Whether to Outsource (Part 2 of 9 in Outsourcing Proposal Development)

 If you have not already read Part 1, I would suggest taking a look at that now – the scenarios regarding Company A and Company B are fundamental to these recommendations. And – these are strictly general recommendations – deciding whether to outsource proposal development requires a much deeper analysis of the company’s market position and capabilities.

To recap – Company A has just a couple of medium-sized contracts with five-year terms, and operates only in one state. Company B has more than a dozen medium to large contracts with one- to five-year terms, covering multiple state and federal customers.

Should Company A Outsource?

For Company A, to know when and whether it’s appropriate to outsource, we need a bit more information. In particular, how competitive is their market? If it’s attractive to local, national, and regional competitors, then the risk of losing is increased – magnifying the need for a better proposal.

In this situation, we would recommend that the company outsource the proposal development work for renewals of each of its two contracts. The work is too infrequent to build a high-performance internal proposal development capability. And, there is too much risk in removing key executives from operational roles to work on the proposal. (Who knows whether they are really any good at that anyway?)

By outsourcing the work to a qualified proposal team, the company can leverage the best expertise and experience available for procurement, and use its internal subject matter knowledge to collaborate on designing the best solution for the customer.

But what if it is not a competitive market – in fact, the company is the only likely supplier of the required product or service, and there is no competition? In that case, it probably makes sense for the company to allocate some part of staff time to work on the proposal. Caution: if the company thinks there is no competition, but the intelligence is faulty – well, you get the point.

Should Company B Outsource?

Company B – given its large number of contracts and its desire to grow by adding more contracts – should almost certainly outsource, some of the time. When? Well, that really depends on the workload, and the internal staffing available for proposals.

Because Company B has a number of contracts, is in multiple markets, and is reasonably large, they will have multiple contracts up for re-procurement every year; sometimes several at once. Thus, it makes sense for them to build an internal proposal development capability – consider that:

  • The company can standardize certain proposal development processes
  • They will likely achieve some cost reductions by paying permanent staff rather than consultants
  • They can build an internal, concentrated source of expertise for working on proposals.

But what is the right staffing level? Think about the worst case – a dozen contracts renew at the same time. Given the typical size of state healthcare proposals, and the usual 30-90 day response schedule this might require as many as 40-50 full-time staff members to process.

What do those people do for the next year? The next five years? Mostly, they cost the company money.

But how do you predict exactly what you will need? It’s harder in this situation, because we don’t know exactly when the contracts might really come due, or what new opportunities might arrive, requiring proposals.

In situations like these, we usually recommend that the company do a little ground work to determine the number and size of proposals in an average year. Then, based on its own productivity metrics, calculate the number of full-time staff required to service that proposal load (without regard to any overlap that might occur in actual proposal schedules). Finally – we suggest that the company then hire approximately 50% of the calculated staff requirement – and outsource the rest as and when needed.

This helps address several of the challenges described here and in Part 1. The company can:

  • Have sufficient staff to build and retain internal core knowledge and proposal expertise
  • Use staff expertise to standardize proposal processes
  • Service ongoing, routine proposal development needs for most workload, without overstaffing and associated costs
  • Conduct general maintenance and proposal database activity during low work periods
  • Bring in supplemental staff to address the workload at peak times (multiple re-procurements or new procurements on top of existing load)
  • Draw on external, top-level expertise to provide new ideas and perspectives for proposals from time to time.

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