Section D
To Tender or Not to Tender
The smartest side to take in a bidding war is the losing side.
Warren Buffett
1 The Tendering Decision
1.1
The company should get approximately two weeks notice that an enquiry is on the way. Large projects will have been around and known about for some time. Smaller projects will naturally have a shorter notice period. The purchase of aircraft is advised with a ten‐year lead time.
1.2
The three key ‘to tender or not to tender’ decision makers (see 1.7 below) won't have time to read all the documents involved in a tender request and, therefore, the job of analysing the enquiry is given to an out‐of‐work project manager.
1.3
Read the request for a proposal enquiry document, and review it with the sales/business development department.
1.4
Check that there is a clause providing an overall limit of liability (see Section F Contracts, Paragraph 3.5 and 3.5.1). The absence of such a clause is a reason for not tendering. This must be negotiated before starting work on the tender. If there isn't one in the client's contract document, and they won't give you one, walk away. You have to ask yourself, ‘Why won’t they give one?'
1.4.1
Has the client provided a ground conditions survey? If they haven't, ask for it.
1.5
The salesman's job is to bring in the enquiries. Once the enquiry is ‘in house’, fifty percent of their effort will be directed to selling it internally. They want to be given the credit for a success. For this reason, they should not be a decision‐maker in the process of deciding ‘to Tender or not to Tender?’.
1.6
Unfortunately, this decision process often takes up to twenty‐five percent of the tender period. The company should already have a basic strategy. Therefore, it should not be difficult to identify if and where prospects fit into the business plan.
1.7
The key decision‐makers should be:
- The managing director or chief executive – they make the final risk decision. Their neck is on the chopping block.
- The business development/marketing director – they know the marketplace and have a handle on the company tendering portfolio.
- The operations/technology director – they know if the company has the technical capability and if the resources will be available.
Sometimes people want to add in the finance director, but all you need from them is the answer to the questions: Can we afford it, and can we get the finance for it? Similarly, people want to add the legal executive, but their attitude can be that it is far too risky to be in business, anyway. Nevertheless, you will need the legal people to do a risk evaluation on the contract documentation. These two functions have a contribution to make, checking that the key people are being consistent and logical, but they are not necessarily decision‐makers.
1.7.1
When I ran a proposals department, I was asked to be part of the decision group. I turned it down on the basis that it was up to key decision makers; my job was to produce a quality proposal.
2 The Tender Decision Analysis
2.1
Considerations for the tendering decision should be:
- Company strategy
- Project size
- Budget and resources
2.2
The key decisions areas will be:
- Probability of award to the company
- Ability to do proposal
- Ability to execute project
- Probability of the project proceeding
2.3
The most effective way to turn a very subjective process into a more objective process is by means of a Tender decision matrix; see Figure III.D.1.
2.3.1
Get the company to agree on the criteria, but limit them so that the matrix fits onto one side of A4 paper. Leave room for comments covering:
- Features of note
- Key risks
- Specialist resources required or restraints
- A ‘completed by’ signature. This enables the decision‐makers to make their own assessment about any bias or lack of objectivity. As an out‐of‐work project manager, make a decision whether you want to lead the proposal effort, or don't you like the proposed project and don't want to be the project manager?
2.4
More emphasis has been given to the proposal issues in the matrix, since if you can't be positive about the proposal, you will not win the project. You have a little time to resolve the project issues whilst the tender is being prepared.
2.4.1
Importance: Is it a key prospect in the business plan or has it come in off the street?
2.4.2
Qualifications: does the company have the experience or is it a new area of business?
2.4.3
Competition: is this a single source enquiry that scores a 10, or is it one of ten or more tenderers and as a result it might score a zero?
2.4.4
Market intelligence: when did we know about this project? Has it changed over the time that we have been chasing it?
2.4.5
Client rapport: who are the client's key people, and do we know them? Does anyone know one of them personally? What were they like on a previous project?
2.4.6
Proposal effort: will this enquiry involve a lot of people developing new material, or can it be put together by modifying material from another tender (not really recommended if you want to win)? Have we got the people available to do the work or are they busy on other proposals?
2.4.7
Proposal timing: have we been given sufficient time to develop tailored material focused on the client's objectives, or will we be in a rush and make mistakes under pressure? Do we have time to analyse a network?
2.4.8
RFP exceptions: have we had an enquiry from this client before and come to terms with the way they do business? If we have too many exceptions to the enquiry documents, and in particular the contract, we will be ruled out as non‐compliant.
2.4.9
Team availability: do we have a ready‐made team coming off another project at the right time, or will a team have to be cobbled together from all over the place?
2.5
Project schedule: is the schedule being imposed upon us, or do we have to develop one? A good schedule can be a winning strategy. Can we develop a network to substantiate the schedule?
2.5.1
Pricing strategy: what are the client's evaluation criteria so that we know where to reduce costs? Will there be lots of changes? Are there any comments on the percentages for: overhead, risk contingency, allowance for inflation, and negotiating margin?
2.5.2
Profit margin potential: have we got any innovative ideas for reducing costs that we can share partly by reducing our price but also increasing our margin? Are there areas where we can make additional money on services?
2.5.3
Work location problems: Has a country risk assessment been carried out? See Part V, Section M, subsection 5.
2.5.4
Risk and liabilities: has the legal department had a good look at the contract? Is there a limit of liability clause? What guarantees are required? Are there any unacceptable risks such as ‘unknown ground conditions’?
2.6
You may have to carry out a modified analysis if you have to purchase the enquiry documents. For example:6
“To obtain the tender documents the bidders will irrevocably deposit the sum of XXX.”
“Only the bidders who obtain the tender documents after having paid the amount of XXX have the right to submit bids upon this tender.”
2.7
The matrix helps focus where you are good and need to boast. In addition, it also shows where effort will have to be made to overcome a low matrix score/weakness.
3 The Final Tendering Decision
3.1
If the risks are reasonable and you think that they can be managed, if the company has done work for the client before and relationships are good, and if you think the company can provide the best combination of technical and project execution proposals and contractual and commercial terms; go for it and move to Section E Preparing a Proposal for a tender.
3.1.1
I made a persuasive assertion, saying, ‘It’s our turn, they like us, we know the project, and have some innovative ideas' and so on. We lost and I lost credibility with the executive decision makers for the next six months.
3.2
If any score in the matrix is zero, then don't tender.
3.3
You must have a unique selling feature and be able to produce a professional proposal. If you do not have everything right, one of your competitors certainly will, in which case you may as well not submit a tender.
3.4
You must be able to answer the question: “Why should the client choose us?” If you can't answer this question, don't tender.
3.5
Analyse the decision to tender. If you do not stand a chance or do not want the job, do not waste everyone's time and money.