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1 Click to edit Master title style Fourth level

2 The Real Reason Price Matters Click to edit Master title style Breakout Third Session level #A08 Fourth level Jason Rupinski Price-to-Win Strategist Leidos Date: Monday, July 27, 2015 Time: 11:15am - 12:30pm 1

3 Click Agenda to edit Master title style About the Presenter Cost vs. Price Is there a Difference? Why Second is Price level so Important? The RFP s Influence on Price Fourth level Common Mistakes Price Considerations 2

4 Click About to the edit Presenter Master title style Name: Jason Rupinski Click to edit Master text styles Position: Price-to-Win Strategist Company: Leidos Phone: Bio: Fourth level Engages in and leads all aspects of the cradle-to-grave strategic development of complex, large dollar value pricing solutions for proposals. Jason has been with Leidos for 18 years and prior to his current role served as a Contracts Representative, Pricing Analyst, as well as a Deputy Program Manager/Division Manager. He volunteers his time serving on the Board of Directors for both the Pikes Peak Chapter s of the National Contract Management Agency (NCMA) and the City of Colorado Springs Parks, Recreation, and Cultural Services. 3

5 Click to edit Master title style Cost vs. Price Is Fourth there level a difference? 4

6 Click Cost vs. to edit Price Master title style Is there a difference? Do they mean the same thing? Are Second they level interchangeable? Does it change if I m the buyer/seller? Fourth level Why do/should even I care? 5

7 Click Perhaps to edit Master the Dictionary title style P>C or C=P or C>P or Price Defined Price (n) The cost at which something Fourth is obtained level Value or worth The amount of money or goods, asked for or given in exchange for something else Pricing (v) To fix or establish a price Cost Defined Cost (n) An amount paid or required in payment for a purchase, a price The expenditure of something, such as time or labor, necessary for the attainment of a goal Cost (v) To require a specified payment, expenditure, effort, or loss 6

8 Click Other to Views edit Master on Cost title vs. style Price The Government s View Price means cost plus any fee or profit applicable to the contract type (FAR ) The General Buyers View: Price is Fourth the determination level of how much the customer/buyer is willing to pay for the product and/or service The Reality: Fee/Profit is not a requirement of a Price Price could be lower than the estimated or actual cost to perform 7

9 Click Cost vs. to edit Price Master title style It is easy to see why these terms get used Click interchangeably to edit Master text styles For our purposes today: Fourth level Price =» allowable Fifth level and allocable costs plus any profit or fee applicable to the contract/clin type Price = Cost + Fee 8

10 Click to edit Master title style Why is Price so Important? Fourth level 9

11 Click Why is to Price edit Master so Important title style Every Click time to edit an individual Master text or an styles organization does something or changes something, an Second impact to level price/cost is involved For our purposes Fourth level today, a price action occurs when we submit or respond to a: Request for Quotation (RFQ) Request for Proposal (RFP) Change Request (CR) Engineering Change Proposal (ECP) Desire to have something 10

12 Click Why is to Price edit Master so Important title style Realities of Life as a Seller: Companies need revenue; hence, a need to win B&P dollars are harder to secure making each pursuit ever more important; therefore, you need to Third increase level your Probability of Win (Pwin) You Fourth need to level be able to accurately forecast the cost in order to pinpoint a profitable and winning price The price» Fifth you level charge determines your expected Profit/Fee or buy-in position Buyer: Price indicates how much you are willing to pay for the product/service as well as the value of said item Limited Budgets and Schedules drive the resources available to pay for Services/Supplies 11

13 Click Why is to Price edit Master so Important title style Key Notes: Determining how to price and how to demonstrate value is vital to the long-term success Second of level a business Our chosen Price point says a lot about a company as well as the implied value of the product/service Fourth level It is important to not create errors or admissions in your price submission Bottom-Line: Cost/Price impacts may equate to an increase, decrease, or neutral event Your pricing will often make or break a deal 12

14 Click to edit Master title style The RFP s Influence on Price Section-by-Section Assessment of Price Impacts Fourth level 13

15 Click A Common to edit Example Master title The style RFP Recall from earlier, every time we engage Click to in edit an Master action there text styles is almost undoubtedly a price/cost associated with said action i.e., Every Fourth level time we do something, it may impact the cost/price Now, let s review the Uniform Contract Format ( ) and assess how we can push the Cost/Price discussion earlier into the capture cycle to avoid making some common mistakes 14

16 Click The RFP s to edit Influence Master title on Price style One of the first critical steps in developing your Cost/Price proposal is to perform a complete and thorough Click to review edit of Master the solicitation/request text styles Section Third A: Solicitation/Contract level Form $: Proposal due date, and Defense Priorities and Allocations Fourth System level (DPAS) rating Section B: Supplies or Services and Prices/Costs $: Outlines specific quantities of items (supplies and/or services) to be purchased $: Outlines contract type per contract line item number (CLIN) 15

