What was the company profit on projects

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Reference no: EM132234055

Question: According to this case study, Marvin's company used parametric and analogy estimation on all contracts which allowed them to use either level 1 or level 2 of WBS. As per client, they would like to see five level structured WBS. The more details of WBS, the more exposure of the project's pros and cons will be that will allow both the company and the clients to figure out details risks and potential opportunities either for short term or in the long run.

There are number of objective and subjective factors that need to be considered before drawing any conclusion regarding they should bid or not. The following are the very important factors that should be considered in every bid/no bid decision:

Objective Considerations

1. Bid Cost Tenability - What will it cost (time/money) to participate in this bid? What is the probability of winning the bid?

2. Profit Potential- Can the company makes a profit on this project?

1. Does the company have the right expertise and manpower in-house to do this project profitably?

2. Is this a competitive bid? In order to win, will the company need to bid so low that it loses all profitability?

3. Historically, what was the company's profit on projects in this industry or from this client?

3. Payment - Will the customer pay the company in a reasonable amount of time, or will the company fund this project? How long can the company fund it and how will this impact the business?

Subjective Considerations

1. Competition Win Impact- Who are the competitors?

Does the company want its competitor to get their foot in the door with this client? Does the company need to win this project simply to keep my "insider" edge with this client?

2. Scope - Is the scope well defined? If poorly defined, will this put a strain on the company relationship with the client?

3. Terms and Conditions - are they too onerous? Will the company expose themselves to a high level of risk?

4. Future Opportunity - If a new client, industry or technology - would the company benefit from this opportunity either in terms of gaining new expertise, experience in a new industry, or developing a new client relationship?

In this case study, although Marvin's company considered profit potential and future engagement with client but there are no specific information provided on ROI, ‘bid cost tenability' and/or ‘payment' layout. Also, some of the subjective matters, for example, ‘competition win impact' have not given emphasis over the competitive pricing. Also, their analysis and concern was largely focus on ‘release of the company's cost-structure' that means non-disclosure agreement (NDA) has largely been ignored for consideration. How come competitors will see the cost structures if NDA is attached w/ the RFP?

ZweigWhite's (2014) Financial Survey described the competitive advantage over the following criteria that could be another factors to be considered for Marvin's company's bidding decision:

1. Smaller firms are more profitable (1-24 employees = 20.9% vs. 500+ employees = 11.8%)

2. Private sector projects are far more profitable (20.5% private vs. 15.3% government) (Often less competitive, with a higher repeat business percentage).

3. Specialized firms are more profitable vs. multi-discipline firms (single - 23.3%, multi - 15.8%)
From the above discussion we can conclude that if Marvin and his team would consider the above factors, a favorable efficient project planning potential would be clearer for both the current and future bidding. If this would not be the case, we would not recommend moving forward.

Reference no: EM132234055

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