Explains the proposal profit and loss statement
Open the proposal PRICING tab and click on the link above Design to cost target called "Quotation P&L" to see the proposal Profit and Loss statement. This is essentially the revenue, cost and margin for the entire proposal, followed by the risk and opportunity adjusted cost and the impact of any internal company investment, for both the target and estimated values.
- The target price to win from - your competitor analysis, and the estimated price or sum of proposal line item or phase prices - is displayed first as the revenue, along with the variance between price to win and estimated price. A negative variance means your estimate is higher than the maximum price needed to win this bid
- The target design to cost (DTC) from your WBS hierarchy and the estimated total cost for this entire proposal is displayed next, along with its variance. A negative variance here means your estimates are running higher than the DTC target
- The margin or price - cost, as a money amount and as a % (margin/price) is displayed next
- The sum of weighted risks and sum of weighted opportunities is displayed next. Opportunities reduce cost as opposed to risks which increase cost of this program
- The risk adjusted cost is either the target (first column) or estimated cost (second column) + the sum of weighted risks - sum of weighted opportunities
- The margin or difference between price and risk adjusted cost is displayed where it says "Margin (Adj. Cost)" with the same margin (price - risk adjusted cost / price) as a % below
- If you elected to make a strategic investment and entered it into the PRICING tab, it is displayed here. The one strategic investment figure is displayed in both columns
- The risk & investment adjusted cost is simply the design to cost or estimated cost + weighted risks & opportunities - any strategic investment. A strategic investment has the effect of reducing cost or increasing margin from the viewpoint of this proposal
- The worst-case or 80% confidence adjusted cost is the estimated risk adjusted cost at 80% confidence level, i.e. the maximum cost including risks & opportunities anticipated in 80 out of 100 different outcomes for this program. Some clients use monte-carlo analysis to calculate this figure, though it is currently pro-rated three fifths of the way between the risk adjusted cost, or cost + sum of weighted risks & opportunities representing 50% confidence, and the cost + unweighed risks with no benefit from opportunities representing 100% confidence
- Finally the worst case margin, or price - worst-case cost / price is displayed as a money amount and as a %. Many companies require the worst-case margin, or the margin at 80% confidence level, to be at least 0%