The Value Cover Letter
Last week’s message continued…
In the face of a blatant ‘low-price-will-get-the-job’ RFP, we did the exact opposite, proposing a complete scope and proper level of effort. Our fee was nearly 2x the ‘cheapest engineer’. Our proposal explained how a proper engineering effort would result in a better project that cost less. We were awarded the work because we provided the words and rationale the client needed to serve the ratepayers best. Here’s the cover letter:
The <Project Name> is nearing the end of the planning phase and will next enter detailed design. This is a pivotal juncture in your project’s development. At just ~1%, design is the smallest of the project’s lifecycle costs, but will have an outsize effect on the total. Design is unique, because it doesn’t simply add to the total, it also acts as a multiplier of the largest project costs.
Construction, equipment, operation, maintenance, and financing will make up 99% of the lifecycle cost of your project. This design will impact all five, either positively or negatively, depending on the quality and thoroughness of the effort. For example, ambiguity remaining in the design will cause contractors to add contingency to their bids, first increasing the cost of construction, then further compounding the cost of financing. A lesser design will invite more and larger construction change-orders, and will increase the likelihood of costly construction claims and lawsuits. A minimized design budget will not include time to optimize constructibility and O&M, increasing the cost of both. Nor would time be included to consider technologies that might reduce the continuing cost of O&M.
Since low cost is a key factor in this selection, we could simply propose to design this project for $85, assigning one engineer for ½ hour and one sheet of paper. But the costs to construct, operate, maintain, and finance the project would rise considerably. To the extent the optimal design effort is compromised to reduce its cost, your total project cost increases far more.
When price is a key factor in a competitive selection, consultants simply propose to do less. A seemingly low design cost may sway the unaware client, but it comes at a considerable price to the project and to those paying for it.
We will not propose a sub-optimal design effort to win this project. Instead, we have assumed your goal is to achieve the lowest total project cost for the ratepayers. As such, we have crafted highly cost-efficient but thorough design plan aimed at delivering the highest value, lowest risk, and lowest cost outcome. Our proposal conveys both the effort and expected benefit of tasks and time, clearly demonstrating that our 1% of the lifecycle cost will deliver the lowest total cost and greatest value for your ratepayers.
Sincerely,
The reason we roll the dice on competitive proposals at all is to get new work to keep folks busy. But competitive proposals are a costly, high-risk way to accomplish that. Rely on them less! There are better ways to generate work that cost and risk far less, and we'll talk about those ahead.
Beautiful weekend ahead!
Dave
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