Bob Lohfeld

OPINION

Do's and don'ts of lowering your proposal costs

 

I used to think that no one would have the audacity to say you’re spending too much on proposals as long as you were winning.

With companies falling short of revenue goals, however, most certainly there will be downward pressure on all operating costs, including proposals costs. There are easily 50 ways to reduce proposal costs, but regrettably 45 of these will also lower your win rate.

The challenge is to reduce proposal costs without reducing your win rate.

We have done a lot of work on win rates and ways to reduce proposal costs. Here are some ideas that work and some that don’t.

Compensation levels for proposal professionals

With few exceptions, reducing proposal costs is all about reducing the total amount of labor needed to create a winning proposal, not reducing the hourly rate paid to the workforce. In the proposal field, you pretty much get what you pay for, so hiring low-priced labor tends to create a workforce that works slowly and suffers from proposal quality issues.

Generally, you can overcome these quality issues by applying additional hours for proposal rework, but this runs up the total cost. In the end, setting hiring salaries below market norms will likely increase the total cost of proposals. Even worse, outsourcing proposals to low-cost offshore providers has just not worked in the Federal Government arena.

Let’s resolve that the first step in reducing proposal costs is to hire good proposal professionals who are highly productive at their profession and pay a fair wage for these professionals. The Association of Proposal Management Professionals (APMP) conducts a study on salaries of proposal professionals worldwide, and the newly released 2012 study can be a good starting point to help you assess your salaries’ competitiveness.

70/30 Proposal staffing rule

Managing your proposal staff’s downtime is another area to examine when reducing proposal costs. When there is a lull in the workload, the company is still paying salaries, benefits, and other costs for proposal employees with little derived benefit. Because government solicitations arrive when the government wants to release them and not when we are ready to write them, there will always be peaks and valleys in proposal workloads, and this creates times when the in-house proposal team is paid to sit on the bench.

You can reduce this bench cost by staffing your internal proposal team to handle about 70 percent of the expected annual proposal workload and then contracting out the remaining 30 percent as peaks occur. Using this just-in-time, 70/30 proposal staffing strategy will save money in the long-run even considering that you probably pay more per hour for external resources. If you have any doubt about this, look at what it costs to staff up with your in-house team for an imminent RFP and then to keep that army of resources in place while the RFP slips month after month. It will make you a believer in the 70/30 rule.

Process, tools, and training

It should come as no surprise that you can make capital investments that will increase your proposal workforce’s productivity. Higher productivity equates to fewer hours required to produce proposals. Trading capital investment for labor is well understood and one of the best ways to reduce overall labor costs.

In the proposal area, these kinds of investments generally pay for themselves within 12 months. Some of our favorite investments include processes, tools, and professional training. If you haven’t already done so, consider standardizing and documenting your proposal processes for task orders and larger proposals based on industry best practice models. Establish a collaborative enterprise repository for use in managing all your proposal development activities. Use collaborative tools such as GoToMeeting or WebEx as part of your proposal tool suite. Keep computer and office software up to date (SharePoint 2010, Office 2010, Adobe CS6, SnagIt 11, Mindjet MindManager 2012, WinZip 16.5, etc.), and make sure you use the many low-cost and free software tools that improve personal proposal productivity. We evaluate these tools and publish a list of over 100 of our favorites on our Lohfeld Consulting Group website.

You should invest in other productivity tools as well, including:

  • An online proposal library of your past proposals and RFPs
  • A resume database of all resumes you’ve used in proposals and resumes of all your professional employees
  • A project past performance database of all the contracts that you are likely to cite in your proposals, including write-ups about what you actually accomplished when performing these contracts
  • An online graphics library of reusable proposal graphics
  • A library of pre-written proposal content covering such topics as your project management plan, recruiting process, accounting processes, etc. so you can use these in proposals.

Proposal travel costs

Travel costs also figure into the overall costs of doing proposals. You can reduce these costs by teleworking and by running proposals in a virtual development environment. The Washington, D.C., beltway is jammed with people commuting to and from work each day. If you allow telework on proposals, you can convert commute time into productive proposal time.

Companies frequently use out-of-town travel to bring large teams together to work on proposals. Putting them up in hotels and paying travel and meal expenses can add up. Some companies insist this is necessary to do their proposals, while others with dispersed workforces regularly develop proposals virtually.

Virtual proposal development using the right tools is highly effective and cost efficient. In our case, we manage virtual proposal development for some companies where we have never met anyone face-to-face. We manage the entire process using proposal collaboration tools, and the proposals are just as good as if everyone had traveled to a central location to work the proposal.

There are many other cost-saving tips that we did not discuss. I’m sure you also have your favorite cost-saving tips. If you would like to share them, please post your ideas in the comments section following this article so others can learn from your experiences.

 

Reader Comments

Mon, Oct 1, 2012 Deb Margolis Anchorage, AK

Here's another tip: During those proposal lulls, put your team to work on marketing materials, SOQs, website updates, and other marketing materials. They get to use their creativity and design skills, while maintaining productivity and producing value for the company!

Fri, Sep 28, 2012 DD Tennessee

Mr. Lohfeld's article points out the need to carefully plan for contingencies such as RFP release date slippage, and using very experienced small "swat teams" of external resources on demand. When combined with virtual proposal teaming, my experience is that this is very effective in lowering proposal actual costs. Another cost measure is to carefully evaluate proposals at each gated review, and don't chase opportunities if the probability of win trends significantly downward due to emerging conditions. Always know your customer.

Fri, Sep 28, 2012 Dawn Woodbridge

Thank you for this article. The advice is common sense yet thought provoking, and has motivated me to take a closer look at what we are spending for proposals.

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