25/10/11 Proposal / Quotation

11-10-25 quotation proposal financials4 steps to controlling your design project costs.

LUCK = Labour Under Correct Knowledge.

1) "How much is it going to cost?"

This is potentially the single most important question at the outset of a project. Unfortunately, the answer is not just a figure. You should expect your design team to show the details so that you are able to clearly see:

  1. Costs
    1. Fixed price elements – often design labour
    2. Variable price elements – prototype materials
  2. Specification – very project/product dependent (not all may apply)
    1. User types (engineer/installer/security/maintenance/end user)
    2. Size/profile/casework
    3. Define uses rather than features
    4. Define behaviours rather than 100 lines of “if this happens /do that”
    5. Battery life/power consumption/standby or sleep modes
    6. Performance characteristics (distortion levels, accuracy, power etc.)
    7. Relevant standards (CE/EU Harmonised, industry specific criteria)
  3. Scope of work - does it provide:
    1. Proof of Concept
    2. Prototype
    3. Demonstration standard – often used for attraction of investment
    4. Pre-production
    5. Fully developed production device including revisions after pilot manufacture
  4. Who is involved/know your supplier(s)
    1. All work conducted by direct employees of the contracting organisation
    2. Specialist activities are contracted out on the basis of long term association
    3. Responsibility for the delivered result is with the prime contractor
  5. Level of test and whose responsibility
    1. Basic bench test
    2. Parametric tests with some measured results
    3. Field testing (often the client influences or controls this)
    4. Beta testing of product with known end-customers (very much client led)
  6. End point
    1. Who owns the Intellectual Property Rights?
    2. Do you have access or control of all relevant design files (original CAD files/drawings, Gerber files, source code etc.)?
    3. What kind of follow on support is offered?

2) Proposal to Quotation

Commonly, the expectation is that a quote should be obtained. Even in tightly regulated quotation processes, the offerings in different quotations are frequently diverse. This means that a direct price comparison is not possible.

A fixed figure in a quotation can only be for a specific scope of work to one specification. The concept of a proposal and quotation is an offering based on proposed route to the end goal. This allows the proposal element to be discussed and amended to suit the revised requirements. Once all parties agree to the structure then it is a quotation based on a known set of parameters and outcomes.

3) Commercial Awareness

Your design team should be commercially aware and consider the business case. The whole exercise of any project from Proof of Concept to total product design is a means to generating new revenue or added value. The design team should appreciate that the project is more than an indulgence of the design process – it is a necessary step towards a commercial goal.

Design teams with experience and commercial awareness are likely to have useful insights into risks and pitfalls as well as potential savings. This experience will combine many years of hands on with the observation of countless projects. Ignoring these insights begs the opportunity to rediscovers known commercial pitfalls. Engage your design team in dialogue and seek their opinion in this area – you do not have to agree with it or follow any recommendation. Being aware of risks and savings will help you to manage the process.

4) Manageable sizes

Most projects have a series of steps. These should be of manageable proportions, preferably with defined outcomes. There may be instances where a single step is many weeks of work. Wherever possible it is better to break them into monthly “chunks”. It is far easier to make many small corrections to direction rather than end up with a project that is hugely deviant from its intended path.

Money, cost, cash-flow are very able to surface as an issue in a project. Design projects do not work well if these issues keep surfacing. If the proposal/quotation was set up correctly, then there should be fair and timely payments for the work done. This means that the design team should be delivering identifiable value for the payment stages.

A good proposal/quotation will offer the project with the work stages already separated into manageable sizes with definable outcomes or identifiable value.

 

It all sounds very simple and on the whole it is.

However, we have helped to recover many projects that have “gone off the rails” elsewhere. The usual story revolves around not doing some apparently simple things – simple things matter.

 

Posted by: Peter Hawkins on 25/10/11.


Image: Michelle Meiklejohn / FreeDigitalPhotos.net.