Does Unintended Bias Influence Your Price-To-Win...

Does Unintended Bias Influence Your Price-To-Win Proposals (Avoiding the Narrative Fallacy)

David DeWitt – Director of Commercial and International Programs

Copyright Galorath Incorporated 2016 1

Overview

• Price-To-Win is a strategic assessment of what price will win a bid based on an assessment of:

• The competition

• The contract environment

• Probable customer funding

• Unfortunately, strategic assessments are always susceptible to believing a narrative that never existed – especially when that narrative leads us to the conclusion one wants to hear.

• This unconscious force that drives poor assumptions is known as the “Narrative Fallacy”

• In this presentation, we will:

• Explain the Narrative Fallacy

• How it can detrimentally affect Price-To-Win proposals

• Help identify what attributes of Price-To-Win proposals are most susceptible to improbable assumptions

© 2016 Copyright Galorath Incorporated 2

Intro To The Narrative Fallacy

• As humans, we can be obsessed with creating narratives that do not exist

• This is especially true when those narratives support our outlook

• “The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship upon them”

• When preparing or evaluating a PTW strategy the Narrative Fallacy is ever present and dangerous


What is the Narrative Fallacy? - Let’s Try a Real Simple Example


• I like to use puzzles in my Story Point training classes

• I ask - “How long will it take to build this puzzle?”

• For most of us - we’ve been playing with puzzles since childhood. We have formed a “narrative” for how to:

1. Sort all the pieces

2. Build the frame

3. Assemble large parts

4. Fill in the Holes

5. Hunt for missing pieces

6. Convince yourself some pieces are missing

We ALL have our “Narratives”

• “We build these all the time – What could go wrong?”

• Let’s assume a customer wants his puzzle sooner…

• So we will build it using Agile and Sprints!

• Ask team to rate complexity of what Product Owner wants – in sequence:

The lifeguard tower

Blue blanket

All the neckerchiefs

Just the Sunglasses

Ball and Umbrellas

Dog feet only

But What About The Unexpected?


Even if we’ve built this exact puzzle before… our “Narrative” is false

But We Trust The Narrative – Even Though the Solution is Different


The Narrative Fallacy limits our ability to look at sequences of facts without weaving

an explanation into them

Two Must Have Resources!

• While Nassim Taleb coined the term Narrative Fallacy and describes the problem in his best seller The Black Swan…

• … Nobel Prize winner Daniel Kahneman provided a solution to the impact of an “Inside View” in his book Thinking Fast and Slow


Ever notice how famous authors always cross their arms

But they don’t - Famous Authors Hold Their Heads!


Or do they?

What’s This Have to Do With PTW?

• A survey by Amplio Software shows that few companies rated their tactical competitive intelligence ability as “good” or “very good” – Price to Win Survey (2014) Ampilo Software


What then is the remedy for low quality data…

The Reflex is to Trust in a Narrative

• Who do we use for Price to Win support?

• Existing employees – If we’re the Incumbent

• We built it before we can do it again

• We know where all the bodies are buried

• We already know our inefficiencies and can “fix” it

• Consultants on loan/retainer to “win the work”

• Most come from the Incumbent (see above)

• These are the experts and know what it takes to win

• They are ready to start work when you win!

• Independent Price to Win consultants

• They come loaded with lots of “good data”


AND – they all have their collection of war stories!

Before We Go On, Let’s Review What a PTW Is and Is NOT?

• It IS - a strategic assessment of what price will win the bid based on an assessment of the competition, the contract environment (LPTA, Best Value, Technical Excellence (sections L&M from the RFP), and probable Government funding

• It’s NOT - a life cycle cost estimate – although some RFPs require a maintenance cost estimate be included

• It’s NOT - not a proposal pricing exercise

• It’s NOT - not an engineering build up estimate


But the “Not’s” may be part of the PTW activities

When Does The Narrative Fallacy Impact PTW Activities

• Now that we know what the Narrative Fallacy is – can we predict when it might appear during a PTW exercise?

• The next few slides are from a presentation by Bob Hunt/Tom Sanders/Jon Kilgore at the Washington ICEAA conference in 2013.


