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Proposal Land

Contracting 101: Risky Business

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Well, what’s the problem?
Businesses take risks.

As a retired senior military officer told me more than a few times, this attitude prevailed among his not-yet-retired military colleagues who were responsible for developing RFPs.

Yes, businesses “take” risks. But maybe a better verb would be “calculate” or “estimate” or “cost-in.” Businesses don’t just “take” risks wildly and blindly — not and survive very long, anyway. Based on their experience, they look at what could go wrong and at what could change over the contract term, and they allow some margin for it in their price. They include some contingency for things they can’t control.

So what? So this.

If you’re a client, consider the Work you’re contracting out in light of this train of thought:

  • What uncontrollable risks will the contractor be subject to?
  • What could the downside be for the contractor? What are you likely paying for the contractor to “take” that risk; that is, for every competent bidder to include it in their price?
  • Would it be cheaper to find a mechanism to share the risk?

What sorts of risks are uncontrollable? Input costs are a big one, for everything from insurance to commodities. Market shocks are beyond any contractor’s control: Think of the original oil embargo, or the 9-11 attacks that drove insurance prices, or the hard-to-predict swings in commodity prices that wreak havoc with cost control over the extended schedules inherent in capital acquisitions.

Finding a way to share those risks with contractors will get you a lower contract price. It might also encourage competition, by lowering the bidding risk for smaller companies. Finally, it will prevent windfall earnings if cost increases don’t materialize.

If you’re a contractor, consider suggesting a risk-sharing arrangement if the client doesn’t suggest it. After all, who knows the risks of the Work better than you?

 

Term: Scope Creep

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The general tendency for the contracted scope of work to increase, bit by bit.

Can be caused by clients seeking shiny new performance enhancements, especially in acquisition contracting, or by contractor employees gradually doing more than they are required to, especially in services contracting.

Scope creep can lead to contract amendments, formally modifying the performance requirement along with the cost and schedule, or it can lead to an informal (some might say “insidious”) increase in expectations with no corresponding contract coverage or compensation.

Contracting 101: Obligations and Entitlements

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Contractors, listen up. If it’s in the contract — which includes your proposal, way down in the precedence list — you have to do it. You’re obligated.

Clients, listen up. If it’s not in the contract, you can’t have it without paying extra. You’re not entitled.  “Hiring” a contractor is misleading language: It is not like hiring an employee. There’s no contractual equivalent to the “Other duties as required” line in job descriptions.

Is it quite that simple? No. Contractors sometimes do freebies in exchange for goodwill; clients sometimes accept less of one thing to get more of another. But the contract is supposed to rule and it will rule if/when you get a new contracting officer on either side.

So listen up, both of you: At the bidding stage, pay attention to what’s in the contract.

Deadlines

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Management reserve: You need some in your schedule. I say so and Seth agrees.

 . . . unavoidable delays and errors compound
in a system that doesn’t have enough buffer space.

But deadlines have to be real, not fake. I say so, and Seth agrees.

Fake deadlines exist when we can’t trust others (or ourselves) to be clear about our progress or prioritize honestly. So we invent a date before we actually need something to arrive.

If you set it earlier than you really need because you assume someone will be late, you just teach everyone to be late. I say so, and — you’ll never guess — Seth agrees.

The challenge is that fake deadlines compound. Once someone on another project realizes that they’ve been outfoxed by a fake deadline, they’ll simply escalate their urgency as well. Or perhaps the provider realizes that we’ve been faking the deadlines, and so now there’s a whole new level of guessing about what the real deadline is.

It’s a form of sandbagging. It’s driven by fear. And it’s super bad for teams, fostering contempt for the schedule in a schedule-driven environment.

So go ahead: Add some management reserve to your schedule. But don’t hide it: Make it visible.

And get everyone on board with meeting every deadline.

Read more here about how schedule pressure affects every aspect of proposal work.

Check out a sample six-week schedule here.

Just the Facts, Ma’am

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Many proposal writers start here . . .

Isabel is a uniquely well-qualified, world-class proposal editor.  Her deep intimacy with all imaginable types of proposals ensures that she can leverage her wealth of knowledge and vast experience, using leading-edge best-of-breed practices.  An unparalleled career of in-depth exposure to innumerable incoherent RFPs makes her the very best at discerning the intent hiding within the most obtuse instructions.

Too many end there also. Blah blah blah. And bleh.

Contrast that with this . . .

Since 1990, Isabel has edited more than 100 proposals in diverse sectors: defence, oil and gas, telecommunications, recruitment, relocation services, facilities and property management, and design-build.  She has guided responses to RFPs from diverse clients: government (Canadian federal, provincial, municipal; and US federal and state); near-government (Crown corporations, agencies); and the private sector.  Her win rate of 1/3 exceeds the industry average of 1/5; she has contributed to winning contracts worth more than $8 billion.  She has never missed a deadline or strangled a team member.

Now we’re getting closer. Because once you actually have some facts to work with, you can consider other presentation formats: One that might actually highlight content that’s missing . . .

—Number of proposals:  >100 since 1990

—Win rate:  1/3 (versus 1/5 industry average)

—Value of wins:  >$8 billion

—RFP issuers:  Government (Canada, USA), near-government, private

—RFP types:  missing

—Sectors:  oil & gas, telecom, facilities maintenance, operation & maintenance, design-build

—Teams: 5 to 75 people

—Deadlines met: 100%

—Team members strangled:  0

Where you stop is up to you. But as a good rule of thumb, don’t stop where you started.