17 Click The RFP s to edit Influence Master title on Price style Section C: Description / Specifications Click to edit Master / Work text Statement styles $: Second Defines level the what Third Outlines level descriptions and specifications of what Fourth is being level delivered/purchased Section D: Packaging and Marking $: Specific Packaging and Labeling Requirements 16

18 Click The RFP s to edit Influence Master title on Price style Section E: Inspection and Acceptance $: Inspection and Quality Assurance Requirements Section F: Deliveries or Performance $: Defines Fourth expected level delivery schedule and location Section G: Contract Administration Data $: Defines payment and funding data Section H: Special Contract Requirements $: Defines special items or terms not defined elsewhere in the solicitation 17

19 Click The RFP s to edit Influence Master title on Price style Section I: Contract Clauses $: Defines terms and conditions generally only in reference form. Be sure to read the original and full text for any cost/price implications (e.g., labor laws, Second taxes, level overtime provisions, earned value or other reporting requirements, etc.) Fourth level Section J: List of Attachments $: Be sure read each attachment to assess impact to your technical, schedule, risk, and cost/price Section K: Representations, Certifications, and Other Statements of Offerors or Quoters $: Be sure to understand the impact of the clauses that you are certifying (i.e., contract sweep (TINA); etc.) 18

20 Click The RFP s to edit Influence Master title on Price style Section L: Instructions, Conditions, and Notices to Offerors or Quoters $: Defines the content, format, number of copies, Second and level packaging requirements for each volume $: Generally, any SB Goals/Requirements show up Fourth in this level section (but they often are hiding in» other Fifth level sections as well) Section M: Evaluation Factors for Award: $: Provides indicative factors: Regarding the importance of Cost/Price compared to the other proposal volumes For where the offeror s price point needs to be relative to competitors for being considered for award (e.g., LPTA, Best Value, Hybrid) 19

21 Click The RFP s to edit Influence Master title on Price style As our brief demonstration highlights, each Click section to edit Master of the solicitation text styles may have a material impact on price For Second the Seller: level Be sure to understand all the terms, provisions, Fourth level explicit and implied requirements for which you are bidding For the Buyer: Be sure to understand the impact of what you re asking offerors to bid. Add sufficient terms to ensure you are getting what you re paying for but don t be onerous in adding unnecessary contract terms/requirements 20

22 Click to edit Master title style Common Mistakes Fourth level 21

23 Click Not Fully to edit Reading Master the title Request style Be sure to read/review the entire action (e.g., RFP, RFQ, ECP, etc.) Click Identify to all edit stated Master and implied text requirements styles Identify all restrictions, caps, exclusions, etc. After your complete and thorough review of the solicitation Fourth or request, level it is vital to create a: Requirements Driven Outline (RDO) that captures critical cost/price related artifacts as well as those provisions, terms, conditions, delivery, schedule, and other items that may impact price Proposal schedule to include key Cost/Price Milestones (e.g., request for quote to vendors and subcontractors, Basis of Estimate Reviews, Cost/Price Reviews, etc.) Assign a dedicated Basis of Estimate Writer(s) Assign a dedicated Price/Cost Estimator 22

24 Click No Basis to edit of Estimate Master title (BOE) style Do you have a Basis of Estimate (BOE)? Defined: a detailed description of the estimated Click resources to edit (e.g., Master labor, material, text equipment, styles travel, etc.) required to complete tasks, activities, and/or produce, check, Second and make level delivery on contract deliverables and/or services Rationale: One of the best mechanisms or tools for collecting Fourth and assessing level proposes costs is by leveraging a BOE Helps to» facilitate Fifth level both company (internal) and Customer (external) review of your estimating rational and methodology. Business Estimating System Compliance A general rule of thumb is that if you don t propose a particular cost than you might not be able to bill for it later Naturally, this is not an exclusive statement and exceptions definitely exist (e.g., Changes Clause, Engineering Change Proposal, etc.). 23

25 Click Ignoring to edit FAR Master Part 31 title style We won t get into this FAR part but be sure to work with your Finance/Business Lead to determine if the resources/costs Click to edit identified Master in your text Basis styles of Estimate (BOE) are: Allowable Second level Allocable Reasonable Fourth level Understanding» Fifth the level sound business judgment for BOE is as important as determining the proper treatment of said costs It is much better to catch any inconsistencies with your company accounting policies, FAR rules, etc., prior to submission of your proposal than during proposal evaluation and/or negotiations 24

