There is a cost to preparing a response to an RFQ. Often, small business persons are caught off guard or they take the costs for granted. If you consider the time and effort of an expert proposal writer, the cost could be in the range of $2,000 to $5,000, depending on the type of proposal. This does not include postage, packing, and copying the proposal.
The immediate concern for the small business, which is going after its first RFQ, is who will pay for this cost? Most make the assumption that the business will absorb this cost. If you are awarded the contract, you may be able to absorb the cost through your gross profits. However, some costs are never recouped, especially when based on federal regulations outlining reimbursements for preparation costs for some projects.
In 1987, a study was done that indicated the substantial differences in preparation cost for traditional RFQs. After analyzing numerous estimates of time, effort, and cost, the study concluded that sixty percent of the identifiable preparation costs were thought of as direct costs. However, the economics of RFQ preparation is more substantial, considering the success rate of the small businesses submitting the RFQ. This becomes even more evident when we look at who is actually receiving the contracts. Those actually receiving the contracts are usually successful applicants from the past; the percentages of new applicants are relatively low. This presents a good rationale for the business person to consider bidding on a RFQ as a subcontractor.
The study also showed that the contracts for the second or continuing years were competing with new RFQ responders, yet the same effort went into the preparation of a continuing proposal as a new one, and similar costs were charged. Since the overall continuation contract rate is much higher than the initial contract rate, preparation costs for continuations are more likely to be covered by ongoing contract funds. This means that you have a better opportunity to absorb the preparation cost if you get continuation contracts. The RFQ award should pay for the non-competing continuation costs, since in essence, it is really a required Progress Report in many cases.
Unlike universities where the young graduate or young professor prepares for their first independent RFP or RFQ while under the guidance of a mentor, the small business person may never have an opportunity to work with a mentor. This may account for the low success rate of many first time proposal responders.
The system appears to give an advantage to existing recipients. It is stacked even higher as more contracts are awarded for three to five years. With all this under consideration, it may be difficult and it may take some research, but you can prepare a winning proposal!
Sample of Proposal Preparation Costs
| Research and Information Gathering (12-26 hrs) |
$ 516.60 |
| Long Distance Calls, Faxes, and E-Mails |
$ 80.00 |
| Preparation Copy Cost |
$ 50.00 |
| Writing Costs (30 hrs) |
$ 753.50 |
| Paper |
$ 16.00 |
| Packaging Cost |
$ 10.00 |
| Mailing Cost |
$ 60.00 |
Dr. Cortez Williams, Ph, D.
New Mexico African American Research Group UNM Dept. of African American Studies
4000 Mesa Vista Hall #4016
Albuquerque, NM 87131-1581
