Quotation
What
The quotation in the launch phase covers the realisation of the project with respect to costs, overheads and margins.
How
The dish
Quotation
Ingredients
- Launch Phase Development plan
- Exact Requirements and Design Criteria
- Technical Platform analysis
- Experiences and metrics from previously performed projects
Process
With the Development Plan and the technical platform analysis as basic documents, make a list of the estimated costs needed to perform the activities in the realisation and post project phase.
If there are more than one ore two developers involved in and responsible for the costs of different parts of your project, it is often preferable to let each developer associate his or hers part of the quotation to their own project area. In that case all developers should use the same management tool (or worksheet) so that the combination of all parts of the project is as simple as possible.
- 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 and components needed to realise your product. Take into consideration the requirements and expected number of units you are going to use during the project realisation phase and obtain a written quotation from the suppliers. The quotation from the suppliers should also include the time of delivery.
- List the expected costs for external engagements such as test facilities: write, e-mail or call the supplier or test premises to obtain a written quotation for the work of facilities you want to rent or buy.
- Consider the expected travelling needs. (visits to the customer, test premises,..). Estimate and list the travelling expenses.
- Summarise the total costs listed above.
Now you have the net price for your development project.
If there is more than one attractive way of implementing your product (in accordance with the technical platform and general architecture analysis), the quotation analysis above is done separately for each implementation method.
To find the price to be announced in your first quotation, it is important to take into account overheads and margins for your work in the realisation phase and post project phase. Usually, an overhead factor is multiplied by the net price to get the price listed in your quotation. The overhead factor depends on how detailed you are able to do the above analysis and on your level of expenses indirectly connected to the project.
Margin considerations: If you previously have completed projects, here is a simple way of estimating the needed margin or overhead: Compare the cost to completion estimated at project start to the cost at completion for each completed project. The ratio between the initial cost to completion and the cost at completion can be used to indicate how large your overhead factor should be. Multiply your net price from above by the overhead factor found from previously performed projects and you will get the best price estimation of your launch phase activities.
Remember 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. State prices as net prices with appropriate discounts based on customer, volume and initial and upgrade purchases.
In some cases it is possible and very useful to compare your price with the price of similar products already on the market.
Also in future projects you would probably like to compare and refer to the current project and therefore it is very important that your quotation is well documented.
Why
In almost all situations a customer wants to know the maximum price of a product before ordering.
The quotation in the launch phase covers the realisation of the project with respect to costs, overheads and margins.
To get the job, 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 you will not get the job, if there are other vendors in the field. 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 economical point of view.
The development plan made in the Launch Phase is used as a basis for the quotation. To make the quotation, the developer should consider the different activities listed in the development plan. For each activity the expenses as to wages, materials of any kind, transport, test premises etc. are considered.
Remember that a first quotation also should include margins for negotiations with the customer.
Example
The following sheets are part of the full quotation, listing expenses only related to one of the activities presented in the project plan.
The project manager version:
The customer version:
