WFED405:
Lesson 3: Developing Project Proposals
Lesson 3 Overview
This lesson prepares you to develop project proposals. Whether you are working as a project manager responding to RFPs or a staff member responding to an internal request to submit project ideas, writing winning proposals is a very important skill for professionals throughout both public and private sector organizations. This lesson also discusses how organizations make the decision to respond to an RFP and how they assess the effectiveness of their proposal submissions and success. The lesson introduces several of the project management processes within the Project Procurement Management Knowledge Area, which includes a discussion of the primary types of contracts used in procurement management and control.
Lesson 3 Learning Objectives
Upon conclusion of this lesson, you should be able to
- develop a project proposal;
- identify how organizations determine whether or not to respond to an RFP;
- measure the success of an organization’s proposal efforts;
- explain the types of contracts and terms and conditions; and
- identify the inputs, tools and techniques, and outputs related to 12.1 Plan Procurement Management, 12.2 Conduct Procurements, and 12.3 Control Procurements project management processes.
Lesson 3 Readings and Activities
By the end of this lesson, be sure you have completed the readings and activities found in the Lesson 3 Course Schedule.
Proposal Development | Video
Your textbook discusses the typical sections that are usually included in a project proposal. The type of project and the RFP will often determine the actual content and detail included. An RFP may include a suggested budget range based on available funding, and this will limit the scope of the work that you propose. You will be using your textbook as a guide to respond to an RFP for your course project. As discussed in your text, cost estimates must be realistic and reasonable. If your budget is too conservative (too heavily padded), your proposal may exceed the customer’s authorized funding or not be competitive. However, if you underbid, you may end up losing money or end up sacrificing the quality of your end products.
“First, have a definite, clear practical ideal; a goal, an objective. Second, have the necessary means to achieve your ends; wisdom, money, materials, and methods. Third, adjust all your means to that end.”
—Aristotle (as quoted by Khanna & Awad, 2015, p. 185)
Creating a Winning Proposal (Success Factors)
Following are some things that determine the success of a proposal(adapted from Gido et al., 2018):
- Remember that project proposals are selling documents. This is a competitive process, and the proposal is your chance to sell your company.
- It should emphasize that your proposal is the best solution to the problem.
- Be sure to highlight unique factors that you can provide.
- Emphasize the benefits that your proposal will provide to the customer. Your proposal needs to distinguish what your company offers over your competitors.
- Be as simple and concise as possible. If it’s too wordy, you reduce the chances of a complete read.
- Be sure to address each requirement as listed in the RFP. Use headers to make it clear where you have addressed the requirements.
- Be realistic; don’t oversell. If you propose it, be sure that you can deliver.
Obviously, a key item in a proposal is the budget and costs. Pressures will be imposed on the proposal preparer to provide margin and profit, and also to have a low enough cost to be the preferred source.
Watch Video 3.1, which is a very short Dilbert video clip on budgets.
PMBOK® Guide Highlights
When considering the PMBOK® Guide recommendations (and answering questions on the course lesson quizzes or on PMP®/CAPM® exams) related to project proposals, assume that many project proposals are competing with each other, and that a formal selection process is in place to review, compare, and select/approve by management.
PMP®, CAPM®, and PMBOK® Guide are registered marks of the Project Management Institute, Inc.
Deciding Whether to Respond to an RFP
Your book discusses several factors that an organization should consider when deciding whether to respond to an RFP. Corbin Links offers additional guidance when deciding whether or not to bid on an RFP. The following list has been reproduced from Links (n.d.).
Should You, or Should you Not Respond to an RFP?
Requests for Proposal or “RFP” can be expensive and time consuming to create, much less respond to.
Often, there are many stakeholders involved, many different decision makers, and many barriers to payment.
The trick to being successful is finding out all the “insides” of the RFP.
Why was it really created? Who created it? What is the creator’s role in the organization? Does he or she have actual purchasing authority, or are they just a cog in a much larger wheel? Did a vendor create it for the requesting company? If so, did the vendor create it in such a way as to be overly favorable toward that vendor?
Calculate the true RFP winning chance, before deciding.
Let’s take government RFP bid responses as one example. A government agency may clearly state it is looking for a certain type of expertise, or composition of staff demographics, and pricing. And often, a certain weighting criterion will be assigned to each. But those criteria are for the “public”, and often required by law. In reality, an established vendor, doing the exact work specified in the RFP, for that exact agency and offering the lowest price STILL may not win the RFP award. Why? Hidden factors. (See above.) If you are stacked against 20 other competitors, you have to be realistic about your true chances of winning vs. effort in. Put honestly and bluntly—RFP responses can be like buying lottery tickets. Sure, maybe the RFP lottery has much better odds than the multimillion-dollar lotteries advertised on television, but it’s still a lottery. Or like betting on a horse race. The formula changes for each individual RFP, but here are a few things to consider:
- Time to be spent in response. (An RFP requiring a 20–50+ page response with graphs, citations, diagrams, etc. can take weeks for a responding company to prepare.)
- Opportunity costs of not pursuing other direct clients who have money in hand, while responding to the RFP.
- The perceived chance percentage your firm could be selected out of several—or even dozens—of other bidders.
- The payoff—if you win, will it all have been worth it? If so, how long will it take you to recoup your up-front investment? (Money, prestige, other new business, marketing collateral, etc.)
Calculate the RFP requestor’s award ratio.
There are many organizations, including governments, who may engage with you throughout the entire RFP process, only to later halt or stop the bidding process entirely. Or cancel the project after it is awarded. Try to find out how many RFPs are created vs. awarded by that organization, before bidding. (It’s not easy, but worth a little research.) For example, freelance bid services such as Elance include this statistic. It helps potential bidders understand if the requestor is a perennial tire kicker seeking only free information, or if he is a bona fide bidder with budget [sic]. We recommend responding only to organizations with a 75% or greater award ratio.
Avoid any RFP requiring a “shotgun” approach.
Let’s say you just found out about this great RFP. You just know you can do it. They [sic] payoff is huge. There’s only one catch—the deadline is 2–3 days away! Rushing the process can lead to mistakes and reduce the time spent on research. Research is SO vital to the decision process that I almost always recommend against shotgun RFPs. If you don’t have the time to do it right, just sit this one out. There will always be plenty more RFPs in the future. If you do decide to respond, consider engaging an RFP Specialist to help increase your winning percentage.
Have you bid—and won—on similar RFPs?
(Self explanatory [sic] . . . )
If you do decide to go for it, then go for it.
Submitting a winning RFP response takes time, effort, diligence and high quality [sic] work. Your response should literally scream “there is no other choice but us!” Need help with that?
RFP Response Trends and Benchmarks
We can’t emphasize enough the amount of effort and potential costs associated with developing an effective proposal. You must give careful consideration in making your decision to go for it. Loopio (n.d.) conducted a 2020 study of RFP responders to evaluate response trends and benchmarks from over 650 people across North America that were either directly involved in the RFP response process or managed an RFP response team. The study participant industries included software (22%); technology (hardware, telecom, and IT) (20%); financial, legal, and media services (20%); manufacturing and retail (15%); other (12%); and public sector (education, health care, government, and nonprofit (11%). The following summarizes key insights from the report 2021 RFP Response Trends & Benchmarks by Loopio (n.d.).
RFP Response Trends and Benchmarks
- Organizations responded to 150 RFPs in 2020 on average, with 18% of those surveyed responding to 101-250 RFPS, 9% responding to 251-500 RFPs, and 8% responding to over 500 RFPs in 2020. Small and midsize companies (1-500 employees) responded to significantly fewer RFPS than enterprise companies (5001+ employees).
- 40% of respondents indicated that they responded to more RFPs in 2020 compared to 2019, with 81% indicating that the reason for more responses was due to an increase in the number of RFPs that were received, and 39% indicating that they received more RFPs because they proactively pursued more bids.
- 21% of respondents indicated that they responded to fewer RFPs in 2020 compared to 2019, with 68% citing the reason for the drop in response rate was because they received less RFPs in 2020 (keep in mind that 2020 was impacted by COVID). Another 23% indicated that they were more selective about responding to RFPs, 19% indicated that the drop was due to less resources to respond, 11% indicated the drop-in response rate was due to a change in business strategy, and 10% indicated that their win rates were not high enough to justify doing more.
