Developing Project Proposals

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Chapter Concepts
• Building relationships with customers and partners
• Proposal marketing strategies
• Decision making to develop a proposal/quotation
• Creating winning proposals
• The proposal preparation process
• Elements that may be included in a proposal/quotation
• Pricing considerations
• Customer evaluation of proposals/quotations
• Types of contracts between the customer and the contractor
• Measuring the success of proposal efforts

© 2018
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 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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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Project Procurement
Project Management Knowledge
Areas from PMBOK® Guide Management

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Building Relationships with Customers and
Partners
Customers (clients) and partner organisations prefer to work with people they
know and trust. Relationships establish the foundation for successful funding and
contract opportunities. Relationship building requires being proactive and
engaged.

• 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 organisation

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Pre-RFP/Proposal/Quotation or Tender
Marketing
• Begin developing the relationship before RFP is prepared
o Can help client identify needs
o Better position to win the contract
o Develop a more clearly focused response to RFP
• Pre-RFP and pre-proposal efforts are business development
o No cost to the customer
o Help build the relationship
• Unsolicited proposals and uncompetitive contracts
o Result of identified needs and problem solving
o Eliminates preparation of an RFP and soliciting process

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Decision to Develop a Proposal or Submit a
Quotation
Because the development and preparation of a proposal takes time and
can be costly, contractors interested in submitting a proposal or quotation
in response to an RFP must be realistic about the probability of being
selected as the winning contractor. Evaluation by a contractor of whether
or not to go ahead with the preparation of a proposal is sometimes
referred to as the bid/no-bid decision.

• 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
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Bid or no-bid?
A contractor might consider the following factors in deciding
whether to develop a proposal in response to an RFP:
o Competition
o Risk
o Mission
o Extension of capabilities
o Reputation
o Customer funds
o Proposal resources
o Project resources

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Creating a Winning Proposal
It is important to remember that the proposal process is competitive. A customer uses
an RFP to solicit competing proposals from contractors. Each contractor, therefore,
must keep in mind that its proposal or quotation will be competing with other contractors’
proposals to be selected by the customer as the winner. Submitting a proposal that
meets the customer’s statement of work and requirements in the RFP is not sufficient to
guarantee selection as the winning contractor. Many or all of the proposals will likely
meet the requirements. The customer will select the one that it expects will provide the
best value.

In the proposal, the contractor must convince the customer that the
contractor:
• understands what the customer is looking for
• can carry out the proposed project
• will provide the greatest value to the customer
•Is the best contractor to address the need or solve the problem
• will capitalise on its successful experience with previous, related projects
• will do the work professionally
• will achieve the intended results
• will complete the project within budget and on schedule
• will satisfy the customer.
© 2018
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Proposal Preparation
Preparing a proposal or quotation can be a straightforward task performed
by one person, or it can be a resource-intensive effort requiring a team of
organisations and individuals with various expertise and skills.

• Proposal team
o Can be one person or many
o Various skills and expertise
o Proposal manager for large proposals
• Proposal development
• The proposal schedule must allow adequate time for writing, review,
and approval by the management of the contractor’s organisation.
• Proposals in response to RFPs can be as brief as a few pages or as long
as hundreds of pages, including text and drawings.
• Customers do not pay contractors to prepare proposals. Contractors
absorb the costs of proposal development as part of normal marketing
costs
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Proposal Contents
Proposals are often organised into three sections:
• technical,
• management and
• cost.
For large proposals, these sections could comprise three
separate volumes. The amount of detail the contractor
includes will depend on the
• complexity of the project and the
• contents of the RFP.
Some RFPs state that contractor proposals that exceed a
certain number of pages will not be accepted by the customer
—it takes time to evaluate proposals thoroughly and if they
take too long, it slows the customer’s own process.

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Technical section
The technical section should contain the following elements:

• Understand the need - the contractor

must show the customer that they
thoroughly understand the problem to be
solved.
• Proposed approach or solution - the
proposal should describe the approach or
methodology that would be used in
developing the solution
• provide the least risky and most beneficial
solution
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Management section
The objective of the management section of the contractor proposal is to
convince the customer that the contractor can do the proposed work (the
project) and achieve the intended results.
The management section should contain the following elements:

• Description of major tasks

• Include a list of all Deliverables
• Project schedule of major tasks
• the contractor should describe how the work and
resources will be organised to perform the project
Related experience
• the contractor may want to provide a list of the
equipment and special facilities it has in order to
convince the customer that it possesses the necessary
resources.
© 2018
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cost section
The objective of the cost section of the contractor proposal is to
convince the customer that the contractor’s price for the proposed
project is realistic and reasonable.

