A friend of mine is a fireman in a rural village, which had been fighting for years to get a new fire engine. They were so far away from the nearest big town and main road that they needed to have their own retained fire crew. They had been struggling on with a cranky, unreliable old fire engine for forty five years, always worried that it would fail if ever they were called out to a serious fire.
After years of pestering, the County bought them a brand new, ultra modern fire appliance. The crew would meet every Tuesday evening and would spend the first two hours of their weekly training just polishing their new pride-and-joy. A friend of mine was one of these valiant firemen and when I went to stay with him, he spent at least two pints telling me how proud they were, now that they had a ‘real’ appliance.
‘It’s all very well spending all this time cleaning and polishing’ I said, ‘the first time you take it to a real fire, it will be covered in soot dirt and grime’.
‘We thought about that’ he replied, taking another sup. ‘We only take the new one out to false alarms’.
How absurd! Of course they won’t know if it’s a false alarm until they get there. But that is very similar to the situation faced when making decisions whether or not to bid for a contract. Wouldn’t it be great if you knew which bids you could win before you started bidding? It is critical to all businesses that they limit the amount of time, money and resources spent on bidding – yet many waste huge amounts putting together speculative bids in the hopes that one or two will be lucky.
For most people, the starting point is a regular trawl through the contract notices. TED is a useful one – it advertises all the public-sector contracts of any size. But if you start there, then you have missed out on the most important factor in bidding success – knowing your own organisation’s competitive strengths and weaknesses.
With few exceptions, price is the most influential criteria in the selection of low- to medium-risk projects. If you pitch higher than other bidders, it doesn’t matter how good your are, how good your bid-authors are, or how well you deliver; You won’t get the contact. For many companies, this means cutting costs to the bone, employing cheaper people, work them harder. Yet companies who consistently perform well and make a profit, rarely employ these tactics.
Price can also be reduced by lowering costs by doing things better. In business-school-speak this is called the Experience Cost Curve. Every time you do a particular activity, some learning is bought forward from the last time you did one. As you practice, your people get better, slicker and more efficient. Eventually, you will be able to perform complex projects at a fraction of the cost that a competitor can do it.
Take for example, MacDonald’s: The first time they sold a hamburger, they had to acquire a building, recruit a workforce, train them, get customers through the door…
By the time they had done this a few million times, they had a completely efficient supply chain, a training system, a standard design of kitchen, fully trained customers (who knew how to order) and their costs were miniscule compared with what they were initially. The care they took in refining the ‘sell hamburger’ process quickly developed into a ‘’open new restaurant’ process and eventually into their ‘expand into a new country’ process.
The chances are that in many small ways, your company has done this – you can do a lot of things better and cheaper than your competitors. Do you know what they are? If you have been sufficiently disciplined or intuitive to discover how these fit together to create competitive advantage, then you should be able to spot an opportunity that will be a good match for your corporate capabilities. But that is not the end of the story.
Large organisations – particularly public authorities – don’t always behave rationally. It’s perfectly natural to assume that the choice of a supplier will be based entirely on logic and common sense, but that is not always true. As well as cost, there are usually a small proportion of the decision criteria based on other factors. Those other factors are not always as rational or as transparent as we would like.
Large organisations are a collection of influencers and coalitions that can have a substantial effect of the outcome of procurement. A very large procurement on which I worked was said to have at least nineteen major groups of stakeholders, legislators and political oversight bodies who had to be satisfied with the placing of each contract. Typically, some of these groups had diametrically opposed interests and fought their agendas with huge amounts of gusto. The resultant decision criteria were practical, legal and fair – but somewhat removed from the types of criteria bidders were expecting.
Sometimes, the criteria which are eventually applied in the evaluation of bids are not quite what you expect. It takes a keen and experienced eye to spot them.