project management replies
main que:Read the case study “To Bid or Not to Bid” on page 1011 and then answer the questions on page 1012
No need to provide answer to the main question.Just read below student posts and reply accordingly each in 125 words.
Other factors to consider by Marvin and his team:
In the case study, it is mentioned that in the past, win to loss ratio was excellent as the company used to bid on all jobs that were a good fit for the companyâ€™s objectives. However, this time the client is requesting pricing information and work breakdown structure for the project. But since this is a ten-year project, many things would change, and it is to be communicated with the client of the complications in presenting such data. Also, it might be beneficial to consider other factors such as profits from this project vs the loss that the WBS would incur.
Also, the company could plan for a non-disclosure agreement between it and the client, to not disclose its WBS with its competitors. The company could communicate that, if the project is attained by the company, future bids might not have the same WBS depending on the projectâ€™s needs and available resources and future changing cost structure. They could additionally discuss a contract for future projects.
Should they bid on the job?
After considering all the mentioned factors and after discussing additional propositions and agreements with the client like non-disclosure agreement. This agreement is important as there is a clear risk of the companyâ€™s competitors seeing the cost planning and structure and as mentioned in the pro-con list, their competitors could hire away their talented employees.
If the profits for the 10-year term is acceptable after excluding the loss due to providing pricing and work breakdown information to the client, they should go ahead and bid for the project. This bidding will not only maintain the companyâ€™s position in that clientâ€™s bidders list and make it a strategic partner of that client but also will be noticeable by its competitors for not backing out in tough situations. It will retain its reputation as a strong company which increases the chances of getting more projects for various companies. If it wins the bid, its overall profits skyrocket and it could build a stronger working environment for itself with better strategic approaches. This will help the company in winning larger contracts.
In the bidding process, the decision should be made not only by the likelihood of winning the tender, but also on the capability of the client being able to succeed in delivering the project on time. It also needs reasonable time along with experienced management team to deliver successful bids.
What other factors should Marvin and his team consider?
Marvin already discussed some of the pros and cons related to this job with team composed of his senior officers. Ultimately, the decisions related to â€œbid or not to bidâ€ depends on various factors. Some of them are as follows:
- Capability: One should determine whether the organization is capable of doing the work or not. Then, they need to check with the current project backlog to ensure that they can provide the personnel, supplies and other services to contribute to the project before work is expected to begin and complete it within the appropriate time-frame. They also need to ensure their financial stability in completing the project with enough cash flow to execute the work without violating any of their other commitments. Knowing your limits is key in successful decisions as it will not stretch you away from your capability.
- Historical Analysis: To gain improvement in bidding process and to achieve more success in future, one should maintain a detailed list of all the bids (both successful and lost). It is evident to know the reasons (like lack of experience/money) behind the lost bidding’s, which actually helps to improve in respective areas.
- Long-Term Strategy: Every company has its own future planningâ€™s regarding extension of business throughout various places, recruiting more resources or implementing new technologies etc. So, verify whether the project which is under bidding process is capable to fit in future goals or not.
- Risk Assessment: One should be ready with the list of potential risks around the project even before the actual bidding process starts. Maintaining a prioritized list of risks by taking certain factors like time, money and resources etc, is key. If there is high impact of loss or risk identified, then it is good to move away from the respective project immediately.
Should they bid on the job?
According to my opinion, I would suggest them to bid on the job. Apart from the request from the client regarding pricing information for each work package in the WBS, there are many benefits from this bid. So, Marvin should deal in a smarter way with the client and make him accept with summary-level pricing information or to maintain absolute secrecy of the actual pricing details shared by him.
The benefits around this bid include:
- As it is a 10-year project from a big client, it will definitely give support and strong base to the organization throughout the period.
- There are also chances for extension of the project if their performance was good.
- There will be job opportunity and also security for large number of resources.
Bidding is always a tricky business. One can say that it needs both trust to just do a leap of faith and also a thorough analysis to estimate the cost as accurate as possible. It is always a good practice to not share the entire cost break down to client for multiple reasons such as we may see client requesting for low profit offer (if the bid is flexible), and there could be a false impression from clients if they see that we have a good profit margin. In anyway a bidder should stay in a position where he should be loyal and trustworthy and also not to disclose the entire cost plan on deeper levels.
If we look at the example that was given Marvinâ€™s position is exactly like described in the above context and If I were one of his senior management, I would vote for not bidding for this specific client. I can see there is a stronger risk in doing so for multiple following reasons.
Firstly, giving away the company cost structure completely to a client is same a chef sharing his recipe with the customer. Chef should be in a position to assure that whatever the requirement the customer asks he/she should be able to deliver the food. It is the same logic it applies here a bidder can assure the client that their requirement on each delivery aspects will be met but trading the entire cost structure is not an ideal solution.
Second, If the cost structure is shared, we lose the ability to bid higher and smarter in our future contracts and we will always to tied up to deliver products in the lower margin. Which is not a smart decision from a bidder perspective. It would also put us in a position where we had some higher profit margin bids in the past and now if the client see that we are capable of
bidding a lower price this gives a negative impact from the client on our company.
To bid or Not to Bid” have to think for a long time and should finalize to bid or not to bid, for taking that decision you have to consider the project your are bidding ,time and resources that you have . So thorough analysis is required to meet the company’s goals and factors that have to consider while making the decision are as follows:
Profitability:-if you are not having any profit on the project, you will not get business bidding on it in the first place, make sure you have an perfect idea on account of labour, equipment costs, so you can have a perfect idea of your job costs. So while calculating labour costs you should be aware of including taxes, insurance, vacation pay, tools and equipment and all additional benefits you provide to your employees. After determining the cost to complete the project then you need to check the location, requirements of contract and so on. And if you find it is profitable then you have to submit the winning bid (Bob, 2015).
Capability:-After guessing that you can make some money of project, you should examine whether your company is capable of doing the work or not. so you should check the current backlog for the upcoming projects to conform that you have enough equipment, staff and other resources to do that project. so that you can expect the timeline to complete it.
Historical Analysis:-To get better bids and win more works, you should keep records of all your bids ,which are successful and not successful. It’s important to have the records for having a clear picture on what you are lost out on a bid .Ask the feedback of your client after the bidding process is completed (Bob, 2015).
Other factors that have to consider while making the decision to bid or not to bid includes location, duration, all the resources that required. So by considering these factors you can able to make good and smart decision on what projects to do in the future (Bob, 2015).