In 2009 I wrote a blog called Projects at NIL cost! Essentially, I found that (too) many project managers were working on projects without including any estimate of the cost of their time. In general, management time was not costed.
Move forward to October 2012 and the West coast mainline franchise fiasco. (see http://www.guardian.co.uk/uk/2012/oct/03/west-coast-mainline-rail-franchise-cancellation-reaction) It is interesting to see that Richard Branson was able to put a cost to developing the Virgin Rail tender submission at £14million. I wonder how many companies know the actual cost of tendering and the key question; whether its worth tendering at all.
A quick story (my aha moment):
Around about 5 years ago, I was searching for something on my PC. By chance I saw all of the tenders I has bid for. Lots of them, millions of ££ of work (literally – it was over a 10 year period) and after some reflection, I realised that I was wasting my time. I had not won any of these tenders!
Interestingly, it was one tender that led me to decide, no more tenders. I calculated my time to prepare the tender, prepare for the presentation to the inevitable panel (and travel costs) and realised that I needed to work around 10 days to win back my costs. The contract was for 12 days. Call me naive but it was my aha moment!
As a result of this, I started to cost out my time and look at the return on investment. This led to no more tenders being submitted, freeing me up for more productive work. It was a wise decision.
Since pulling out of all tender races I have spoken with many companies who fail to look at the costs of the tender process versus the income/profit from the work. They fail to cost internal management time! In one case the company won the contract however made a significant loss because the auditors identified the costs of tendering and managing the contract well exceeded the income. (These costs were not included in the original tender process – no account was taken of management time or even project management time.)
I have long argued that the business case for a project should try and include internal staff costs. Too often ‘free’ staff time gives the impression that this is a great project. However, business cases often fail to mention this. Nor are they picked up later on within the project.
MY aha moment worked for me however I wonder if it works for you.