Don t Just Price Price-to-Win It!

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2 Don t Just Price Price-to-Win It! Breakout Session #: C07 Jason L. Rupinski Date: Monday, July 25 Time: 4:00pm 5:15pm

3 Agenda About the Presenter Why Price-to-Win (PTW) Defining PTW The PTW Areas of Focus Getting our PTW Started Ethics 2

4 About the Presenter Name: Jason Rupinski Position: Sr. Principal Price-to-Win Strategist Company: Leidos Phone: Bio: Engages in and leads all aspects of the cradle-to-grave strategic development of complex, large dollar value pricing solutions for proposals. Over 21-year career he has served as a Contracts Representative, Pricing Analyst, Deputy Program Manager, and PTW Lead. He volunteers his time serving on the Board of Directors for the City of Colorado Springs Parks, Recreation, and Cultural Services. 3

5 Why Price-to-Win? Can t you just price my technical solution? 4

6 Integrating PTW into Capture How does price fit into your bid development? Exemplar Approach to Business Development Cycle Post- Submission Proposal Capture Pursuit Opp Qual OPP ID Traditional Bid Approach Not Recommended for Use Final Bid Price (Cost + Fee) Proposed Solution Success Driven Model PTW Post Award PTW Assessment Final Bid Price & Solution Price Strategy Proposed Solution 5

7 Why PTW: The Reality is As Sellers: No longer live in a world where a superior technical offering and a reasonable price will win the day! The value proposition is continually drawn at or below technically acceptable, low price Notice: not lowest price, but low-price 6

8 Why PTW: The Reality is Your pricing will make/break a deal Therefore, be smart and begin early Determine the value proposition of your supplies/services and how this matches: Corporate strategy Micro-level strategies augment higher level strategies Where in your Market Segment you want to play/price is important Be careful: by chasing low-price today, you may be introducing a losing proposition long-term 7

9 Why PTW: The Reality is Every entity needs revenue; hence, a need to win and win consistently B&P dollars are harder to secure making each pursuit ever more important; therefore, the need to increase Probability of Win (Pwin) Need to accurately forecast the cost in order to pinpoint an executable offering at a profitable and winning price The price you charge determines your expected Profit/Fee or buy-in position Fee/Profit is not a requirement of a Price Price could be lower than the estimated or actual cost to perform 8

10 Defining Price-to-Win (PTW) 9

11 Defining Price-to-Win Price-to-Win (PTW) is an integral process in building a strategic approach to critical capture decisions. It is worth its weight in gold! PTW provides a mechanism to understanding the overall competitive position, risk tolerance, and results in an optimal bid strategy. The ultimate outcome is achieved through a series of alternative what-if and sensitivity analysis yielding a solid business case that enables management to make an informed and strategic decision. Bottom-line: PTW is the estimated price that, when integrated into the Government s source selection process, results in a winning bid. 10

12 Defining Price-to-Win PTW as a process: Involves a team reviewing and discussing internal capabilities, customer expectations, and competitive pressures Enables an analyst to build dynamic pricing and cost models which incorporate detailed information on: your own company, competitor(s), alternative technical approaches/solutions, customer relationships, supplier relationships, past performance, bidding history, preferred insourcing/outsourcing approaches, etc. Built over time (i.e., iterations) and continually refined as the PTW team s knowledge grows and changes 11

13 PTW Is Not PTW is not an exact science nor can the process provide 100% precision towards the winning bid position Risk Free Performing Due Diligence on your data, sources of data, risks, assumptions, and everything else you model is vital to ensure you avoid the pitfalls of GIGO (Garbage In, Garbage Out) 12

14 The PTW Areas of Focus 13

15 Five Focal Areas of PTW 1. Opportunity Information Understand the nature of the solicitation Basically the Who, What, When, Where, & How Explicit & Implicit Requirements 14

16 Five Focal Areas of PTW 2. Price-capability Tradeoff - Be able to answer the question: How will the customer evaluate the offering? (i.e., understand (Section M)) Which Proposal Sections are evaluated and how (e.g., scored (e.g., numerical or colored), pass/fail, confidence rating, etc.) Understand the overall evaluation model (i.e., Lowest Price Technically Acceptable, Capability Satisfied, Best Value Approach) Be able to articulate and demonstrate how the customer s evaluation model impacts the PTW for all credible competitors 15