- Organizations responded to 65% of the RFPs that they received on average, with 22% responding to 76-90% of RFPs received, 15% responded to 91-99% of RFPs received, and 11% indicated that they responded to 100% of RFPs received.
- 72% of respondents use a go/no-go process to assess if they are likely to win an RFP prior to starting a proposal.
- On average the organizations surveyed win 47% of the RFPs that they bid on; 29% of respondents won between 50-79% of their bids and 13% won 80% or more; whereas 32% only won between 20-39% and 16% of respondents won only 19% or fewer bids.
- Those that had higher response rates also tended to have higher win rates.
- 75% of the top performing teams with response rates greater than 50% used a go/no-go process to decide if they should respond to an RFP. This could be an indication that those that are not using a go/no-go process may be winning fewer bids because they are wasting their time responding to RFPs that they are unlikely to win.
Common Reasons for Losing a Bid
The following indicates the percentage of respondents that selected each of the common reasons for losing a bid, interestingly, the reasons for losing a bid were often impacted by company size, role of respondent, and employee level of respondent, with larger companies more likely to cite price as the top reason; proposal managers and writers more likely to cite price and losing to competitors as the top reason; and executives and leaders were more likely to cite proposal quality and customization level, bad fit customers, or missed deadlines as the top reasons for losing bids:
- Price of our solution (56%);
- Lost to competitor (50%);
- Favored incumbent from the start (36%);
- Product doesn't meet customer needs (32%);
- The bid was blind (27%);
- We never found out why (12%);
- Proposal quality wasn't strong (8%);
- We missed the deadline (5%);
- Other (3%).
Key Insights from Top Performers
The top performers were respondents that won 51% or more of their RFP bids. They tended to submit more RFPs, have larger RFP response teams, use RFP response software, track success metrics, and invest more time in preparing each RFP.
The following are statistics related to the top performers:
- submitted 175 RFP responses in 2020 compared to the average of 147 across all respondents;
- included 10 stakeholders on average with every RFP preparation compared to the average of 9 across all respondents;
- spent 25 hours on average writing a single RFP compared to the 23 hour average across all respondents;
- 91% tracked RFP success metrics;
- 72% used a go/no-go process for deciding whether to respond to an RFP;
- 69% used response software for developing responses to RFPs.
RFP Response Team, Contributors, and Effort
The following includes key statistics related to RFP ownership and characteristics of the RFP response team:
Hours Spent
- On average respondents spent 23 hours developing a single RFP response with over 50% of respondents spending 5-20 hours on each RFP response, 32% spending 21-50 hours on each RFP response; and 9% spending 51-70 hours writing each RFP response;
- Large companies spent 27 hours on average compared to 19 hours in small and midsize companies; and the software industry spent significantly more hours than other industries at 27 hours per RFP response; respondents with the highest win rates spent 2 hours more on each RFP;
- 55% of respondents took between, 5 and 48 hours from start to finish on the turnaround time for an RFP response, 21% had an average response writing time of 6-10 days; 15% had an 11-20 day response time; 4% at 21-30 days; 2% at 31-60 days; and 2% greater than 61 days;
Team Members
37% of respondents indicated that the owner of the RFP response process was a dedicated RFP manager/writer or team; 18% indicated that the owner was both the proposal and sales team; 16% indicated sales representatives; and 14% indicated solutions engineers/consultants;
Team Size
- The average RFP response team size was 7, with 20% having 1-2 team members, 20% with 3-7 team members, 36% with 8+ team members, and 11% that did not have a dedicated RFP response team;
- A total of 9 people is involved in the creation of every RFP response on average, with 28% of companies involving less than 5 people and 33% of companies involving more than 10 people on each RFP;
- Respondents with larger teams and more contributors were more likely to have higher win rates which could be due to greater insights from across an organization or shared workload that provides opportunities for better quality proposals;
Use of Response Software
- Teams that use RFP response software have 2 more contributors on average, which could either be due to the software making it easier to involve more contributors or because larger teams are more likely to adopt software;
- 69% of respondents use RFP Response software and the technology industries were more likely to use it than other industries;
- The following indicates the percentage of respondents that selected each benefit for using RFP Response software:
- content storage improved (65%);
- time saving (63%);
- automation of manual tasks (53%);
- better quality proposals (45%);
- completing more RFP responses (42%);
- improved collaboration between teams (40%);
- meeting more deadlines (36%);
- enabled more team members to contribute (30%);
- faster sales cycle (21%);
- better win rates and/or increased revenue growth (16%).
Journal Entry 3.1
At this time, please read "How Bad Can It Be?" by Cal Harrison, which discusses issues with the priced-based RFP process. This ties into the issues related to making bid/no-bid decisions.
Next, please read the research article "A Comparison of Qualifications Based-Selection and Best Value Procurement for Construction Manager/General Contractor Highway Construction," by Alleman et al. (2017) that evaluated QBS versus best-value procurement practices within the construction industry. You may choose to only read the following: Introduction, pp. 2–3, and the Results and Findings section, pp. 8–13. Both articles are linked from the course schedule.
Then, continue to the journal entry on the next page.
Journal Entry 3.1: QBS and Best Value Processes
Stop, Think, and Reflect—Journal Entry 3.1
Answer the following questions before moving on to the rest of this course to realize the full potential impact of these assignments:
- First, be sure you have read the three articles that have mentioned the qualifications-based selection (QBS) process. The first was in the last lesson by James Hegarty (2011) “How to Develop and Evaluate an Engineering Services Proposal.” The second one was by Cal Harrison: “How Bad Can It Be?” And the third was by Alleman et al. (2017): “A Comparison of Qualifications Based-Selection and Best Value Procurement for Construction Manager/General Contractor Highway Construction.” All three of these articles are linked from the course schedule.
- In your journal, discuss your opinion regarding the use of the QBS and best-value processes for proposal selection.
Submit Assignment
Select Submit Assignment, and use the text-entry feature to submit your completed assignment.
| Criteria | Ratings | Points |
|---|---|---|
| Discuss your opinion regarding the use of the QBS and best-value process | Instructor to leave comments related to this criterion | 10 pts |
Estimating Project Proposal Costs
We will get into cost estimations in much more detail later in the course, but for now we would like to introduce you to a few concepts that will help with the preparation of your project proposal.
Project Proposals
When preparing a project proposal, you will need to provide a detailed budget estimate to the customer.
When estimating project costs, you cannot simply include the hourly wages for your employees; there are many more costs associated with an employee, and your budget estimate should capture those costs.
The following are some terms related to employee expenses and budgets.
Direct Costs
Direct costs can easily be tied to the project, such as
- hourly pay/salary (this is the base pay for an employee),
- cost of materials, and
- cost of equipment usage.
Indirect Costs
Indirect costs include additional costs related to an employee's benefits or other costs related to running a business that are shared across the organization and cannot be easily tied to a specific project. Organizations determine a percentage to add on to budgets to capture these costs:
- Fringe benefits: Costs related to employee benefits, such as health care, retirement contributions, paid time off (vacation and sick leave), workers' compensation, and so on.
- Overhead: Overhead includes the business expenses that are not project-specific, such as rent, heat and air conditioning, electricity, office supplies, phone and internet, computer equipment, web hosting, and so on.
- General and administrative (G&A): G&A includes other general expenses related to running your business, such as salaries for executives and administrative staff that would not be directly assigned on a project, legal fees, accounting fees, and so on.
- Facilities and administrative (F&A): This would be equivalent to combining overhead and G&A and at Penn State include research facilities, utilities, administrative salaries, and general office expenses.
These indirect costs typically have a rate assigned to each category, and that rate is applied to the estimated direct costs. A 2017 Government Contractor Survey by Grant Thornton (2018) reported the following rates for companies that conducted business with the U.S. federal government in 2017:
- Fringe: 36% (median rate excluding the effect of bonuses)
- Overhead: 50% (based on median on-site rate) and 33% (average off-site, customer location)
- G&A: 13% (using a total cost input [TCI] base) and 15% (using a value-added cost input)
Example: Penn State
Penn State's rates in 2021 for government grants and contracts—Penn State uses F&A and fringe rates to add on to project budgets to capture these costs:
- F&A: Rates vary based on location, type of work (research or instruction), and whether it is on or off campus and range from 26% to 60% at University Park. F&A is applied to modified total direct costs:
Modified total direct costs (MTDC) includes all direct salaries and wages, applicable fringe benefits, materials and supplies, services, and travel. MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, and participant support costs.
