Knowing When To Stop Spending Good Money On Marginal Pursuits (10-04-19)
Most competitive opportunities draw multiple bidders but, mostly, there is only one winner. Senior management's response to this brutal business development reality is to require the continuous, incremental monitoring of the "winnability" of pipelined opportunities. This is the "Win Big or Lose Early" strategy and the aim is to stop squandering pursuit funds and human energy as soon as the strategy's monitoring mechanism flashes unwinnable.
Monitoring the winnability of a promising major pursuit requires a two-track approach. Track 1 pursues the targeted opportunity with vigor, investment, realism and optimism, while Track 2 looks at the competitive situation from a pragmatic, competitor-focused, analytical and non-political point of view. The results generated by each track converge at periodic management reviews (e.g., Gate Reviews) where track findings are shared and compared. The review's outcome will be:
- continue a potentially "winnable" pursuit;
- demand more information from either track team; or,
- "pull the plug" and preserve as much pursuit treasure as possible
Dealing with Track 2 first, an early, comprehensive, Price To Win (PTW) study is usually undertaken to identify, and then objectively assess, each competing bid team's ability to earn non-cost and cost evaluation award points. The PTW study will also assess your team's ability to earn non-cost evaluation award points and determine the price your team will need to bid to win the most overall evaluation award points and, put your team in the winner's circle.
In addition to developing a superlative team, solution, approach and non-cost proposal elements Track 1 needs:
- a well-developed bid pricing strategy;
- a well-reasoned competitive price point target; and
- an embryonic post-award execution strategy (to ensure that gaming strategies that support the target price point are not violated during contract execution).
Management's role is to energize and manage both tracks concurrently and, as they progress:
- schedule periodic review sessions to understand, consider and compare each track's winnability assessment; and, as they say,
- determine whether the pursuit at hand is a hold 'em or a fold 'em one.
Most Track 1 energy is spent turning a solution, a team and relevant past performance and expertise into a compliant and compelling non-cost proposal elements. Meanwhile, the pricing volume, which tends to carry an outsize evaluation point weight, garners little early attention. Track 1 of a capture campaign tends to give scant early thought to target price development and the gaming and pricing strategies that underly it. As a result, a Track 1 price estimate that does not analyze gaming potential is likely to have little credibility when compared to a carefully developed, PTW-driven Track 2 price estimate.
The pundits know that price gaming is both an art and a science. The art of it spots the gaming opportunities while the science exploits them. First we need to decide where within the underlying set of evaluated items (i.e., the CLINs) the gaming potential exists and which gaming strategy applies to each potential gaming opportunity. Before selections are made each putative gaming strategy should be tested to ensure that each expected benefit (i.e., lower evaluated price, higher profitability, more manageable risk, etc.) is delivered.
For instance, consider the Delta Margin Gaming (DMG) pricing strategy that, for opportunities that involve numerically evaluated CLINs, moves margin (and sometimes even cost), out of the pricing for items that appear to be over-evaluated into prices for under-evaluated items. Examples of CLIN items that may be gameable using DMG include:
- The numbers of on- and/or off-site labor category (LCAT) hours being evaluated during a given contract year; or
- Just about anything else that agencies buy that are quantitatively evaluated (e.g., numbers of airplane engines, computers, vehicles, seminars, etc.).
Some non-pricing professionals think that second guessing customer evaluation schemes for gaming purposes is an exercise in futility. If this is your view consider that, in addition to laws and sausages, the making of Evaluated Case quantities are rarely a pretty sight mainly because the results, especially in a contract's out years, tend to be works of fiction. Since customers never commit to buying the quantities that comprise their Evaluated Case why should bidders commit to pricing those precise quantities? In most cases there is potential for unreality(i.e., the + or - delta between Evaluated Case and Reality Case) for DMG to exploit. Said differently, contracts that use evaluation quantities very often present an opportunity for a bidder to reduce their evaluated prices and improve their profitability.
To play the DMG-based pricing game a capture team will need to develop a Reality Case for each of the Evaluated Case's numerically evaluated items. Reality Cases identify the quantities of each quantitatively evaluated item that bid team stakeholders believe will actually be bought, and when.
The Reality Case development process brings together customer-facing and capture stakeholders, usually under the aegis of a facilitator. The facilitator poses questions related to the opportunity's evaluated line items such as: "Who believes that the government's time-phased line item evaluation quantities will be bought when the customer's Evaluated Case says they will be bought?"
Stakeholders that answer YES, either believe that the Reality Case is the Evaluated Case (i.e., no deviations are likely) or they are saying they have no basis for forming an opinion. If all parties agree that YES is the correct answer then DMG will not be a viable gaming strategy for this bidder for this opportunity. [The bigger question for stakeholder groups that don't feel qualified to develop an opportunity's Reality Case is: Why are you bidding?]
Those that answer NO, evidently see negative or positive divergence (i.e., what DMG call unreality)between Evaluated Case quantities and the eventual reality they believe will happen or what, as the awardee, they believe can be made to happen. If we have unreality then its "Game On!" for DMG since the stakeholders evidently don't believe the Evaluated Case quantities will happen.
Assuming that DMG is deemed to have viability as a gaming strategy, stakeholders are provided with an Evaluated Case spreadsheet (items, quantities, timing) and are asked to state, for each CLIN and CLIN time period, why they feel the item's evaluation quantities are, or are not, realistic and, if they are not deemed to be realistic, what reality quantities are most likely to be, and why. The stakeholders reconvene and participants present, discuss and defend their views of reality quantities. The facilitator develops consensus and compiles a consolidated Reality Case for DMG use.
At best, an Evaluated Case estimate reflects what the opportunity's customers/consumers have bought and/or might want to buy. What it does not represent is an order! At worst, an Evaluated Case estimate may have no basis in fact, or at best, it is an estimate. So, by ignoring the Reality Model step a capture team will be tacitly adopting the customer's close cousin of flawed laws and suspicious sausages.
Good luck and happy hunting.
If your firm is grappling with how to develop an effective PTW-driven means of detecting when pursuits become unwinnable, please call me at (301) 807 8171. I am always happy to discuss how CAI/SISCo can help improve your firm's processes and win rates.