There are a number of key things to consider when assessing whether or not to bid for a new contract. This is your ‘bid or no bid’ decision.
When presented with what seems like a great opportunity, it can be hard to think about turning it down but sometimes this is exactly what you should do.
You need to have clear criteria for assessing opportunities in order to decide on whether you pass on an opportunity, or whether you have a good chance of winning.
These criteria need to be established so that you only bid for those tenders that are the right fit strategically, provide you with the returns you desire and you have the capability of beating the competition.
Profitability cannot be the only factor by which you assess a tender – your criteria for your ‘bid/no bid’ decision also needs to be strategic.
For example, will you sacrifice profit to secure business from an entrenched incumbent, or to get your foot in the door with the view of securing more lucrative contracts down the line?
Some of the questions you might ask include:
So, investment vs profitability and resource are common themes.
As a starting point, take a look at 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.
These factors inform the estimates of effort involved and subsequently affect the investment made in responding to an opportunity.
Getting the right team together is key to winning the bid. This will offset the investment, rather than losing a bid and adding a cost to your overhead. But how do you justify the cost of these resources?
There is no magic equation to determine how much you should invest, 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.
There are some instances when bidding low could be part of your organisational strategy. Companies who want to get a foothold in a region dominated by a competitor, for example, might decide to put in an intentionally low price so they can establish a presence. Once the contract is underway they will leverage this to win more profitable work – hopefully.
Having advised hundreds of organisations on the best way to determine whether to bid or not, we have developed the following questions to help you determine whether or not to respond to a bid request:
If organisations are not responding to competitive bids 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 under-utilised 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.
Sometimes a lack of resource is the primary reason which prevents organisations from bidding. But there are other options. This is where bid consultants, like eXceeding, can step in.
Our bid consultants can help with all your bid needs and help you develop a ‘bid/no bid’ process that aligns with your strategic business objectives.
We work with clients to identify their key strategic aims and align the ‘bid/no bid’ process to support business objectives. If you hone this process and really get it right, then investment in the bidding process will provide you with substantial return on investment.
For further information on responding to bids and tenders please visit our Bid Strategy page.
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