- Fringe benefits: Fringe rates vary based on the type of employee—salaried employee (34.88%), graduate assistant (12.35%), hourly wage payroll (7.94%), student hourly wages (0.31%), and postdoc (23.88%).
More Than Just Salary
The point of this discussion is that when estimating project costs, you need to account for much more than the salaries of your employees. For the course project, we would like you to estimate a fully loaded hourly rate for your employees. If Penn State were to submit a project proposal, they would include the salaries of all employees on the project, a line item for fringe (applied to the salaries), and a line item for F&A (applied to all expenses including fringe). Instead of estimating your budget in this way, we would like you to use a fully loaded charge-out rate for each employee. You do not need to account for overhead and G&A for materials or equipment. We just want to see that you have put some thought into the actual expenses a company incurs for their employees.
For example, if your project proposal includes the cost of an engineer whose base salary is $100,000, this would be the equivalent of $48/hour. Fringe would tack on an additional 34.88% and F&A would be another 60%.
The fully loaded hourly rate would be
$48 + ($48 × 0.3488) + ($64.74 × 0.60) = $103.58 per hour
Project Proposal Personnel
When you submit your course project proposal, your budget section should indicate the employees that will be working on the project. For the course proposal, you can include fictitious people (don't do that on a real proposal!), but we want you to consider the personnel levels. So if you include the employee names, you should also include their level to indicate experience level. Later in the semester when costs are added to the project file (in MS Project or ProjectLibre), you will be including the human resources by job type and level to get you thinking about who would be doing the work. For example, you don't need a senior engineer to be doing the work that could be done by a Level 1 engineer. Similarly, you don't need a senior trainer to do work that could be done by an entry-level trainer.
Examples of Employee Types and Levels
Here are some examples of employee types and levels that might be used for the two course RFPs. The hourly rate for each employee type and level would vary by position, discipline, and level. This is not a comprehensive list but is intended to get you thinking about the personnel that you would have in your project proposal. The point of this is that you need to illustrate that you have thought through the type of employee and experience level required for your tasks and indicate that by assigning the "type" and "level" of the resources used.
SVRA Boardwalk Replacement RFP
For the engineering personnel, you would also specify discipline:
- Engineer I: Entry-level engineer that works with a senior staff engineer to learn the relevant processes, procedures, practices, and regulations.
- Engineer II: Independent contributor to the project teamwork.
- Staff Engineer: Completes all functions of lower level engineers as well as higher level, more complex engineering tasks. May be responsible for monitoring each assignment and project and coordinating assignments.
- Senior Staff Engineer: Completes function of lower level engineers and also coordinates and establishes approvals for engineering work.
Other employee types and levels may include:
- Electrician I
- Electrician II
- Draftsman
- Construction Site Foreman
- Construction Worker
Engineering Leadership Development Camp RFP
For those working on the Engineering Leadership Development Camp RFP, below are employee types and levels you may wish to consider:
- Trainer I: Applies basic skills while developing some specialized skills in procedures, operations, and so on; performs routine tasks, limited decision-making.
- Trainer II: Applies skills and job knowledge in area of expertise; may adapt procedures, operations, techniques, and so on to meet needs of area of specialization; may work on nonroutine tasks.
- Trainer III: Applies full range of job knowledge and specialized skills; frequently adapts procedures, techniques, and so on to meet specialized needs; may serve as lead; relies on experience and judgment; regularly works on varied and complex tasks.
Other employee types and levels may include
- Training Manager
- Instructional Designer
- Administrative Assistant
You are not limited to any of the above disciplines or levels, and again these are not comprehensive. Rather, they are intended to get you to think about the needed resources for your project.
Project Management Basics: Procurement | LinkedIn Learning
This LinkedIn Learning video series is optional but encouraged for anyone interested in learning more about procurement.
Procurement management includes the processes necessary to purchase or acquire products, services, or results from outside the project team. These processes are required to develop and administer contracts and purchase orders.
Before moving on, please watch the following LinkedIn Learning video series on Project Management Basics: Procurement by Oliver Yarbrough. If you have not already logged in through Penn State, go to Penn State's LinkedIn Learning page, log in, and then select the video series link.
Watch the Video Series
This video series covers the following topics (26 short videos: 1h, 13m total).
Introduction
- Implement successful procurement (1m, 36s)
- What to know before watching (1m, 27s)
Procurement Management Overview
- Define procurement management (2m, 26s)
- Project manager's role in procurement (2m, 20s)
- Key procurement management concepts (2m, 3s)
Common Procurement Pitfalls
- Dealing with conflicts of interest (2m, 9s)
- Failure to communicate objectives (2m, 45s)
- Use of blanket purchase agreements (3m, 9s)
Critical Procurement Success Factors
- Study best practices (2m, 20s)
- Tailor procurement techniques (2m, 51s)
- Reward behaviors and results (2m, 27s)
- Set up a contract change control system (3m, 24s)
Procurement Management Processes
- Plan Procurement Management (3m, 50s)
- Contract types (3m, 42s)
- Conduct procurements (2m, 39s)
- Control procurements (3m, 49s)
How to Implement Procurements
- Procurement research (2m, 50s)
- Procurement solicitation (3m, 6s)
- Procurement negotiation (2m, 58s)
- Procurement award (2m, 25s)
- Procurement administration (3m, 15s)
- Procurement closeout (2m, 53s)
Emerging Trends: Project Procurement Management
- Focus on rapid procurement (3m, 53s)
- Increase in reverse auctions (3m, 56s)
- Impact of technology (3m, 10s)
Conclusion
- Improve your procurement skillset (1m, 1s)
Accessing LinkedIn Learning
LinkedIn Learning videos are available to Penn State students free of charge. To access this collection, go to LinkedIn Learning and search for the course name Project Management Basics: Procurement. You may need to login with your Penn State WebAccess username and password (the same login you use to access Canvas).
Need Assistance?
Should you have any difficulty or technical issues accessing these tools, please don't hesitate to contact the IT Service Desk, which is available to you 24/7. Assignment-related questions should be addressed to your instructor.
Introduction to the Project Procurement Management Knowledge Area | Focus on Application
Project procurement management is one of the 10 Knowledge Areas outlined in the PMBOK® Guide. It includes four project management processes that are located in four of the five process groups (see Table 3.1). This lesson will cover the three processes in the Project Procurement Management Knowledge Area.
| Project Management Process | Process Description | Project Management Process Group |
|---|---|---|
| 12.1 Plan Procurement Management | The process of documenting project procurement decisions, specifying the approach, and identifying potential sellers. | Planning |
| 12.2 Conduct Procurements | The process of obtaining seller responses, selecting a seller, and awarding a contract. | Executing |
| 12.3 Control Procurements | The process of managing procurement relationships, monitoring contract performance, and making changes and corrections as appropriate. | Monitoring and Controlling |
As discussed in the previous lesson, the procurement management processes involve agreements (such as legally binding contracts) between the buyer and the seller, which obligate the seller to provide something of value (such as products, services, or results) and obligate the buyer to provide monetary or other valuable compensation. Legally binding agreements and contracts are usually subject to more extensive review and approval to ensure that the project need will be satisfied. Organizational policies often mandate the involvement of specialists in contracting, purchasing, law, and technical disciplines.
In cases where the acquisition is not just for shelf material, goods, or common products, the seller may manage the work as a project. In these cases, the buyer becomes the customer, and the seller’s project management team is concerned with all the processes of project management, not only the procurement processes.
For purposes of the certification exams, when considering these processes, assume that the buyer of an item for a project is assigned to the project team, and the seller is external to the project team, and that a formal contractual relationship exists between the buyer and the seller and will be developed.