The cost section usually consists of tabulations of the contractor’s

estimated costs of elements such as the following:

• Include • Documentation
estimated costs • Overhead
• Labour • Escalation
• Materials • Reserve
• Equipment • Fee or profit
• Facilities
• Subcontractors
and consultants
• Travel
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Pricing Considerations
When contractors prepare a proposal or quotation, they are generally competing
with other contractors to win a contract. Therefore, they need to be careful not to
overprice the proposed project, or the customer may select a lower-priced
contractor. However, contractors must be equally careful not to under-price the
proposed project; otherwise, they may lose money rather than making a profit or
may have to request additional funds from the customer, which could be
embarrassing and hurt the contractor’s reputation.
• 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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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Simplified Project Proposal
Large, complex, mega-Rand projects that are outsourced by customers using an
RFP result in contractors preparing and submitting comprehensive proposals that
can be very detailed and include much of the information discussed in the section on
proposal contents. However, smaller or less complex projects may not require such
extensive proposals. In some cases, contractors may even submit an unsolicited
proposal prior to the customer’s preparation of an RFP. In both of these situations, a
simplified or basic proposal may be appropriate and sufficient.

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

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Proposal Submission and Follow-up
The customer’s RFP will usually have instructions about the due date by which
proposals or quotations must be submitted and the name and contact information
of the person to whom the proposals should be submitted. Some customers want
the contractor to provide an electronic copy and/or several hard copies of the
proposal because the proposal will be distributed to various individuals within the
customer’s organisation for review and evaluation.

Submission
• On time
• Formatted properly
• Sent in manner required
• Hard copies Follow-up
• E-mail • Be proactive
• Electronic form
• Professional manner
• Two sets by different
• Follow RFP guidelines
delivery methods
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Customer Evaluation of Proposals
Customers evaluate contractors’ proposals in
different ways. Some customers first look at
the prices of the various proposals and select,
for example, only the three lowest-priced
proposals for further evaluation. Other
customers initially screen out those proposals
with prices above their budget or those whose
technical section does not meet all the
requirements stated in the RFP. Other
customers, especially on large projects,
create a proposal review team that uses a
scorecard to determine whether each
proposal meets all requirements in the RFP
and to rate the proposal against predefined
evaluation criteria.

• Customer sets criteria

• Customer may request a best and final
offer (BAFO)
• Helps to have common comparison
criteria
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Contracts
Before the project can proceed, a contract must be signed
between the customer and the contractor. It is a vehicle for
establishing good customer-contractor communications and
arriving at a mutual understanding and clear expectations
to ensure project success. Types
• Fixed Price
• Price remains fixed
• Low risk for customer
Agreement • High risk for contractor
• For well-defined projects with
• Contract must be signed little risk
before starting work • Cost-reimbursement
• Establishes communication • Price for actual costs
• Agreement of deliverables • High risk for customer
• Low risk for contractor
for a certain price
• For higher risk projects
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Contract terms and conditions
The following are some of the terms and conditions that are commonly
included in project contracts:
• Misrepresentation of costs – states that it is illegal for the contractor to
overstate the hours or costs expended on the project.
• Notice of cost overruns or schedule delays – outlines the circumstances
under which the contractor must notify the customer of any schedule delays.
• Approval of subcontractor – indicates when the contractor needs to obtain
approval before hiring a subcontractor.
• Customer-furnished equipment or information – lists the items that the
customer will provide to the contractor throughout the project and the dates
by which the customer will make these items available.
• Patents – covers ownership of patents that may result from conducting the
project.
• Disclosure of proprietary information – prohibits one party from disclosing
confidential information, technologies, or processes pertaining to the project.
• International considerations – specifies accommodations that must be made
for customers from other countries.
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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 • Termination – states the conditions under which the customer can
terminate the contract, such as non-performance by the contractor.
• Terms of payment – addresses the basis on which the customer will
make payments to the contractor.
• Bonus/penalty payments – some contracts have a bonus provision,
wherein the customer will pay the contractor a bonus if the project is
completed ahead of schedule or exceeds other customer performance
requirements.
• On the other hand, some contracts include a penalty provision, wherein the
customer can reduce the final payment to the contractor if the project is not
completed on schedule or if performance requirements are not met.
• Changes – covers the procedure for proposing, approving, and
implementing changes to the project scope or schedule.

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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Measuring Proposal Success
• Contractors measure the success of their proposal efforts by the number of times their
proposals are selected by customers or by the total Rand value of their proposals that are
selected.
• Win ratio: The percentage of the number of proposals a contractor won out of the
total number of proposals the contractor submitted to various customers over a
particular time period; gives equal weight to all proposals.
• Total Rand value: Total Rand value of proposals that the contractor won as a
percentage of the total Rand value of all the proposals the contractor submitted to
various customers during a specific time period; gives more weight to proposals with
larger Rand amounts.

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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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Critical Success Factors
• Customers and partner organisations 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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2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 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 reserves.

© 2018
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 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 organised 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 Rand value of their proposals that
are selected.

© 2018
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.