Working with others can improve your scoring in the areas of qualification, capability (including innovation) and references and also gives you access to different contractual routes. Alliances aren’t as serious as marriage but even so shouldn’t be entered into lightly as there will be challenges to be worked through in protecting your ideas, deciding who does what and working effectively together.
It’s normal to have a Non Disclosure Agreement (NDA) to make sure that both parties understand the limits on what they can do with what they learn whilst working together.
Qualification and Capability
If you can’t meet the buyer’s qualifications or provide everything they are asking for you can improve the situation by forming an alliance with someone who can. For example you build it and they test. In choosing partners bear in mind that clearly defined capabilities with limited overlap makes relationship easier.
You should demonstrate consistency in partnering as buyers need to feel convinced that you will work together well. To show you are taking the alliance seriously, particularly where you haven’t worked together before, consider structuring the alliance for use in future contracts.
Buyers generally want innovation and many expect to get it from small and medium sized companies, but may not want to manage the risk of having many independent contributors to a project. In such situations it’s normal to see prime contractors with large, long term contracts subcontracting work to a large number of subcontractors.
The prime contractors will usually set up processes for attracting, evaluating and contracting with SMEs often directly involving their end customers. This can be attractive in reducing the time and cost of sale, although SME’s need to be selective in choosing which prime contractors are worth dealing with. They also need to show that they will be increasing the prime contractors revenues and margin.
If your aim in forming or entering the alliance is to increase the range of references the issues are similar to those encountered when forming an alliance to increase capability. If your aim is to increase the volume and the alliance organisations do largely similar work there are likely to be increased challenges in keeping to who does what. NB Buyers will be suspicious if they feel that the only rationale for forming the alliance was to compile enough references.
Whoever the buyer contracts with takes the risk if things go wrong and will also need to administer the contract. It’s therefore reasonable for them to charge a fee.