Tenders; knowing went to hold and when to fold

17 October 2017

One of the most important factors in tender success is "to tender or not to tender - that's the critical question."

Some time back, JWPM was asked for advice by a large manufacturer on how to improve their tender success rate.

Their hit rate was around 5% (no, seriously!!) They were selling a custom engineered product. Each bid required three days of design and development, costing and proposal writing. Consequently, their design and estimating department was well staffed. They were a large successful family owned business that had dominated their industry for over 60 years. However, they had also slipped into a comfort zone where they hadn't noticed the market place had changed.

After some investigation and analysis, it was determined that they had no strategy and very poor tactics…

They rarely visited their customers
They rarely called their customer to clarify specifications
They bid on anything that moved
They were focused on price (margins were ridiculously thin)
Their tenders were somewhat primitive - a fax header sheet, "Dear Robert, thank you for inviting XYZ to submit for the design, build and delivery of...", plus 100 pages of drawings, schedules, and T&C's (don't forget the T&C's, in case we actually win one).

On the plus side, they pumped out a lot of tenders.

Their underlying assumptions were…

Everyone knows us, we always get asked to tender
There is no point in meeting with the customer, they just fax us their specifications
We must respond to all bid requests because they might get offended and stop asking us.
It's all about price; they know our product, they just want the lowest price.

After further analysis, customer research and market investigation, we observed and advised…

They were near 100% successful on bids where robust engineering and maximum reliability was important.
Their product was “high-end”, bulletproof well-engineered solutions suited to mission-critical applications where failure is not an option.
Don’t offer a bid when the application can easily be met by commodity off-the-shelf modular solutions (you can’t win, your product is too bespoke, hand-built and costly).
Don’t bid when the customer is simply a building contractor who only needs the equipment to last through the 12-month warranty period. Bid when the customer is the end-user and must live with his/her procurement decision [and the consequences, should it fail].
Don’t offer a bid if you don’t meet with them first.

Their tender success rate improved to over 50% and their bidding costs were slashed.

When tendering, avoid being cannon fodder

The reason why you need to meet with the customer before you start work on the bid is…

Too often tenderers are simply making up the numbers or are being used to keep the preferred tenderer honest.

Most organisations when buying anything significant have (at least) a “get three quotes” policy.

But often, they have a preference for a particular supplier – the so-called “preferred tenderer.”

Requesting a meeting to discuss the requirements is a good test to see if they are serious. Sometimes they will outright decline the meeting...

“That won’t be necessary, everything that you need is in the specification, call us or email if you need anything clarified.”

It’s human nature “why waste time meeting with a tenderer who you don’t intend using?”

Tendering - understand their true requirements

If they are serious, meeting face-to-face serves a very important purpose; you want to really understand their needs. Often customers either don’t understand their need and therefore have specified something unsuitable or aren’t good at putting it in writing. Either way, meeting face-to-face gives you the opportunity to gain valuable insight. This valuable insight enables you to tailor your bid to solve their real problem and/or develop a superior non-conforming alternative.

This approach is so powerful, I have witnessed a supplier talk a company out of competitive tendering because the supplier convinced them (truthfully) that they were the only company capable of meeting their need. They negotiated a contract instead.

In addition, meeting face-to-face provides the opportunity to...

Feel the vibe: "Am I getting warm fuzzies from talking to these people, or am I getting the feeling that they are just going through the motions?"
Understand their buying team: If you are being asked to tender then more than one person will be involved in making the decision. People assessing bids usually fall into one of four categories: The End User, The Procurement people, The Technical Buyer and The Financial Buyer. Understanding who these people are, their attitude toward the project (and you), and the degree of influence they have over the outcome can really change both your decision to proceed with the tender and your bidding strategy. Sometimes the buying team roles aren't explained but reading the body language and observing who speaks when and about what offers clues. Clues you can more easily pick-up when meeting face-to-face.
Decision-making criteria: These are sometimes listed in the tender specification, but all too often they aren't included or are just a standard template. Talking face-to-face gives you the opportunity to tease out what is really important to them.
Internal politics: The back-story behind the tender provides important information; encouraging the customer to explain context can provide some important insights. This is also a good method to uncover any corporate politics that might affect the tender decision. More than one tender has been issued (putting many people through a lot of pain) when not everyone on the customer side was convinced that the purchase was required. Sometimes organizations call for proposals as a scoping exercise and to pick-up new ideas.

Build the relationship

My client had forgotten the number one maxim of b2b selling – relationships.

Pure logic (the fall-back position of accountants and engineers) would suggest that relationships have nothing to do with tendering “all they are interested in is the best price.”

But, more sophisticated b2b operators (including the more successful accountants and engineers) understand that the relationship strength has high value.

And it comes down to trust and the grief factor.

All projects and purchase decisions have an element of risk. When the project runs into problems “can I pick up the phone and sort this out?”

The grief factor is also critical; some customers and some suppliers are painful to deal with. Building the relationship isn’t about falling in love, it’s about making a human judgement “can I work with these people?”

You won’t develop that relationship without meeting face-to-face (and if possible, spending some quality time together at a venue that serves truth-serum).

Relationship building is what enables really successful companies to consistently win more than their fair share of the bids. How? Because they are coached and guided toward winning. But, good luck trying to prove it.

Old marketing jungle saying, “never bid until you have seen the whites of their eyes.”

These simple guidelines increased our client’s success rate to roughly 60% (albeit, of a somewhat smaller pool of projects. However, revenue and net profit were much improved. They went from considering closing the division to investing in new plant and equipment to keep up with demand).

Number one rule of tendering “Know when to hold and when to fold.”

Capture planning - a more sophisticated approach

Large project engineering companies typically operate with a discipline called "capture planning" which is a more sophisticated and standardized methodology for...

Assessing the suitability of a project opportunity and the likelihood of success before committing resources to bidding
Producing a strategy and action plan aimed at increasing bid success

Depending on the size of the opportunity, the capture plan is often a detailed process and document. Before proceeding with the tender the pre-sales team must obtain approval sometimes from CEO and even from board level.

While such a process might seem excessive for the solution selling firm undertaking seemingly routine low-level projects, a more appropriate light-weight version of capture planning should be implemented by all organizations undertaking project work.

JWPM Consulting