26 Click Missing to edit Cost-based Master title Reviews style Assigning an independent BOE and Cost/Price reviewer to perform checks on: Click Sound to estimating edit Master methodology, text styles Proposed costs and fees meet the test(s) for: Second Allowable level Allocable Third Reasonable level Realistic Cost/Price proposal/format Fourth level meets solicitation requirements Cost/Price proposal meets company requirements and goals Business Model makes sense to the enterprise and the customer Ensure that the Technical Solution matches the: Resources estimated in the BOE BOE aligns with the Cost Estimating TINA Sweep (most current and accurate quotes, costs, FPRA/FPRRs, etc.) 25

27 Click Defective to edit Pricing Master Mistakes title style Defective Pricing, aka FAR (a) (a) If any price, including profit or fee, negotiated in connection with this contract, or any cost reimbursable under this contract, was increased by Second any significant level amount because -- Third (1) The level Contractor or a subcontractor furnished certified cost or pricing data that were not complete, accurate, Fourth and level current as certified in its Certificate of Current» Cost Fifth or level Pricing Data; (2) A subcontractor or prospective subcontractor furnished the Contractor certified cost or pricing data that were not complete, accurate, and current as certified in the Contractor s Certificate of Current Cost or Pricing Data; or (3) Any of these parties furnished data of any description that were not accurate, the price or cost shall be reduced accordingly and the contract shall be modified to reflect the reduction. 26

28 Click Other to Common edit Master Errors title style Not bidding in compliance with your standard procedures or Cost Estimating System Manual/Disclosure Click to edit Master Statement text styles Mathematical / Computational errors Incorrect Second Start level and End Dates Disconnects between Key Personnel and Proposed Rates Fourth level Disconnects between stated requirement and proposed requirements without justification or supporting documentation providing rationale Quantity purchase errors Incorrect model number, part numbers, version number, etc. Adding quantities, items, features, etc., that: Are not asked for/requested Do not Denote Value Create compliance issues 27

29 Click to edit Master title style Price Considerations Fourth level 28

30 Click Things to to edit consider Master for title pricing style Contract Type May impact (example list only): Resource Estimates Assessment of Risk/Uncertainty Fee Requirements/Hurdles Delivery Third Quantity level Considerations Minimum Fourth as well level as maximum amounts Order Quantity Timing, Delivery, and Flexibility Delivery Location Delivery Method Method of Inspection Schedule of Delivery and Inspections Made in requirements Must vs. Should have requirements 29

31 Click Things to to edit consider Master for title pricing style Data Rights Use Click Rights to edit Master text styles Contract Second Data level Requirements List (CDRL) Often Third but level not always $NSP don t forget to budget the resources to complete these vital Fourth level contract requirements Federal, State, and Local Laws Tax Implications SB Goals Customer Hot Buttons Political / Internal Hot Buttons 30

32 Click Things to to edit consider Master for title pricing style Other Considerations: Amount of Customization vs. Re-use More Second vs. level Less (i.e., hours, units, etc.) Acceptable Substitutes Make Fourth vs. Buy level Prime vs.» Fifth Subcontract level Performance Leveraging existing resources (e.g., GFE, GFI, IRAD, etc.) Timing/Scheduling of events/tasks (e.g., parallel, sequential, etc.) Fee/Profit Structure 31

33 Click Things to to edit consider Master for title pricing style Changes, Changes, Changes Any change to the Technical, Schedule, Second level and/or Risk of your offering should be checked/verified against your Cost/Price proposal to make Fourth level certain these changes flow throughout your entire submission Document, Document, Document All technical, schedule, risk, and cost/price based assumption 32

34 Click Final Thoughts to edit Master title style There are many methods to solving the price puzzle Click Caution: to edit there Master is no one text size fits styles all Reminders, the Price communicates one or more messages Third level about your company and your offering, so: Fourth level Incorporate» Fifth Cost/Price level decisions early in the capture cycle Allow/Schedule sufficient time for reviews Be certain that changes to the Cost/Price Strategy don t cause conflicts to Technical, Schedule, or Risk Likewise, be sure that changes to Technical, Schedule, or Risk don t cause an imbalance to Cost/Price 33

35 Click Final Thoughts to edit Master title style Find ways to: Be creative with your offering Provide / Connote Value (don t just say it show it) Evaluate each and every Price Component to determine what viable options exist Be sure Third to understand level your customer, their stakeholders, and your stakeholders Fourth level Be sure to» consider Fifth level what the competition might offer/propose Be sure your solution is congruent with enterprise goals Provide a mechanism to your customer to demonstrate reasonableness, realism, and minimal risk! As time allows, review each component of cost to assess alternatives considering potential impacts to Technical, Schedule, and Risk. 34

36 Click Contact to edit Information Master title style Jason Rupinski Organization: Leidos Second level Phone: Fourth level 35