Which Microsoft product is best for this?
SharePoint can handle document storage and collaboration, and even a Wiki to store your best practices for proposal writing. It may be used as an intranet or as an extranet to make it easier to collaborate with team members outside your company. At InfoStrat, we use SharePoint for both our intranet and our extranet. When we have teammates on a proposal, we share an extranet site with them so we can work on proposal documents together. You can also share documents using SharePoint with Office 365.
While you could build custom lists in SharePoint to track your opportunities, Dynamics CRM is designed with sales force automation in mind, and includes a complete data model and advanced functionality for tracking leads, marketing to prospects, sales reports and dashboards. You could insert documents as attachments in Dynamics CRM, but if you are editing them and would like version control and collaboration, SharePoint is much better.
The Dynamics CRM for Government Contractors solution adds the fields and business processes required by government contractors to Dynamics CRM.
Microsoft includes integration between Dynamics CRM and SharePoint. Dynamics CRM shows a view into SharePoint for documents, and you can add custom web parts to SharePoint to show data from Dynamics CRM. You can also extend this integration to meet your needs. For instance, you may prefer to create separate SharePoint sites or folders, or to consolidate documents within a single document library.
The bottom line is that SharePoint and Dynamics CRM each provide tools that are essential for government contractors to make their capture processes more efficient. The two products work better together than trying to make either product fulfill all the necessary features.