Chapter 8

Bid Strategy

Many bids are won or lost before the government releases the final RFP. How is that possible? How can you lose before the competition begins? To lose early, you simply need to let your competitors influence the customer in a way that gives them a decided advantage, or allow them to develop an effective bid strategy while you do nothing.

Once you decide to pursue a bid opportunity, you must address the key question: How do you plan to win? The operative word here is plan. Those who develop a systematic set of actions focused on capturing a future procurement gain competitive advantage. Those who fail to develop a plan or bid strategy rely on luck. Or they wrongfully imagine that they will win for some other reason, like being the most technically qualified. In the long run, it will be more profitable to take your money to Las Vegas than to spend B&P funds on efforts that lack a clear, well-defined bid strategy.

THE WHEN AND WHO OF DEVELOPING BID STRATEGIES

Bid strategies are not developed in a single sitting. They evolve over time as you accumulate information about the bid opportunity, the customer, and competitors. You should start as soon as you have enough information to begin formulating strategies. As new information becomes available, continue developing and refining your strategies. You should plan to have a set of strategies firmly in place before the RFP is released. However, strategizing may continue throughout much of the proposal development phase. It might extend up until just before the proposal is submitted. You are not finished until you are satisfied that no further improvements are possible.

It is amazing how much a new piece of information or fresh insight can alter a given bid strategy. Be prepared to turn those insights into strategies if it will improve your win probability. Nonetheless, you must remain mindful that it takes time to integrate a new or altered strategy into your proposal. So, there are some limitations.

Bid strategy development is a team activity. The person responsible for capturing the bid opportunity should lead the team. You may want to include representation from marketing, proposal, and program management, plus technical and cost personnel, as appropriate. Of equal importance is the ability of team members to consume and integrate a lot of information and then transform that information into bid strategies that can help you to gain competitive advantage. At least one member should be a seasoned veteran in the art of bid strategy development. Such persons tend to be quite rare. If you do not have someone with these credentials, consider hiring a consultant to help with this part of the bid process, at least for strategically important bids or “must win” situations.

The best strategies come out of intense brainstorming sessions. Do not discard seemingly preposterous ideas. Great strategies occasionally find their origin in what may initially appear to be sheer craziness. Also, create an environment where vehement disagreement among team members is allowed. Some of the best strategies emerge from intense disagreement, sometimes highlighted by shouting and bordering on fisticuffs. Conflict is often the handmaiden of creativity. Just be sure you have team members who can disagree to the point of strangulation, go away and lick their wounds, and then return to work as effective members of the team.

An effective bid strategy is one based on a careful evaluation of the customer, program requirements, potential competitors, and your team’s capability. The outcome of this evaluation is a set of actions and plans that will enable you to capture the bid opportunity. Many organizations document their bid strategy in what is commonly referred to as a capture plan (see Appendix A).

CUSTOMER ASSESSMENT

The customer is the procuring agency responsible for purchasing the goods or services that make up the bid opportunity. In addition, you may need to consider the ultimate user of those goods or services if that user is part of the source selection process. The more information you have about the customer, the better. Consider the following information categories to focus your bid strategy on critical customer elements.

Customer Name/Organization

Identify the name of the procuring agency and the department or division responsible for the bid opportunity; list names and phone numbers for key customer personnel. Also, list users, if applicable, and identify key user contacts. For key players, identify any biases or concerns that could influence your bid approach. For example, are there any areas that the customer sees as high-risk, or are there elements of a technical solution that would be viewed in a favorable light?

Customer Buying Pattern

On what basis does the customer award contracts? Does low cost always win, or are procurements awarded based on best value? If a customer uses a best-value selection approach, how close to the lowest qualified bid do you have to be to win if you have a better technical solution? Does the customer have a favorite contractor? Over the past three years, who has won the most contracts from this customer? What is your success rate? Does the customer have a favorite or preferred technical solution, product, or manufacturer, or any other bias that could influence bid outcome?

If the customer always picks the low-price bidder, an important bid strategy is set. However, be careful in jumping to conclusions. A procuring agency may have a reputation of always picking the low-price bidder. Yet, in reality it might pick the low bidder because there is no recognizable difference in what is being proposed by the bidders. That is, all the proposals sound the same. Hence low price is the easy discriminator.

Knowing biases toward competitors, suppliers, or technical solutions also provides important insights into bid strategy. Aligning your bid with the customer’s biases and avoiding things the customer doesn’t like will improve your win probability.

Customer Acquisition Strategy

Analyze the customer’s acquisition plan. Does the customer normally publish a draft RFP, host pre-proposal conferences, ask for written responses to draft RFP material, conduct one-on-one discussions with bidders, require oral proposal presentations, require information about your past performance, conduct site visits, evaluate proposal and performance risk, issue evaluation notices, or ask for final proposal revisions? Knowing the typical acquisition process and the amount of time allotted for proposal preparation provides valuable information for proposal planning and strategizing. You also should be aware of the information required by a typical customer RFP. Some procurement agencies ask for a minimal amount of information. Others ask for everything but the kitchen sink. Does the agency typically request plans (quality, safety, software, systems engineering, configuration management, etc.) or résumés for key personnel? Does the agency limit the number of pages allotted for the proposal?

Customer Documents

Make a list of available documents that define the customer’s requirements. These can include statements of work, specifications, statements of need, operational requirements documents, or draft RFP material once it becomes available. Include documents that define any pet processes the agency embraces or describe how they conduct source selection. Search the Internet for papers or presentations given by members of your customer’s organization.

Past Performance with Customer

List every program you are performing, or have performed over the past three to five years, for this customer. For each program, identify any formal evaluation conducted by the government. List any problems such as cost or schedule overruns or any performance shortcomings. Also, list any unique requirements and things you did well. Determine how you will overcome any negative image with the customer and how you will exploit instances of good performance or extraordinary achievements. If you have previously experienced problems and have since solved them, consider scheduling a briefing with the customer, where you can explain what measures you have taken to solve the previous problems and how those measures will be implemented to ensure problems will not arise on the program you are bidding.

