What exactly is a bid and proposal (B&P) budget? It is the money your company allocates to cover the costs of bidding a solicitation. It includes all activities associated with that specific bid starting with pre-RFP business development or capture work through proposal development and submission and ending with the contract award. The source of the B&P dollars depends on whether you are pursuing a commercial or government bid.
For a commercial bid, the company can pass along all costs associated with the bid along to the customer by charging a higher price for the product or service. However, it’s not that simple for government bids. It is the Government that determines the percentage of allowable cost, and the amount of money equivalent to that pre-determined percentage is the total B&P pool. This amount is allowed to be charged back to the Government through overhead and general and administrative (G&A) rates, and this practice is disclosed to the appropriate Defense Contract Audit Agency (DCAA) representative.
The overhead and G&A rates are applied to all labor and material costs. It is up to you to determine how to allocate this dollar pool across the bids you plan to pursue over the course of a year. If you find that the dollar amount needed to pursue the identified proposal efforts exceeds the budget through poor planning or program slippage by the Government, you have two options. You can 1) decide to bid all the identified efforts and pay for the difference between budgeted and actual B&P expenses out of profit or 2) prioritize the bid opportunities and decide not to bid the ones with the lowest probability of win (Pwin). This means that upper management pays attention to ensure all bid opportunities stay on budget.
When deciding the B&P effort, you should consider its Pwin based on the competitive position. Use an expected schedule of probable events for the procurement effort, such as submitting questions to the Government on a draft RFP, capture management, solution development, proposal development and production, responding to post-submission questions, site visits, orals, or discussions.
The B&P budget is submitted to management who may modify the requested budget before approval. That is why it is important to account for all reasonably expected activities. It makes it easier to justify the amount of money you are requesting when you can provide detailed and reasonable data to back it up.
Actual expenses incurred against the budget are managed, and status reports are provided to management to ensure the capture and proposal team is maintaining the schedule and adhering to the budget. Actuals may exceed the budget if the team overspends or the Government delays the program. In this situation, you may need to re-evaluate the bid decision and potentially stop work.
Develop the B&P budget for a specific proposal effort early in the process, usually before the RFP is released, including costs for:
Provide realistic labor estimates. Consider not only how long it will take to do the job, but how many people it will take to do the job. It doesn’t matter how good a proposal writer is; it is going to take more than 16 hours to write a 50-page management volume that includes developing the storyboard, writing the first draft, preparing it for internal and external reviews, incorporating reviewers’ comments, finalizing the volume for submission, and potentially being available to help draft and/or finalize answers to questions the Government asks post-submission. In this instance, you will not only need to increase the number of hours, you may consider bringing on another proposal writer to split the workload on that volume.
If you are uncertain how much time a specific task will take, ask the person who is going to do it. He or she is the expert and has probably done it before. You’ll be able to get a realistic idea of the
tasks involved and the number of hours needed to complete them. Once you have decided on the number of hours, ensure the person, such as the proposal writer, understands how many hours you allocated to his or her task. People will work to the deadline they are given. Therefore, don’t give your proposal team members an open-ended deadline to get the work done. Tell them how many hours they have to accomplish their task, and expect them to work within that limit.
Here is a simple example of a B&P budget. It defines all the members of the team, their roles, how many hours they are allocated to work on this proposal, their burdened hourly rate, and labor, travel, and material costs. Remember to take into consideration which employees are hourly and which are salaried. It makes a difference when allocating hours. For example, if the capture manager is a salary employee, then the budget will be charged a maximum of 40 hours for a week regardless of the actual number of hours worked. However, if the graphic artist is an hourly employee, the B&P budget will be charged for all the hours worked, including time and a half for overtime.
Be prepared for unforeseen events. For example, you are five days away from submission, and the government customer releases an amendment that eliminates some the requirements in the statement of work. Oh, and did I mention the customer didn’t give you an extension on the proposal submission? Now you have to find time to 1) review the proposal, 2) delete material that is no longer relevant or required, 3) make sure the document still makes sense, 4) determine if any of the past performance citations need to be changed, and 5) determine any impact the change in work scope has on labor categories, labor hours, and pricing. All this activity probably wasn’t included in your original B&P budget, and it will have an impact. Be ready to make adjustments, including going back to management to request additional funding if necessary.
So, you see it is possible to stay within your B&P budget if you plan and accurately assess what it takes to pay for all the tasks associated with pursuing and bidding the opportunity. Remember:
– The Octant Best Practices Team