time. You also need to consider whether your competitors are incumbents. Headlines tend to take less risk and think less “outside the box.”

4. Provide a well-designed work breakdown structure (WBS) that links to the statement of work performance and is supported by a basis of estimates.

We believe that without a WBS to estimate the work outlined in the performance statement of work or statement of work, all the elements related to performance cannot be properly thought through. You are likely to miss some items or potentially double your estimates. We often find that a three-level WBS is adequate for estimating work. Furthermore, we see that contractors frequently estimate at all levels of the WBS rather than just the third level, leading to confusion and incorrect estimates. When you develop this level of detail, it is easier to see where you can make corrections, cuts, or additions to your cost estimate.

5. Actively determine your company’s investments in the project you are bidding for.

Company investments are those elements that your company performs to improve project performance or efficiency (training, recruitment, transitions), investments in property, plant and equipment, and project-specific reductions taken by the corporation in indirect rates. All these types of investments are those that are borne by the corporation and are not elements of reimbursement by the Government.

6. Be the company that is easy to do business with.

Give them what they ask for and more. The company that wins is the company that facilitates the evaluation, presents the data (technical and cost) in an organized and traceable way, and presents the data in written and electronic format. Even if the RFP doesn’t ask for an electronic format, give it to the government anyway. Keep all the formulas so the evaluator can easily follow your thought processes. Remember, the company that gives you the written and electronic version that you can follow will probably score points without scoring with the evaluators.

7. Be cost competitive and creative about it.

This step is the easiest (really) if you’ve done all the remaining steps before this one. This means you sharpen your pencil and mind on labor rates, staff greening, downscaling, competitive rate structures, competitive rates and new indirect, direct offers whenever possible, and company investments. .

Leaving aside all those details, there needs to be a visible unity of purpose and thought between all the elements of the proposal. In short, you cannot describe something in the technical or management proposal that is not identified in the cost. Many (perhaps most) of the proposals are very difficult to trace from one volume to another. As cheeky as it may sound, there should always be an identifiable link between items, even if you have to create it yourself.

Most projects or products, either implicitly or explicitly, have a work breakdown structure. For projects, this is usually something like the structure of the statement of work. In the case of products, it can look a lot like the specification. However, it happens and as difficult as it is to come to an agreement on its details, there is such a rift. This breakdown is the most viable contender for linking the various volumes.

In the absence of a specific address in the request, this breakdown would constitute a sensitive, easy-to-explain and important link between the technical and cost proposals. “But the client didn’t ask us to do that,” you say. Yes, you may be right, but you want to win, right? Customers want to buy from companies that are easy to do business with. A great way to start building that impression could be to simply make your proposal easier to understand than your competition’s. “But it’s too much work to set prices that way,” you might say. You want to win?