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How to Manage a Pricing Schedule

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Why a proper pricing proposal schedule matters.

You’ve been preparing and actively developing capture strategies for an upcoming bid and eagerly awaiting the draft or final RFP to drop. Finally, it drops! All proposal functions swing into action. The proposal manager’s first job is to develop a schedule and hold everyone accountable to it. Very seldom do we get a proposal manager to ask us for a “Pricing Schedule”. However, we always insist.  Here’s why:

Price/Cost volumes these days require a lot more facilitation and coordination with other volume leads than most people realize. 

  1. Basis of Estimates. Many cost volumes require a complete basis of estimates to be written and tied to the price tables. The question is “How is the pricing manager going to be able to do this without coordinating with the technical/management volume leads?” The Basis of Estimates (BOE) and technical schedules MUST be in sync with the cost volume timelines. We recommend that the pricing manager set this schedule. This includes giving out deadlines to the BOE writers and standardizing the BOE data calls.  This is usually a standard template organized to capture the various work breakdown structure (WBS) elements that feed the various Contract Line items (CLINS).  It is critical to understand that unless these estimates can be produced and relayed into the pricing tables in due time, the whole proposal WILL be at risk. It is never an easy task to take in estimates at the last minute and develop pricing tables and submit the proposal within a day. We recommend that the first cut of these estimates be provided to the pricing team right after red team is done on the technical volumes. Then a review and updates are to be provided after the final review of the technical volume.
  2. Subcontractors. If the RFP requires subcontractor rates and sealed bids, this must be coordinated in advance. This timeline must be set and adhered to early on. Not only for compliance, but also for finalizing rate strategies. Sealed bids also require a few extra days of preparation by your subcontractors. They need instructions and active management of this timeline. Often these rates also impact your small business plan numbers that must be submitted. All these pieces must be accurate and in sync by the time the cost volume is finalized. Pick up the phone and get everyone aligned, early.
  3. Management Review. Management reviews are a soap box item for many pricing managers. If you don’t give your pricing team enough time to cycle through the technical and rate updates, how do you expect them to be ready for a proper management review? If management has to make the final decisions on fee/profit, workshare, key personnel, and any other ways to finalize the price, they need the best models with the most accurate information in order to do so. Bad or incomplete technical estimates make for bad pricing models. Plain and simple. So, get them done in time! Organize and coordinate with the BOE writers, hold them accountable for the pricing timelines. You may also need to hold the management team accountable, so that they realize that any changes made at the last minute (yes Gold Team reviewers we’re looking at you), have cascading effects on the pricing volume.  All final decisions should be made during Green Team (which should happen a few days before Gold team, if possible).

We have seen many cost volumes developed in a rush in the final days of the proposal stage, and this puts the entire proposal at risk. Mitigate this by being aware of missed opportunities to refine/review a smartly developed and compliant proposal.  With good schedule management, the pricing volume can be a proper, accurate and complete document that will be a part of the winning proposal. Don’t make your pricing volume the reason for your proposal loss.

BOOST has pricing experts at the ready, but don’t wait until it’s too late. (See point b, above.) Get connected with us now so that when you need us you already have our number on speed dial. [email protected]

What is Price to Win?

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All right govcons, here’s another fancy schmancy phrase that is pretty common in our industry and yet nobody really knows what this mysterious thing is. Price to Win (PTW)! What? Does anyone truly have a guide to THE winning number? Think about that for a second. The answer is a resounding NO. If someone did, they would be richer than Jeff Bezos. So, what is the number or how can we at least get close? After working on and consulting with the Price to Win gurus in the industry, it’s safe to say that Price to Win isn’t a miracle cure to your pricing problems.

What are pricing problems?

  • You’ve been losing proposals because of the pricing factors involved
  • Your technical and other volumes have been kicking down the door by getting excellent/good ratings, yet no wins.

Now, don’t go blaming your pricing team because of these losses. Trust us, it’s not them, it’s you, the Capture Team. A winning price is achieved by thoroughly analyzing competition, acquisition trends, budgets, price and capabilities tradeoffs. We can’t forget an accurate cost proposal development. (Notice that the cost proposal development is only one part of this process.) This process is essentially the concept of “Price to Win”.  PTW informs your pricing decisions.

