Why Outsource? (Part 1 of 9 in Outsourcing Proposal Development)
If you do business with the state or federal government, chances are that you will need to submit a proposal to secure any substantial contract. And – if you have ever worked on a proposal for a large contract – you know that it can be time-consuming, arduous, and maddening. (“What solution are we proposing this afternoon?”)
Schedules for procurements – release of the Request for Proposal (RFP) – can be unpredictable as well, for several reasons:
- The agency is directed by legislation or regulation to establish a new program or replace an existing program, or wants to design a new program to improve cost control
- The agency cancels an existing contract due to contractor performance problems
- The agency decides not to exercise option years in the contract, because of contractor problems, or a need to make a significant change in the program design – or just to keep everyone on their toes
- Design of the RFP for a scheduled re-procurement takes more time than anticipated due to political wrangling, changes in agency leadership, and program design decisions
- Approval of funding for a shared state/federal initiative (for example, Medicaid) takes longer than expected, thus delaying release of the associated RFP.
Even with great intelligence about what’s going on in the halls of the legislature or agency, it’s easy for potential bidders to be surprised by the release of a new RFP.
Now let’s consider the effects of that unpredictability on two very different organizations.
- Company A has only two contracts with a single state, with multi-year (five year) terms, and values in the tens of millions of dollars per year for each contract. It wants to retain its existing contracts, but has not particular interest in seeking other government contracts beyond these two. So, this company might reasonably expect to respond to a request for proposal every three to five years, depending on how the contract start and end dates are staggered.
- Company B has over a dozen state contracts (covering several states) and some federal contracts, with contract values ranging from tens of millions to hundreds of millions, and contract terms ranging from one to five years. It wants to retain its existing contracts and secure new ones that fit the company’s strategy and help to achieve its objectives. So, Company B might need to respond to five to ten requests for proposal in a given year. Or, it might have fewer, if there is a dry spell in new opportunities that match its objectives.
Here’s the problem, then: how should I staff for proposal development in each of these scenarios? Examined closely, each presents some great opportunities – and some significant challenges.
- Because of infrequent RFP work, don’t use proposal staff at all – just have internal team write the proposal
- Saves cost of setting up an internal proposal unit
- Allows direct connection of contract subject matter expertise to the proposal.
- Using operational staff diverts them from value producing activities on existing contract, potentially degrading contract performance – which may affect ability to re-win the contract
- Operational staff has no specific proposal management or proposal development expertise – may miss things, causing proposal to be non-compliant, or just waste time on unproductive activities
- Outstanding skills in technical, business, and persuasive writing are needed; this is a skill set that not all operational staff have or get to practice and refine
- Competitive capability in proposal development, and in program solution design, may not be up to the standard of other larger competitors who also want the contract
- Existing contract subject matter expertise may be limited to what the agency wanted in the past, not what they really want as expressed in the new RFP
- Internal resources tend to be less objective about the effectiveness and competitiveness of their operational solutions (in all cases, but particularly in regionalized companies that aren’t as frequently exposed to what’s going on nationally).
- Size and number of procurements means that company can build an internal proposal development department with dedicated expertise
- Achieve economies of scale by doing a lot of proposals using lower-cost internal staff instead of outsourced consultants
- Allows standardization of proposal development processes and application of quality management techniques to improve processes and proposals.
- Dedicated internal proposal development department can have an insular view – sees only this company’s way of doing proposals, not very aware of industry-wide product design and proposal presentation options
- Get into a rut on proposals – this proposal looks like the last one, lacks fresh ideas and perspective, “phoning it in”
- Lack of predictability on actual RFP issuance cycles makes it hard to determine the right staffing level to cover every opportunity – too many staff, have people idle much of the time; too few, cannot handle peak periods.
From these challenges, you can see that there are reasons why it’s sometimes appropriate to outsource some proposal development work. These include:
- Acquiring direct, current, and high-quality expertise in general proposal development
- Acquiring current knowledge and an objective outside perspective regarding the state of the art in strategy, products, and proposals for your industry
- Allowing staff to remain primarily focused on current job and contract performance while the proposal is underway
- Addressing variable staffing requirements due to the lack of predictability in procurement cycles.
By the way – my comments in this post, and two subsequent ones that will address this topic, are from the perspective of our background and work in the state and federal healthcare arena. But, I think most of these concepts apply to other industries as well.
In Part 2 of this series, I will provide some recommendations for when to outsource, based on the scenarios given here.