Case Study: TO BID OR NOT TO BID
Marvin was the admiral and arch controlling administrator (CEO) of his company. The accommodation of whether or not to bid on a job aloft a assertive dollar amount adequate absolutely aloft his shoulders. In the past, his aggregation would bid on all jobs that were a acceptable fit with his company’s cardinal objectives and the company’s win-to-loss arrangement was excellent. But to bid on this job would be difficult. The applicant was requesting assertive advice in the appeal for angle (RFP) that Marvin did not appetite to release. If Marvin did not accede with the requirements of the RFP, his company’s bid would be advised as nonresponsive.
Marvin’s aggregation was awful acknowledged at acceptable affairs through aggressive bidding. The aggregation was project-driven and all of the acquirement that came into the aggregation came through acceptable contracts. Almost all of the audience provided the aggregation with abiding affairs as able-bodied as follow-on contracts. Almost all of the affairs were firm-fixed-price contracts. Business was absolutely good, at atomic up until now. Marvin accustomed a action whereby 5 percent of sales would be acclimated for responding to RFPs. This was referred to as a bid-and-proposal (B&P) budget. The amount for behest on affairs was absolutely aerial and audience knew that acute the aggregation to absorb a abundant accord of money behest on a job adeptness force a no-bid on the job. That could eventually aching the industry by abbreviation the cardinal of bidders in the marketplace. Marvin’s aggregation acclimated parametric and affinity ciphering on all contracts. This accustomed Marvin’s bodies to appraisal the assignment at akin 1 or akin 2 of the assignment breakdown anatomy (WBS). From a banking perspective, this was the best cost-effective way to bid on a activity alive abounding able-bodied that there were risks with the accurateness of the estimates at these levels of the WBS. But over the years connected improvements to the company’s ciphering action bargain abundant of the ambiguity in the estimates.
One of Marvin’s best important audience appear it would be activity out for bids for a abeyant ten-year contract. This arrangement was beyond than any alternative arrangement that Marvin’s aggregation had anytime accustomed and could accommodate an accomplished banknote breeze beck for ten years or alike longer. Acceptable the arrangement was essential. Because best of the antecedent affairs were firm-fixed-price, alone summary-level appraisement at the top two levels of the WBS was provided in the proposal. That was usually acceptable for the company’s audience to appraise the amount allocation of the bid. The RFP was assuredly released. For this project, the arrangement blazon would be cost-reimbursable. A WBS created by the applicant was included in the RFP, and the WBS was burst bottomward into bristles levels. Anniversary applicant had to accommodate appraisement advice for anniversary assignment amalgamation in the WBS. By accomplishing this, the applicant could analyze the amount of anniversary assignment amalgamation from anniversary bidder. The applicant would again be comparing apples and apples from anniversary applicant rather than apples and oranges. To accomplish affairs worse, anniversary applicant had to accede to use the WBS created by the applicant during activity beheading and to address costs according to the WBS.
Marvin saw the risks appropriate away. If Marvin absitively to bid on the job, the aggregation would be absolution its abundant amount anatomy to the client. All costs would again be acutely apparent to the client. If Marvin were to bid on this project, absolution the abundant amount advice could acquire a austere appulse on approaching bids alike if the affairs in the approaching were firm-fixed-price. Marvin convened a aggregation composed of his chief officers. During the discussions which followed, the aggregation articular the pros and cons of behest on the job:
● A advantageous ten-year (or longer) contract.
● The adeptness to acquire the applicant amusement Marvin’s aggregation as a cardinal accomplice rather than aloof a supplier.
● Possibly lower accumulation margins on this and alternative approaching affairs but greater all-embracing profits and balance per allotment because of the beyond business base.
● Establishment of a applicable accepted for acceptable added ample contracts.
● Absolution of the company’s amount structure.
● Risk that competitors will see the amount anatomy and appoint abroad some of the company’s accomplished bodies by alms them added pay.
● Inability to attempt on amount and accepting absolute amount anatomy apparent could be a attached agency on approaching bids.
● If the aggregation does not bid on this job, the aggregation could be removed from the client’s applicant list.
Clients charge force Marvin’s aggregation to acquire lower accumulation margins
Marvin again asked the team, “Should we bid on the job?”
1. What alternative factors should Marvin and his aggregation consider?
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