A PTW process should begin the minute you identify an opportunity. It should be integrated into your bid/no bid decision.  You must understand the competitive landscape at that time of opportunity, and what it’s likely to be by the time the Request for Proposal (RFP) actually drops.  This can be quite a long window of time (a year to two in some cases). This is why Price to win is an iterative process. You must keep an eye on the ball because the landscape changes quite a bit in our industry. A current competitor might be your teammate and a current teammate might suddenly become a competitor if there is M&A activity (which is a huge trend).

What does PTW entail?

As we’ve highlighted in our Circle of Pricing before;

Price to Win – this is a bottom-up build based on the draft RFP documents and final RFP documents. The end result is to model the Total Evaluated Price (TEP).

The inputs into the TEP (for example, the technical solution), are determined during the Competitive Analysis. The outputs of the Price to Win analysis are to recommend specific strategies identified in competitors that can be incorporated into your internal pricing strategy. Price to Win should provide you with a comparison of labor categories, location, etc. that are being priced by your competitors. You can use this information against your approach and make adjustments to your solution and to your pricing.

The smartest way to conduct a thorough Price to Win analysis (that includes competitive assessments, buying trends, market cost estimation) is to hire the experts.  Hiring industry experts provide a very good lens to obtain a robust view.  You can have your internal team conduct this, but you may want to consider outsourcing.  A subject matter expert will have a better finger on the pulse of the market.  It’s worth the investment to use these experts and outsource your Price to Win function to capture the market analysis with an unbiased view.

If you’d like to learn more about how this looks for your business, contact BOOST! [email protected]

Top 3 Pricing Mistakes

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The govcon industry has its own sub-industry – the govcon proposal industry.  There are many companies, and thousands of professionals (if not more) dedicated to this profession of proposals and business development in the govcon sector.  It’s an intense career path, and it challenges professional sanity to quite an extent. This is not due to the difficulty of putting a proposal together, but because the government (yes we’re going there), makes the entire process extremely cumbersome and unnecessarily complicated. You can debate the necessity of providing cost data in 5 different formats all you want. There are brilliant proposal writers, managers and growth executives that are often caught in frustrating proposal hell because their product, aka the proposal, isn’t a function of their actual talent. Instead, it is a collection of documents that are much less of a sales pitch with compliance matrices and solutions weaved in.  Sometimes things can be made a bit easier.

There is hope! Some easy pitfalls to avoid, at least when it comes to the pricing volumes include:

  1. Incumbent bias (very common): If you’re an incumbent on a contract, your first instinct might be to bid existing contract rates.  We highly recommend against using that approach. No matter what the evaluation criteria are, whether cost is an important factor or not, the bottom line is that you must bid like a competitor. You must be very smart and understand the market landscape. The government is a buyer, their decision-making processes are rarely set up to award to incumbents without much justification. If your competitors develop an excellent solution including the best value and bid the fair market price/value, the government will need a lot of justification to award to the incumbent.
  2. Inaccurate calculations: Believe it or not, this happens a lot.  You must make sure that your actual pricing calculations are in sync with your accounting policies and procedures.  If your overhead base includes direct labor and fringe, then you must bid it that way.  If your G&A is total cost input, then you must apply it to all costs in the proposal.  Often small calculation mistakes can magnify a pricing error and it can cost you the entire bid.  Enough time for reviews and quality checks must be built into the pricing schedules, and executives must be coached about the impact of last minute changes and cascading effects on final pricing models.
  3. Non-compliance: Nothing gets you kicked out faster than a non-compliant proposal. This applies to all volumes, but particularly to the cost/price volume. This trips people up because often the instructions in section L of the RFP in regard to the cost volume are confusing and contradicting.

 

To mitigate these common mistakes we suggest that you should:

  • Shred the RFP thoroughly. No part left unturned.
  • Review all the instructions in Section L for all volumes (because there are overlaps and connections you may not even know between the cost volume and the tech volumes)
  • Note any and all questions as you review the first, second, third time. You must do this to capture every intent of the instructions.
  • Create a thorough compliance matrix for the cost volume. This step really helps flush out interdependencies on other volumes, and confusing instructions.

 

This process will give you enough time to prepare and submit questions to the government to help clarify issues ahead of time.  These 4 steps will help you to create the shell of the cost volume early on and the pieces will fit in better as you coordinate and facilitate the volume development.

As an understatement, pricing is difficult. Luckily you have BOOST GovCon pricing specialists in your corner. Let’s connect today and get ahead of these common mistakes so you can win more work! [email protected]