Focus on Application
Boeing 787 Dreamliner
Outsourcing is a term for contracting out portions of work, services, manufacturing, and so on (to suppliers outside of the organization). During the development of the Boeing 787 Dreamliner, Boeing made a decision to outsource a much greater percentage of the work than they had ever done in the past, with the intention of reducing the development time from 6 to 4 years and reduce the development cost from $10 billion to $6 billion (Denning, 2013). Boeing had typically outsourced about 35%–50% of their work, but they increased this to 70% for the Dreamliner (Denning, 2013). They intended to outsource in an effort to keep manufacturing and assembly costs low while spreading the financial risks of development to Boeing’s suppliers. In the end, the Dreamliner was billions of dollars over budget and 3 years behind schedule (Denning, 2013).
What went wrong? The following is adapted from Denning (2013):
Coordination Issues
When outsourcing, there are risks that components won’t fit together during assembly. In addition to outsourcing the manufacturing of components, Boeing also outsourced the on-site support for coordination and oversight to subcontractors and, in the end, they had to send hundreds of Boeing engineers worldwide to solve the various technical problems.
Innovation Risk
Boeing outsourced not only known technologies, but also major technological innovations, including new electrical systems, power, and distribution panels. Boeing delegated a significant amount of the detailed engineering and procurement to subcontractors, resulting in a barrage of unexpected problems that contributed to the delay and increased cost.
Warnings About Outsourcing and Make-Buy Decisions
Hart-Smith (2001) has warned that large-scale outsourcing comes with additional costs and risks, and that instead of cutting costs and increasing profits, it drives profits and knowledge to suppliers while increasing costs for the mother company. Hart-Smith argues that a complete assessment of all the costs should be made before making a make-buy decision: “make-buy decisions should not be made until after the product has been defined and the relative costs established.” You need a considerable amount of additional up-front planning to ensure that major sub-assemblies fit together at final assembly. Without this planning, you run the risk of increasing the cost by orders of magnitude compared to the potential savings from outsourcing.
Tiered Outsourcing
Boeing used a new tiered outsourcing model, where Tier–1 strategic partners served as the integrators who assembled the parts and subsystems produced by Tier–2 and Tier–3 suppliers, instead of Boeing serving in this traditional role. It turned out that some of the Tier–1 partners did not have the knowledge to develop portions of the aircraft or ability to manage the suppliers.
Contractual Arrangements
Poorly designed contractual arrangements created incentives to work at the speed of the slowest supplier.
Offshoring
Components of the Dreamliner came from nine different countries, with 30% foreign made. Boeing did not plan for the additional communications and involvement required.
Communication
Boeing opted for a web-based communications tool (Exostar) in place of face-to-face or on-site communications. Suppliers were to input up-to-date information regarding progress; however, suppliers did not input accurate or timely information, partly due to cultural differences, as well as a lack of trust. This resulted in a significant delay in identifying problems.
Project Management Team
The original leadership team did not include any expertise in supply chain risk management.
Read the entire article at What Went Wrong at Boeing?
PMBOK® Guide is a registered mark of the Project Management Institute, Inc.
PM Process: 12.1 Plan Procurement Management
You will now step through the first three elements of the Project Procurement Management Knowledge Area. The first of these, the Plan Procurement Management process, is one of the 49 project management processes and includes the documentation of procurement decisions, the specification of the procurement approach, and the identification of potential sellers. Plan Procurement Management is in the Planning Process Group, and the first process in the Project Procurement Management Knowledge Area. The process determines whether to acquire outside support, what to acquire, how to acquire it, how much, and when. Table 3.2 includes the inputs, tools and techniques, and outputs for the Plan Procurement Management process.
| .1 Inputs | .2 Tools and Techniques | .3 Outputs |
|---|---|---|
|
|
|
12.1 Plan Procurement Management Process Inputs, Tools and Techniques, Outputs Glossary Definitions, and Additional Details
The PMBOK® glossary definition is provided for each of the inputs, tools and techniques, and outputs for this process, shown in italics, for any terms that have not previously been defined. Otherwise, the term is hyperlinked, and you can hover over the link to view the definition. When relevant, the instructors may provide additional information following each definition. See PMBOK® Guide (6th ed.), pp. 466–481.
.1 Inputs to the Plan Procurement Management Process
.1.1 Project charter
.1.2 Business documents
- Business case
- Benefits management plan
.1.3 Project management plan
The components of the project management plan that are most useful for the plan procurement management process are the project scope statement, work breakdown structure (WBS; see Gido et al., 2018, Chapter 1), and the WBS dictionary. These components help in deciding whether the work should be completed in house or contracted out.
- Scope management plan: A component of the project or program management plan that describes how the scope will be defined, developed, monitored, controlled, and validated.
- Quality management plan: A component of the project or program management plan that describes how applicable policies, procedures, and guidelines will be implemented to achieve the quality objectives.
- Resource management plan
- Scope baseline: The approved version of a scope statement, work breakdown structure (WBS), and its associated WBS dictionary, which can be changed using formal change control procedures and is used as a basis for comparison to actual results.
.1.4 Project documents
- Milestone list
- Project team assignments: Indicates which personnel are assigned to work on the team.
- Requirements documentation
Requirements most pertinent to the Plan Procurement Management process are those related to any legal or contractual requirements. - Requirements traceability matrix: A grid that links product requirements from their origin to the deliverables that satisfy them.
- Resource requirements: The types and quantities of resources required for each activity in a work package.
Information from the activity resource requirements will help in making decisions related to using a contract for outside services or performing the work in-house. - Risk register
The risk registry may help to inform decisions regarding whether to use a contract for outside services or performing the work in-house. - Stakeholder register
The stakeholder register is helpful in determining whether the decision to contract out work or use suppliers has any impact on any project stakeholders.
.1.5 Enterprise environmental factors
The most pertinent factors are those related to the marketplace, such as availability and price of goods and services.
.1.6 Organizational process assets (OPA)
This can include many factors, but the most critical factor is the procurement contract type. There are three primary contract types, and each of these have their own variations.
If you would like to learn more about contract types, please visit this website (this link includes an example for each type): Types of Procurement Contracts Used in Project Management.
PMBOK® Guide Highlights
For each contract type, be sure you know
- how the seller is paid (is it based on delivery, effort, or time?);
- who has more risk: the buyer or seller; and
- how detailed the statement of work (SOW) is (Is it clearly defined? Is there flexibility?).
.2 Tools and Techniques for the Plan Procurement Management Process
.2.1 Expert judgment
Expert judgment related to purchasing or legal issues is most relevant to this process.
.2.2 Data gathering techniques
- Market research: The process of gathering information at conferences, online reviews, and a variety of sources to identify market capabilities.
It provides information on the availability, pricing, and new alternatives related to needed goods or services.
.2.3 Data analysis techniques
- Make-or-buy analysis: The process of gathering and organizing data about product requirements and analyzing them against available alternatives, including the purchase or internal manufacture of the product.
When deciding to make or buy, consider all costs, as highlighted in the Boeing case study.
.2.4 Source selection analysis
Several selection methods are available to choose from in selecting the source when multiple bidders are available. Best practice is to include the selection method in the procurement documents so that bidders know in advance how the bids will be evaluated. The PMBOK® Guide reading includes a description of each: least cost, qualifications only, quality-based/highest technical proposal score, quality and cost-based, sole source, and fixed budget. Least cost and qualifications-based selection (QBS) are discussed in more detail in the supplemental readings. The least cost method is appropriate for project outcomes that are well defined, standard or routine, and have well-established standards and practices. For nonstandard projects that involve risk, qualifications and experience become much more important.
.2.5 Meetings
These may include pre-bid meetings with potential bidders.
.3 Outputs From the Plan Procurement Management Process
.3.1 Procurement management plan
A component of the project or program management plan that describes how a project team will acquire goods and services from outside the performing organization.
.3.2 Procurement strategy
The approach by the buyer to determine the project delivery method and the type of legally binding agreement(s) that should be used to deliver the desired results.
.3.3 Bid documents
All documents used to solicit information, quotations, or proposals from prospective sellers.
Procurement documents: The documents utilized in bid and proposal activities, which include the buyer’s Invitation for Bid, Invitation for Negotiations, Request for Information, Request for Quotation, Request for Proposal, and seller’s responses.
- Request for information (RFI): A type of procurement document whereby the buyer requests a potential seller to provide various pieces of information to a product or service or seller capability.
