Quote

What

The quotation in the pre project covers the launch phase with respect to expenses, overhead and margins.

How

The dish

Quotation

Ingredients

• Development plan
• Experiences and metrics from previously performed projects

Process

With the Development Plan as a basis make a list of the estimated costs/expenses 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 your 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 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 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 against the cost at completion for each completed project. The ration between the initial cost to completion and the cost at completion can be used as an indication of 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 estimation of the price 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 be visible to the customer so that the quotation will appear well founded and reasonable.

Why

The Launch Phase is normally paid by the customer on an hourly basis and therefore the developer can analyse the system-to-be more detailed.

It is important to make a quotation that has a reasonable price level both from the customers and the developers point of view to get the job. If the price is too high you won't get the job if there are other vendors in the field, and 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.

To make the pre-project quotation, the developer should understand enough of the customers idea to estimate the how long time should be spent analysing more detailed. The development plan to be made in the Preproject Phase is used as a basis for the quotation.

Remember that a first quotation also should include margins for negotiations with the customer.

Are there components that should be bought and experimental measurements to be done in the launch phase to investigate important possibilities or advantages of different implementations/solutions, these should be taken into account. Are there needs for changing software or development platforms? If there are, the price and time consumption should (maybe partly) be included in the quotation.

Example

Project manager version:

The version of the quotation to be presented for the customer: