A company is confronted with many RFP opportunities, each with its own likelihood of being:
Converted into an awarded contract.
Refined through a negotiation process.
Placed into formal backlog.
Staffed with resources committed to its execution.
Often proposals are developed and submitted on many RFPs—all of which have varying degrees of likelihood of success. A non-backlog project budget is simply a proposal that has been promoted to the special status of being a high probability potential award.
Budgeting & Planning considers the special status non-backlog proposal as part of a reconciliation process that seeks to substantiate the level of operations that is reflected in the budget of a given organization.
The budgeting cycle takes the organization’s AOP or Outlook and then compares it to the sum of all of the current budget and/or EAC data from projects that are already in backlog, plus the current non-backlog project budgets, to determine a risk factor— the greater the difference or gap, the greater the risk. Since the organization budgeting cycle is key to the estimation of forward bidding and billing rates, the risk factor is a measurement of the likelihood of planned indirect rates being inaccurate. It’s also likely that a rate variance, or under-absorbed indirect expenses, will occur.