Used when information is wanted from a potential bidder but before a request for proposal or invitation to bid is initiated. - Request for quote (RFQ) (may also be called an "invitation for bid" or "tender notice"): A type of procurement document used to request price quotations from prospective sellers of common or standard products or services. Sometimes used in place of request for proposal and, in some application areas, it may have a narrower or more specific meaning.
These are often used in place of an RFP when the purchasing decision is most likely going to be determined based on the low price technically acceptable offer (LPTA). - Request for proposal (RFP): A type of procurement document used to request proposals from prospective sellers of products or services. In some application areas, it may have a narrower or more specific meaning.
An RFP is typically used when the purchase decision will include other aspects beyond price, such as the proposer’s past performance, reputation, and technical approach.
.3.4 Procurement statement of work
Describes the procurement item in sufficient detail to allow prospective sellers to determine if they are capable of providing the products, services, or results.
Please see the document for a Statement of Work Template. You can use this template for either the project statement of work or the procurement statement of work.
PMBOK® Guide Highlights
Be able to identify differences between the procurement statement of work and the project statement of work. Remember, for purposes of the course quizzes and the PMI exams, you are on the project team that is working on a project for your customer. As the project team, you might decide to purchase additional products or services from another seller:
- Project statement of work: This comes from your customer describing what they want from the project you are working on for them.
- Procurement statement of work: This comes from you describing what you want to purchase from your potential bidder.
For more on the difference between the two, read Rowley's 5th Edition PMBOK® Guide—Procurement Statement of Work vs. Project Statement of Work post.
.3.5 Source selection criteria
A set of attributes desired by the buyer which a seller is required to meet or exceed to be selected for a contract.
You should finalize source selection criteria prior to reviewing bids.
Rowley (2013) developed a set of questions that the organization can ask in order to score proposals against criteria (Table 3.3).
|
|
Category |
Criterion |
Explanation |
|---|---|---|---|
|
1. |
Integration |
Management approach |
Does seller have, or can it develop, management processes and procedures to ensure a successful project? |
|
2. |
Scope |
Understanding of need |
Does proposal address the procurement statement of work (SOW)? |
|
3. |
Time |
Deadline |
With what degree of confidence can the seller produce the product within the specified deadline? |
|
4. |
Cost |
Overall or life-cycle cost |
What is the total cost of the procurement (purchase cost plus operating cost)? |
|
5. |
Cost |
Financial capacity |
Does seller have necessary financial resources? |
|
6. |
Cost |
IP rights |
Does seller assert intellectual property rights in the product they produce for the project? |
|
7. |
Cost |
Proprietary rights |
Does seller assert proprietary rights in the product they produce for the project? |
|
8. |
Quality |
Technical approach |
Can seller’s technical methodologies, techniques, and solutions meet the technical requirements in the procurement documents? |
|
9. |
Quality |
Warranty |
What will seller cover by warranty, and for what time period? |
|
10. |
Quality |
Production capacity |
Does seller have sufficient production capacity to meet potential future requirements? |
|
11. |
Human Resources |
Technical capability |
Does seller have technical knowledge and skills needed? |
|
12. |
Risk |
Risk response |
How much risk is being assigned or transferred to the seller? How does the seller mitigate risk? |
|
13. |
EEFs |
Business type and size |
Does seller’s enterprise meet a specific category of business (disadvantaged, etc.) defined by the organization or established as condition by government agency? |
|
14. |
OPAs |
Past performance |
What is the past performance of selected sellers? |
|
15. |
OPAs |
References |
Can seller provide references from prior customers verifying compliance with contractual requirements? |
.3.6 Make-or-buy decisions
Decisions made regarding the external purchase or internal manufacture of a product.
Factors that influence the decision to make or buy include the core capabilities of the organization, the value delivered by vendors, and the risks associated with each option. The decision to make or buy determines the next steps, if the decision is to make, and the project progresses with the other project management processes. If the organization makes the decision to buy, then the project proceeds with the remaining processes in the Procurement Management Knowledge Area. When deciding to make or buy, consider all costs, as highlighted in the Boeing case study.
.3.7 Independent cost estimates
A process of using a third party to obtain and analyze information to support prediction of cost, schedule, or other items.
.3.8 Change requests
Deciding to purchase goods or services instead of using in-house resources can affect the project plan and other project documents and may require change requests. Change requests are an output of all of the monitoring and controlling processes and many of the executing processes, but this is the only planning process with a change request as an output.
.3.9 Project Documents Updates
- Lessons learned register: A project document used to record knowledge gained during a project so that it can be used in the current project and entered into the lessons learned repository.
- Milestone list
- Requirements documentation
- Requirements traceability matrix
- Risk register
- Stakeholder register
.3.10 Organizational process assets (OPA) updates
Figure 3.1 shows the relationships between the various predecessor and successor processes, as well as the data flow for the Plan Procurement Management process.
PMBOK® Guide Highlights
- Plan procurement management is one of only four processes in the Planning Process Group that has change requests as an output.
- No closing process has change requests as an output.
- Change requests are outputs for all Monitoring and Controlling processes.
- Change requests are outputs for 8 out of 10 of the executing processes.
PMBOK® and PMBOK® Guide are registered marks of the Project Management Institute, Inc.
PM Process: 12.2 Conduct Procurements
Having considered the Plan Procurement Management process, move on to the next process, Conduct Procurements, which is in the Executing Process Group. This is one of the 49 project management processes, and as the team conducting the procurement activities, you follow the procurement management plan. You, the buyer, send out procurement documents; the seller submits a proposal in response to your procurement documents; you, the buyer, decide whom you are going to buy from; and you award a contract to the selected supplier. For large, complicated projects, the process may include additional steps where you use the first phase to eliminate preliminary proposals that are not technically qualified and use a more detailed approach with those bidders that make your short list. Table 3.4 summarizes the inputs, tools and techniques, and outputs for the Conduct Procurements process.
| .1 Inputs | .2 Tools and Techniques | .3 Outputs |
|---|---|---|
|
|
|
12.2 Conduct Procurements Process Inputs, Tools and Techniques, Outputs Glossary Definitions, and Additional Details
The PMBOK® glossary definition is provided for each of the inputs, tools and techniques, and outputs for this process, shown in italics, for any terms that have not previously been defined. Otherwise, the term is hyperlinked, and you can hover over the link to view the definition. When relevant, the instructors may provide additional information following each definition. See PMBOK® Guide (6th ed.), pp. 482–491.
.1 Inputs to the Conduct Procurements Process
.1.1 Project management plan
- Scope management plan
- Requirements management plan
- Communications management plan
- Risk management plan
- Procurement management plan
- Configuration management plan
- Cost baseline: The approved version of the time-phased project budget, excluding any management reserves, which can be changed only through formal change control procedures and is used as a basis for comparison to actual results.
.1.2 Project Documents
- Lessons learned register
- Project schedule
- Requirements documentation
- Risk register
- Stakeholder register
.1.3 Procurement documents
.1.4 Seller proposals
Formal responses from sellers to a request for proposal or other procurement document specifying the price, commercial terms of sale, and technical specifications or capabilities the seller will do for the requesting organization that, if accepted, would bind the seller to perform the resulting agreement.
These can include bids, quotes, and proposals.
.1.5 Enterprise environmental factors
.1.6 Organizational process assets (OPA)
This could include any historic information on previous sellers that have been successfully used in the past or have been excluded from consideration and the reasons why.
.2 Tools and Techniques for the Conduct Procurements Process
.2.1 Expert judgment
.2.2 Advertising
The process of calling public attention to a project or effort.
You use advertising to announce that you are planning to make a purchase with the intention to increase the number of responses that you receive, and to increase the quality of responses to your procurement documents.
.2.3 Bidder conference
The meetings with prospective sellers prior to the preparation of a bid or proposal to ensure all prospective vendors have a clear and common understanding of the procurement. Also known as contractor conferences, vendor conferences, or pre-bid conferences.
As the buyer, you can hold a meeting with potential bidders after they have had a chance to review the procurement documents, such as an RFP, procurement statement of work, and so on. This can include answering questions that have been sent in advance. A walkthrough of a construction site might also be included for construction-type projects or other work sites that might provide critical insight regarding the proposal. As the buyer, you need to be fair and make sure that you provide enough information to the bidder, and that any information you share is distributed to all bidders so that no one has an unfair advantage.
