The Estimating Process With Agencies, or Why We Hate RFPs

Kellie Walton // November 2015

When we kick off a project, there are three things that our clients want to know up front:

1. What will you deliver?
2. How long will it take?
3. What will it cost?

To give you a good answer for #3, we need to answer #1 and #2 first. We have a process for this.

Pricing out a tech project is a lot like buying a house.

When you find a house you want to buy, you might walk through it a few times before you put an offer on it. At that point, you have a basic level of knowledge about the house. But the offer you make is usually based on contingencies — you need much more thorough information about the house before you can understand its true cost.

So, you perform a home inspection. You hire a professional to take a deep, hard look at every detail of the house, from the roof to the basement, to find out what you’re really bidding on. The home inspector will always unearth issues that you didn’t pick up on during your walk through — and sometimes the issues will be significant. Discoveries like wiring that’s not to code or mold damage in the basement will impact your original assessment of the offer. You will likely renegotiate the price of the house based on your deeper understanding of the value of the home and the work at hand.

In the web development world, the “home inspection” part of the project is known as the “discovery period.” We can talk in a general sense about a project, and provide a ballpark estimate of what we think the project might entail, but until we can perform a thorough evaluation that ballpark estimate is just our best guess.

That’s why our standard project plan involves a paid discovery period — that time period is an investment in understanding the true cost of a project. The process goes like this: LOE → Paid Discovery → Project SOW → Project Delivery.

Bidding on RFP

But — what if you need to know how much the project will cost in order to even get the project? This is a common situation when we partner with agencies. Agencies will bid on an RFP and want to enter a line item cost for web development. In a time and materials world like ours, this is putting the cart before the horse. Let’s use another real estate example to illustrate.

When a house is sold at auction, there is no discovery period for the bidder. Some general specifications are available — public records, real estate listings — but there is no opportunity for you to make a thorough home inspection before purchase. Instead, you take your best guess at the value of the home based on the shallow data pool you have.

You make a list of line items that you think the house will need. You call a local roofer and ask him to drive past the house and let you know if 20K is a good starting number for a new roof. Based on that back of the napkin assessment, you try to place the most competitive bid you can — because your first goal is winning the auction.

It’s only once you have the winning bid that you’ll get a chance to actually inspect the property and see what you’ve really got. And when you ask your roofer to spend a few hours inspecting your roof, he says that you need truss repair and other structural work that he couldn’t see during his drive by, and his estimate immediately triples. 60K? How are you going to make any money at all on this project?

In the agency/RFP world, we don’t want to wind up in the roofer’s shoes. We can provide a general range of hours we think the project might take, but again, that estimate is contingent on having deeper knowledge about the project. And, much like the roofer wouldn’t stick to a 20K estimate after determining that the scope of the project was much greater than anticipated, that’s not something we can do either. Like the roofer, we get paid for time and materials — if the amount of work changes, our costs change as well.

So, how to move forward? You need to put a number on an RFP for development costs, and we want to work with you. To do this, we integrate two estimate revisions in the project discovery phase, as project milestones.

Here’s our process:

  • We provide a preliminary estimate, contingent on what we learn in the discovery period. This includes estimate costs for both a discovery period and development time.
  • Our paid discovery period begins after RFP is won.
  • We perform estimate realignments during the discovery period — this includes two estimate and scope reviews and adjustments.
  • We agree on an SOW at the end of the discovery period. 
  • Development begins.

Stay tuned for the second post in the series to see how this works. 

Kellie Walton Headshot

Kellie Walton

Director of Strategy

I work with both clients and internal teams to identify unmet needs, goals, opportunities, and challenges. As Strategy Director, I provide clear roadmaps to solve for those issues, and I create and oversee the execution of plans to meet a variety of strategic objectives at Isovera.

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