1. Price to Win Process Jon Myerov, AM.APMP, CIP Copyright 2014, Jonathan S. Myerov 1

2. Price to Win Defined Copyright 2014 Jon Myerov 2 Definition: The highest price we can offer and still win Shaped entirely by external factors: the customer and the competition The winning price will not always be the lowest price Using an effective PTW process early can be the single most determinative factor in securing new business Customers key decision makers must like us and prefer our solution Our pricing must be in line with both competitors and proposal evaluation scoring/weighting The best, most successful companies use mature PTW processes

3. When to Do PTW Copyright 2014 Jon Myerov 3 PTW is iterated throughout the capture process Develop initial PTW target before bid/no-bid With a go decision, PTW process gets launched in earnest driving to the Should Price and the Bottoms-Up Analysis (BUA) This all should occur in advance of the RFP being issued SShhaarree ooff TToottaall EEffffoorrtt Preliminary PTW (15%) PTW (65%) PTW Update (15%) PTW Update (5%) WWhheenn CCoonndduucctteedd Before bid/no-bid decision After setting win strategy; before setting cost targets After RFP drop; during proposal development During BAFO development MMaaiinn PPuurrppoossee Justifies bid/no-bid decision Drives work- share and verified win strategy Justifies proposal go-ahead decision

4. PTW Relies on Three Different Analyses Copyright 2014 Jon Myerov 4

5. ANALYSIS #1: CUSTOMER BUYING BEHAVIOR ANALYSIS Copyright 2014 Jon Myerov 5

6. Customer Buying Behavior (CBB) Analysis Copyright 2014 Jon Myerov 6 Customer Funding Customer Historical Award Behavior Recent/Relevant Competitions Recent/Relevant Bids Recent/Relevant Contracts The first step in conducting a PTW analysis is toThe first step in conducting a PTW analysis is to determine how much money the customer has todetermine how much money the customer has to spend on your work scopespend on your work scope

7. What Does CBB Produce? Copyright 2014 Jon Myerov 7 CBB establishes (a) the likely pricing scenario in play and (b) theCBB establishes (a) the likely pricing scenario in play and (b) the relative position of the winning price versus the competitionrelative position of the winning price versus the competition

8. Customer Available Funding Copyright 2014 Jon Myerov 8 QuestionQuestion Yes / NoYes / No Implication for Buy andImplication for Buy and BudgetBudget Is this a repeat buy? Did the customer conduct a market study? Did the customer receive any ROM or unsolicited proposal prices? Did the customer use a comparable project as the basis of budgeting this one? Did the customer request pricing in an RFI? Never bid above the customers available funding! (It happens.)Never bid above the customers available funding! (It happens.)

9. Customer Historical Award Behavior Copyright 2014 Jon Myerov 9 Over years, customer buying behavior tends to be consistent Few companies conduct any analyses of customer purchasing activity Look at specific similar sales: who was selected and why? Lowest price or price premium?

10. ANALYSIS #2: COMPETITOR TOP- DOWN ANALYSIS Copyright 2014 Jon Myerov 10

11. Competitor Top-Down Analysis (TDA) Copyright 2014 Jon Myerov 11 Look at competitors past bids Understand work scope, order size, delivery schedule, level of competition Use these to establish a cost baseline Example: Start with competitor list price Interview sales to determine discounting policies

12. Starting with Our Own Cost Baseline Copyright 2014 Jon Myerov 12 Start with our own cost baseline on the bid Run down customer requirements and generate estimates for each Be careful! If cost estimates are inaccurate or contain inefficiencies, competitor analysis will also suffer Cost baseline Should Price Should Price = Our cost baseline minus costing and design inefficiencies, plus profit margin Use Should Price to estimate competitors bid price Adjust our estimates for differences in competitors approach Identify key cost drivers against customer requirements Remove features not required or desired by the customer Identify our own potential trade-offs by interviewing engineers USUS THEMTHEM

13. ANALYSIS #3: CUSTOMER BUYING BEHAVIOR ANALYSIS Copyright 2014 Jon Myerov 13

14. Competitor Bottom-Up Analysis (BUA) Copyright 2014 Jon Myerov 14 First, determine the strongest competitor Focus PTW energy on only this competitor, not on many (with rare exceptions) Important to get the right competitor, in terms of price and technical evaluation Do competitive and cost analysis until its clear who the top one is Deduce the architecture of the competitors likely solution Differences in architecture will drive most cost variations, not labor and OH Focus also on positioning of the competitor: variety-based, needs-based, or access-based (see Porter) Create a BOM for all significant items in the competitors technical approach