Having experienced a problem on a past program is not necessarily detrimental; it depends on how you handled it. Sometimes having successfully solved a problem is seen in a more favorable light than not having had any problems. At a minimum, you should be prepared to explain what measures you have taken to prevent comparable problems from occurring in the future. On the other hand, you can use good past performance to demonstrate your ability to perform successfully on future contracts.

Document the outcome of your customer assessment. This is an important component of developing a bid strategy. This information can also be used to help prepare the past performance volume of the proposal, if one is required.

PROGRAM REQUIREMENTS ASSESSMENT

Clearly defining program requirements is an important ingredient of making a bid decision and building a bid strategy. Requirements are defined by the technical effort required to perform the contract. This translates into requirements for products, technical disciplines, personnel, systems, processes, facilities, test equipment, and any other specific need. Compare program information to the capability of your organization to identify potential strengths and weaknesses and to use as input into your bid strategy.

The following areas identify categories of information for defining program requirements. A good summary of program requirements can easily be achieved within one or two pages. Keep it brief, but capture essential information.

Summary of Program Requirements

Provide a brief summary of program requirements. Differentiate between contracts that require you to develop a new product or modify an existing product and those that require you to provide services. For example:

Sometimes a contract may require both product development and services. For example:

Schedule

Identify the length of the contract and any options. If it is a development contract, identify the required delivery dates for products and any key milestones such as design reviews, system integration, customer acceptance testing, first article installation, and initiation of logistics support. For a service contract, identify any key dates, such as when transition will begin and end.

Technical Disciplines Required

Identify the key technical disciplines required to perform the contract. Keep this general. You do not need to list every labor category required. Just note the key disciplines.

Personnel

Do you have the necessary personnel to perform the contract? If not, how will you overcome this shortcoming—subcontractors? Contract labor? If there is an incumbent contractor, will you be able to hire the existing workforce? If not, how will you staff the program after contract award?

Sometimes the customer sets minimum qualifications or certification standards for technical personnel. Likewise, some customers set minimum experience, qualifications, or security clearances for key personnel. Make sure you are aware of such requirements and are prepared to meet them.

Processes and Systems

Does the program require any special or unique processes or systems? For example, a customer might require bidders to have an automated inventory control or maintenance data collection system. Other examples might include a specific computer-aided design (CAD) system, a video post-production studio, or numerically controlled manufacturing equipment. Such requirements can be important. They may give you or one of your competitors an advantage.

Does the customer require any specific certifications? Typical examples include a requirement for a quality assurance program certified to International Organization for Standardization (ISO) standards or processes that have been certified against the standards set by the Systems Engineering Institute (SEI) Capability Maturity Model Integration (CMMI^®). Again, any required certification can become a source of competitive advantage. In some cases, companies try to get such certifications included in the solicitation to give them an advantage.

Location and Facilities

Does the procuring agency require any special facility requirements, or does it specify where work is to be performed? Sometimes it is an advantage to be located close to the customer. Occasionally the customer may require you to have an office within a specified distance from its office. In other cases, specialized facilities may be required, or you may need a special security clearance for your facility. Just be sure you are aware of such requirements and have the ability to meet them.

Penalties and Other Special Requirements

Identify any contract penalties or special contract clauses. Penalties most often involve contracts under which you operate or maintain a system for your customer. In these cases, the customer may withhold part of your regular payment if you fail to achieve a specified equipment availability rate or fail to restore a downed system within the allotted amount of time. Contract penalties create risk. They impact your overall program plan and bid strategy because they potentially affect profit. Alternatively, list any cases in which incentives will be paid, or where you can receive extra credit in the evaluation for fulfilling a special requirement, such as early delivery or meeting a specific performance metric.

Note any special contract requirements. They may define when and how contract options will be exercised, require that you obtain certain data to support product development, or require that you establish a working relationship with other contractors. They are important because they can impact your bid cost or technical approach or involve program risk.

COMPETITIVE ASSESSMENT

No one shows up for the Super Bowl without having assessed the strengths and weaknesses of the team they are going to face. Nor would a general send troops into battle without information about the enemy. What works for sports teams and military encounters also applies to proposals. To state the obvious: You cannot expect to win if you do not know against whom you are competing.

You should always know who your competitors are and what they are likely to offer. Competitor analysis is a critical component of preparing a winning proposal. Collecting and organizing this information is an ongoing task. It is during the pre-proposal phase that competitor information is used to develop a bid strategy. In performing a competitor assessment, consider the following questions:

Who is your principal competition? List the companies you expect to bid.

What experience do they have with the customer? For each company, list current contracts with the customer. Assess the quality of performance for each contract as perceived by the customer. Do you have a copy of each contract? If not, get one. As indicated previously, copies of your competitors’ contracts are a rich source of information about the competitors, especially pricing information.

What is your past experience competing against each company? If you have competed against this company in the past, did you win? If so, what strategy did you use? If you lost, what strategy did the winner use? What could you have done to win?

What are the primary weaknesses of each competitor for this procurement? Weaknesses, like strengths, must be assessed against the specific requirements of the procurement.

How is each competitor likely to respond to the RFP? This question requires you to estimate how each competitor will approach the competition. In essence, it means that you must discern their bid strategy.

DEVELOPING A BID STRATEGY

Two key factors contribute immeasurably to the development of an effective bid strategy. The first is time. You must start well in advance—at least 12 to 24 months prior to final RFP release. The second factor is information about the customer, the requirements of the bid opportunity, and the likely competition.

