To bid or not to bid? How to work out which tenders are right for your business
Whether you call it ‘bid/no bid’ strategy, a ‘go/no go’ process or some other name, it’s important to have a clear idea of the types of contracts that are worth your company’s time and energy to bid on.
If you’ve looked into it, you’ll know that developing such a strategy can sound complicated and, to be fair, you can make your own strategy as complex as you want. But in simple terms, all you really need to do is figure out your ‘deal breakers’ and let them guide you.
Why is it important?
When you are awarded a contract following a tender process, you are then bound by that contract for however many years the contract runs for. It’s essential that you choose contracts that your company can realistically uphold.
It’s also vital to choose contracts that fit your company’s short, medium and long term goals. It’s the difference between building and maintaining the business you want versus ending up with a business shaped predominately by outside factors.
Deal breakers from your perspective
Your company will inevitably have its own specific deal breakers as well as or instead of the common examples listed below. Also, many of the deal breakers you decide on might then be influenced by other factors within the contract. Figuring out where your hard lines are and where some elements can be balanced out by others is useful.
Type of contract
Is it a single supplier contract or a framework?
Single supplier contracts, where you supply and manage the whole of the contract, can seem like the holy grail but really, whether they’re right for you depends on the set up of your business. Maybe 70% of your business comes through the private sector and you just want one or two single supplier public sector contracts in hand as well.
Or maybe you only serve the public sector, in which case you might want a nice balance of both single supplier contracts and frameworks.
Frameworks can be great – they’re essentially a ‘preferred supplier list’ – but there’s usually no guarantee of the volume of work you’ll get through it and, in some cases, how you score on your tender determines how high up you are on that list and therefore how likely you are to be invited to bid for future projects. There are sensible reasons to apply to be on a framework even if you don’t think you’ll get any work through it at all but they apply in specific circumstances (hm, that sounds like a good excuse for another post!).
Your break points for type of contract might therefore include:
- What types of contract fit our business plan right now?
- What types of contract will we not consider?
- How many of each type of contract does it make sense to have, in the context of our business?
Does location have a bearing? If you can deliver your products and services anywhere in the UK or globally, perhaps it doesn’t. If you provide people-to-people services within communities, or your staff, equipment and materials are managed from a specific depot, then perhaps it might.
- Which region(s) do we want to supply to?
- Which region(s) will we not consider supplying to?
There are as many reasons to draw lines around different types or organisations as there are organisations themselves. Some of those reasons might be pretty clear, for example, if your business was created to respond to a specific organisational need in a specific sector. On the other hand, some reasons might be a little intangible or even a bit personal.
For example, you might actively want to work with certain types of organisations; charities, housing associations, community organisations, known good payers, etc. Or you might actively not want to work with certain types of organisations; known slow payers, organisations that conflict with your morals and ideals etc.
- What kind of organisations do we want to work with?
- What kind of organisations will we avoid like the plague?
- Which organisation types align well with what we provide?
Working out the minimum contract value you’re prepared to bid for is essential – it’s got to be worth your while. When you add up any additional resource or contract management costs that will be incurred by your business as a result of taking on the contract, where does that leave you?
Sometimes it’s worth taking on a contract that’s a little on the low side because that contract might bring you other benefits, such as evidence of experience you can then use in future tenders for higher value contracts.
It’s also useful to work out a maximum contract value break point in line with your current circumstances. While it’d be nice to make one big leap from doing projects in the tens or 100s of thousands to projects worth millions, you need to be realistic about whether you can fulfil such contracts at this point in time.
- What’s the lowest value contract we’ll consider going for?
- For contracts at the lowest edge, what other benefits would we need to gain from a contract to make it worthwhile?
- What’s the highest value contract we’ll consider going for this year?
- For contracts just on the edge of too high, what risks would we need to consider before making that stretch?
- What’s the longer term plan for increasing the value of the contracts we go for over the next few years?
So for contract value you’d want to set a relatively fixed low-high range, with the option of a little wiggle room on each end depending on the individual tender.
