In response to a recent SMPS CPSM Listserve post, I don't believe there is an “average dollar approximation of what it costs to submit a proposal,” or no average that would have any accuracy as a guide. This is because I don't believe there is any such thing as an "average proposal."
For example, last month I produced a proposal for a roadway improvement project in a small suburban city. The project involved pavement and drainage improvements along a State Highway access road and an intersecting street, with approximately 200 feet of utility upgrade/relocation. There were no subconsultants on the team and only 5 people on the organization chart. Total invoice $1,150.
On the other hand, a few months back I produced a proposal for on-call A/E services for a major urban medical complex. The full-service proposal covered architecture, all kinds of engineering, wayfinding, environmental services, commissioning, construction management and other services. There were 15 subconsultant firms on the team and 40 people on the organization chart. Total invoice $9,300+.
The vast majority of proposals I have written for clients over the last 10 years fall somewhere between these two extremes, although I did actually have one effort with a final invoice in excess of $11,000.
These were just my invoiced costs as an outside proposal manager/ writer. These numbers do not include my client's hours for research/ writing technical sections, the cost of any special binding or packaging, and delivery costs.
I think there are too many combinations of too many variables, to make a meaningful prediction about an average cost.
Obviously, anyone with a calculator can determine the “average” cost of proposals over a given time. Just add the costs of all proposals for the period and divide by the number of proposals. If your firm opens a specific billing number for each proposal, the costs are easy to aggregate. But this is an average cost for what might be wildly different proposals. It does not begin to define an "average proposal."
I believe the person posting the question wanted a guideline to facilitate reasonable Go/No Go decisions – in other words, a way to predict with some accuracy what a proposal would cost as part of the Go/No Go evaluation. However, since there is no such thing as an average RFP, a (mathematical average) proposal cost guidline is not going to have a lot of value. Here’s an example:
TxDOT issues an RFP to design 4 miles of 4-lane concrete highway outside Dallas. There are 32 owners from whom they need to acquire right-of-way and/or construction easements. There are no streams crossing the route, no difficult topography and no utilities to relocate. TxDOT sees this as a straightforward design job.
XYZ Engineers decides to propose and tracks all their costs that can be tracked. Once the proposal is submitted, they total the costs – labor, special binders, copying and courier service for delivery.
Unfortunately, XYZ Engineers is a “bill your best 40 hours” kind of firm. So if someone works 35 hours on billable projects that week and 15 hours on the proposal, he/she only bills 5 hours to the proposal. With multiple people showing only a part of their proposal time on timesheets, there could be a significant number of hours that don’t get captured.
Two months later, TxDOT issues an RFP to design 4 miles of 4-lane concrete highway 60 miles south of Dallas. There are 17 owners from whom they need to acquire right-of-way and/or construction easements. There are 3 streams crossing the identified corridor and some major gas and water transmission pipelines.
XYZ Engineers wants to propose. The RFP seems very similar to the previous one, but the differences in the actual projects and sites make it impossible to use the costs of the previous proposal as a guide for estimating the cost of this new submittal.
Also, a few projects were completed since the last RFP, so people who spend 15 hours on the proposal are going to bill all 15 of those hours on their timesheets. The work will be pretty much the same effort, but more time will be associated with the proposal, making the second effort LOOK much more expensive than the first.
If the second hypothetical RFP had been IDENTICAL to the first (similar site with similar characteristics), the cost of the first would have been a good guideline for what the second would cost. But this rarely happens in real life.
I think there was a lot of good information in the many responses to this post, particularly on the subject of capturing/tracking costs. I have known a number of principals who won’t open a proposal number until they are short-listed because they don’t want to look like they are spending so much time and money on "losing" submittals. Of course, this means that none of the proposal costs were captured except in a general overhead number where they couldn’t be disaggregated. Couple this with the firms where you “bill your best 40,” and you have a huge number of A/E/C firms that don’t have a true understanding of their general cost of doing business, much less the specific cost of proposals.
It is very important to be able to track every proposal cost to make rational decisions, but the solution lies jointly in the capabilities of a firm's accounting system and the way its principals think of marketing activities and determining the cost of doing business.
However, the fact remains that there is no such thing as a meaningful "average" proposal cost unless your firm severely limits the type of work it pursues, the clients with which it wants to work, and the physical characteristics of the sites on which projects occur.