The best way to start is to assemble all the information you have gained about the customer, the program, and competitors discussed above. Look for any conceivable area where you can gain competitive advantage. What can you do to better satisfy the customer’s need, fulfill a desire, avoid a risk, reduce cost, improve reliability, be more responsive, reduce customer workload, standardize systems or processes, offer more performance, enhance efficiency, or cater to a customer bias? What aspects of the program—technical requirements, people, processes, systems, facilities, personnel, schedule, etc.—offer potential opportunities to capture the upper hand? Is there any way you can leverage your capability? Are there trade studies or analyses you can perform to “ghost” the competition or enhance the perception of your approach? (Ghosting is a tactic whereby a competitor’s weakness is highlighted by emphasizing your strength or by creating the impression that the competitor’s approach is more risky or less desirable than what you are proposing.)

Review contract terms and conditions, contract type, period of performance, and special contract clauses to identify things you might do that are cleverer than your competitors. Leave no stone unturned. Consider everything, no matter how trivial it may appear at first. From this dizzying array of information and possibilities, you must craft a bid strategy that will enable you to better the competition.

There are two levels of bid strategy: general or overarching and specific. A general strategy represents an overall approach to the procurement that yields an overarching strategy. Most often, general strategies revolve around cost. The second strategy is actually a series of specific bid strategies. Each is focused on a specific aspect of the procurement with special emphasis on what the customer views as most important.

General Strategy

The best way to illustrate an overarching bid strategy is by example.

Example 1: Marginally Compliant, Low Cost

Many years ago, I was recruited to start a new subsidiary for a major aerospace company. We planned to launch the new company by winning a major procurement. Unfortunately, we did not have any existing contracts. Nor did we have any specific technical capability apart from that of our parent company. All the major competitors were firmly entrenched. Clearly, we were not going to win this competition by convincing the customer that we were technically superior.

Instead, we adopted an approach where our goal was to be technically compliant while offering a price that would be too attractive for the customer to refuse. We reviewed every element and aspect of the program to identify areas where we could reduce cost. We also focused on the major cost drivers, paying particular attention to ways we could minimize those costs. Personnel cost accounted for about 70 percent of our bid cost, so we did everything possible to reduce personnel.

Our strategy was a low-priced, marginally compliant approach. Our proposed solution was technically compliant, but just barely. Whenever a judgment call was required, we always chose the less expensive solution. We also took some risks. Every action and decision was based on providing the lowest-cost solution that met program requirements. In the end, we won a $150 million contract with a bid significantly below the next higher bidder. In case you are wondering, yes, we bid profit, although at a relatively low rate.

Example 2: Best Value

In another case, I was working for a company whose cost structure made it unlikely it would be the low bidder. So, we adopted a best-value bid strategy. Best value means you will be able to convince the customer that the value of your solution is worth the higher cost. We attacked every program element with a view toward convincing our customer that we had the best approach—best performance, lowest risk, lowest life cycle cost, easy maintenance, long-term supportability, etc. We emphasized value to the customer at every turn and “ghosted” less expensive approaches as being inadequate or risky. When the smoke cleared, we had won a $400 million program with a bid more than 15 percent higher than the rest of the competition.

Example 3: Low-Risk Systems Integrator

The third example of an overarching strategy does not involve cost. In this case, the customer was an aircraft manufacturer that had just won a major contract to provide an integrated aircrew training system, including aircraft. The customer was required by the government to competitively select the ground-based training system.

Our analysis of customer and program requirements revealed the following: First, as the aircraft prime contractor, our customer was more interested in selling airplanes than in worrying about the rest of the training system. Second, this was to be a completely integrated system. Finally, although the customer was a major aerospace company, the performing division was a recent acquisition, with a culture and operating style more akin to those of a small company.

From this information, we built a three-fold strategy. First, we emphasized a low-risk, technically compliant solution. Our intent was to assure our customer that it would not have to worry about our approach—it was low-risk and would not require the customer to divert energy or attention away from its primary focus of building airplanes. Second, every aspect of our approach and technical proposal emphasized a system engineering approach and the ease with which we would integrate our technical efforts with those of our customer. Finally, our organization was about one-tenth the size of the other competitors. We went out of our way to stress that being a smaller company would be an advantage. We emphasized that we would be easy to work with, knew how to be a good subcontractor, and would follow the lead of our customer. This strategy, along with other specific strategies, enabled us to win the contract, which was one of the largest ever for this type of work.

Most often, general strategies involve only one focus. Occasionally, as in this example, the general strategy contains multiple focuses. Regardless, a general strategy covers your entire approach. It is the basis for making program decisions, and it must completely permeate your entire proposal.

DEVELOPING SPECIFIC BID STRATEGIES

Plan to develop a specific bid strategy for every element of the procurement. Specific bid strategies do not need to be glamorous or earthshaking. Your goal is to achieve a better score than your competitors for each proposal area. You do not have to be great, just better. Home runs are nice, but most games are won by consecutive base hits. Moreover, you really do not have to be better than the competition. Instead, you only need to convince the customer you are better. In the world of proposals, perception becomes the reality on which source selection decisions are made. As described in Chapter 3, how you present your case is just as important as what you have to offer. Often, it is more important.

You must understand the customer thoroughly and search every single aspect of the procurement to identify areas where you can gain competitive advantage. Remember, you are just looking for an edge—a little something to nose ahead of competitors, that elusive one point that pushes you over the top.

If the customer requires an equipment availability rate of 95 percent, can you offer 97 or 98 percent without incurring any additional cost? Can you respond to customer service requests faster than the contract requires? If the contract requires a computer speed of 1 GHz, can you offer something faster? If the customer asks you to walk a mile, can you go a mile and a quarter? Of equal importance, can you convince the customer that what you offer is better—that it offers a meaningful benefit?