Available by emailing: [email protected]

mailto:[email protected]

Four Steps of a PTW Analysis

Four steps underlying the strategy are:

1. Know what the Government Client wants (as defined in the RFP)

2. Know what the Government Client can afford to/is willing to pay

3. Know what the competition will likely bid

4. Assess your client’s bid – Review the estimate, perform an independent estimate, review the BOEs, or all of the above

Narrative Fallacy can influence each step


What is the “Story” that motivates the actors performing each step above?

From: Price-To-Win (PTW) A Cost Estimator's Perspective

Balance Wants and Costs

• A subtle and particularly troublesome problem, especially in high technology projects, is lack of balance between the customer’s perceived value of (i.e., importance of, desire for) design features and the cost of these features.

• This problem is quite common. It can result in a risky, volatile project that has a high probability of failure; often defined by cost growth rather than program cancellation

Highly Susceptible to Narrative Fallacy

Consequence of the Narrative Fallacy



PTW Includes

• An analysis of the requirement as defined in the RFP

• An assessment of what the purchasing agent/Government agency is willing to pay,

• An assessment of who the competitors are and what they are likely to bid/”invest” to win, and

• An independent assessment of the client’s internal proposal in the form of a red team of the estimate, a truly independent estimate, or estimating support and BOE assessments

Ambiguity is often tempered by Narrative

Is the Assessment data driven or a Narrative?

Does the Narrative speculate the threats?

This is how the Narrative is tempered! © 2016 Copyright Galorath Incorporated 15


But Isn’t This All Common Sense?

• In hindsight it is. But… that’s the irony

• Hindsight is a Post-hoc rationalization where stories and legends are born

• To continue with Taleb’s description – he describes how a Narrative Fallacy is given life:

Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding.

• See - A Narrative Fallacy is not constructed during the Price to Win activities – they are carried into the room!


The better a War Story the more likely some facts were mis-remembered.

What Can We Do To Minimize It?

• We saw the answer several slides ago

• Perform an independent assessment of the client’s internal proposal

• in the form of a red team of the estimate,

• a truly independent estimate, or

• estimating support and BOE assessments

• BUT – All the participants need to be aware of inherent bias's they carry into the room

• All assumptions without basis in hard facts should be discounted or at least minimized of influence

• Where there is little data – dig harder or remove the assumption


How do we turn off all those stories we’ve learned?

We Are Wired This Way!

• The only way to overcome a bias is with data

• All PTW artifacts should be challenged as either an Assumption or Fact by the reviewer

• Anything that is an Assumption should be tossed out or pushed back on for more data

• Anything marked as a Fact should have a data point to validate it:

• Federal marketing sources – Input, Fed Sources, FedBizOps, Freedom of Information Act (FOIA) requests

• NDIA events can be sources of “facts” – but sift them

• Open source PM/PEO briefings also hold a wealth of useful data – but don’t read into “qualified” answers


Much of the Data can be generated using models

SEER Helps Fight Off the Fallacy

• No Data? A benefit of SEER tools is their ability to capture what you know and model what you don’t know

• Build integrated cost assessment to accomplish trade-offs

• Create independent cost assessment (using little or no customer data)

• Identify likely competitor pricing

• Perform after bid assessment - to identify potential cost risk areas in a successful bid

• SEER Tools are Math Models – Let the Science of Parametrics mitigate the influence of War Stories and the Narrative Fallacy



“The good thing about science is that it’s true whether or not

you believe in it.” - Neil deGrasse Tyson,

“Qu’ils mangent de la brioche”—“Let them eat cake.”

• The “Story” goes that when the French poor were starving Marie-Antoinette said those famous words

• She then became a symbol of decadence that fueled the revolution that would cause her to (literally) lose her head several years later


This is a Narrative Fallacy of the worse kind!

• It was likely said by philosopher Jean-Jacques Rousseau’s description of Marie-Therese – Marie-Antoinette was only 10 years old

• But a Narrative was born and the consequence was death

• Beware of the Narrative Fallacy – you wouldn’t want to loose your head.

• Questions?

She never said it.


Contact:

Galorath Sales

310.414.3222

www.galorath.com

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