Wednesday, May 20, 2015

Requests for Proposals and the Iron Triangle

One of the unchanging truths of project management is the tradeoff between time, features, and cost.  This relationship is called the project management triangle, iron triangle, or triple constraint.

Source: Wikipedia http://en.wikipedia.org/wiki/Project_management_triangle

The project management triangle has implications for organizations which issue requests for proposals (RFPs).  Typically, the goal of the RFP is to solve for price and to hire a vendor to provide services or a solution.

The more information that an RFP provides on the schedule and scope, the more accurate the cost can be.  Without sufficient details on the scope of a project, the vendor is forced to guess.  One guessing approach is called time boxing.  In this method, the vendor established a schedule and then determines the cost for a typical team to provide services for a comparable project.   Time boxing means that some features must be discarded in order to meet the schedule and cost.

The absence of requirements details, or the inclusion of vague and open-end requirements drives up the cost of bids to cover risk.  Unspecified deliverables have unspecified costs. The result is often that no acceptable proposals are received.

Typically, the budgeted cost is not revealed to the bidders.  Conventional wisdom is that sharing the budget would stop bidders from offering a price lower than the budget and hence make a bargain impossible. 

The reality is that a budget can help vendors come up with realistic and accurate pricing, as well as offering a viable project approach. 

If an RFP contains only one of cost, scope and schedule, it is unlikely to result in a successful procurement.  The best approach is to include all three and ask vendors to show how they can solve the problem best within these constraints.

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