What actions can you take to offset a competitor’s strength? Can you add a subcontractor with equivalent or better capability? Is there any action you can take, or an area you can emphasize, that will counteract this strength? For example, is there anything about your competitor’s software development approach you can ghost? Go back and remind yourself of the problem the customer is trying to solve. What is important? Is it schedule, cost, reliability, supportability, portability to other applications, interface with legacy systems, software development environment, future ability to upgrade, or proprietary data rights? I bet if you think hard enough, you will come up with something tangible.

Consider performing some trade-off studies or analyses that will enhance the perception of your approach or detract from that of your competitor. For example, imagine your competitor is going to host its new product on computer platform X. You plan to use platform Y. During the pre-proposal phase, you perform a trade-off study that compares platforms X, Y, and Z. Amazingly, the results of your study show that platform Y is clearly superior to X and Z. In your proposal, explain how you performed the trade-off study and share the results in a way that will cause the customer to question why anyone in his right mind would ever choose anything but platform Y. Document the study and offer in your proposal to provide a copy to your customer.

Here is another twist. Historically, your customer has had problems with contractors keeping track of requirements or with their ability to manage software configuration baselines. Highlight these as potential program risks and then explain how you will avoid them.

A Methodology for Developing Specific Bid Strategies

Specific bid strategies focus on individual elements of the program that we believe are especially important to the customer. The customer’s perception of what is most important is what I refer to as customer key evaluation Requirements (CKERs). They exist long before an RFP is prepared and represent the customer’s perspective, which may differ significantly from our view, of what is most important. We expect CKERs to be areas the customer will use to discriminate between competing solutions and pick a winner. Accordingly, what we define as CKERs should evolve into RFP source selection evaluation criteria and standards.

Developing specific bid strategies consists of a four-step process:

1. Identify and list CKERs; prioritize if possible.

2. Compare your capability to the capability of your competitors for each CKER.

3. List strengths, weaknesses, and neutral areas based on the competitive assessment.

4. Develop a strategy for each strength, weakness, or neutral area.

Identify CKERs

The first step in developing specific bid strategies is to identify those aspects of a program deemed most important by the customer. They are factors that will or potentially could contribute significantly to program success or failure. Typical CKER categories include:

• Technical/performance

• Management

• Logistics

• Schedule

• Risk

• Cost.

Normally, one or more elements of the required technical solution or expected performance will be a CKER. CKERs are not simply program or technical requirements, of which there could be hundreds. Instead, they tend to be more general measures of performance or a collection of all the technical requirements. Meeting all the key performance parameters established for a system might be a CKER, or meeting all the technical performance requirements while concurrently reducing weight and power requirements might be another. Having a system design based on all commercial off-the-shelf (COTS) hardware, or a system design that readily accommodates technology insertion, could be a CKER.

Sometimes CKERs are found in the management of the program itself. For example, if a customer has experienced problems resulting from the inability of one of its contractors to manage its subcontractors, effective subcontract management might be a CKER. Similarly, if the customer has encountered recent problems where a contractor required substantial government oversight, or where program difficulties were attributable to an inexperienced program team, a CKER might be the ability to work with minimal customer oversight, or an experienced program management team.

Logistics CKERs could involve any aspect of support considered critical by the customer or user. Typical examples include equipment reliability or operational availability rates, the time required to repair a piece of equipment and return it to service, ease of maintenance, time required to assemble and disassemble a system, ease of transport, timeliness of product training, or the availability and quality of technical publications.

If the time required to deliver product or provide services is critical to a customer, it is probably a CKER. If there is a critical need for a product, schedule will be important to the customer. Sometimes customers will give “extra credit” for early deliveries or even pay a price premium. These are clear instances where schedule is a CKER. The ability to respond rapidly to surge requirements, or to quickly fill a personnel vacancy, might define CKERs on a service-type contract.

All programs have some potential risk, but not all risks are CKERs. Risk is a CKER only if the customer believes risk has the potential to significantly undermine program success. Risk can originate from any aspect of the program—technical performance, management, logistics support, schedule, or cost. Sometimes a dual CKER can arise from a single program element. Having a robust software development capability might be a technical CKER. If the customer thinks successful software development is critical to program success, software development may also be considered a CKER from a risk perspective.

Customers and contractors view risk differently. Customers see risk from a management perspective (they manage the resulting contract), whereas contractors view risk from an implementation or programmatic perspective. Just make sure you have the right vantage point when trying to determine whether a particular program risk is a CKER.

Cost is always a CKER. Even when cost/price is the least important evaluation factor, it plays a substantial role in determining the winner. As technical differences between bidders decrease, cost becomes ever more important. When no discernible difference exists, based on an evaluation of competing proposals, cost becomes the sole factor in making a selection decision.

By focusing on CKERs, we hope to build a series of specific bid strategies that will enable us to differentiate ourselves from the competition in areas that are most important to our customer.

The easiest way to determine what is important to our customer is to talk to the customer. We will want to read any available technical documents, such as statements of need, requirements documents, or draft RFP sections, but the most effective vehicle is direct customer communications. The term customer in this case refers to multiple people responsible for defining program requirements and eventually conducting source selection. Key customer personnel include the government program manager, chief engineer (if applicable), key technical staff, and contracting officer. We might also want to interact with some of the customer’s senior management if we believe this will help us to identify CKERs, and with user representatives if they will play a role in source selection.

Identifying CKERs is an iterative process. It begins when we first decide to pursue a bid opportunity and continues until after we receive the final RFP. It requires multiple exchanges with the customer. If we simply ask a customer to identify what is most important, our request will likely be met with a blank stare. Instead, we need to engage in meaningful discussions with our customer, led by the appropriate member of our team. Our program manager should interact with the government program manager; our lead engineer, with the customer’s chief engineer, etc. Over time we should gain a good understanding of the areas our customer deems most important. Once we have compiled a list, we need to validate it with the customer. Again, this will come through multiple discussions with the customer, rather than showing up with a list and asking the customer to validate it. In most cases, customers will not simply validate your list for fear they will be required to do the same for all other bidders, or because they fear such action could be viewed as giving you preferential treatment and hence an unfair competitive advantage.

