In one line: A credible price comes from a credible plan. Build the schedule, put resources and costs on every task, add margin, and only then quote, and pitch it as if the contract depended on it.
Core idea
In a capstone team exercise for the fall term, teams bid to design and build a chicken coop for a fictional customer. The customer supplies a minimal specification and drawings from an earlier project, and makes clear that it wants creativity, imagination and features it hadn’t thought of. Simply buying something off the shelf won’t win. Above all, the bid has to make business sense: a coop that loses money for the builder is a losing bid, however clever it is. The most important deliverable is a costed Gantt chart, a schedule with resources and costs on every task, built in a project-management tool, from which the cost and then the price are derived.
How it works
- Understand the specification as a floor, not a ceiling. Find the customer’s real needs and opportunities for delight.
- Develop the concept and design using the course’s product development tools.
- Break down the work (see Work Breakdown Structure) and schedule it (see Project Scheduling).
- Assign resources and rates to every task: labor hours by role, materials, equipment, subcontracts.
- Roll up the cost: direct labor and materials, plus overhead and general and administrative costs.
- Set the price: cost plus profit margin, sanity-checked against what the customer will value and what competitors might charge.
- Present the bid in ten minutes to an investor-style panel. Grading covers the presentation, the Gantt chart, the cost analysis and the team dynamics, with extra credit for gratuitously applying anything learned in the program, and a point for the best team name.
In practice
The exercise stitches the whole fall term together:
- customer needs and specifications
- concept generation and selection
- architecture and design for manufacturing
- scheduling and costing
- presenting and teaming under time pressure
Its lesson for real proposals is that price credibility comes from visible planning. A number backed by a task-level, resourced schedule is defensible. A number reverse-engineered from what you hope the customer will pay is not.
Questions to ask yourself
- Could I defend my last estimate task by task, with resources and rates?
- Where did we treat the customer’s specification as the ceiling instead of the floor?
- Does our proposed price make money after overhead, or only before it?
Connections
- Planning tools: Work Breakdown Structure, Project Scheduling. Money: Product Development Economics.
- Real-world form: Proposals and White Papers. Team side: High-Performing Teams.
- Capabilities exercised: Realizing the Vision, Communicating and Advocacy, Resourcefulness, Interpersonal Skills.
Sources
- Course team exercise: a costed bid and presentation for a chicken-coop product; no public source.