The quotation in the PreProject Phase covers the Launch Phase in terms of costs, overhead and margins.
- Development Plan
- Experiences and metrics from previously performed projects
With the Development Plan as a basis, make a list of the estimated costs needed to perform the activities during the Launch Phase:
- Summarise the estimated time consumption as listed in the Development Plan. Convert the time consumption into a net cost simply by multiplying by the developers' net wage per hour.
- List estimated expenses for materials/components if these are needed to do the analysis in the Launch Phase.
- If test equipment and/or external technical expertise is needed in the Launch Phase, estimate these costs and list them.
- Summarise the total costs listed above.
Now you have the net price for your Launch Phase activities.
To find the price to be announced in your first quotation, it is important to take into account overhead and margins for your work in the Launch Phase.
Margin/overhead considerations: If you have completed projects previously, here is a simple way of estimating the needed margin or overhead: Compare the cost-to-completion estimated at project start against the cost-at-completion for each completed project. The ratio between the initial cost-to-completion and the cost-at-completion can be used as find your overhead factor. Multiply your net price from above by the overhead factor found from previously performed projects, and you will get the best estimation of the price of your Launch Phase activities.
Keep in mind that a first quotation should also include margins for negotiations with the customer.
Make the different elements of the quotation visible to the customer so that the quotation will appear well-founded and reasonable.
The Launch Phase is normally paid by the customer on an hourly basis and therefore, the developer can analyse the system-to-be in more detail.
It is important to make a quotation that has a reasonable price level both from the customer's and the developer's point of view: If the price is too high (and if other vendors are in the field), you will not be assigned the job. On the other hand, if the price is too low, you might get the job, but the project will not be attractive to you from an economic point of view.
In order to make the PreProject quotation, the developer should understand enough of the customer's idea to estimate how long time should be spent analysing in detail. The development plan to be made in the PreProject Phase is used as a basis for the quotation.
Remember that a first quotation should also include margins for negotiations with the customer.
If components need to be purchased and experimental measurements done in the Launch Phase in order to investigate important possibilities or advantages of different implementations/solutions, these should be taken into account. Is there a need for changing software or development platforms? If so, the price and time consumption should (maybe partly) be included in the quotation.
Project manager version:
The version of the quotation to be presented for the customer: