Reducing Costs in a Pricing Proposal

On September 15, 2010, Mr. Jon Boyle of Unisys, Inc. gave an excellent presentation at the National Capital Area Chapter of the Association of Proposal Management Professionals on a very important topic – pricing to win.  In his presentation, he discussed how to reduce costs in a pricing proposal.

This is a challenge that every company faces when bidding on government contracts.  On the one hand, you want to submit a pricing bid that is within the government agency’s competitive range.  On the other hand, you still need to cover your contract expenses and maintain your profit margin.

Boyle suggests a number of approaches to reducing costs without lowering quality.  They include:

  • Using low-cost partners as subcontractors.
  • Using junior to mid-level employees, when appropriate.
  • Using consultants and part-time employees.
  • Using bundled services and products that produce cost efficiencies.
  • Devising innovative solutions that will address the contract’s Statement of Work but will save money.

There are several solutions that I do not recommend using because I consider them unethical and economically unsound.

First, you should not reduce your employees’ salaries or benefits to be more competitive.  You also should not ask them to donate free hours by working many hours of uncompensated overtime on contracts.  Unfortunately, this is common in many companies.

Second, you should not move contracts jobs offshore.  While this may be less expensive for your company, it deprives Americans of jobs and ultimately weakens our economy.  Unfortunately, this is commonly done today.

And third, you should not submit a low bid just to win the contract.  You do not want to perform work for a government agency that strains your resources, deprives employees of proper compensation, or results in a financial loss.  You should not bid on contracts where you cannot properly price to win.

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