K Andy Pricing Case Pricing Case.

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Presentation transcript:

K Andy Pricing Case Pricing Case

KAndy Pricing Case Case Objectives: Identify the environmental and business factors impacting pricing decisions of DoD contractors Assess the risks associated with pricing, relative to environmental and business factors • Requirements: As an individual (homework): Read assigned readings shown in Lesson Assignment Sheet Complete the “individual issues” sheet during homework reading (turn-in when requested) As a team (in class): Analyze case information Complete the team’s “business issues” sheet Complete “Contract Bid Proposal” (turn-in at designated time) Prepare a business case that supports the team’s bid prices Make a presentation supporting the team’s bid for the contract

Example of One Company’s Analysis Bid / No – Bid Process Example of One Company’s Analysis New Business Process Investigative Phase Probability >10% Pursue Decision? Probability >30% Capture Decision Probability >60% Win Contract? Probability >90% Execute the Capture Plan Bid & Proposal Account # Assigned Identify Programs: 1. Strategic Fit? 2. Know Key Players? 3. Have Product Knowledge? 4. Management Interest? 5. Budget Available? 6. Schedule Allows? High Expectation of Winning or Notified of Contract Award Go or No-Go Bid-No-Bid

That Affect Pricing Decision Business Issues That Affect Pricing Decision Internal Issue - risk to pricing External Bid If bid won at bid price, can we meet/beat estimated costs? How accurate are our cost estimating – and cost control – processes? Impact to stock price on Wall Street? Actual profit at that bid price? Will bid price win the contract? Is bid low enough? Will bid price “leave a dollar on the table?” Is bid just high enough to win? Group Work

Business Case Considerations Supporting Team Recommendations Use “Butcher Paper” Flip Charts to Record Information Address competition relative to winning contracts -- For HAVOC Missile contract For SCORPION contract Will proposed bid prices on HAVIC provide company a profit? For HAVOC RFP compliant contract? For commercial variant contract? Was fully absorbed or variable overhead cost method used to determine bid? Address which HAVOC proposal is preferred (RFP or commercial) Address confidence level of winning the contract Address in general terms the impact on company’s financial position for the next five years if (1) HAVOC contract is won and (2) HAVOC contract is not won Group Work

Red Team # _____ Contract Bid Proposal Key Assumptions in Determining Recommended Bid Price Proposals: Win HAVOC only? Yes / No Win HAVOC and Scorpion? Yes / No Win USAF Follow-on business? Yes / No Bid Price Proposals Details: HAVOC RFP Fully Compliant Bid $ _______ Profit or CM Expected on RFP Compliant Bid? No / Yes $ _______ Indicate if “fully absorbed” or “variable cost” method was used Confidence in Winning Bid ________ % Commercial Variant Bid $ _______ Profit or CM Expected on Commercial Variant? No / Yes $ _______ Group Work – Turn in to Instructor at designated time

Individual List of Issues Name / Team Number Individual List of Issues ________________________________________________ Individual Work While Reading Case Turn in When Requested by Instructor

Team List of Business Issues Team Number Team List of Business Issues ________________________________________________ Turn in With “Recommended Price Proposal” Submission