17 Five Focal Areas of PTW 3. Customer s Information Budget Timing of Funding Profile of Funding Source of Funds (i.e., Color of Money) Should-cost model Independent Estimates Prior purchases of similar nature and recent award trends 16

18 Five Focal Areas of PTW 4. Credible Competitor(s) Analysis Alliances or teaming Prior bid positions/decisions SWOT / Gap Analysis Relative financial condition Risk Assessment Rate(s) Analysis 17

19 Five Focal Areas of PTW 5. Our Team Analysis Alliances or teaming Prior bid positions/decisions SWOT / Gap Analysis Risk Assessment Supplies & Services Rate(s) Analysis 18

20 Getting Our PTW Started 19

21 Getting Our PTW Started The key to leading the PTW process is decomposing 5 PTW focal areas into manageable steps. So let s get started! Step 1: Opportunity Description Step 2: Identify the PTW Team/Resources Step 3: Opportunity Information Step 4: Customer Information Step 5: Competitor and Market Information Step 6: Our Team Analysis Step 7: Modeling What-if & Sensitivity Analysis Step 8: Repeat All Steps above as necessary!!! 20

22 Step 1: Opportunity Description What: Determine what-is-it? Perhaps the best place to start any PTW activity is with completion, even in-part, of an Opportunity Description document (Opp Doc) A PTW Opp Doc captures salient components of the opportunity. Four of the key areas are: opportunity information, customer information, competitor information, and our team information and capability data PTW is an iterative process and the PTW Opp Doc should be updated throughout the course of capture activities Deliverable: A regularly up-to-date PTW Opp Doc 21

23 Step 2: Identify the PTW Team What: Keep the team relatively small Add members as needed to assist with collection of various information, data calls, or management level decisions Depending on the nature and size of the bid, a typical PTW team may include representatives from Business Development, Pricing, Program Management, Project Control, Contracts, Subcontracts, Procurement, and other Subject Matter Experts as needed Caution: Remember that while this team contributes resources and knowledge to support the PTW analysis and modeling activities the overall PTW is competition sensitive and should be treated as such Deliverable: PTW Org Chart for this specific opportunity 22

24 Step 3: Opportunity Information What: In order to better understand the opportunity and gather data from open source information providers, you are encouraged to use the Opportunity information collected via our PTW Opp Doc to secure more data from: Our internal opportunity MIS Use of 3rd competitive research and analysis services for intelligence on the opportunity. Various subscriptionbased research firms are available FOIA Request Securing FOIA data is often critical on tasks that are being recompeted or are of a similar nature to a new effort. Read up on the FOIA process, understand how it works, and coordinate with the capture leads on which contract(s) to FOIA and what information to request Open Source Intelligence Searches 23

25 Step 3: Opportunity Information Deliverable(s): Document each of the following: Findings: capture the facts Questions/Inquiries: develop questions and points of inquiry for further research/exploration Assumptions: Remember, assumptions will be the basis for the Risk Matrix and BOE artifacts that substantiate our proposal submission 24

26 Step 4: Customer Information What: Valuable information via researching the customer Not all information is important but you are seeking information both germane to the solicitation in question as well as those recent awards of a similar nature Research the customer using open resource sites Access the specific Agency website each agency should have a web-site. Visit their web-site and review award announcements, briefings, other salient materials germane to our capture effort Deliverable: A record of the salient customer information that may influence the overall bid solution/strategy 2 5

27 Step 5: Competitor/Market Info What: Researching the competition will yield valuable information and insights that may help facilitate modeling the competition s bid position Not all information about a competitor is vital but we are seeking nuggets about historical and recent activities and actions that could influence what the competition is thinking and methods to their proposing strategy Again, all information comes from public open source data 2 6

28 Step 5: Competitor/Market Info Deliverable(s): Document findings: report the nuggets that may impact this opportunity A SWOT analysis Price (i.e., Labor Rates & Quals, Avg Hrly Rates, Solution Costs, win prices, etc.) information of the Competitor and Subcontractors for future modeling Model the competitor s Price Offering (i.e., leverage the open source information above, note our assumptions, and model the competitor s price offering 2 7

