Archives for December 2013

How to discuss assumptions in proposals to your benefit

The ubiquitous Assumptions section

Each IT proposal has a section towards the end – just before the financials and pricing, there is a small section with a list of assumptions on which this proposal is based on. And when it comes to the discussion table, both providers and IT buyers fumble with how to deal with this section. From a provider’s perspective, this is their way of setting down the boundary conditions of the solution. It is their way of offering a solution that is based on certain parameters which if fulfilled will enable them to deliver the solution they have designed.

Should you remove Assumptions?

Well, yes – but not without a discussion.

From the other side of the table, assumptions look scary. All you see are hidden data points and conditions which can suddenly increase the price if this is not either discussed away or controlled. And the result is predictable: Often contract negotiators try to remove all the assumptions so that it comes down to a contract sans assumptions. I am not advocating making contracts with assumptions. But should you seek to remove blindly? That would be wasting a hidden opportunity to have an in-depth discussion that benefits both parties. But how do you start this discussion?

Question mark

Divide and Focus

First segregate the assumptions. There are multiple types of assumptions – there are those that have material impact on the solution since they drive the entire effort of the provider, and those that simply lay down the financial conditions on which the price is based (e.g. handling of lodging and travel costs). Focus on the ones that shape the solution or refine the problem definition.

Don’t insist on removing assumptions without understanding the impact – because the only way the provider can remove assumptions is to price it into their solution.
Discuss each of them using the following questions:

  • What is the basis of this assumption? How does this impact operations?
  • What happens if this assumption is proven wrong?
  • What happens if a value increases or decreases?
  • Who can control this value? what are the means of controlling these values?
  • What can either of the two sides do to control these values?

Have this discussion dispassionately without first assigning responsibility – after this find out which party can control this risk best – this will give you the optimum balance between responsibility split and price.

Can Assumptions help you?

  • Often assumptions can lead you to finding a solution to your problem.
  • If you release a list of goals that you want to achieve and ask for a solution – you will get a solution that is driven by assumptions.
  • Such assumptions are not a nuisance – use them wisely to bring more refinement into the definition of the problem, or the enrichment of the solution depending on which side of the table you are sitting on. More on this topic in this article on Request for Solutions.
  • A smart provider should also think of using assumptions to coach the IT buyer – but they should not do this by talking down to the IT buyer
  • A smart provider should coach the IT buyer into what should be added to the problem, what they have potentially missed, what they should be demanding in addition. Believe me, IT buyers value this coaching as it shows them that you are thinking for them.
  • Use this discussion to find out where the buyer want to draw the line to split the responsibility.

Assumptions work both ways

IT buyers should not stop at only discussing assumptions that the provider has raised. They should create a list of assumptions of their own as the solutioning dialog progresses. Use these questions as a kick-start:

  • What are you taking for granted?
  • What are you being promised? How can you verify this for yourself?
  • What assets are you relying on? What are these assets performing that will be useful to you?
  • How can you check and measure that this is actually the case?

Now use these assumptions to drive due diligence on both sides. Giving each party the possibility to check the assumptions will go a long way in avoiding any conflict situations after the contract is signed.

In summary

Often the actual persons that are available during the contract phase on both sides (the deal team on both sides) leave after the contract is signed, and this is then handed over to the delivery team on both sides. Discussing the assumptions on both sides, and documenting the results of the same by baking it into the problem definition or into the solution will bring the required rigor into the contract.

The parties on both sides that are forced to live the contract over the next five years will thank you for it.

photo credit: Marco Bellucci via photopin cct

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