The True Cost of Proposals

© DigitalGenetics -

© DigitalGenetics –

I recently listened to an episode of the Contracting Officer Podcast, a show that talks about the government market from the contracting officer’s perspective and aims to make government contracting better, one contract at a time.

Hosts Kevin Jans (Skyway Acquisition Solutions) and Paul Schauer (CACI’s National and Cyber Solutions) discussed how much it actually costs to write a proposal for a government RFP. An important and much misunderstood topic!

The first key point they make about proposal writing is that even though it seems like a no-brainer that proposal writing would be part of what they call Zone 3 – The RFP Zone, it’s not (their “zones” are explained in earlier podcasts, but you should kind of get the picture from my emphasis in this post on qualification and capture).

“Proposal writing starts long before the RFP is released, before the draft RFP is released,” Paul explains. The process goes back to the Zone 2 (Market Research for their audience of contract folks, or what we industry folks would call capture – shaping the potential RFP), so that’s where the costs start as well.

This is an extremely important point that often the government does not appreciate. From the moment of market research, and sometimes even before when the true customer begins to think of the requirement, cost is beginning for industry. There is where you as the contractor begin answering the question, “Can we solve this customer’s problem?”

By the time a Request for Information (RFI) comes out, “the writing’s already started,” Kevin says, “And that’s why it’s so important that the investment in brain power, in resources, in time, and of course, in labor” has already started as well. Here again, while we’re talking about brain power, resources, time and labor, what’s really going on is relationships – a company building a picture of what the customer is looking for, based on how the customer describes it. This is the early stages, even before the RFI or market survey comes out. Remember that often the RFI is about set-aside issues, not about solution issues.

It’s important for both sides – government and industry – to understand the true cost of proposals. This gives the buyer and seller a level playing field as they communicate through the proposal process. Kevin says this is one of his favorite sayings: “Ambiguity in here is going to lead to mediocrity.”

This is perfect, yes indeed, ambiguity leads to mediocrity, but if ambiguity remains, it’s the industry’s fault for not asking all the questions for fear something will be revealed to competitors, and the government’s fault if they don’t answer by bringing new clarity to the question. Questions are good, not a forced delay and to be resented. Over-explaining can be costly as well, Kevin points out.

Paul says to compare this to hiring a contractor to put a new roof on your house. You might use any combination of marketing messages, past performance, and talking to friends, and then get quotes from several companies. They pretty much all do the same thing, so the quotes will be pretty simple.

“Think about it,” he says, “if you went out to all these companies and you said, ‘I need a 12-page proposal with double-spaced, 12 Times New Roman font on the whole thing, graphics have to be no smaller than 8 font, and you can’t use anything, but the primary colours,’ …. You wouldn’t get a single bid ‘cause nobody’s going to put in that time and energy.”

Contracting officers should remember that “the amount of proposal documentation that you have to submit could drive decision making on whether or not a company actually bids on your acquisition.”

Paul explains that the government team writing the RFP has to realize that they’re driving more cost to the taxpayers with their complex RFPs that take longer to respond to and evaluate. And this is a critical point – bad evaluation processes and lack of clarity drive up costs. So do all the regulations, and these lead to higher costs to the government.

Now LPTA has adjusted that, but the competitive pressure means less well-constructed proposals, and lower quality of responses, or lower quality of people you can afford for the prices bid. We can never forget the trade-off between price and quality.

In government contracting some inefficiency in the process is a given, with so many regulations in the FAR. But it’s those rules that give everyone an equal opportunity to bid, says Paul. Unfortunately, most of the inefficiency is actually self-inflicted – by the government as they write RFPs, and by contractors because they don’t do a good enough job evaluating their decision whether to bid on a contract.

“If you’re really having to force that language [while you’re writing an RFP], that should tell you something.” We’ve talked a lot on this blog about focusing your federal contracting efforts, and being able to answer these three key questions about your prospective customers:

  1. Does this customer have money allocated to solve this problem?
  2. Can your company solve this problem?
  3. Do you have the capabilities to win this job?

If you can’t answer yes to all three of those questions, don’t waste your time writing a proposal. Contractors should never forget that business development and proposal writing cost money, and there will be a single winner and many losers. Every loser needs clarity as to why they lost.

The Phases of Capture Management

The process of setting out to win a new contract is generally divided into phases. The larger the opportunity and the more sophisticated the competition, the more detailed you’ll want to be about the steps in this process.

As you might imagine, large companies have enormously intricate systems for managing this, and the King of these systems is the Business Development Lifecycle from a company called Shipley that produces a methodology with hundreds of steps and all sorts of defining documentation for every step.

For our purposes as small businesses, we merely have to understand that there is a process, and those hundreds of steps can be summarized into a few key small phases that we have to pay attention to.

Step One – Identifying and Qualifying the Lead

At the very beginning of the capture management process, you have a lead. It could be something that you’ve downloaded from one of the information services like GovWin, it could be an announcement through FedBizOps, or it could be a piece of information that you’ve gotten from a current customer about potential future needs.