PMBOK® Guide Highlights
Test your knowledge below by thinking through the question and your answer, and then selecting the arrow next to Select to Reveal Answer to reveal the answer and further explanation.
When do you think you (the buyer) would be more likely to want an independent estimate? When you receive many proposals or just a few?
-
- Many proposals
- A few proposals
Select to Reveal Answer
b. A few proposals. When you only receive a few proposals, you are less likely to know the fair price for the product or service.
.2.4 Data analysis techniques
- Proposal evaluation techniques: The process of reviewing proposals provided by suppliers to support contract award decisions.
As the buyer, you should specify your selection criteria before you receive bids. For example, you might decide to weigh your proposal evaluation based 40% on the technical plans proposed, 40% on past performance, and only 20% on price.
.2.5 Interpersonal and team skills
- Negotiation: The process and activities to resolve disputes through consultations between involved parties.
Negotiations can be very useful in establishing a clear understanding of the elements in the contract, responsibilities, and costs.
.3 Outputs From the Conduct Procurements Process
.3.1 Selected seller(s)
The sellers which have been selected to provide a contracted set of services or products.
An approved seller list is often used to select sellers. The approved seller list will exclude unqualified or disqualified vendors from bidding.
.3.2 Agreements
This document describes the responsibilities (terms and conditions) of the buyer and the seller. It may also be called a contract, subcontract, understanding, or purchase order. As mentioned previously, a contract is a legally binding agreement.
PMBOK® Guide Highlights
The contract should accurately reflect the responsibilities of both the buyer and the seller, and the buyer and the seller should be doing what is outlined in the contract.
- If something is in the contract, then it needs to be completed, or the contract should be modified to remove it.
- If something is not in the contract, then it should not be completed, or the contract should be modified to include it.
.3.3 Change requests
.3.4 Project management plan updates
- Requirements management plan
- Quality management plan
- Communications management plan
- Risk management plan
- Procurement management plan
- Scope baseline
- Schedule baseline: The approved version of a schedule model that can be changed using formal change control procedures and is used as the basis for comparison to actual results.
- Cost baseline
.3.5 Project Documents Updates
- Lessons learned register
- Requirements documentation
- Requirements traceability matrix
- Resource calendar: A calendar that identifies the working days and shifts on which each specific resource is available.
- Risk register
- Stakeholder register
.3.6 Organizational process assets (OPA) updates
Figure 3.2 shows the relationships between the various predecessor and successor processes, as well as the data flow for the Conduct Procurement process.
PMBOK® and PMBOK® Guide are registered marks of the Project Management Institute, Inc.
PM Process: 12.3 Control Procurements
Having placed the contracts, your next step is to track and control these procurements. The Control Procurements process is one of the 49 project management processes where you, the buyer, are ensuring that the contracted supplier is performing their contracted obligations, and that you, the buyer, are meeting your contracted obligations. Control Procurements is in the Monitoring and Controlling Process Group. The Control Procurements process also includes any necessary changes or corrections to the contracts. Table 3.5 includes the inputs, tools and techniques, and outputs for the Control Procurements process. Because of the legal consequences related to any actions and decisions related to the contract, the contract administrator (for both the buyer and the seller) usually reports to a part of the organization that is outside of the project. As the buyer, you are responsible for making sure that the seller receives payment on time, usually tied to work accomplished. As the buyer, you are also responsible for making sure that the seller is performing, and if not, you need to document any performance problems and take corrective action.
| .1 Inputs | .2 Tools and Techniques | .3 Outputs |
|---|---|---|
|
|
|
12.3 Control Procurements Process Inputs, Tools and Techniques, Outputs Glossary Definitions, and Additional Details
The PMBOK® glossary definition is provided for each of the inputs, tools and techniques, and outputs for this process, shown in italics, for any terms that have not previously been defined. Otherwise, the term is hyperlinked, and you can hover over the link to view the definition. When relevant, the instructors may provide additional information following each definition. See PMBOK® Guide (6th ed.), pp. 492–501.
.1 Inputs to the Control Procurements Process
.1.1 Project management plan
The primary subcomponent of the project management plan utilized in this process is the procurement management plan that describes how the procurement processes will be managed. However, this process uses each of the following subcomponents:
- Requirements management plan
- Risk management plan
- Procurement management plan
- Change management plan: A component of the project management plan that establishes the change control board, documents the extent of its authority, and describes how the change control system will be implemented.
- Schedule baseline
.1.2 Procurement documentation
- Assumption log
- Lessons learned register
- Milestone list
- Quality report: A project document that includes quality management issues, recommendations for corrective actions, and a summary of findings from quality control activities and may include recommendations for process, project, and product improvements.
- Requirements documentation
- Requirements traceability matrix
- Risk register
- Stakeholder register
.1.3 Agreements
These are documents that describe the responsibilities (terms and conditions) of the buyer and the seller.
.1.4 Procurement documents
.1.5 Approved change requests
A change request that has been processed through the integrated change control process and approved.
PMBOK® Guide Highlights
Remember, when an inspection is used versus an audit:
- Deliverables are inspected.
- Processes are audited.
.1.6 Work performance data
The raw observations and measurements identified during activities being performed to carry out the project work.
This is the raw data that will become work performance information, which will be used in the work performance reports.
.1.7 Enterprise environmental factors
.1.8 Organizational process assets (OPA)
.2 Tools and Techniques for the Control Procurements Process
.2.1 Expert judgment
.2.2 Claims administration
The process of processing, adjudicating, and communicating contract claims.
A process should be in place to deal with instances when the buyer and seller cannot agree on compensation for a change (or they cannot agree that a change has happened). Contested changes are also called claims, disputes, or appeals. If the buyer and seller cannot come to an agreement, they may need to use the alternative dispute resolution (ADR) outlined in the contract. The following includes potential methods of dealing with claims, in order of the preferred method:
- Negotiations: Both parties negotiate a resolution.
- Mediation: A third-party mediator helps to work out the disagreement.
- Arbitration: A third party is brought in to make the decision.
- Litigation: A court makes the decision.
.2.3 Data analysis techniques
- Performance reviews: (procurement) A structured review of the seller’s progress to deliver project scope and quality, within cost and on schedule, as compared to the contract.
- Earned value analysis (EVA): An analysis method that uses a set of measures associated with scope, schedule, and cost to determine the cost and schedule performance of a project.
- Trend analysis: An analytical method that uses mathematical models to forecast future outcomes based on historical results.
.2.4 Inspection
Examination of a work product to determine whether it conforms to documented standards.
.2.5 Audits
A process to observe performance of contracted work or a promised product against agreed-upon requirements.
.3 Outputs From the Control Procurements Process
.3.1 Closed procurements
.3.2 Work performance information
The performance data collected from controlling processes, analyzed in comparison with project management plan components, project documents, and other work performance information.
This information is tied to the seller’s work performance data (the data is processed into information). You use the information as support in case there are claims or disputes that arise later in the project. You can also use it as an input in future procurements or to help in future planning.
.3.3 Procurement documentation updates
.3.4 Change requests
.3.5 Project management plan updates
- Risk management plan
- Procurement management plan
- Schedule baseline
- Cost baseline
.3.6 Project documents updates
- Lessons learned register
- Resource requirements
- Requirements traceability matrix
- Risk register
- Stakeholder register
.3.7 Organizational process asset (OPA) updates
PMBOK® Guide Highlights
Change requests are an output in all of the processes in the Monitoring and Controlling Process Group. The one caveat is 4.5 Perform Integrated Change Control. Change requests are an input to it, and the output is "approved change requests." All change requests are processed through the Perform Integrated Change Control process.
Figure 3.3 shows the relationships between the various predecessor and successor processes, as well as the data flow for the Control Procurement process.
PMBOK® and PMBOK® Guide are registered marks of the Project Management Institute, Inc.
