What makes responding to Tender so challenging and what you can do about it.
So how big is the public procurement market? As per an IMF 2017 report the total GDP of the world in 2017 was around $ 126 Trillion. Assuming the average public procurement spend at 5% of GDP, this translates into a whopping $ 6.3 Trillion worth of business opportunities. Some back of the envelope calculations suggest that the no. of tenders released in India grew 26% in 2018.
Assuming you wish to benefit from this vast business opportunity, you need to not just familiarize but master the Tender process. Some organizations are tentative and others don’t have an option. We discuss the key decision points from a bidder’s perspective and share how you can traverse them better by leveraging technology and bringing-in new/updated business processes.
Winnability – The primary decision point obviously is – can we win, is the project worth pursuing, at what price are we likely to win, will we make money at the end of the project, what are the risks, and what’s the competition likely to be. While the total factors impacting the win result are multiple, lets focus on what’s in one’s control.
With the RFP win percentages ranging from 2-5% it’s important to engage early and adequately. I have often wondered why Systems Integrators do not engage early in the tender lifecycle instead deciding to play on eligibility, solution and price. Conversely OEM organizations often engage early, right from the seeding stage. This is crucial - identifying and influencing the concerned decision-makers. Else you end up playing to someone else’s ground rules.
Things to consider for effective early engagement – is your sales coverage adequate? Are the sales guys equipped to handle the preliminary solution discussions or should you look at enhancing your pre-sales capability? Are your marketing efforts focused on the right targets/channels? See more actionables in an earlier blog.
Where one has not engaged early a strong, integrated Go : No-Go process coupled with technology can be a great way to handle your pre-decision anxiety. Develop the key parameters based on which you wish to evaluate the opportunity. Have all the key decision makers score/rank each parameter. You can then apply weighted average or a spider-chart approach to visualize the opinions before taking the final call.
What also helps is - developing proper sales/competitor intelligence. What price should we bid at? At what price/margin points have we won/lost recent deals? How have we fared in similar binds in recent times in a given territory? Not having answers to these could be potentially fatal. Here are four steps to go about doing it.
Financial – At least in India, financial terms are the biggest road-blocks. The payment terms can be outlandish – zero advance, 90% after installation, remainder after 1 year. 5-10% BG for the tenure of the contract, penalties linked to the TCV, etc. Not to mention the delay in returning EMD, and BGs. Even the private sector finds ways to buy more time. With no other option, most organisations add finance cost to their price bids to handle this.
Again, from a process perspective your primary approach has to be 2 Ps – be proactive, be persistent. Set the internal and client payment machinery in action, much ahead of the dates. Where possible, have a dedicated collections team. Another option is to tie the sales commission pay-out to collections. Offer incentives to customers to pay earlier .. err may be no 😉
Technology can help you set alarms and notifications for the upcoming milestones. If you have created a single repository of your bid and pricing info, you can now add project completion/margin info to determine which kind of customers/ projects/territories tend to do well and which ones are worse off.
Delivery – Will we be able to deliver? What are the risks? If the organisation has been working on specing the Tender, it is likely that the scope will be in line with their capabilities. Else we have seen organizations manufacture partnerships to meet tender specific requirements.
If you bring together your data from pre and post sale processes, you can see patterns emerge. Segment those to determine if the estimates for the project at hand are in line with the successful projects executed earlier. Send the variances for review. This will ensure you are neither under sizing nor over estimating. Which solution categories do we make more margins upon? Which customers are more amenable for CRs? With enough data, one can also predict a Risk Score for the project.
Submission – Probably the least of the worry. Can we develop and approve the tender response in time? What if we don’t get enough extension? But, has it never happened that two equally attractive opportunities have landed at the same time and you have missed one for the lack of resources and time?
When multiple executives are working on different tenders, priority and commitment are bound to fluctuate. From and organizational perspective its crucial to let them know the priority. Change the KPI of the bid teams, from number of bids submitted to number of winning bids submitted. That changes the thinking, approach and actions completely. More about it here.
Today there are a plethora of technology solutions available for better collaboration, scheduling and productivity. Find one that closely matches the tender response proceses. And you should be good to go.
In summary, tenders are here to stay. They may actually get better in term of processes and approaches. If you are submitting more than 50 bids a year thru multiple teams, it’s quite challenging to take accurate calls every time. Adding technology to the mix, will improve your odds. Good Luck!
Comments and observations welcome at firstname.lastname@example.org.