Australian businesses are wasting time, effort and money chasing tenders in an ad-hoc manner because of an in-built culture towards “bidding for everything”, according to one of Australia’s leading tender management experts.
“In the world of tenders, the default inclination for many organisations is to submit a bid whenever an opportunity arises. It’s an entrenched behaviour and it can be totally counterproductive on so many levels,” said Nigel Dennis, CEO of BidWrite.
“Preparing a bid response is very time consuming and a costly burden on your organisation. Even though winning tenders ultimately means more money through the door, sometimes you just have to say: ‘no, not this one’,” Mr Dennis said.
“These may seem tough calls to make but the no-bid decisions can be just as important as the go-bid ones.”
Mr Dennis said many businesses have adopted a behaviour of ad-hoc tendering which includes chasing every opportunity that presents itself. This wastes effort on bids that were never going to succeed and compromises effort on those that should.
“Repeated losses represent pointless effort, and this has increasingly negative impacts on the morale of the work-winning staff involved,” Mr Dennis said.
“In the business of tendering, the Australian penchant for ‘bidding for everything’ perhaps mirrors our love for gambling.
“The allure of quick and dirty tender efforts accompanying the ‘bidding for everything’ phenomenon loses its sparkle when businesses diligently assess the true costs of tendering and rigorously track win/loss outcomes.
“Half-hearted, rushed or long-shot submissions also create poor impressions with the very people you are trying to impress. So, the problem is magnified because you are likely to lose the tender and create a negative perception of your capability – the exact opposite of what you are setting out to achieve.”
He said companies which take a more strategic approach to tendering make rational, structured and disciplined decisions about which opportunities are worth pursuing.
“This more considered approach is a sure way to win more often. As well as increasing your win rate, focusing on the right opportunities saves you time, money, and makes the whole tendering process far less stressful.”
Mr Dennis said there are many complex considerations for making a bid/no bid decision, but decision making should start with the basics:
- Are You in a Position to Win? The concept of positioning involves conducting thorough research on customer needs and the competitive landscape before the issuance of a Request for Tender. This principle applies universally, regardless of whether your organisation is the incumbent provider or not. While being an incumbent may enhance the potential to retain or rewin a bid, success is not guaranteed. Astute bidders consistently evaluate their positioning realistically and opt not to bid if they cannot genuinely assert themselves as frontrunners before the Request for Tender is issued.
- Can You Do It? Beyond the desire to secure a contract, a critical question is whether your company possesses the technical capabilities and operational capacity to fulfill the requirements of the project. Evaluating your team’s skill set, technological infrastructure, and overall operational capacity is essential. This analysis ensures that, if successful, your company can deliver high-quality results in line with the customer’s expectations. Another way of framing this point is to put yourself in the shoes of your prospect. If you were it, would you want to be a guinea-pig – taking a chance on a supplier/contractor that might be using its tender to enter a new market or offer a new product or service?
- Is It Financially Feasible? The third crucial factor to consider is the financial viability of the bid. Organisations must weigh the pros and cons of top-down versus bottom-up pricing. Generally, zero-based or bottom-up pricing tends to result in a higher amount than top-down pricing, which is determined by what the market is willing to pay for the provided goods or services. The decision on how to price each deal becomes a contextual judgment call. As a prudent approach, it is advisable to set prices as competitively as possible while avoiding an unsustainable cash flow or profitability position in the event of success.
- Do You Want to Do It? While a project may seem lucrative on the surface, it is crucial to consider whether it aligns with your company’s long-term strategic objectives. Assessing the attractiveness of the project or service contract involves scrutinising its compatibility with your business goals, values, and growth trajectory. Pursuing opportunities that align with your strategic direction not only enhances the likelihood of success but also contributes to sustained business growth.
“In the dynamic landscape of business bidding, a miscalculated bid can strain a company’s resources, resulting in extended working hours, overworked staff, decreased morale, and heightened attrition rates,” Mr Dennis said.
When customers award bids, they have certain expectations, and poor bid judgment can also jeopardise relationships, Mr Dennis said.
“In any business, news travels fast, so if you mess things up, everyone finds out really quickly.
“As word spreads, the ability to secure future bids drops off a cliff, creating a cycle of pursuing work that may not be the best fit.
“Bidding is a delicate and complex craft. A strategically positioned bid can drive you towards success, whereas a poorly judged bid may yield consequences that reach far beyond negative financial implications.”
About Nigel Dennis:
Nigel is a co-founder and BidWrite director. A leading consultant in the proposal management profession in Australia, he has developed a significant international reputation, presenting at seven annual world proposal management conferences since 2008. With qualifications in engineering, commerce and marketing, Nigel is a strong advocate for the profession. In 2008, he founded the Australian/NZ chapter of the Association of Proposal Management Professionals (APMP) and has served on the chapter board every year since.