How small bids and tenders really work

 

Most people who haven’t actually won a small tender misunderstand how they actually work.

First we’ll describe how small tenders are supposed to work in theory, then how they work in practice.

In theory it starts when a purchasing organisation (local or State Government, or even a large corporate) publishes a ‘request for tender’ on the web. In theory any seller can download that request, and prepare a ‘tender response’ with their capability, pricing, and so on and upload it.

Just to make this easier to follow, we’ll use a fictional example: Council wants to buy signage services. Council publishes a request for tender in tenders.gov.au

Then you find out about the tender and submit a tender response. Your tender response is the cheapest of all of the responses that Council has received, and so even though they’ve never heard of you, they give you the work.

That’s the theory. Unfortunately it doesn’t work quite that way.

In practice, before the purchasing department at Council puts out the request for tender, best practice (and common sense) says that they should find out whether anyone is going to respond to the tender. After all, if they publish a request for tender and there are no responses, then the purchasing department is going to look pretty silly.

So they’ll usually talk to a number of suppliers who they think might be interested, and they’ll generally start with the ‘incumbent’. This is the supplier that’s already supplying the services to Council.

That’s not to say that anything illegal, or even immoral takes place, just that generally before a tender request is published, the customer has had discussed it (in broad terms) with at least one likely supplier.

When the tender responses are evaluated, research shows that the incumbent wins 80% of the time. And if you think about it from Council point of view, that makes perfect sense. After all, they know the incumbent, so they represent a low-risk choice.

Even when there isn’t an incumbent (eg for a new requirement) the chance of a supplier who is unknown to the Council winning is very small.

Bottom line: if you haven’t already had a discussion with the client, your chance of winning a tender is very small.

So what does this tell you about winning small tenders?

Rule number one: if you aren’t already known to the client, don’t bother responding. Look at it from their point of view: how safe would you feel choosing a supplier without having met them?

Here’s the moral: Treat tendering as simply an extension of your normal sales process. Talk to potential clients and find out whether they have an incumbent, and whether they’re happy with that incumbent. If the answer is yes, and yes, then walk away.

If on the other hand you convince the client that you’re going to provide a better service (or if it’s a new service) then the conversation might go like this:

Council: “We’d like to use your services, but our internal rules say we have to go to tender.”

You: “No problem, we’d love to respond to your tender.”

At this point, you can come to us, and we’ll help you write the response.