TO BID OR NOT TO BID Marvin was the president and chief executive officer (CEO)
ID: 414865 • Letter: T
Question
TO BID OR NOT TO BID Marvin was the president and chief executive officer (CEO) of his com pany. The decision of whether or not to bid on a job above a certain dollar value rested entirely upon his shoulders. In the past, his company would bid on all jobs that were a good fit with his company's strategic objectives and the company's win-to-loss ratio was excellent. But to bid on this job would be difficult. The client was requesting certain informa- tion in the request for proposa (RFP) that Marvin did not want to release. If Marvin did not comply with the requirements of the RFP, his company's bid would be considered as Background nonresponsiVe Marvin's company was highly successful at winning contracts througlh competitive bidding. The company was project-driven and all of the rev- enue that came into the company came through winning contracts. Almost all of the clients pro- vided the company with long-term contracts as well as follow-on contracts. Almost all of the Bidding Process contracts were firm-fixed-price contracts. Business was certainly good, at least up until now Marvin established a policy whereby 5 percent of sales would be used for responding to RFPs. This was referred to as a bid-and-proposal (B&P;) budget. The cost for bidding on con- tracts was quite high and clients knew that requiring the company to spend a great deal of money bidding on a job might force a no-bid on the job. That could eventually hurt the indus- try by reducing the number of bidders in the marketplace Marvin's company used parametric and analogy estimating on all contracts. This allowed Marvin's people to estimate the work at level 1 or level 2 of the work breakdown structure (WBS). From a financial perspective, this was the most cost-effective way to bid on a project knowing full well that there were risks with the accuracy of the estimates at these levels of the WBS. But over the years continuous improvements to the company's estimating process reduced much of the uncertainty in the estimates One of Marvin's most important clients announced it would be going out for bids for a potential ten-year contract. This contract was larger than any other contract that Marvin's company had ever received and could provide an excellent cash flow New RFP stream for ten years or even longer. Winning the contract was essential Because most of the previous contracts were firm-fixed-price, only summary-level pricing s of the WBS was provided in the proposal. That was usually sufficient for op tw the company's clients to evaluate the cost portion of the bid The RFP was finally released. For this project, the contract type would be cost-reim bursable. A WBS created by the client was included in the RFP, and the WBS was broken dowin into five levels. Each bidder had to provide pricing information for each work package in the WBS. By doing this, the client could compare the cost of each work package from each bidder s from each bidder rather than apples and To make matters worse, each bidder had to agree to use the WBS created by the client The client would then be comparing apples and apple OI during project execution and to report costs rding to the WBSExplanation / Answer
Answer 1.
The other factors Marvin and his team should consider are as below
Basically all this factors helps to take right decision for the company to bid or not bid. This decision will be based on analysis of all the key factors, which can have significant impact on the company. Based on the analysis and outcome of impacts on the company, the right decision will be taken.
Answer 2: Yes, They should bid on the job.
The reasons for this are as below
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