If possible, try to rank-order the CKERs from most to least important. This is a very difficult exercise but one worth the effort because it will force you to give significant thought to the reasons behind why you identified a factor as a CKER in the first place. In addition, you should devote the greatest effort to building strategies for the highest-ranked CKERs. Also, stay focused on what is important to the customer versus what your team thinks is important. The two may differ substantially, and what counts is the customer’s perspective. Within a best-value source selection, a CKER should be something the customer is willing to pay more for. The operative word here is should.

To illustrate the process of identifying CKERs, consider the following information compiled by our business development staff for the Joint Tactical Widget bid opportunity:

Based on the background information for the JTW program, we identified the following potential CKERs:

• Development and installation schedule

• Risk of degrading legacy systems

• Open-system architecture

• Design ability to accommodate technology refresh

• Cost (always a CKER).

Once we have validated these issues as CKERs, we will want to conduct a competitive assessment.

Conduct a Competitive Assessment of all CKERs

The next step in developing specific bid strategies is to use our list of CKERs to conduct a competitive assessment. For each CKER, we compare the ability of our team to fulfill the CKER versus the ability of our likely competitors to fulfill the CKER. To accomplish this, we use a simple scoring system: If a competitor has a greater capability, we assign the competitor a plus (+) for that CKER; if it has an equivalent capability, it is assigned an equal sign (=), and if it has less capability, it gets a minus (-). If we do not have enough information available about a competitor to complete the evaluation, we give the competitor a “?” for the assessment and try to acquire the necessary information to complete the assessment.

Figure 8-1 illustrates a sample competitive assessment using the CKERs identified for the JTW program. The capability of three potential competitors, denoted as A, B, and C, is compared to the capability of our team.

Figure 8-1. Competitive Assessment Using CKERs for the JTW Program

Identify Competitive Strengths, Weaknesses, and Neutral Areas

Based on the outcome of the competitive assessment, we can identify potential strengths and weaknesses. Strengths are cases where we are more capable of fulfilling a CKER than a competitor, whereas weaknesses are cases where we are less capable. Neutral areas are cases where we have equivalent capability. A strength exists only when we have a capability greater than all the competitors, but a weakness exists whenever any competitor has a greater capability. From Figure 8-1, the only CKER we rate as a strength is our ability to provide an open-system architecture. Everything else is rated a weakness, except for our ability to accommodate technology refresh, which we rate as equal.

Rarely does a situation exist where competitor strength cannot be neutralized, at least from a proposal perspective. If you can counter competitors’ strengths, exploit their weaknesses, and highlight your own strengths, you will win more than your share of contracts. Almost any issue, viewed in the proper perspective, can become a strength. It just depends on how you “spin” the information. For example, if you select a subcontractor, highlight the advantage of its specialized skill, capability, or experience and how this will benefit the customer. If practical, solicit information from multiple potential subcontractors and perform an analysis to select one. Use this information in your proposal to convince the customer that you have the best choice and to ghost a competitor that might have selected a subcontractor you rejected. Alternatively, if you do not have any subcontractors, explain how your approach avoids the risk of subcontractor management. This could be especially advantageous if one of your competitors is proposing subcontractors.

Note from the competitive assessment above that we have a serious problem with our cost. Identifying this problem early, say 12 months before RFP release, gives us ample time to do something about it. If we wait until RFP release, the probability is low that we will solve our cost problem by the time we submit our proposal. It is impossible to overemphasize the value of developing effective bid strategies long before the RFP is released.

Develop Specific Strategies for each CKER

Next, we develop our strategy for each CKER, taking into consideration the outcome of the competitive assessment. In areas where we have a strength, we want to develop a strategy to protect or extend that strength. For CKERs where we have a weakness, our strategy needs to focus on overcoming or countering that weakness. Ideally, we should be able to neutralize any competitor strength. If we do nothing to counter a weakness, we can expect to lose that portion of the evaluation. For neutral CKERs, we want to develop strategies that transform what is otherwise a neutral factor into a strength.

Specific bid strategies consist of four parts:

• Approach—The collective set of actions we plan to perform to implement the strategy. Starting early allows sufficient time to develop and implement effective strategies.

• Benefit to customer—A clear articulation of the benefits our approach will afford the customer or user. If possible, these benefits should be quantified.

• Proof or substantiation—Evidence we will present in our proposal to substantiate or prove to the customer that we will effectively fulfill CKER requirements and hopefully fulfill them better than our competitors.

• Theme—The proposal message we want to convey to the customer in our proposal.

To continue with our JTW-bid example, we can conclude that, based on our competitive assessment, we have a weakness for the CKER related to our ability to mitigate the risk of degrading E-XB legacy systems. We have equipment comparable to JTW already fielded, but we do not have experience on the E-XB platform or with the legacy systems. Competitor A likewise does not have legacy experience. However, competitor B has experience with legacy systems on the E-XB platform, and competitor C has experience with the legacy systems but on a different platform.

• Approach—Our bid strategy to counter this weakness is to team with Legacy Systems. This company recently performed several modifications to the E-XB aircraft. Therefore, it has good knowledge of the existing legacy systems with which the JTW must interface and has experienced and well-known (to the government) program personnel. Legacy Systems also has a good reputation of working with the existing E-XB contractors.

  We also plan to have Legacy Systems prepare a preliminary JTW interface control document (ICD) to demonstrate our knowledge of key legacy interface systems.

• Benefit to customer—Having Legacy Systems on our team, and as an integral member of our systems engineering and integration team, enables us to mitigate the risk of degrading the E-XB legacy systems. In addition, we will be able to maximize the potential effectiveness of the complete system, including the JTW modification.

