Tender Traps

• Arthur Thompson
• 12 March 2008
• Page 1 of 2 : single page

Photo credit: Getty Images

It’s a common problem for many Australian companies that recognise the potential of government and corporate sector tenders for their business, but are perturbed by the mystery and complexity that surrounds the tendering process.

In Australia, tenders released by the Federal Government alone represent more than $60 billion in contracts each year. On top of this, each state government, local council and public agency is required by law to use the tendering system to award contracts over the value of $100,000. This is a major pie for any business to not have a piece of.

The worse news is that the trend is continuing: more and more private organisations are choosing the tender process to provide fair and auditable results for shareholders; and the Government is consolidating purchasing into larger contracts and purchasing panels which break the minimum tender threshold.

So how do small-to-medium businesses get a share of this action?

Tenders 101: Common pitfalls and misconceptions

So often we hear stories from businesses that tried and failed in the tendering market, and usually the tales are the same:

• “We were undercut by another supplier who wanted to win at any cost”

• “The tender process was just routine to reappoint the same supplier”

• “We were told after the fact that we hadn’t supplied all of the information”

• “The specs were tailored to the opposition”

• “You just can’t beat the big firms”

While it’s true that government agencies are required to release tenders to the public even when they are happy with their existing supplier, the tender process cannot be bought. There are simply too many audits and checks in place to prevent this. Every respondent to a tender is viewed equally from the outset and each must demonstrate independently their ability to meet the criteria and specifications.

Price is only one consideration of the many evaluation criteria.

Only in the final stages of a tender is price evaluated into the decision process. If two proposals show equal value to the buyer the cheaper one will succeed, but generally other criteria and the overall value of a tender are more important than the bottom line.

Suppliers that lose tenders may often make the assumption that their competitors have gone below cost price because they cannot see how else they were beaten. In reality, the competitor has more than likely better demonstrated the value of their proposal to the buyer at a similar or competitive price.

Another common downfall in the tender process is failing to follow the tender guidelines and being non-compliant. In our experience, most tenders submitted often fail basic compliance tests by either not including all the relevant information or failing to address the criteria. Above everything else, your tender must comply wherever possible. That includes following the guidelines for how the tender is formatted, structured, submitted, the information supplied, compliance with the project specifications and contract terms. Failing to meet the compliance standards in any of these areas may render your response non-compliant and prevent it from proceeding in the valuation process.

Many excellent tenders have failed to win simply because they fell short on meeting a seemingly insignificant requirement in the tender conditions.

How to win a tender

1. Select the right tender

2. Provide a compliant response

3. Show the buyer your value

Step 1: Select the right tender

A winning tender begins by selecting the right tenders to respond to. Often we hear companies that offer statements such as ‘It’s a numbers game’ about responding to tenders, believing that responding to more tenders will bring about more success. In reality, the opposite is true; businesses that carefully select the tenders they respond to have much higher success rates, generally 70-100 per cent, than businesses that respond to any tender that is available (less than 20 per cent). The reason for this is simple: businesses that choose tenders that they stand to win will put their full resources behind the response, whereas businesses responding to every tender available will simply complete the basics and put forward a sub-standard response. The result is overwhelming in terms of quality of response; the best tenders that cross an evaluator’s desk are those from companies that genuinely want the business.

So, which tender is the right tender?

Choosing the right tender is not always an easy process, especially if you are burdened with the need to meet a sales budget or continue the growth of the company. It is a matter of waiting for a tender that feel you can both completely deliver the requirements as they are described in the request document as well as offer the buyer additional value that your competitors cannot. Consider what the differentiating factors are for your business and what significant advantages you have over your competition. Also, equally importantly, identify what deficiencies your organisation has that may deter a potential buyer. Then seek a tender that not only calls for the services you offer, but also for a supplier that bears the qualities your consider to be your strongest assets.

Step 2:Writing a compliant response

Preparing a compliant response is a matter of planning and reviewing. From the time the tender is received you should be studying the tender document to fully understand the requirements; not only the requirements of the solution the buyer is calling for, but the conditions of tender and the conditions of contract that are included with the request. It may not always be possible to be fully compliant with every single requirement in the tender or condition the contract, and you certainly shouldn’t commit to a condition you don’t comply with. The best approach to these non-compliant points is to fully explain why you are not compliant and how the solution you can offer will still achieve the same or better results for the client. The most common downfall for respondents in terms of non-compliance lies with the tender conditions. The tender conditions could be considered the instructions or even rules for responding to a particular tender and many people fail to place enough importance in them. The conditions of tender stipulate exactly how the tender response is to be presented and submitted to the buyer, and is often used as a benchmark to test a suppliers ability to follow instructions. Failing in a tender process as a result of not following a condition of tender is simply caused by lack of attention to detail or failure to plan and review.