‘Resources’ covers a multitude of things. It could be staff, premises, equipment, products, internal systems and more.
For example, some tenders require that bidders have a minimum number of staff to dedicate to the contract and that those staff must be part of your existing team. You could get around this by hiring new staff to work on your existing contracts while old hands move to this new one but you still need to consider how that might affect your day to day business – is a particular contract worth the internal upheaval?
Some tenders require your internal business processes to function in a certain way. This might include how you take, process and invoice orders, or how you monitor, measure and report your performance. Are your internal systems already set up for this or would they need developing?
Some deal breakers around resources might be:
- What is the maximum scope of a contract that we could handle using existing staff?
- How many new staff would we be prepared to take on (and train) for a contract?
- What is the maximum scope of a contract that we could handle using existing premises/equipment/fleet etc.?
- What further premises/equipment/fleet etc. would we be prepared to invest in for a contract?
- What is the maximum scope of a contract that we could handle using our existing suppliers?
- How much time and money would we be prepared to invest in updating our internal systems and processes for a contract?
If this, then that
You could put together a neat little flowchart, strictly defining each of your deal breakers and never tender for a contract that’s a penny under your minimum value or one that requires you to take on one more staff member or buy a new printer.
I think that’s a little restrictive though – there’s a lot to be gained by looking at how each individual contract fares when you weigh up all of these factors against each other.
Your ‘bid/no bid’ strategy needs to be fixed enough to almost eliminate the risk of wasting time and effort tendering for unsuitable contracts, while leaving just enough wiggle room for you to rationally consider ‘almost perfect’ opportunities.
Deal breakers from the contracting organisation’s perspective
Of course, all of the above is in vain if your company can’t meet the pass/fail benchmarks set out by the contracting organisation.
It’s important to understand what those might be and how they might affect you. This is something you’ll only really know once you’ve got the full tender documentation in front of you and, while it’s tempting to just plough on with a ‘cross that bridge when we come to it’ attitude, there may be certain benchmarks that no amount of clever writing can fix. For example:
One of the biggest hurdles, especially for small and/or new businesses is the requirement to prove your financial stability. If you don’t have three years’ worth of audited accounts, a parent company or a fat wodge of cash in the bank, you may find yourself out in the cold.
There is a big emphasis at the moment within the procurement world on helping SMEs access and apply for contracts wherever possible. In many cases, as long as you have some other form of proof of your financial stability, such as a statement from the bank (not to be confused with a bank statement) outlining your current financial situation and copies of your unaudited accounts, cash flow and assets, you may still pass that section.
However, this is not always the case – most recently, a client discovered they couldn’t possibly pass the financial assessment of what seemed, on the surface, to be a perfectly reasonable tender because there was a requirement of any bidder to have a minimum of £500k behind them, either in their own bank or via a guarantor. Essentially, this locked out the majority of small businesses, including my client.
Qualifications, certifications, registrations, experience
Depending on the sector, your company or your individual staff might need to comply with certain legislation or requirements, without which you will not be considered. For example, DBS checks, health & safety certification, membership of industry schemes, individual qualifications and/or years of experience.
Location, social and economic value
Many public sector tenders now require that suppliers actively contribute to the local social and economic value they offer to their communities. I’ve got a whole post on how this can be a good thing for small businesses here: What is ‘social value’? but the bottom line is if the tender assigns a lot of potential points to that aspect, it’s important that you can respond to what they’re asking for.
Other likely deal breakers
Really, there are unlimited ways in which you can be knocked out of a competition before you even start. Every organisation has its own aims, goals, preferences and legal requirements.
The time to find these things out is well before you start completing the bid response, so always read through the documentation carefully.
This can also be really useful information to know. If you find you’re consistently coming up against certain barriers when you look at possible tenders, it might be time to consider adding ways to overcome them into your business development plan.
Still baffled? Give me a shout
If you’d like to know more about how to develop your own ‘bid/no bid’ strategy or want some help getting started, get in touch.
You can also book me to deliver a half-day workshop for your company away day, supplier event or business network. Find out more about the workshop here: Workshop: To bid or not to bid?