29 Step 6: Our Own Team Analysis What: Naturally, valuable information can be garnered from understanding our own company and teammates. Our competition is just as hungry to understand and model our moves and will be searching open source data to better understand our go-in position A key point in this step is to look at our Team as the competition would view us You ll use the information you gather in this step to help build a bottom-up model of our team 2 8

30 Step 6: Our Own Team Analysis Deliverable(s): SWOT Analysis Balance of Technical, Schedule, and Risk as it relates to Cost Trade-off Team Labor Rate Analysis Non-labor Cost Assessment Model our team s Price (Top-down) Team Wrap Rate Assessment And so on. 2 9

31 Step 7: Modeling and Analysis What: Developing our team s business model on how-to achieve the recommended PTW Target is completed through modeling and analysis of those technical, schedule, and resource driven cost levers that can tactically impact our price offering Metrics are an important but not without the analysis regarding: customer/client, internal research/capabilities, the assumptions, competitive and market research, and other attributes supporting the best offering A key component is to modeling those tactics that can be leveraged to enable our team to hit the target In building an analysis and metrics for any tactic, be sure to measure the impact of each change. Not only with respect to price but non-price factors (i.e., changes to: assumptions, operational impact, risk, etc.) 3 0

32 Step 7: Modeling and Analysis Deliverables: Dash board financials/metrics Model our team s go-in position (i.e., bottom-up model (finalized closer to RFP release)) Notes: Management does not need to see all our calculations and detail Summary dashboard reports are most helpful. Show metrics that are relevant to our particular situation and business case Use metrics and reporting points of interest that impact how we view various cost drivers in our modeling and represent charts that have been helpful in viewing our bids 3 1

33 Step 8: Rinse, Wash, & Repeat Remember Start Early! The process is iterative The assumptions and the facts will change as new information is learned throughout the life-cycle Therefore, repeat steps 1-7 as necessary to refine and complete the process 3 2

34 Ethics 33

35 Ethics The Importance of Ethics: Open Source Information Strictly follow Business Ethics and Compliance Guidelines. Never take shortcuts in your research. Never jeopardize your company s, team s, or personal ethical standards. Be Sure to Know: Where your information comes from How and when you may use information When to say no to others! Take the high road at all times. 3 4

36 Conclusion 35

37 The Reality is In order to avoid failure, steer clear of Last minute price tactics that could sink your proposal. Thinking about price as an afterthought or a mere result of the technical solution Reactive price tactics are not strategies and often only serve to diminish the value of your offering You must reshape your capture cycle to think about Price upfront! Create a Disciplined but Flexible Process Due Diligence is vital Understand your overall goals and objectives before you get started Be Ethical Rinse, Wash, Repeat 3 6

38 Contact Information Jason Rupinski Organization: Leidos Phone:

39 Back-up (Thought Exercise - As Time Allows) 38

40 Thought Exercise: (As Time Allows) The Art & Science of PTW 39

41 The Art & Science of PTW PTW is a mix of Science and Art Terms are not polar opposites but exist along a continuum Science Art Objective Subjective Rational Open Ended Unbiased Emotional Factual Meanings - Feelings - Viewpoints Observed Natural Order Justification of Thought/Ideas Probabilities Possibilities Solves Problems Connects Expressions General Laws Aesthetics Reason & Development Creativity Neither "Needs" the other but they do co-exist Beauty Expressive 4 0

42 Talking Point Chart: Widget X Design, Build, and Deliver N units of Widget X 5 Focal Areas of PTW 1 - Opp Info 2 - Price Capability Trade-off 3 - Customer Info 4 - Credible Competitor Info 5 - Our Team Analysis Widget "X" Team "A" Price $117 Science Cost of Resources Amount of Resources-historical Learning Curve-formula Art Source of Resources Amount of Resources-future Learning Curve-application Range of Widget "X" Prices in the Current Market Space Initial Spec Adj Range % Δ Range % Δ $99 n/a $99 $ % $102 $ % $105 Below Performance $ % $108 Specification $ % $111 $ % $114 $ % $117 n/a $ % $ % $ % $ % Comp $ % $ % All Range $ % $ % Min $99 $117 Notional $ % $ % Avg $132 $135 Range of $ % $ % Max $165 $153 Competitive $ % $ % Offerings $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $156 $ % $159 $ % $162 $ % $165 Above Price Tolerance 4 1