By Ross McCarthy20th February 2019
Business owners often ask us are public tenders a waste of time.? In this post, we are going to tease out this assertion and look into the reasons behind this assertion.
Are public tenders a waste of time?
Busy business owners prioritise what they focus on and where they place their efforts to drive their business forward. Public and private tenders (typically into large multinationals) can be time-consuming. It can be difficult to decide if it is worth a company’s time to develop a bid response for competitive tenders. A typical bid costs businesses between €3,500 and €6,000 to develop and submit so every bid is an investment and needs to be treated as an investment.
So, are public tenders a waste of time? Yes, definitely – if you bid without a clear strategy. If you have a clear strategy, they are a profitable, stable source of sales that help businesses get through economic downturns and manage their financial exposure to private sector cycles.
If it isn’t a waste of time, how do you know whether you should bid or not?
Companies considering whether they should bid or not need a good strategy. They should only consider bidding if they think they can win. The table below contains some considerations for companies to reflect on BEFORE they develop ANY bid.
A good bid strategy avoids tenders that are a waste of time
How confident are you that:
You understand the organisation and its strategy – if the answer is no, why bid?
The organisation will want to see a bid from your company – if the answer is no, can you stand out?
You understand your competition – if the answer is no, how can you differentiate your approach?
Your solution is potentially compelling – if the solution is not meeting their specific needs, can you win?
You can deliver against all criteria – if you cannot meet all criteria, why bid?
You have a strong, relevant track record – if you do not have relevant experience, why bid?
It is worth taking the time to understand the buying organisation’s approach to procurement
Have you taken the time to understand whether:
The organisation is reputable and in good standing – have procurement scandals occured there?
Buyers rotate – have they used different buyers in the past?
There is a record of supplier rotation – have you checked financial reports?
Buying decisions are made by teams – have you investigated this?
There are no long-standing incumbents – have you investigated this?
No apparent personal relationships – have you investigated this?
Why the procurement culture matters
We assume that companies do not want their bids to be a waste of time. To avoid this, they need to ensure they understand the buying organisation(s). There are organisations across the public and private sectors that do not rotate buyers. In fact, sometimes, people remain in key roles, buying from the same suppliers, for decades. This does not mean that any rules have been broken, but it can mean bidding is a waste of time. Where organisations rotate suppliers, buyers rotate and decisions are made by teams, the bidding environment is more favourable to new entrants.
When dealing with organisations like publicly funded charities, community organisations or other infrequent users of procurement processes, the quality of the tender documents is important. Well-written tender documents indicate the people running the process have strong commercial acumen. While circumstantial, it provides an indication that the process is professional.
Why bid strategy matters
It is difficult to write a good bid without a good understanding of the organisation that the company is looking to sell to. While a company can win low-value work bidding with little knowledge of the organisation, higher value work is harder to win this way.
If a company wants to avoid a bid that is a waste of time, they need to ensure they focus on a specific set of organisations that buy their products/services and are a good potential fit for them culturally. The company also needs to understand their relative strengths and weaknesses compared to its competitors. The solution they develop and include in their bid document needs to be strong, tailored and fully meet the criteria outlined in the tender.
The final point we’ll make in this post is the importance of relevant, prior experience. Companies should only reference projects that align with the tender criteria. When a company says it wants a dessert pear but a supplier keeps talking about an avocado pear, what is the outcome likely to be?
Tendering does not focus on whether a company can do/provide a particular good or service. Instead, it focuses on where a company has already delivered to a high standard in the past. Newer companies can break through quickly but to do so they should focus on consortiums and strategic partnerships.
Check out our sister site, www.sluamor.com for more on consortiums and avoid tenders that are a waste of time by following these steps.