How much do you invest in bidding?
The cost of responding to a bid is a key element in deciding whether to bid or no bid an opportunity. Clients often ask our consultants if there is a correlation between bid investment and contract value when responding to opportunities. This is an open ended question as it will depend on:
- The value of the contract
- The procurement method being used
- The buyer’s response requirements
- The questions or scope that needs to be addressed
- Graphical content
- Procurement and solution complexity
- Resource required
- Availability and accessibility of reusable collateral
One key factor when assessing the effort and resources required is the length of responses requested. Often character, word, or page limits will be stipulated and compliance to these require strict adherence. However, we advise our clients that these limits can also give you an indication of level and depth of response expected. A four page limit would suggest the buyer is seeking an in depth response with enough detail to instil confidence in the buyer that you are the supplier of choice. Whereas a 2000 character limit suggests a summary response which will require a different approach. In all cases using all the word or page allocation wisely is more challenging than not having a limit. These factors inform the estimates of effort involved and subsequently affect the investment made in responding to an opportunity.
If organisations are not responding to competitive competitions regularly, they can struggle with identifying the right level of skilled resource required to complete a submission. In those cases piecing together a project team of underutilised resources to draw together a response can be more detrimental to the reputation and confidence of a business than qualifying out early - even though it may seem cost effective.
There is a difference between investing in a proposal and a winning proposal – hope is not a strategy. Taking your chance by pulling something together with the available resource will require less investment than producing a winning submission that has been allocated the right resource. Getting the right team together is key to winning the bid and will offset the investment, rather than losing a bid and adding a cost to your overhead. There are no magic equation for this but typically we advise our clients that a 1%-3% of the contract value is the average investment in a winning proposal. This comes with the caveat that it will depend on size, complexity, sector and value of the contract being pursed. Even so most organisations would be looking at a win rate of around 35%-50%. Where investment increases to around 6% the win rate shoots up to around 60% on the basis that the team that is responding have all the right skillsets and have been pulled together specifically to respond to the opportunity. This ensures senior management involvement, the right balance of subject matter experts and bid writers working collaboratively to produce a winning proposal
No one can guarantee a win rate but investing in the right resources can significantly increase your bid response efficiency and ultimately your win rate over the long term.