• Proof or substantiation—We will provide a copy of our teaming agreement with Legacy Systems, as well as a copy of the preliminary JTW ICD, in our proposal, typically in a non-page-limited attachment.

• Theme—Our team’s experience installing and integrating E-XB legacy systems mitigates the risk of system degradation due to potential interface problems.

For each bid strategy approach, we need to assign responsibility and suspense dates to monitor our progress. For the sample CKER, this would entail preparing and coordinating a statement of work and teaming agreement with Legacy Systems and overseeing development of the ICD to ensure it is ready in time to support proposal development.

We continue this process until we have developed a specific bid strategy for every CKER.

Note the last two elements of the bid strategy—proof and theme—help bridge the gap between bid strategy development and proposal preparation.

Cost as a Specific Bid Strategy

Because cost is always a CKER, we always have a bid strategy for cost. Look for cost strategies in each program element. Is there anything you can do to reduce cost that still fits within your overall bid strategy? Make sure actions to reduce cost do not become a weakness in the eyes of the customer. Long-term contracts and those that include options may offer rich opportunities.

Review the RFP to fully understand how cost will be evaluated, again being vigilant to detect potential strategic bid opportunities. Sometimes evaluated price is different from the actual price you are proposing. If so, the way the government calculates total evaluated price could offer an opportunity for a separate bid strategy.

For example, in one procurement bidders were asked to propose as contract options a series of fairly expensive equipment relocations. Because the customer did not know in which year the relocations would be required, bidders were asked to include fixed-price relocation prices for each of nine option years following award of the basic contract. To determine total evaluated price, the customer planned to add together the price for all the options for each year of the contract. Although the relocation option might never be exercised or, at most, would be exercised once or twice, the price for all nine years was added together.

A possible bid strategy for this situation would be to first estimate the likely cost of probable relocations. Let’s assume that our estimated relocation cost is $45,000. We would include this cost once in the first (base) year of the contract and bid “not separately priced” (NSP) for all the relocation options. If we bid $45,000 for each of the nine option years, the evaluated price would be $405,000. Bidding it for just the first year yields a $360,000 reduction in evaluated price ($405,000 – $45,000). It also increases profit by $45,000 if the option is never exercised because the cost is contained in the basic contract. Alternatively, this strategy involves risk. You could lose money if the customer exercises the option more than once. Therefore, making this type of bid strategy decision requires a careful consideration of the corresponding risk-reward consequences. In this case, is a reduction of $360,000 in evaluated price worth the risk? You might decide to be more conservative by bidding $60,000 or $90,000 rather than $45,000.

Similar opportunities arise when bidders are asked to provide unit prices for differing quantities of product for each year of the contract period of performance. For example, bidders might be asked to provide unit prices for quantities, e.g., 1–10, 11–29, 30–60, 61–100, and 101–150. To arrive at total evaluated price, the customer might then add together price for all quantities. If so, you could gain competitive advantage by developing unit prices that minimize total evaluated price while preserving an acceptable price for the quantities most likely to be purchased by the customer. If you believe the customer would never purchase more than 100 units at a time, you could reduce your unit price for those quantities to the lowest practical level. Just remember, you must not violate the requirement for balanced pricing.

Reviewing Specific Bid Strategies after Final RFP Release

Developing bid strategies against CKERs occurs before you have a final RFP—often before you have a draft RFP. Once the final RFP is released, you should conduct another competitive assessment using the list of evaluation criteria contained in Section M of the final RFP. Recall, these are the general criteria the customer will use to score each proposal and select a winner.

Assess the ability of your team to satisfy each technical evaluation criterion compared to the ability of each competitor to satisfy the criterion. Identify evaluation criteria for which you have a strength, weakness, or neutral area. Develop a matrix listing competitors and technical evaluation criteria, as illustrated in Figure 8-2.

Figure 8-2. Sample Competitive Assessment Using Final RFP Evaluation Criteria

As shown, this example includes three competitors. It also shows technical evaluation criteria for three technical subfactors (T1, T2, and T3), two management subfactors (M1 and M2), and cost. For each evaluation criterion, compare the competitor with your company and determine if the competitor has a greater capability (+), an equivalent capability (=), or less capability (–) than your company.

Compare the outcome of this competitive assessment with the one you conducted using CKERs. Also, compare your list of specific bid strategies against the evaluation criteria of the final RFP. The purpose of this comparison is to identify areas where you need to develop an additional bid strategy so that all evaluation criteria are covered. Ideally, the bid strategies developed beforehand will map directly onto the RFP evaluation criteria. Unfortunately, this rarely occurs. Evaluation criteria typically are far more general than specific bid strategies, although bid strategies should fall within the boundaries of the evaluation criteria. In addition, final evaluation criteria are not always directly derived from things deemed important to the customer. In any event, ensure you have a strategy for every evaluation criterion contained in the final RFP.

Customer Contact Plan

A commonly used practice is to develop and implement a customer contact plan during the pre-proposal phase. This is simply a plan to visit key customer personnel before the final RFP is released. The plan includes the names of customer and user representatives to be visited, when visits should be made, and the person in your organization who will make or lead the visits. The purpose of these visits is to collect information to help you make a bid decision, develop a bid strategy, and support proposal planning.

Target customer personnel who will likely serve as members of the source selection team—the government program manager, contracting officer, lead engineering and technical personnel, key users, potential members of the source selection advisory council, and others. Customer contacts should not be used to make a marketing presentation. These are opportunities to identify the customer’s wants, fears, and desires, plus any biases that could influence your proposal approach.

Customer contacts should be made by your program manager and appropriate members of your technical and contracts staff, depending on the specific person with whom you are meeting. For example, your technical managers should meet with their government counterparts; your contracts manager, with the government contracting officer; and so on. Marketing can assist with these meetings but should not take the lead role.

