We will use as a case study the same Defense Contractor Client discussed in the April e-newsletter. One of the things we learned in that project was the significant labor that can be expended developing a proposal. Depending on the opportunity, engineering, materials and direct labor costs have to be estimated at a high degree of confidence to ensure that they price-to-win but don't get stuck losing money on a project. Because none of the people working on the proposal want to make a mistake, they tended to default to more detail than was intended.

The problem statement of this project is shown on slide #1 and the current state process flow map on slide #2. You can see that there is a lot of work that goes into creating a proposal... much more than this company thought.

http://www.supplyvelocity.com/files/July_2012_Proposal_Strategy_using_Strategic_Filters.pdf.   

Here is how proposal strategy using strategic filters is applied. When an opportunity arises management (sales, finance, supply chain) put the deal through a filter. They decide on the level of detail that is appropriate for this proposal. Many companies have these conversations, but they don't formalize it into a clear communication plan. Consequently people work in the dark, do their best, but many times get off track. It is amazing what saying "this is a Level 3 effort" can do for an organization on providing clarity.

We've found that 5 levels is the right stratification of many of our Clients' proposal opportunities. These can be defined in your company however it is appropriate. Below is an example of these definitions.

Level 1 is the simplest type of proposal. Historical data is sufficient. They can be Level 1 for a number of reasons; because there is little chance of winning but we want to submit a number just in case, we were asked by a corporate parent or customer to submit a bid, or maybe we know we will win it and therefore don't want to expend resources on a proposal.

Level 2 is a step up in complication. This company defined Level 2 as using historical cost data but doing some checks to make sure that there are no surprises when they win a project and have to deliver to the contract. It is like Level 1, but provides some additional assurances.

Level 3 is an 80/20 cost estimating effort. By choosing the few cost drivers, and estimating these completely, they can do a "good-enough" job and be economical in the resources allocated. After implementation, many proposals became Level 3. It is often the most popular proposal strategy level.

Level 4 is a Level 3 with some engineering effort and a deeper cost estimate, but not complete.

Level 5 is a full engineering project with a complete cost estimating effort.