Fixed Scope – Variable Cost

In a traditional solicitation an organization may assemble specifications within a Request for Proposal (RFP) which clearly spells out precisely the effort and deliverables to be provided. Typically this contract is then awarded to the firm able to provide these explicit items for the lowest cost. Occasionally the evaluation may include some qualifications or performance based metrics in addition to low-bid, but ultimately the “best” firm wins – right?

Let’s discuss a few pros and cons to that approach to consider before your next contractor / consultant procurement:

PROS:

–          I’ll gladly pay less, Thank You: You know exactly what it is that you want and are able to articulate it highly effectively leaving little room for misinterpretation or subversion. Please give it to me and I will gladly pay less.

–          Black & White: Your RFP / advertisement leaves nothing to question. You are clear to proposers on your project requirements and goals. You will get exactly what you ask for, nothing less.

–          Manage what you Know: As the Owner, you are in the best position to determine what the scope should be. You may not be in the best position to determine how much you should pay for it. Let the market answer that question.

–          Competition is a Great Thing: In some respects, it’s the American Way. Let the cream rise to the top and if you’re the best, you win. This isn’t a charity.

CONS:

–          There’s Always Ambiguity: Just how sure are you? At the time of procurement, are you really that confident – not only in your scope, but in your definitions and project controls? It will never be apples-to-apples

–          How Simple is Your Shell Game?: Supposedly if you have money left over after your low bid, you can apply it to the next project. Just how simple of a paperwork shell game is that for your organization? Would it be simpler to add scope while you are at it on one project then re-allocating?

–          Do it Right the First Time: Of course budget is always a factor, but let’s not come back three more times to get the job done. If your contractor can give you more scope while they are impacting the area, just get it done while they are out there. You will waste more money assembling the next project to complete what could have been done the first time.

–          Buy the Job: Everyone wants to save money, but is the bottom line really the bottom line? How many times would you have gladly paid more to have a more well-qualified firm do the job than saving a buck on the low bidder only to pay in headaches every day from then on.

 

On every project there is a delicate balance between Scope and Budget. What is more well defined at bid time? What is more flexible to your project? To get the most out of your procurement you have to ask these questions and have answers and project controls that are as explicit and air-tight as possible to get what you want. Do you know what you want?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s