Plan each visit. Make a list beforehand of the information you want to collect and the topics you want to discuss. Let the customer do most of the talking. Take good notes and document the results of each visit.

Figure 8-3 shows a simple form that can be used to list customer names and decision-makers and to build a customer contact plan.

Capture Plan

Many organizations document the outcome of their bid strategy development in what is commonly referred to as a capture plan. (See Appendix A for an example.) As the name implies, this plan contains the actions and strategies that will be implemented to capture the target business opportunity.

Building a capture plan has several advantages. First, it formalizes the strategy development process and creates a legitimate end product. The danger of informal processes is that they might never produce a tangible product. For bid strategies, this amounts to a lot of talk but no action. Second, a documented plan can be distributed easily to proposal team members. This will greatly enhance their ability to integrate elements of the plan into the proposal or to offer critical recommendations concerning the plan itself.

Figure 8-3. Forms—Customer Information and Contact Plan

RISK/OPPORTUNITY COMPONENTS OF BID STRATEGY

Every bid carries with it a corresponding set of potential risks and opportunities. Both should be integrated into bid strategies. Risks arise from two interrelated sources. One involves the risks associated with performing the contract and its attendant terms and conditions. The other is generated by bid strategies themselves. Bidding a program with a payment penalty for failing to achieve equipment availability goals involves risk. So does bidding NSP for relocation options rather than fully pricing each one, or bidding a computer upgrade with a six-year payback period (see Example 2 on page 157).

Risks must be balanced by the expected gain or advantage they offer. Take the availability penalty as an example. Assume that availability is a function of the number of maintenance personnel and the depth of spare parts. Decreasing either people or material reduces bid cost but decreases availability in this simplified example. The advantage of a lower price must be weighed against the risk of incurring a payment penalty and the size of that penalty, forgetting momentarily the potential impact on your relationship with the customer. The amount of risk your company is willing to accept may represent a significant part of a winning bid strategy. Sometimes the winning contractor is the one that accepts the greatest amount of risk or is able to develop a unique or innovative way to mitigate risk.

The flip side of risk is opportunity. Every bid carries with it some opportunities beyond those represented by winning the contract. Potential opportunities include future additions or changes to contract value via engineering change proposals, the chance for follow-on work, growing market share, maintaining dominance in a particular area, protecting an area or contract from assault by competitors, or using the contract as a gateway to future procurements.

Occasionally, customers procure programs in phases. You must win one of the initial contracts to remain in the competition. A common procurement approach within DoD is the use of indefinite delivery/indefinite quantity (ID/IQ) contracts. These contracts serve as gateways for future contracts. That is, you must win one of them to receive or compete for future business.

Clearly, future potential opportunities, or the strategic value afforded by a contract, must be considered in developing bid strategies. Risks and opportunities must be weighed and balanced to arrive at a bid approach acceptable to your organization. You may be willing to accept a higher level of risk on a contract because of the opportunities it represents. Note that risk always translates into money. So, accepting a higher level of risk means that you are willing to risk some or all of your profit.

In other cases, you may simply bid a lower profit margin as a way to gain access to future business or in hope of increasing contract value. You may be willing to accept a 3 percent profit (versus 7 percent) on the initial contract if you believe that there is a good chance to add future work at a profit margin of 12 percent. Bidding lower increases the probability you will win. Future work at a higher margin will enable you to realize a reasonable profit over the life of the contract, but perhaps lower than if you won the program at the higher (7 percent) initial rate.

There are always trade-offs. The key is to thoroughly assess the risks and opportunities associated with a bid and integrate this information into your bid strategies. In Chapter 4, we discussed how to perform a strength-weakness-opportunity-threat analysis for each unique line of business being pursued by your organization. This same general approach can be applied to a specific bid opportunity. (See Figure 4-2 for a sample form.)

DEVELOPING BID STRATEGIES FOR SERVICE-TYPE CONTRACTS

Building bid strategies for service contracts follows the same process discussed above. Nonetheless, bid strategies for service contracts require some special considerations. Most service contracts are already being performed by an incumbent contractor. If you are not the incumbent, you must be clever enough to unseat the existing contractor. This can be difficult if the customer is reasonably satisfied with the incumbent’s performance. To be successful, you must be innovative. To complicate matters further, service contracts tend to be brutally cost competitive. Often, labor accounts for the vast majority of direct cost. Moreover, the Service Contract Act (SCA) covers many of these contracts. SCA contracts dictate, by geographical area, the minimum wage and benefits for specified labor categories. Hence, labor costs are fixed (unless you plan to bid higher than SCA requirements). In such cases, the number of personnel proposed and your company’s indirect costs and bid profit account for practically all the available cost variables.

In short, to be the low-priced bidder on these contracts, you must bid fewer people, propose a cheaper skill mix, or have lower bid rates (overhead and G&A costs). Reducing head count to cut your bid cost may incur performance risk. At some point, it could result in your being eliminated from the competition. Reducing cost and remaining technically compliant can be a difficult balancing act. Yet it might represent your best chance of securing a win.

If the customer truly considers value, you can strategize about ways to increase the value—that is, benefit to the customer—or to reduce program risk as ways to gain competitive advantage. This assumes you can do so without significantly increasing your cost. Otherwise, you must figure out how to cut cost. As described, you will need to evaluate every aspect of the program to identify potential areas for cost savings. I hate this terminology, but you must be able to “think outside the box.” Here are two real-world examples.

Example 1. An existing contract required the contractor to provide instructors to teach flight simulator sessions and academics to Air Force pilots at multiple sites. Historically, this contract had been awarded to the lowest-priced qualified bidder. Contract wages were governed by the SCA. Under the SCA, pay raises are determined by labor surveys performed by the Department of Labor. Delays in these surveys, combined with generally inadequate wages, were causing a high personnel turnover rate, which had been affecting contract performance. As contract re-competition approached, bidders were faced with a dilemma. Low cost seemed to be the winning formula, yet it was clear that SCA wages would be insufficient to retain the necessary personnel.

