Four Practices to Improve Estimating and Proposal Preparation

By Gary Alongi, CPA, CCIFP®

Profit margins within professional service firms rely heavily on the overall quality of the proposal, the project definition and scope, the delivery process, and the accuracy of labor and materials estimates. Yet even seasoned practitioners make mistakes that reduce revenue and bottom line profits.

Common errors include:

  • Failing to know the client well enough to understand their needs, requirements and preferences and translate them into an appropriate project definition, scope, statement of work and budget.
  • Failing to account for the types of resources, number of hours and availability of resources to meet the proposed timelines.
  • Having an unstructured proposal development process with limited to no coordination among estimators.
  • Failing to ensure loaded labor rates, and assumptions used in their calculations, are current, accurate and reflect impending adjustments.
  • Failing to allow for delays and problems.
  • Failing to build in margins for contingencies.

Some firms try to minimize errors by instituting cumbersome processes in which only project managers are able to gain access to critical project, employee qualification and employee availability data. Unfortunately, it’s hard for project managers to undertake proposal development work while attending to their other responsibilities. In this case, too much control can stymie the firm’s ability to secure new business and grow.

On the other hand, some firms have multiple employees prepare proposals using different methodologies, structures and supporting documentation (e.g., resource hours by phase and/or task). This creates a lack of consistency and potential for large variations in scope, project plan and budget. It is also a waste of time when a standardized approach would improve quality, accuracy and efficiency.

Here are four practices that can elevate your firm’s estimating and proposal development process.

Sample Project Frameworks

Create frameworks for common project types with detailed questionnaires to guide discussions with prospective clients. These constructs should reflect approaches that have proven most effective in the past. The frameworks can also serve as marketing tools through which prospective clients get a sense for how you will work with them. They suggest a thoughtful, time-tested process that gives ample room for customization to the client’s circumstances, stated requirements and expectations.

Project Plan and Budget

Translate the frameworks into project plans and budgeting tools the estimators can customize based on insight from client discussions. When there are questions or options to consider, confer with the client to gain clarity and document the response. Upon completion of the customized project plan and budget, get another pair of eyes to check the assumptions, inputs and calculations to ensure they are realistic.

Formal Proposal

Use the client input, project plan and projected budget to draft a proposal based on a standardized template. As the proposal may be referenced in a contract, it needs to be thorough, thoughtful, accurate and professional. Common sections include:

  • A cover letter, title page and table of contents.
  • A detailed project definition which summarizes the context in which the work will be complete, the project scope, requirements and operating parameters.
  • A narrative description of the project approach with appropriate graphics and delineation of phases and steps.
  • A summary of the project deliverables with projected staffing and timelines.
  • A list of assumptions used in the preparation of the proposal that reflect statements made by the client and include the firm’s expectations of key inputs, products and services provided by others.
  • A value proposition that extols the virtues of the firm and provides concrete evidence of the depth of its expertise and related experience.
  • The project budget, including expectations for payment and provisions for contingencies.

Process Improvements

Revise the business development process based on critical reviews of past experience and findings from continuous improvement initiatives. Take a penetrating look at what has gone well and what has gone wrong. Pay particular attention to scope creep and the means through which it arises, as it’s a frequent source of cost overruns. Brainstorm solutions, and then build the appropriate processes, controls and safeguards to minimize the chance of recurrence.

At the end of the day, standards and the associated tools will save time, improve consistency and sweeten the bottom line while ensuring all parties involved are on the same page.

Meet Gary

Gary’s extensive knowledge of the construction industry allows him to provide value-added services that save clients money, helps them comply with regulations and requirements, and take advantage of opportunities helping them grow their business.

Connect with Gary here.