Having quickly scored and discarded most opportunities look at the remaining ones in rather more detail to understand whether the cost to win is justified by the prize.
Cost of bidding
First work out a realistic schedule of events, this is often provided by the buyer but if it isn’t ask for it. It’s sensible to assume that the schedule will slip; government organisations regularly underestimate the time it takes them to make decisions and the availability of their key people. Knowing the buyer enables you to make confident assessments about the schedule. Good buyers know what they want and understand how to get things done internally; bad buyers don’t and are more likely to create slippage and to abandon procurements.
In general the timeslots for you to provide documents will be fixed and by assessing who will need to work on the documents the cost can be calculated. NB The questions you will be asked are usually designed to test if you are:
- Safe to do business with, e.g. registered as a business, that you have a history and accounts and that any consortium you’ve entered into will hold together
- Are capable of doing what they want, e.g. have qualified staff and professional processes backed up by a history of successful projects (references)
Your costs answering questions will be minimised and the chances of success maximised if you have a library of source material that you can reuse for your proposal.
Your costs are likely to be higher where the buyer isn’t sure what they really need, and hasn’t engaged in pre-procurement activities (e.g. Issued a PIN and or/ used a Concept Viability Workshop). For example, they might chose to use the “competitive dialogue” process to refine what they need during the competition. Competitive dialogue can be costly, to assess how expensive you should ask the buyer who they will be involving and their expectations for duration and number of meetings. You might feel concerned if they plan to use new external consultants or if they haven’t decided who will be involved. This isn’t a criticism of the process; the cost of removing uncertainty is usually justified.
Value of winning?
Although this isn’t always easy to judge until you get immersed in the detail it’s worth making as good a guess as you can at the revenue and margin for each year of the contract and going back to check it every time something changes.
Your calculations need to include the cost of investing in increasing capacity where that’s necessary. For comparison with the costs of bidding the value should be in terms of profit after any financing costs are taken into account.
There is a natural inclination for Sales people to be over optimistic and give a false impression. It’s therefore unusual to get an over estimate of the cost of bidding and even rarer to get a pessimistic estimate for the value and the probability of winning.
Probability / odds?
This is probably the biggest and most difficult variable. With experience the cost and the prize can be judged fairly accurately but the probability of winning is something entirely different. In practice there are often two gambles, getting short listed and then getting the contract.
Bidding to be short listed is relatively inexpensive but only wins the right to gamble again. This is the time to use the filtering guidelines to minimise wasted response as the stakes increase at the next stage.
Normally the buyer will short list to keep between three and five suppliers in the competition right up to award of contract. Putting aside the pleasure at being short listed this is the time to balance the cost to bid against the reward knowing who you’ll be competing against. Beware the temptation to ‘throw good money after bad’ when you learn that the odds are weaker than you expected.
It’s not professional, or legal, to conspire with your competitors but it does make sense to use your network to judge how strong your competitors will be. One approach is to analyse your competitor using the filtering approach you used to decide whether to bid and compare their scores with your own.
Best of luck – but at least you understand the cost, the prize and the odds.
And remember that when the facts change, for example there is a delay or a change in requirements or personnel you need to review your decision.