Lesson 3 Summary
This lesson discussed important considerations when deciding to bid on RFPs and how organizations assess their proposal submission success, as well as best practices for project proposal development. The lesson also reviewed four of the project management processes within the Procurement Management Knowledge Area. Be sure to review these processes before taking the lesson quiz, as most of the questions on the quiz tie to these procurement processes in a format similar to the CAPM®/PMP® exam. Your project proposal will not be due until the end of the next lesson, but you should start working on the proposal now. The upcoming lesson will also include your first exam and an introduction to project management information systems.
Before you move on to the next lesson, please make sure you have completed all of the readings and activities listed for this lesson within the Course Schedule of the Full Syllabus.
References
Denning, S. (2013, January). What went wrong at Boeing? Forbes. https://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-at-boeing/#54d3b76f7b1b
Gido, J., Clements, J., & Baker, R. (2018). Successful project management (7th ed.). Cengage Learning.
Harrison, C. (2015, June 24). How bad can it be? Canadian Consulting Engineer, 34. http://www.canadianconsultingengineer.com/features/how-bad-can-it-be/
Hegarty, J. R. (2011). How to develop and evaluate an engineering services proposal. Pipeline, 20(3), 31–34. http://www.qbs-mi.org/
Khanna, R. & Awad, M. (2015). Efficient learning machines: Theories, concepts, and applications for engineers and system designers. Apress.
Links, C. (n.d.). Should you, or should you not respond to an RFP? https://corbinlinks.com/should-you-or-should-you-not-respond-to-an-rfp/
Loopio (n.d.). 2021 RFP Response Trends & Benchmarks.
Project Management Institute. (2017). A guide to the project management body of knowledge (PMBOK® guide). Project Management Institute.
Rowley, J. (2013, August 27). 5th edition PMBOK® guide—Chapter 12: Source (supplier) selection criteria. 4squareviews. https://4squareviews.com/2013/08/27/5th-edition-pmbok-guide-chapter-12-source-supplier-selection-criteria/
Thornton, G. (2018, Spring). 2017 government contractor survey. Professional Resources Council. https://www.grantthornton.com/-/media/content-page-files/public-sector/pdfs/surveys/2018/2017-government-contractor-survey
CAPM®, PMP®, and PMBOK® Guide are registered marks of the Project Management Institute, Inc.
Lesson 3 Activities
Lesson 3 Questions
Assignment Instructions
- Download the Lesson 3 Questions Word document.
- Include your responses in the space provided in the document. Be sure to complete all parts of each question for full credit.
- Be sure to include your name (and assignment name) in the file name of the document.
- Upload the completed document to this assignment.
Submit Assignment
Select Submit Assignment and use the file upload feature to submit your completed assignment.
| Criteria | Ratings | Points |
|---|---|---|
|
Question 1 (4 parts) Calculates the proposal writing success using 2 methods described in the Gido book, compares and contrasts results and if different describes why. Also speculates on what the results might indicate. |
Instructor to leave comments related to this criterion | 3 pts |
|
Question 2 Describes when the lowest-priced proposal may be appropriate to select as the winning bid and provides enough depth to justify response. |
Instructor to leave comments related to this criterion | 2 pts |
|
Question 3 Describes when the lowest-priced proposal should NOT be selected as the winning bid and provides enough depth to justify response. |
Instructor to leave comments related to this criterion | 2 pts |
|
Question 4 Describes an example for when it may be appropriate to select the lowest-priced proposal as the winning bid and provides enough depth to illustrate the complexity/risk of the project and the bidder's qualifications as they relate to the selection decisions. |
Instructor to leave comments related to this criterion | 1.5 pts |
|
Question 5 Describes an example for when the lowest-priced proposal should NOT be selected as the winning bid and provides enough depth to illustrate the complexity/risk of the project and the bidder's qualifications as they relate to the selection decisions. |
Instructor to leave comments related to this criterion | 1.5 pts |
|
Question 6 (5 parts) Describes a fixed price contract, when it should be used, and the risks associated with it relative to the contractor and customer, and provides an example that clearly shows the relevant level of project risk or complexity to show when the contract is most appropriate to use. |
Instructor to leave comments related to this criterion | 5 pts |
|
Question 7 (5 parts) Describes a cost-reimbursement contract, when it should be used, and the risks associated with it relative to the contractor and customer, and provides an example that clearly shows the relevant level of project risk or complexity to show when the contract is most appropriate to use. |
Instructor to leave comments related to this criterion | 5 pts |
Lesson 3 Quiz
Please note that the lesson quiz is heavily focused on the project management processes described within the lesson commentary. The quiz questions are structured similarly to the question format you would see on the CAPM®/PMP® exams. These are intended to give you an opportunity to practice for the CAPM/PMP exam. You may take the quiz five times. Please note that the questions are randomized, and you will see different questions each time you take the quiz. Your highest score will be recorded.
This quiz covers Chapter 3 of your Gido et al. textbook and the following sections of the PMBOK® Guide:
- 12 Introduction to Project Procurement Management Knowledge Area
- 12.1 Plan Procurement Management
- 12.2 Conduct Procurements
- 12.3 Control Procurements
CAPM®, PMP®, and PMBOK® Guide are registered marks of the Project Management Institute, Inc.
Deliverable 1: Project Proposal in Response to RFP (Team Assignment; Due in Lesson 4)
Activity Overview
This is a team assignment, and your project team will be responding to a Request for Proposal (RFP). Your first task as a team will be to decide which RFP your team would like to respond to. Your team may either respond to the SVRA Boardwalk Replacement RFP or the Engineering Leadership Development Camp RFP (see below).
You must submit the following two documents for this assignment:
- Project Proposal (MS Word or PDF)
- Completed Excel file Cost Section Template (you enter information on the Cost Template sheet, and the Proposal Table sheet is auto-calculated)
All students must contribute to the assignment. We suggest that your team members take turns being the person responsible for entering the final information and submitting the required documents. This will become more critical in Deliverables 2 and 3, where the lead person will need to prepare the final document using MS Project or ProjectLibre.
There will be two occasions in this course where you will be asked to provide self and peer feedback on the deliverable assignments. The first peer feedback will be provided after Deliverables 1 and 2 and the second peer feedback will occur after Deliverables 3 and 4. This will provide opportunities for you to hold your team members accountable, with a significant portion of their grade based on the average ratings from the team members for each individual.
Responding to the RFP
Working in your project team, you will develop a project proposal responding to one of the following RFPs. Please note that there are two different RFPs, and your team may choose between the following:
SVRA Boardwalk Replacement Project
- SVRA Boardwalk Replacement Request for Proposal (RFP)
- You may find the document on Constructing Wetland Boardwalks and Trails helpful in preparing your proposal.
Engineering Leadership Development Camp
- Engineering Leadership Development Camp Request for Proposal (RFP)
Your Company (Make Up a Fictitious Company Name for Your Team!)
You will respond to this RFP on behalf of a fictitious company that you are working for. You may assume that you have all the necessary employees to conduct this project. Do not limit your company to the real people on your course team. Also do not limit your company's experience and expertise to the real people on the team. The purpose of this assignment is for you to show that you know what is needed in a proposal. Do not propose to use subcontractors. Please keep this as simple as possible. Assume your company has all the necessary resources.
As you write your project proposal, remember that the proposal is considered a selling document. Consider what content will contribute to the customer seeing your organization as the best choice to complete the proposal within the technical, management, and cost sections.
Because this is a fictitious project proposal with the aim of helping you to understand how to write an effective proposal, you are encouraged to exaggerate your skills and abilities. Think about the qualifications that are needed to successfully complete this project, and then write the proposal as if you or your fictitious project team has the experience and past success that would illustrate to the customer that your company is uniquely qualified to do the job. Of course, on a real proposal you would not include any false or misleading information; that would be unethical. For the purposes of this course proposal, assume that you have on your team the people and resources needed to complete the project.
Requirements
You will develop your proposal according to the recommendations in your textbook using the guidelines in the section on “Proposal Preparation” found on pages 74–81 of your Gido et al. textbook, with some additional requirements as outlined below and in the RFP.
Proposal Content
Your proposal is limited to 6 single-spaced pages (not including transmittal letter, cover page, or table of contents) total for the main proposal (they need to be 6 good pages!), but it can also include an appendix with supplemental details if needed. If you decide to use an appendix, be sure to describe what is in the appendix within the body of the proposal and reference it.
