When, During A Pursuit, Should Bidders Develop Their Winning Price?
Guest Contributor | September 24, 2018
Note: Tony Constable is a senior pricing analyst with over 30 years of experience working large programs.
The object of pursuing competitive opportunities is, of course, to win. To win single award “best value” competitions bidders have to: 1) convince the evaluators to turn a bidder’s proposed team, solution, transition plan, and past performance into non-cost evaluation award points; and, 2) do the work needed to ensure that a bid price can earn enough cost and overall evaluation award points to make it into the winner’s circle. The non-cost and cost evaluation award point earning activities, while not mutually exclusive, are prosecuted by different capture team elements. This mini-paper addresses the following question: At what point during the capture process should price become the central issue? Below potential “when” answers to this question are grouped by 3 “Goldilocks”-like response buckets: late; just right; and, early.
Managers whose answers fall into the “late” group feel strongly that their price target has to be a derivative of team, solution, and solid, relevant past performance. In short, they tend to believe price is exclusively driven by their bid team’s overall ability to earn non-cost evaluation award points. For this approach to be credible, we have to assume the opportunity will be awarded using a “Best Value” evaluation scheme. We also have to assume the bid team knows both its competitors and their likely abilities to earn non-cost evaluation award points. The bid team’s price needs to earn a sufficient number of cost award points that, when added to the team’s non-cost evaluation award points, will allow the team to win on overall evaluation award points. Unfortunately, a bid team in the “late” group usually fails to define where its competitors’ prices are likely to be, and, therefore, where its own price needs to be. Moreover, bidders in the “late” group usually suffer from a lack of flexibility because they have set all of their solution price drivers (e.g., team, solution approach, etc.) in stone before considering the price that will be needed to win — which is, after all, the object of the exercise.
The “just right” group of managers tend to tie price into Gate Reviews that serve to open up (or close) the B&P/Investment spigot as a pursuit unfolds. Capture teams use in-house pWin processes to assess and score their win probability and use the outcome to persuade management at Gate Review time to maintain or accelerate the funding and tempo of the pursuit. Having reviewed several pWin processes used by major government contracting firms, my conclusion is that they tend to give short shrift to the development of critical pricing issues. For instance, the overall Capture Strategy is strongly featured and requires detailed competitive intelligence and assessments of identified competitors. Where bidders in the “just right” group tend to fall short is by not using early Gates to determine the price that known competitors are likely to bid and to develop incrementally the Pricing Strategy that can generate and support a winning price.
Managers in the “early” group tend to recognize that price is the most important determinant of contract award. This recognition galvanizes them to advocate an early focus on incrementally determining who they are competing against, what the competitors’ capabilities are, what the winning price needs to be, and why. “Early” advocates also realize that as the project’s price envelope evolves over the pursuit period, their team and solution must also evolve to remain within the price envelope. In the process, they discover gold plated teams and solutions must always give way to teams and solutions that can support the price needed to win. The “early” group has to put a pricing stake in the ground and this dictates the price levels that can be profitably allocated to support team and solution approach. They also identify how the price target can be offset by cost avoidances, discounts, and giveaways.
In short, capture approaches tend to focus on either solution first or price first. “Solution first” pushes a capture team toward the “late” group by spending resources too early to describe a solution that may have to adapt to “late” pricing realities. The “price first” approach uses competitive intelligence and analysis to ensure that the coat the customer is to be offered can be made out of the cloth that is available.
Balanced “Just Right” Solution
My recommended approach is the balanced, “just right” approach that Goldilocks would favor. This, however, requires more balanced processes (e.g., for determining pWins) and capture practitioners that recognize that the price envelope horse needs to come before the solution cart. It has long been the case that great proposals and good prices rarely win. What is needed is a good proposal and a great price.