Organizing for Value-Based Contracts

Lump sum projects are high risk/high reward. Value pricing requires a focused strategy to be successful.

Value pricing strategy relies on your ability to provide services that are unique to a client or market sector based on your in-depth understanding of their needs.  By understanding a client or market’s key business drivers, you can identify ways that your firm can help the prospect to be more successful.  When you can provide services that are targeted at a client’s needs, you are no longer considered ‘equally qualified’ or a commodity.  You change your position to a valuable business partner.  Creating this type of relationship allows you to charge fees based on value to the client, not cost.  This opens up the potential for much better financial performance through higher fees.

In Deltek’s experience, these 4 things allow AE firms to capitalize on the reward:

  1. Develop expertise in specific markets
  2. Establish firm’s reputation as an expert
  3. Organize staff to deliver value services
  4. Organize staff to deliver profitable services

Develop expertise in specific markets
Identify markets you want to pursue and then learn about these markets.  Attend conferences, conduct interviews, and determine unique services that you can provide.  It is essential to determine these client needs and then ensure that you can provide the right services.

Establish firm’s reputation as an expert
By learning about key drivers and then presenting this information in blogs, conferences, articles and other industry forums you can establish your company as an expert.  Utilize your CRM system to manage the leads you develop and document the key market drivers.

Organize staff to deliver value services
Market and client needs must be accessible to the organization so that your entire team can be more aware of them. This allows you to manage the pursuit process and document all required actions during this time to alert appropriate staff when their participation is needed.  With client- and market-specific information, your proposals can be more targeted and highlight the specific strategic value your service can provide their company.  Through the use of a robust resource management system you can ensure that you are matching the right staff skills to the specific client assignment to increase the potential for success.

Organize staff to deliver profitable services
By utilizing a detailed plan, the project manager and staff are aware of the specific deliverables within the scope of the effort and the schedule.  These are tools to maintain focus to ensure project profitability and client satisfaction.  The plan and the resource assignments are monitored closely throughout the project execution to ensure the project is on track for both schedule and budget.

Intuitive reporting through the use of graphical dashboards that display key performance indicators ensures visibility for project and senior managers throughout the project.  Frequent communication with the client on progress is another key factor and all interaction can be documented in the management system for visibility to all levels of management.

When the project is complete, you have the opportunity to evaluate firm and client performance.  This assessment can be very valuable for future pursuits with this client and in the market of the project.

Conduct a client satisfaction questionnaire to obtain additional feedback on your firm’s performance and additional information of what is most important to the client.  Determine what additional services are required by the client that can lead to future work.

Maintaining all of this information allows your firm to be perceived as a business partner by your clients and provide the opportunity for revenue and profit growth.

Bob Stalilonis has provided design and best practice consulting to AE firms for more than 30 years.

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About Bob Stalilonis

Bob is the Senior Solution Architect at Deltek with 34 years of AE industry experience. He has both his CPA and MBA. Additionally, Bob is a speaker on AE best practices.
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One Response to Organizing for Value-Based Contracts

  1. PM Hut says:

    Hi Jon/Brian,

    This is actually an excellent article on contract management in project management: you have touched the topic of value contracts in depth.

    We would like to republish this post on PM Hut under the contract management section, where many project managers will benefit from it.

    Please either email me or contact me through the contact us form on the PM Hut website in case you’re OK with this.

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