Please make up a name for your company and their experience so that in the proposal you can clearly show that your company has the needed experience to do the work.
The proposal must include the following sections in this order (you must read pages 75–81 of your Gido et al. book; the proposal sections cannot simply be a restating of the RFP). Also be sure to read the RFP for proposal content requirements.
Letter of Transmittal (Not to Exceed 1 Page)
- The letter must come before the cover page.
The letter could be in any of the following forms. It is up to your team:
- A cover letter, introducing your company and letting the customer know which RFP you are responding to and that your proposal is attached.
- A cover letter that achieves the above but also summarizes key points of the proposal, or provides any needed clarifications regarding your proposal
- A letter with the content in the second bullet, which is also signed by an officer of the vendor that is authorized to commit the vendor to the obligations in the proposal and that the individual signing the letter is authorized to contractually bind the vendor.
Cover Page
- The cover page must come after the letter of transmittal.
- Be sure to include your company's name and logo.
Table of Contents
Be sure to include the section headers and numbering as requested in the RFP for the required sections using these headers and ordering of sections:
- Technical Section
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1.1 Project Needs
Read page 75 in your Gido book. This section should be in your own words and demonstrate an understanding of the customer's needs and not simply restate what is in the RFP.
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1.2 Proposed Approach/Solution
This is the main part of the proposal and should have significant depth/details. You should describe your unique approach as well as details on your solution. You cannot simply describe what is in the RFP; you need to develop your solution.
- Leadership Camp RFP: For the leadership camp, you need to provide an overview of the types of activities that you would include and illustrate how they could be used to meet the skill development/learning objectives for the program. You obviously are not laying out all the program, since the customer will be paying you to do that for the project, but you need to provide enough detail to show the customer that you have some unique ideas and that your leadership camp will be the best. You want to give the customer an idea of what you are capable of but not so much detail that they can just use your proposal themselves and develop the camp on their own.
- Boardwalk Replacement RFP: For the boardwalk replacement project, you need to describe your unique approach to protecting the wetlands as well as any other unique ideas you may have for the boardwalk, signage, and lighting. You need to provide specifics on what you will be giving the customer. You cannot simply state what is in the RFP. You need to describe the size of the boardwalk, viewing area, any railings, and so on. You also need to describe the specific materials that will be used, and in the next section you would describe why they were chosen. You need to show the customer the value added in selecting your proposal. You need to describe the type of lighting that you will provide and number of lights, type of signage and number of signs, and so on. You need to provide enough details so the customer knows what they are getting for the money and can hold you accountable if you don't follow through. If you don't tell them how big, how many, what type, what material, how can they say whether you provided the quality that was expected? Be specific.
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1.3 Benefits of Proposed Approach/Solution
In this section you need to describe why your approach or solution will be better that your competitors. For the boardwalk replacement, why is approach to the wetland protection better? Why would you install composite over pressure-treated wood, and so on? For the leadership camp, why is your camp design going to be better than your competitors'? What is special about your approach or your solution? You can't just say that it is the best—you need to provide justification.
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- Management Section
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Read page 77 of your Gido book as well as the requirements in the RFP regarding proposal content.
2.1 Major Tasks
Describe the major tasks and how you will do the work, do not simply restate the tasks from the RFP.
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2.2 Deliverables
Provide a description of each deliverable that will be provided by the contractor. Do not simply restate the deliverables from the RFP. Describe in enough detail so the customer can see what they are getting for their money. Providing details and being clear about what you will be providing will help avoid misunderstandings later, as the expectations will be clear. The list of deliverables should be self-explanatory so that someone can go right to the list and assess what is being delivered for the price. For anything that can be quantified, provide the numbers. For example, for the boardwalk, how many lights, signs, copies of design drawings, construction plans, and so on will you provide? For the leadership camp, how many activities will the leadership camp include? How many lunches, snacks, copies of training materials, trainers for the training session, and so on will you provide).
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2.3 Project Schedule (see specifics in RFP)
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2.4 Project Organization (see specifics in RFP)
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2.5 Related Experience (see specifics in RFP)
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2.6 Equipment and Facilities
This section pertains to equipment and/or facilities that your company owns or has access to (office space rental, etc.). It is not the facilities at SVRA. You may describe the size of your office space, number of offices, computers, and so on. Is there any specialized computer software that you have that you would utilize for the project? For example, is there anything special to create the training materials for the leadership camp? Or for the boardwalk, design software for creating construction plans, printers/plotters, and so on. For the boardwalk, does your company own its own construction equipment? If so, list it in this section. If you do not own your own equipment but intend to rent something specific for this project, you would not list that here; rather, that would be included in the Cost section.
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- Cost Section
Obviously, in a real proposal you want to have accurate budget estimates to ensure your proposal cost is not unrealistically high or low. Real proposals draw on lots of information from subject matter experts and past projects to develop accurate estimates. However, at this point in the course, you will provide rough estimates as we do not expect you to be experts in these areas, but we do expect you to put some thought into how much work and materials are required to complete the project. In a later assignment you will be adding resources to your project file and may find that your earlier estimates were off, and it will be fine to make adjustments if needed. For now, try to give ballpark estimates for each of the required elements (but be sure to include details). The RFP indicates that you should use the provided Cost Section Template provided with the RFP and submit the Excel template with your proposal. The RFP also indicates that you must provide a summary table of the major cost categories for each major task. The RFP provides a table to include in the proposal. The Excel template auto-calculates the proposal template on a separate sheet for your convenience. However, we make no guarantees with these tables, so always verify the equations. If you make edits to any part of the spreadsheet, you could be causing issues with other equations.
As per the RFP instructions, include the completed Cost Section Template with your project proposal and be sure to copy the table from the Proposal Table sheet into your proposal cost section. You must complete the Cost Template sheet that matches the RFP that you selected (Boardwalk or Leadership Camp). The Proposal Table sheet will be auto-calculated. You will copy the information from the Proposal Table into the MS Word proposal document as indicated in the RFP.
Note on proposal details: If you were responding to a real RFP, much more time and detail would be included in your proposal. You would have already developed a project plan and determined a feasible schedule based on the scope of the project, with a list of the required tasks and promised deliverables. For the purposes of this proposal, you will only be providing a high-level schedule, a summary of the major tasks and major deliverables. In future lessons, you will be developing a detailed schedule with tasks, assigned resources, and budgeted costs.
Additional Resources
Note on the SVRA Boardwalk Replacement costs: We are providing a link that we came across that gives ballpark estimates for pricing of boardwalks. It indicates that for their PermaTrak product and timber piles a cost estimate range would be $60–$85/SF. That estimate doesn't include the lighting, railings, or signage. Instead of estimating the number of boards, screws, and so on, you can estimate a price per square foot.
Based on 1,320 feet in length by 6 feet in width, which is 7,920 square feet at $60 square foot, the cost of the boardwalk would be $475,200 just for the main section of the boardwalk. This is provided as a rough estimate to get you started. You need to determine the costs based on what you propose for the boardwalk.
Submit Assignment
Select Submit Assignment and use the file upload feature to submit your completed assignment.
| Criteria | Ratings | Points |
|---|---|---|
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Format/Writing/Section headers, numbering, and order The proposal is clear, concise, and formatted in an easy-to-read style that is free of grammatical or spelling errors. Proposal adheres to the formatting as required in the RFP/assignment, including the use of required section headers, section numbering, and section order. |
Instructor to leave comments related to this criterion | 3 pts |
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Transmittal Letter, Cover Page, Table of Contents Transmittal Letter is well developed; Cover Page indicates thoughtful consideration to present their company in a professional creative way; Table of Contents is included. |
Instructor to leave comments related to this criterion | 3 pts |
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Technical Section Demonstrates an understanding of the project needs and proposed approach/solution and benefits to the customer are fully developed. |
Instructor to leave comments related to this criterion | 12 pts |
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Management Section Description of the major tasks, deliverables, project schedule, project organization, related experience, and equipment and facilities are fully developed. |
Instructor to leave comments related to this criterion | 16 pts |
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Cost Section The cost section template and proposal table are complete and demonstrate thoughtful consideration of the project costs for the required scope of work. |
Instructor to leave comments related to this criterion | 6 pts |