The Role of Strategy in Developing a Winning Government PriceThe Role of Strategy in Developing a Winning Government Price
In right now of slashed Government budgets, costs are even more a consideration now that has been at any time. Whether the procurement specifies affordable or low cost technically acceptable (LPTA), doing research and sharpening your pencil to have the most competitive pricing is likely to spell the real difference between a victory and losing a vital competitive procurement.
Many companies have great technical solutions, but winning a competitive procurement has a winning price and also a great technical proposal. In today’s environment of lean budgets and affordable awards, Price Matters as part of your. The winning price might or might not necessarily be the good deal. But more often today, it is the low cost. We appear to get involved within the mechanics of filling in the forms and spreadsheets without much of the thought to what takes its winning price. It takes getting information early in advance, doing the analysis, and looking out at you inside the price mirror objectively.
What makes price matter so much today is that you can win technically but lose on price. We hear this so often today. What makes the visible difference? Not hoping you you know what the price really should be. Hope does not get you victory but searching for your customer, your small business and your competition provide closer. You’ve got to turn it into a priority to determine what your target price range need to be.
What many organizations still do today is develop cost, slap an affordable (or competitive) fee within the cost and submit the purchase price. Most of the time pricing gets accomplished with the last minute with very little shown to what it takes to win. There are three elements of Price Matters – data gathering, analysis, and real decision-making about price. This process is ongoing during the entire proposal process (pre-requirement stage, proposal stage and post-proposal to start with final proposal revision) and, most of all, this process begins prior to you think. Developing and implementing a pricing strategy in the win approach is critical to a victory – it wouldn’t be accomplished with the last minute.
Most people feel that the only way to obtain the pricing “right” is always to perform a price to win (PWIN) that may generate a target price. Let’s set the record straight here – PWIN produces a winning range as opposed to an exact number that results in the winning price. PWIN activities usually are meant to get you to build a range of winning targets together with thoughtful actions to gauge risk and capabilities – it is not a perfect science or number. It’s a myth that PWIN is a defined magical number that may be calculated and used because winning price. You weigh the values you develop up against the company capabilities plus the risks your small business are willing to take. The components of winning price are determined from objective data and subjective data (objective examples: current labor data, customer budget or government-generated independent cost estimate, D&B reports on competitors, past & current contracts, competition databases and subjective examples: internet searches, investigations, projections of competitor indirect & labor rates, interviews with current & former employees, your assessment of your business, your assessment of one’s competitor’s strengths & weaknesses).
While PWIN just isn’t about developing a perfect number, and must be viewed as being a compulsory activity to making a winning pricing strategy, it’s actually a process that offers you direction to contemplate variables including rates, risk, capabilities and artistic pricing techniques. When you “pick” a rate as opposed to constructing a target range you’re playing darts – you will possibly not get near to the target nor do you want to consider the variables that can make your price a fantastic price. Wrap rates aren’t the only driver in costing; consider dependence on technically compliant labor rates, escalation/de-escalation, and fee. Your best homework and analysis will consider price in conjunction with many other variables. Be serious about this process.
To establish a PWIN procedure that gives the data you may need, you have to obtain knowledge of the customer, your organization, and of the competitors. Without seventy one knowledge bases, you’ll be missing all you may need to develop a complete pricing strategy. Most people only focus about the competitive analysis and skip another two steps. So you could well be dealing with partial information and likely incomplete results.
1. Knowledge of customer. Customer information “must haves” include synopses, draft and final RFP, anticipated RFP release date and contract start date, contract duration, prior buying history, authorized program funding, deductions from funding for Government program support, customer staff, & reserves, and customer independent cost estimate. Other questions may very well be: Are they experiencing budget pressure? What is their award history? Who are their favorites? Are they single item price-sensitive? Are they price-oriented or performance oriented? Is the customer considering more than the need like a lower risk approach? Are they interested from the relative importance of added value features? Are the gee-wiz-bang things you happen to be going to add quality or low value for that customer? How much would they be ready to pay for them in a best-value procurement?
2. Knowledge of your business. Be realistic about your direct and indirect rates. What you did of all time isn’t something that you should repeat. Break the habit of saying “this will be the way we’ve always done it”. Do a reputable self assessment: of how do others watch you including your customers, other businesses, and outside consultants. Know your reputation wins and losses and why. Resist the temptation to around emphasize your strengths but starting point about your weaknesses. Do a top down view by knowing the competitors’ past pricing behavior & market place conditions. Find out what will be the target range. Perform a bottom up analysis so you are aware what your cost is really. Challenge those cost areas which don’t reach the target. Keep in mind that a bottom up analysis usually brings about higher projections compared to the target range. That’s because the estimators devote everything they could think of. Give the estimators guidelines so you don’t spend quite a lot of time requiring you to cut in which a clear schedule and resource definition would help. In developing bid strategies include creative or new cost centers, consider de-escalation, seek quotes through competitive bidding of lowest supplier costs, design tradeoffs, and seek corporate investments so as to show your dedication to the program. Teammate pricing you can get in trouble. Know ahead what they are more likely to bid since their pricing can boost the bid.
3. Knowledge of competitors. Most often a PWIN only targets a competitor analysis. This is short sighted and only provides you with part of the information you will need. GSA Advantage, D&B, Internet searches and FOIA requests gives you information about the competing companies along with their contracts. Find out who their teammates are and the way they will likely bid. Gather intelligence as to what corporate investments competitors are more likely to make inside project and what their probable approaches will bidding. Find the little tricks the competitors have used inside past to acquire lower pricing in addition to their bid aggressiveness. Do they want to use a new work location for getting to lower costs or infuse their workforce with productivity enhanced tools? Companies have a tendency to do the same things as time passes. Consider if these are incumbent because incumbents often take fewer risks and think less ‘outside the box’. Consider using search services for example GovWin (fusion of Input, FedSources, and Deltek), and Tech America. Remember competitive intelligence is 80% data collection, 15% creative digging & 5% instinct or luck.
The following will be the keys points to take into account in having a winning pricing strategy:
1. PWIN isn’t a exact number instead a process to derive price + capabilities+ risk
2. Costs usually do not set price – market does
3. Get information about customer
4. Competitor’s likely price includes history & bid aggressiveness
5. Get creative!
6. Timely making decisions on price strategies
7. Work your individual costs early
8. Resist technical temptation to around scope
9. It’s not just about wrap rates
10. Are there any certain prices that matter more – what is the customer’s focus button?
11. Teammates can damage your price
12. Get externally focused – Price Matters!
When embark to price a project to win, writing your strategy encompassing ALL of the factors will bring you closer to making your bids winning bids. That means considering your customer, your organization information and also your competitor’s information. Without the three reviewed continuously over the process, you’ll probably be guessing, rather that riveting your attention around the range of price you would like. Consider whether lowest costs are a factor in case your added value items imply much on your customer.