[webproducers] Re: Reveal actual budget in RFP?
- From: Ari Feldman <outdoorminer2002@xxxxxxxxx>
- To: webproducers@xxxxxxxxxxxxx, tom@xxxxxxxxxxxx
- Date: Sun, 4 Jul 2004 12:06:50 -0700 (PDT)
Well, you could do it either way but personally, it's probably safer to
mention a "ballpark" budget in your RFP. By ballpark, I mean c.85% of
what you can actually afford to spend on the project. You can even word
it in your proposal that that the exact amount of your budget is
unclear at the time of writing but in the neighborhood of $X.
There are several reasons to do this, including:
1) By mentioning money, it immedately shows prospective vendors that
you are serious and whether or not it's worth it for them to respond to
your RFP, which saves all involved valuable time and effort.
2) It gives vendors some important financial parameters to work with,
which allows them to propose one or more solutions (e.g. low-end and
high-end) to fit what you said you can afford to spend. If you mention
nothing or show all your cards and mention your full budget, many
vendors will tend to propose only the most expensive solution.
3) It will act as a screener by eliminating those vendors just out for
a quick buck vs. those vendors who see the big picture and would want
to establish a long-term working relationship with you. The latter will
also likely come up with a more reasonable estimate to win your
business.
4) It still gives you a "reserve" to cover the various expenses that
occur in the normal course of a project's lifecycle. Alternatively, it
can enable you to cover the costs of a vendor's proposal that is
*exactly* what you're looking for but *slightly* more than you had
budgeted in your proposal. Therefore, it could serve as "found" money
without really costing you anything additional.
Hope this helps.
--- Tom Davey <tom@xxxxxxxxxxxx> wrote:
> Hi folks,
>
> I'm about the circulate an RFP to Web design firms for a
> rearchitecture/redesign of an existing site that enjoys some
> prestige. The RFP includes a ambitious scope of work. Based
> on what I know about the market today, I'm pretty sure that
> the full scope can't be performed for the fixed budget.
> Let's say for arguments sake that this budget is $150k.
>
> So, I'm asking bidders to make sure that the proposals
> explicitly exclude those features -- e.g., a user
> registration system -- that they won't be able to provide
> given the budget. This will let me pick the vendor bidding
> the most bang for my buck.
>
> Now, design firms always want to know the budget before
> preparing a bid. I wondering whether I should give the real
> budget, or an understated one, say $120k. The hard-nosed
> negotiator in me says that there are two risks to revealing
> the actual budget:
>
> a) if I'm wrong that the entire project isn't doable for
> $150k, then I'm leaving money on the table. Given that bids
> expand to consume the available budget, I'll end up with
> less competitive proposals that I would if, say, I didn't
> reveal a budget, or understated it.
>
> b) vendors may assume that I'm not serious about the fixed
> budget, and will bid thinking that future negotiating will
> determine that actual (higher) price. This will make it hard
> for me to identify the proposals that offer the most genuine
> value.
>
> As well, playing a game by saying that the budget is $120k
> (when it's really $150k) leaves me wiggle room in case my
> assumption about the too-expensive market cost of the
> project is in fact correct. I *can* separately negotiate
> additional features up to 150k without the risk of leaving
> money on the table.
>
> However, playing a game by understating the actual budget in
> the RFP leaves a bad taste in my mouth. Econ theory says
> that markets work best when all parties are in possession of
> the same set of truthful facts. At the least, understating
> the budget leaves me open to vendors thinking "What a
> clueless client. He wants the moon for a measly $120k! I'll
> pass on this disaster in the making."
>
> Are there other drawbacks to understating the budget? Any
> advice?
>
> Thanks,
> Tom Davey
>
> --
> Tom Davey
> tom@xxxxxxxxxxxx
> New York NY USA
>
=====
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http://www.arifeldman.com (personal)
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"Under capitalism, man exploits man.
Under communism, it's just the opposite."
-- John Kenneth Galbraith
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