This time the customer indicated that it would not just award to the low bidder, but would consider measures taken to retain the existing workforce. Working with the incumbent, we hired an outside human resources company to survey workers and determine what they valued in terms of salary and benefits. Although we bid SCA wages, we built a bonus, benefits, and work schedule program that matched the survey results and added the extra cost in our bid profit. Our proposal received high marks, and we won the contract even though we were not the low bidder. In this case, we solved the customer’s problem and mitigated program risk at an affordable price.

Example 2. In another case, an incumbent contractor was providing contractor logistics support for F-16 flight simulators and maintaining the simulator product baselines through sustaining engineering services. The simulators were driven by aging computer systems that were difficult and expensive to maintain. Moreover, multiple simulator software baselines had evolved over many years. This made software updates time consuming and expensive. This was a fixed-price contract covered by the SCA.

As contract re-competition approached, the incumbent was concerned that another bidder would be able to undercut its cost significantly. To offset this potential, we developed a strategy focused on providing a best-value solution without increasing current contract cost. We determined that we could replace the old computers with a PC-based solution and pay for the upgrade with subsequent savings in support costs. This would give the customer all new computers, which improved performance and reduced both the time and expense of future software changes. In essence, the customer was getting a computer upgrade for free. This strategy proved successful, and the incumbent won a ten-year contract.

Again, this bid strategy incurred risk. First, the contract was for one base year and nine one-year options. It would take about six years to recover the expense of replacing the computers. If for some reason the contract was terminated early, the company would lose money. Second, there was no guarantee that the customer would accept our offer to replace the computers. Knowing the program and the customer enabled us to mitigate these risks to an acceptable level.

Bidding as the Incumbent

Amazingly, incumbent contractors lose far more re-competitions than they win. This is amazing because incumbents should know the customer and its needs better than anyone else. A host of factors contribute to the miserable track record of incumbents, but the most pervasive reason is a tendency to bid status quo for the new contract. This is especially true for cases in which the incumbent’s contract performance has been good and when the incumbent believes the customer “loves” him. This creates a belief that what the customer liked in the past will be adequate to secure another contract for the future. Figure 8-4 lists some general advantages and disadvantages of using incumbents.

Figure 8-4. General Advantages and Disadvantages of Incumbents

Here are some strategic tips if you are the incumbent contractor. Do not believe the customer loves you and will retain you because of your good past performance or personal relationships. As history painfully shows, often that is not enough. Start preparing for re-competition at least 12 months ahead of time. Use this period to resolve any performance problems and go out of your way to please the customer, even if it cuts into your profit margin. Customers are more likely to remember your last year of performance than the preceding years. So, you have the opportunity to make up for past sins with good recent performance.

If your past performance has been good, build on it. Avoid making a common incumbent mistake by bidding the status quo. Do not rest on your laurels. There are plenty of innovative, hungry contractors just waiting to snatch away the contract. Identify areas where the customer would like to see improvements, problems the customer is facing, or areas that could involve risk. Develop plans and strategies to attack these areas under the new contract. If practical, implement these solutions before the new contract goes into effect. Also, review your staffing levels and every other facet of the contract to find ways to improve efficiency and potentially reduce cost.

Bring in someone from outside the incumbent team to give you an independent assessment of your approach and bid strategy. Sometimes the incumbent team is too close to the contract to see possible areas for improvement. My general approach is to act as if I am a non-incumbent contractor seeking to take the contract away. So, my general bid strategy is to look for ways to unseat the incumbent, even though I am bidding as the incumbent.

Bidding as the Non-Incumbent

Figure 8-5 lists some general advantages and disadvantages of using non-incumbents.

Figure 8-5. General Advantages and Disadvantages of Non-Incumbents

Here are some strategic tips if you are the non-incumbent contractor. Do not believe rumors that the customer “hates” the incumbent and is ready to switch. Customers always say they are ready for a change to foster competition even if it is not true. If it is true, the customer may still be reluctant to change. Recognize that bidding as a non-incumbent contractor places you at an inherent disadvantage. You must convince the customer that replacing the existing contractor is worthwhile. The customer must have a compelling reason to switch. Transitioning to a new contractor carries risk in terms of both continued operation or mission success and the actual transition to a new contractor.

Start looking for valid reasons for the customer to switch contractors 12 to 18 months before the competition. Apart from incumbent poor performance, you must soundly beat the incumbent by a margin that justifies the risk of changing contractors. Ties go to the incumbent. To win, you will have to propose something that improves performance, reduces cost, mitigates risk, or otherwise satisfies a customer want, need, or desire. These are the basic ingredients from which a successful bid strategy is made.

Also, plan to beat the incumbent’s proposed price by at least five percent. Price is not everything. Indeed, non-price factors like innovation, planned improvements, and better performance contribute to winning best-value bids. Nonetheless, service contracts are severely cost competitive. Winning the price war puts you in a favorable competitive position, especially in today’s environment, which places ever more emphasis on price. Just make sure your lower price does not come at the expense of perceived poorer performance or implied risk on the part of the customer.

Of all the actions you can take to gain competitive advantage, developing and implementing a bid strategy should be near the top of your list. Few activities pay as rich a dividend. Rigorously collect, document, and analyze information about the customer, program requirements, and competitors. Use this information to develop general and specific bid strategies. Seize every opportunity to gain advantage over competitors regardless of how minor an advantage may appear. Added together, many small or even trivial advantages equal a noticeable difference, which may be enough to win the competition.

Exploit the talents of your capture team by creating a working environment that fosters creativity. Refine bid strategies over time. Remain flexible and be willing to adjust a strategy based on new information or perspective. Take measured steps to ensure that bid strategies are reflected in your proposal. Otherwise, their development will amount to only an academic exercise.