15. Copyright 2014 Jon Myerov 15 Cost BaselineCost Baseline Should PriceShould Price Competitor BidCompetitor Bid BaselineBaseline Revised ShouldRevised Should PricePrice HardwareHardware DesignDesign ManufacturingManufacturing Sensors/Sensors/ EquipmentEquipment SW DevelopmentSW Development SEITSEIT ProgramProgram ManagementManagement ShippingShipping G&AG&A ProfitProfit TOTALTOTAL

16. PUTTING IT ALL TOGETHER Copyright 2014 Jon Myerov 16

17. PTW Evaluation Copyright 2014 Jon Myerov 17 CBB + TDA + BUA Determination where to price relative to competition Identify and justify differences in value between our solution and the competitions Commercial methodology for estimating value Government methodology for estimating value

18. Commercial Methodology for Estimating Value Copyright 2014 Jon Myerov 18 Itemize key product and service discriminators of ours and competitors Determine the buyers sophistication and approach, based on history and intelligence Do they consider discriminating factors in the evaluation? From the buyers POV, what dollar value can be placed on discriminators? What confidence level can be placed on this

19. Example Commercial Value Estimate Copyright 2014 Jon Myerov 19 Buyer ValuesBuyer Values UsUs CompetitorCompetitor Value (in $M)Value (in $M) Value (in $M)Value (in $M) Completion Date 21 months $9 24 months -- Quality High $5 Fair -- Schedule Confidence 0 -- +1 month ($3) TotalTotal $14$14 Greater ValueGreater Value $17$17 We can bid up to $17M higher than the competitor and still win.We can bid up to $17M higher than the competitor and still win.

20. Government Methodology for Estimating Value Copyright 2014 Jon Myerov 20 Duplicate customers proposal evaluation criteria (and relative weighting) Score our offering and competitors against the criteria Important to conduct review from the customers POV Implement this evaluation as early in the pursuit as possible

21. Proposal Ratings A. Technical 60% 1. Technical Approach 40% Merit a. Effective Range 7% Mar Out Out Outstanding b. Cruising Altitude 7% HS Mar HS Highly Satisfactory c. Speed 7% Mar Out Sat Satisfactory d. Sensor Capability 7% Mar HS Mar Marginal e. Logistics and Readiness 6% Sat HS Unsat Unsatisfactory f. Ease of Maintenance 6% HS Mar 2. Program and Schedule 20% a. Risk Analysis 5% Sat HS b. Ability to Achieve Schedule 5% HS HS VL Very Low c. T&E Approach 5% Mar Sat Low Low d. SW Risk 5% Mar Sat Mod Moderate B. Past Performance 10% High High C. Similar Experience 10% VH Very High D. Cost 20% Unk Unknown Total Score Low Mod HS Out 68%53% Merit Rating Weights Competitor Us Past Performance Risk Mar HS Mar HS Mar Sat Example Proposal Scoring Copyright 2014 Jon Myerov 21

22. Setting the Price and Cost Targets Copyright 2014 Jon Myerov 22 The PTW target is the final price after all rounds of the post proposal submittals or negotiation Develop negotiation strategy after the PTW to set the proposal price PTW must be derived early in the process to drive key solution elements PTW process also should produce actionable recommendations for improving competitive positioning PTW analysts must, with support from functional organization leaders, set cost targets (i.e., bogies) Cost targets should include burdens, G&A, and fee Cost targets should be tracked against functional estimates Important to deploy cost targets before conducting estimates to help identify scope challenges and right-size the design

23. Resources Copyright 2014 Jon Myerov 23 Winning the Big Ones, Michael OGuin and Kim Kelly Campaign to Win: The 13 Commandments, Jay Herther Capture Guide: Winning Strategic Business, Shipley Associates Powerful Proposals, David G. Pugh and Terry R. Bacon

24. About Me Jonathan (Jon) Myerov Proposal Development Manager, 12+ years with highly technical proposals and teams up to 50+ members 17 years teaching college writing and rhetoric Other interests: Running, Trees/Gardening, Jazz CDs, Leadership People I admire: Bill Belichick, Bill Cosby, Richard Feynman, James Madison, Golda Meir Copyright 2014, Jonathan S. Myerov 24

25. Thank You Jon Myerov www.linkedin.com/in/jmyerov twitter.com/JonMyerov Copyright 2014, Jonathan S. Myerov 25