Is there a way to assess quickly if a price submitted by a Vendor (Proponent) is reasonable, feasible or a “bait and switch”?
With a bit of analysis this can and should be done. The first look should be how far is the price from other bid price submissions. If it does not cluster closely to other submissions, more questions need to be asked or the tendering document (RFP) may have been misunderstood. To arrive at a more analytical approach one would use annual reports for public company vendors or industry numbers for private company vendors. Briefly the calculation is as follows: Start with the total average annual price submitted; Subtract the average net profit from reports (around 10%); Subtract the Sales and General Accounting cost from the reports (SG&A) – generally between 15% and 25%; Subtract 8% of the average annual price submitted for the average risk factors that vendors assign to each opportunity; Add 10% of the average annual price submitted if there is provable evidence that the vendors view this opportunity as a validation deal; Subtract 10% for the initial transition or transformation. If the
