The user evaluates proposals in a fashion similar to one used by the contractor in de- ciding which RFPs to respond to. Each proposal is evaluated according to criteria re- lated to system performance, price, and schedule. Generally, priority and selection of projects is based upon considerations of
• Ability of solution to satisfy stated needs • Return on investment
• Project plan and management • Reputation of contractor
• Likelihood of success or failure (risks)
• Fit to contractor resources and technological capability
Because many users take it on faith that a competent contractor with a good plan will do a good job, choice of the best proposal is sometimes based more on the project plan, project management, and the qualifications and reputation of the contractor than on the proposed solution or technical approach. Thus, the schedule section of the proposal should include a rudimentary plan clearly indicating the key activities to be performed, start and end dates, and deliverables or end-items for each. Methods for preparing the plan are discussed in chapters 6 to 10.
A variety of methods are used for selecting the best proposals. One is a screen- ing system that rejects proposals that fail to meet minimal requirements, such as rejecting proposals when the estimated rate of return of the suggested solution is less than 15 percent, the contractor has no experience with projects similar to the one proposed, or project team members average less than 5 years of related work experience.
Another method uses a checklist or weighted checklist for rating proposals ac- cording to a list of evaluation criteria. The proposal that receives the highest overall score wins. Specifically, each proposal is reviewed and given a score sjfor each crite-
rion j. The overall score for the proposal is the sum of the scores for all criteria,
This method is called simple rating. One limitation of the method is that all evalua- tion criteria are treated as equally important. When some criteria are clearly more important than others, a different method called weighted rating should be used. In that method the relative importance of a criterion j is indicated by an assigned weight wj. After a score has been given to a criterion, the score is multiplied by the
weight of the criterion, sj wj. The overall score for the proposal is the sum of the
sj wjfor all criteria,
The procedures for these methods are illustrated in Example 4.
Example 4: Evaluating Proposals at MPD Company
In response to the RFP sent to several contractors (Example 2), MPD received pro- posals from three companies: Iron Butterfly Contractors, Inc.; Lowball Company; and Modicum Associates. The proposals were reviewed and rated by a group of executives, facility managers, and operations experts at MPD’s Chicago and New York offices. The proposals were each rated on five criteria using a five-point scale as follows:
Criteria 1 2 3 4 5
Technical solution approach Bad Poor Adequate Good Excellent
Price of contract 71.8 1.6–1.8 1.4–1.6 1.2–1.4 61.4
Project organization and
management Bad Poor Adequate Good Excellent
Likelihood of meeting
cost/schedule targets Bad Poor Adequate Good Excellent
Reputation of contractor Bad Poor Adequate Good Excellent
Simple Rating
The results of the group assessment for the three proposals were as follows. Scores
Criteria Iron Butterfly Lowball Modicum
Technical solution approach 4 2 5
Price of contract 5 5 2
Project organization/management 5 3 4
Likelihood of meeting cost/schedule targets 4 3 5
Reputation of contractor 4 4 5
Sum 22 17 21
Based on the sum of simple ratings, Iron Butterfly was rated the best. Weighted Rating
Lowball’s proposal was clearly the worst, but Iron Butterfly and Modicum were considered too close to make an objective decision. The rating group then decided to look at the criteria more closely and to assign weights to them as follows:
Criteria Weight
Technical solution approach 0.25
Price of contract 0.25
Project organization and management 0.20
Likelihood of meeting cost/schedule targets 0.15
Reputation of contractor 0.15
1.00 πwj = 1, and 0 wj 1.0
The weights reflect management’s opinion of the relative importance of each of the criteria. Taking the weights into account, the proposals were scored as follows:
Iron
Butterfly Lowball Modicum
Criterion Weight (w) s (s)(w) s (s)(w) s (s)(w)
Technical solution approach 0.25 4 1.0 2 0.5 5 1.25
Price of contract 0.25 5 1.25 5 1.25 2 0.5 Project organization/ management 0.20 5 1.0 3 0.6 4 0.8 Risks of solution 0.15 4 0.6 3 0.45 5 0.75 Reputation of contractor 0.15 4 0.6 4 0.6 5 0.75 Sum 4.45 3.4 4.05
Using the sum of the weighted ratings, Iron Butterfly Contractors stands out as having the superior proposal.
Assessment of proposals might also include evaluation of project risk, especially when the proposed solutions and associated levels of risk differ significantly between proposals. Methods for identifying and assessing risks are discussed in Chapter 10, “Managing Risks in Projects.”
Proposal finalists are notified when the user has determined that at least one of the proposals is acceptable. Competing contractors may then be requested to provide more data or to make presentations. When a contractor has been selected, the recom- mendation is submitted to user top management for approval. If management accepts the recommendation, then a contract is awarded to the winner. If several contractors receive equal weight or if some terms in the proposal are unspecified or unquestion- able, then negotiation is required to settle upon final terms and a contractor. If none of the proposals are acceptable or the feasibility studies reveal that the systems de- velopment process would be too costly, risky, or time-consuming, or have insufficient return, then the project is terminated.