Question

Evaluate the list of common cost proposal listed below. Select three from the list, and determine the most likely cause of each. Then, recommend a strategy that either the federal government or offered could take to avoid the mistake in the future.

List of common cost proposal mistakes

Not responsive to RFP instruction

Inadequate definition and description of the building blocks of the cost approach

Failure to provide logical conclusions and illustrate that the cost estimate is realistic and reasonable

Making good intension statements such as “we understand,” “we are committed”

Not following instructions to complete costing forms provided in the RFP

Not showing the associated CLIN for each WBS or WBS to CLIN cost reference

Not providing cost subtotal for each higher level of WBS

Failure to separately break out software/hardware requirement

Not providing historical cost data for labor hours, overhead rate, staff levels and etc.

Answer 1

The application of the responsiveness concept to requests for proposals is more difficult. In many jurisdictions, there is an opportunity in requests for proposals (sometimes called “competitive negotiation”) for the government and offerors to communicate after submission of proposals. There may be exchanges to clarify aspects of the proposal. Further, there may be discussions or negotiations regarding certain aspects of the proposal. In some cases, proposal revisions may even be invited. The question then becomes, “What purpose does the responsiveness concept serve in a request for proposal?”

Unlike competitive sealed bidding, in RFPs proposal contents are not disclosed at a public proposal “opening.”

It has been increasingly recognized that one of the major difficulties encountered in the implementation of aquaculture development programmes in developing countries is proper project preparation. Inadequate and poor preparation of projects has often caused the final construction cost of the project to be much higher than estimated. The purpose of this lecture is to present in simple form the various steps required in preparation of plans, estimates and tender documents for projects and to describe some of the planning procedures that are used in these processes.

The building block approach adopted by the Office in its price fixing review is forward looking, in that it looked at expected reasonable expenditure ... . Further, it did not determine the specific operating costs for a particular distributor, but create a benchmark forecast of what the efficient firm might spend, which created an incentive to earn more than what might be described as a reasonable rate of return for a particular distributor.

The building block model is a tool for spreading or amortizing the expenditure of a regulated firm over time. The building block model, when applied correctly and consistently over time, ensures that the firm earns a revenue stream with a present value equal to the present value of its expenditure stream. Put another way, the building block model ensures that over the life of the firm, the cash-flow stream of the firm has a net present value equal to zero.

The building block model makes use of the concept of the regulatory asset base. The regulatory asset base - which is related to the capital stock of the regulated firm - represents the amount that the firm has, in effect, borrowed from its investors in the past (that is, the amount to which its past expenditure has exceeded its past revenue) and is therefore the amount that must be paid back to investors (with interest) over the remaining life of the firm.