Why pay consultants to prepare proposals for your mining projects?

A radical proposal to start the week: do not pay consultants to prepare proposals for your mining projects. You reply: but we do not. This is only partially true. Of course you do not shell out immediate dollars for the proposals you invite and receive. But you pay in higher rates and probably “start-up and research” costs.

Consider the cost to the consultant of preparing a winning proposal. I went out drinking last week with a friend who works for a mid-size consulting firm (about fifty people.) They had just spent $200,000 on a proposal to do soil and groundwater cleanup at a contaminated site. Initially six consultants were asked to submit Statements of Qualifications (SOQs). Then the list was reduced to three consultants who were asked to submit full-blown proposals. All six consultants have done other projects for the company inviting the SOQs and proposals. So the inviting company cannot say they did not know the abilities of those consultants who presumably spent over a million dollars in total to get to the current situation: all three consultants who submitted proposals have been asked to work on different parts of the project. All have agreed, presumably on the basis of better a part of the project than nothing, if you cannot get it all. I cannot help but wonder why the inviting company did not ask them to work thus initially and save all the millions of dollars in proposal preparation fees.

I see the URS has made a multi-billion dollar bid for Washington International hoping to form a company with 54,000 employees. Can you imagine what their proposal preparation budget is, and how they have to inflate fees for just ordinary jobs to cover this cost?

I know that the use of an objective and unbiased proposal system is at the heart of the competitive nature of consulting and the service industry emanating from consulting. I know that at times a dark horse can emerge from the pack to win a job based on a fine proposal that describes an innovative project approach. I once worked on just such a proposal that involved a consortium of four very large design-build firms. We were literally locked in a secure and guarded basement for the two months it took to prepare the proposal and get ready for the orals. Our team won out over the obvious contenders, but it cost. I cannot even begin to imagine how much.

Clearly if there is a possibility for favoritism and corruption on the part of the people awarding government contracts, rigorous bidding and evaluation is the only way to avoid the problems that creep in. Maybe the same is true of the large contracts that mines are awarding for work ranging from design and construction of a new mine to contract mining itself. But one wonders if, for more routine projects, the need for so rigorous a proposal process is imperative. Maybe if you have worked with the consultants before, know their work, trust their judgment, and admire their approach and quality, all you need do is phone them up and ask them to submit a schedule, budget, and project organization chart. If this meets you objectives, appoint them without further to-do.

I know this happens. And in most instances of which I am aware the result has been satisfactory and cost-effective for both parties. Maybe all that is needed at your mine is a more detailed examination of the criteria for awarding contract with and without bidding. Let me know how you do it.