All bids are evaluated on two key criteria: Price and Quality. Whatever the split between these criteria, you need to be clear how they are being evaluated and take action to maximise your overall score. This does not automatically mean you need to be the cheapest, or offer the most comprehensive solution. Having determined your positioning compared to other bidders, the submission must reflect that position.
Focussing on the pricing of your submission we recommend 10 topics to consider:
- Positioning
- Specification
- Clarifications
- Pricing from the bottom up
- Efficient delivery
- Labour costs
- Contingencies
- Political environment
- Challenging yourself
- Buyer feedback
1. Understand your Market Position
Are you confident enough about the quality of your offering to position yourself as ‘expensive’ in comparison to your competitors? Or do you pride yourself on providing a ‘no-frills’ offer that always comes in cheaper than everyone else? Perhaps you occupy the middle ground and promise a ‘value for money’ proposition when it comes to pricing your bids?
Ensure everyone in your organisation has a shared perception of your relative position in the marketplace to bring focus to your bid activity.
2. Scrutinise the Specification forensically
Resist the temptation to jump right into responding to the tender documents when you receive them without becoming familiar with each and every one. Be crystal clear about what is within scope and hence where you can add value. Maybe your sector can benefit from the discipline of Value Engineering, where you search for ways to manufacture, build or deliver the product in a responsible, but more cost-effective way?
Be mindful of the advertised Contract Value. Is the buyer expecting too much work for the budget available? Collect the evidence via an outline business model including estimates from your suppliers and commercial experts. Check the details of the buyer’s pricing schedule and other documents for functional errors and any ‘hidden’ facets of their expectations.
With this deep understanding of the buyer requirements, reflect on how the bid submissions will be scored. Do the evaluation criteria and price / quality split appear to support their objectives? Do they suit you as a bidder or appear to favour others?
3. Use Clarification Questions to your Advantage
Submit robust clarification questions (CQs) quickly and strategically.
Answering these questions gives the buyer an opportunity to improve their tender in a way that still meets their objectives, but at a potentially lower price and with less risk.
Consider highlighting the pricing impact of any changes in specification, volume certainty or contract terms. Use buyer relationships and experience to understand the pain-points in the contract.
In particular, details of any TUPE liabilities are critical and should be requested. The level of detail and timeliness of information provided by the incumbent will vary hugely depending on their appetite for the work and perceived competitive position.
A transparent CQ process will limit the scope for differing assumptions from every bidder and narrow the range of prices submitted. This increases the importance of submitting a compelling response, crafted by a talented Bid Writer.
4. Implement a Zero Based Pricing Model
Build your business model from the ground up, remembering to allow for a reasonable rate of profit. If you identify elements that other bidders might not be pricing, include these when asking CQs. Otherwise your bid might be more detailed and considered, but could end up being more costly than the competition.
5. Look for Efficiencies
What efficiencies might you bring to the solution, recognising innovations and other changes that might occur in the sector over the contract duration? Engage with your supply chain to explore mechanisms and trigger points for cost-savings, but be sure to pass the benefits of some/all of these efficiencies to the buyer.
6. Watch your Labour Costs
Since labour will often be a very significant part of your costs, remain attentive to trends in the labour market. Be clear about the calibre of staff needed to do the work and use the going rates for each role.
Your business model should reflect all applicable costs and allow for variations in demand, including unexpected spikes.
7. Build Contingencies into your Pricing
Despite your best laid plans, sometimes things will go wrong. A contract to build a housing development could be delayed by bad weather, for example. Whilst you need some contingencies in your price, be careful not to overdo it. Ultimately you have to make a commercial decision about how much risk you will accept, and too many contingencies will make you uncompetitive.
8. Be aware of the Political Environment
Whilst the changing geo-political landscape might be outwith your control, it is wise to recognise the potential impact that interplay between and within countries can have. Brexit will likely bring new tariffs, trade deals and potentially new markets to deal with. How it will affect your sector? Within the UK itself the possibility of Scottish independence also needs to be taken into account. These events and others can trigger currency fluctuations – affecting material costs and the availability of labour from abroad.
Recognising these risks, what provision is there for change in the contract? Are there factors that could trigger a repricing exercise and what reference points, such as pricing and labour indices, will the contract be measured against? and importantly, how often will repricing be allowed?
9. Challenge Your Pricing
Experienced bidders will start to build their pricing models early, before going through a process of price adjudication. Trusted people in the organisation look at the bid through different lenses to ensure that it is competitive, profitable and deliverable. When chasing a big, strategic must-win contract, or trying to break into a new market, you should consider getting some external assistance with pricing.
10. Get Feedback
Feedback on your last bid will undoubtedly improve your next one. Did your value proposition somehow fail to land well? We have to make sure that we are telling our bid stories in a way that’s going to resonate with the buyers. A good Bid Writer could make all the difference to your next bid.
Try to ascertain your pricing scores compared to those of the winning bidder. Ideally, try to access all the submissions so that you can review what prices your competitors went in with. Have colleagues with buyer relationships (more common in the private sector) ask for more details.
Finally…Know when to walk away
Sometimes an opportunity is just not right for you. You might suspect this as soon as you see the tender documents, or perhaps at a consultation stage. Or maybe the clarification question responses indicate that you’re not a good fit with this client, or that the contract is too one-sided? When this happens it’s always better to walk away than to find yourself winning a contract that could damage your reputation, or your profitability.
AM Bid are leading bidding and tender specialists and support a range of clients across the UK, Ireland and Europe. For help with your bid and tender writing and bid support needs, please contact us at:
t. 0800 043 0495 e. info@ambid.co.uk