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AB 35 – Guid to tendering for Contracts
A guide to tendering for contracts
When a business bids for a job, usually you will draw up a quotation or an estimate and the contract will be negotiated on that basis. But for large jobs, extended periods of supply, and most public sector contracts, a more formal process of tendering may be required.
It is advisable to carefully weigh up the pros and cons before launching into preparing a tender.
Besides affording a degree of security and confidence to a business, winning major contracts can raise your profile both in the marketplace and among other potential customers or clients. It can also help with retaining and recruiting quality staff.
And there can be benefits from engaging in the tendering process even when you are not successful in your bid because it can help you assess your strengths and weaknesses, fine tune your business plans, and gain a greater understanding of the needs of specific customers or clients. Importantly, this can help with identifying and bidding for future contracts.
Depending on the size and nature of the contract, the process of preparing and submitting a tender can incur considerable costs, most or all of which will be lost if the bid is unsuccessful. You will need to be confident that you can withstand the potential loss before proceeding.
Thought should also be given to other factors or demands such as human resources that will be tied up in the tendering process and how they might otherwise be deployed, perhaps to greater effect.
Before committing resources to preparing a tender, obtain sight of the necessary documentation and check the following carefully:
- Does the work fit in with your strategic plans and overall business objectives?
- Do you have all the necessary skills and resources required by the customer and if not what would be the additional cost of acquiring them?
- How would the work impact on other aspects of your business?
- Are there requirements to comply with specific standards relating to the environment, diversity, sustainability or health and safety matters, and if so can you meet them?
- How important is it for your business to win/retain this particular customer/contract?
- Will the contract be sufficiently profitable?
- What do you estimate the cost of preparing the tender to be and is it realistic to commit those funds at this stage?
If necessary, contact the customer directly to clarify any outstanding questions. Above all, satisfy yourself that the customer is serious and not just inviting a tender to make up numbers or simply test the market.
Beware also that the information you include in a tender could be potentially useful to others such as competitors. Where appropriate protect your interests by requiring the customer to sign a non-disclosure agreement.
Preparing a tender
Having considered the above points and decided to proceed, the next stage is to assign a team to gather all the necessary information, analyse the costs, prepare a pricing schedule, and finally write and submit the tender. These are all areas in which we will be able to advise.
Costing and pricing
The costing and pricing in particular are critical to the viability of the tender and it is essential that these are both accurate and thorough. While you want the tender to be competitive, it also needs to deliver a worthwhile profit.
One key consideration in formulating your offer is to understand whether the customer is looking for value for money or is primarily focused on the lowest bid. Where value for money and not just cost is an important consideration, be sure to emphasise unique features and benefits that your competitors are unlikely to provide. Quality, reliability, support, maintenance, and guarantees should all be emphasised in this context, as should testimonials from other customers where appropriate.
Remember, procurers will generally want to consider the lifetime costs of a product or service and will want to look at costs associated with aftercare, maintenance and replacement, not just the original purchase price. Be sure to itemise these in your tender.
Where the customer lists specific qualifications it is important that you spell out in detail how you will meet them. This is especially true in the case of public sector contracts, where evidence of compliance with specific policies on matters such as sustainability, discrimination, and health and safety is often required.
The customer will want to know that you fully understand their needs and that you have the skills, resources, and experience to meet them. Generally, the more specific you can be in this area, and the more you can demonstrate that you can bring practical ideas and solutions to the table, the more chance you have of your offer being given serious consideration.
Resources and experience
You will also need to demonstrate that you have the resources and experience to manage the contract effectively, adhere to schedules, deliver on time, deal with contingencies, and have appropriate risk management procedures in place.
Finally, remember that with the tendering process timeliness is everything. Make sure you work within the customer’s timetable and that the proposal and any other relevant information is presented in a timely manner.
Do you have the prospect of a public sector contract?
For smaller businesses thinking of bidding for public sector contracts there is good news and bad news.
The good news is that the Government has taken a number of steps towards removing barriers to small businesses bidding for public sector contracts, promising greater transparency, less red tape and easier access to information.
Specific measures included:
- The launch of the Contracts Finder website as the place to find public sector contracting opportunities over £10,000. From now on, all you need to do is specify which contracts you are interested in and details will be emailed to you free of charge
- The elimination of the Pre-Qualification Questionnaires (PQQs) for all central Government procurements under £100,000 so that procurers will be free to choose the best route to market for their individual circumstances
- Allowing businesses to submit their pre-qualification data once for all procurements in common commodities instead of having to submit the same data time and time again
- The launch of SME product surgeries to give SMEs the opportunity to pitch innovative products and services direct to a panel of senior procurement and operational professionals from central Government and the wider public sector
The bad news is that the programme of ongoing public sector cuts the Government has embarked upon is likely to mean there will be fewer public sector contracts on offer, competition for them will be stiffer, and margins will be squeezed as public sector agencies seek to reduce costs.
Traditionally SMEs have complained that tendering for public sector contracts is an arcane process that is stacked in favour of the big players with a culture in many agencies of preferring to offer contracts to organisations that have previously worked for them, making it even harder for new players to enter the field.
But with the new measures mentioned above and a corresponding commitment from the Government that a quarter of public sector contracts will now go to small businesses, it is to be hoped that prospects will be brighter in the future.
In any event, tendering for a public sector contract is a long and potentially complex process and if you do not already have experience in this area we strongly recommend you contact us for help and advice before proceeding.
We can advise and assist both with preparing and presenting tenders. Specifically, we can help with the background work especially the cost and pricing analysis, write up the proposal, or simply provide a fresh pair of eyes to look over the proposal before you present it. Contact us to discuss further.
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