You may also see Sources Soughts or Requests for Information (RFIs), processes agencies use to determine if there are two or more qualified businesses in a particular set-aside category that would be interested in bidding on a contract. If so, the agency may set aside the contract for that set-aside category.

Whatever the source of the lead, your company must answer three fundamental questions:

  1. Does this customer have money?
  2. Does this customer have a problem that we can solve?
  3. Does the customer know that our company can solve their problem?

The process of answering these questions is called qualifying the lead, and typically involves some customer contact and on-site exploration, as well as researching your predecessor’s contract (the incumbent who had been doing the work up until now). Once that is done, you’ll need to have an internal meeting to decide whether this lead is worthy of pursuit.

Step Two – The Capture Phase

Once you decide to go for it, the capture phase is when you work out all the details. This is when we really get to know the customer, understand their hot buttons, their problems, and their visions for how this function is going to work in the future. What new innovations are they looking for? What’s not working for them today? By the end of this phase you want to have built a technical solution that will specifically address those things.

In an ideal world, we actually help the customer to shape and understand their own requirement, in a way that we can clearly support with a positive result for everybody involved. You’ve found a customer and you’ve got the answer, now hopefully you can help them see that you have the answer.

In this phase you will also need to talk to the agency’s small business office so they know you’re out there, as well as the contracting folks. Plus, get a clear understanding of what NAICS code this thing is going to come out in, so you can make sure you’re eligible as a small business for the work.

When the agency releases their RFP (Request for Proposal), you have to meet internally again to decide whether you’re going to bid or not. You may choose not to if the RFP seems to favor the incumbent contractor.

Step Three – The Bid and Proposal Stage

If you go for it, you enter the third and hopefully final stage, the bid and proposal stage. Now you’ll need to line up everything you know about what the customer needs, along with what your company does well, and see how those match up.

This is getting into what’s called “answering the mail,” named for two crucial sections of an RFP – Section L, which lays out the requirements for supplying the quote, and Section M, the portion that defines the evaluation criteria. You must demonstrate that your company is compliant with the requirements established in the RFP.

Again, in a large business there would be hundreds of steps to follow here in the proposal stage. Fundamentally, you’ll take Section L, use that to create an outline, fill in that outline with everything you know about the project and your technical approach, and then prepare a compliant proposal. There’s usually a separate section for technical and pricing information, and those may sometimes be divided up into sub-sections.

Here’s one example of a capture management process outline by the folks at OCI – Organization Communications Inc.:

Capture management is a long process that doesn’t always lead to winning the contract, but it always gives you experience and learning you can use in future successful bids.

How to Find Customers, Part Two: Pairing Up to Win More Government Contracts

Teaming is a way of life in the federal contracting sector. It’s a rare circumstance when one company can win a contract of any significant size by themselves (other than businesses that provide facility maintenance, support services, etc.). Almost all large contracts are done in a multiple fashion with large and small teammates.

According to this article at Inc., the American Express OPEN Victory in Procurement report found that “small business owners who paired up with other small firms or acted as subcontractors won 50 percent more contracts.” In this article, our focus is on your role as a subcontractor.

Your first step towards a successful team contract should be a lawyer’s office, legal website or your PTAC. They can help you create your own non-disclosure agreement (NDA). An NDA will protect you as you proceed through the contracting and identification process; it’s a promise that neither you nor the other party will disclose each other’s information outside of these teaming discussions.

Your next step is a teaming agreement, which generally consists of a whole lot of definitions, points of contact and boiler plate explanations (much of which are repeated from the NDA). At the core of the teaming agreement is what is called Exhibit A – this is where you define the responsibilities of the parties and, most importantly, how work will be allocated amongst the prime contractor and the subcontractor.

There are many ways you can divide work. The simplest is for the prime and sub to agree on a specific percentage share, recognizing that you can’t exactly split things down the middle because you can’t split a person.

It’s very important that Exhibit A specifically identify how you intend to do things, and the work you expect from your partner at every stage of the process. While you’re writing the proposal, who’s going to perform each of the functions? When it’s time to go out and market yourself, who’s going to do that? All of these are important considerations in this process.

Let’s assume that you’ve put yourself out there to various groups and networks and you’ve managed to find the right partner to team with as your prime contractor. Together, you put a proposal together and sent it off to the government, and lo and behold, the government awards the prime contractor the contract.

You’ll recall that piece of legislation that will give more power to the small business officers to enforce percentages that the primes have to give to their small business subs, and now you can see why this is so important. Too often there is a difference between what was promised and what was actually delivered (because, in the end, large businesses want appliances, they don’t want subcontractors). It is very important to get these details in writing, no matter how much you trust your partner. Even if your prime contractor is your relative – even if it’s your mother – get it in writing.

Partnering up with a larger business allows you to go after work that you wouldn’t be eligible for otherwise; you wouldn’t be able to bid on it. The large business needs you to fulfill their small business requirements. They also want certain things from you (customer knowledge, fast performance, functional capability). People like the nimbleness of small businesses – things can move faster without the huge overhead and complex procedures of larger organizations.

All this translates into another set of ways in which you can find customers and get to work.