To Bid - Or Not To Bid - For Business
ITT / Bid Invitations, The Business Fit: Participate or Pass
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When reviewing a RFP/RFQ, the first question you must ask yourself is, "Is this tender a good commercial fit for my company?" Often, companies will invest a great deal of time and energy carefully constructing a tender response without realising the full implications of actually being successful. Tendering is a process employed by buyers to help them select the right supplier for their company. The process is intended to help them minimise risk in the appointment of a supplier, ensure value for money, reduce current costs and guarantee, as far as they can, the integrity of the supply chain.
However, the tendering process is a two-way street. When the tender document arrives in your office, this is your first true opportunity to evaluate the entire scope of the requirement and to carefully assess the likely impact upon your business.
Some examples of questions that you ask of yourself are:
* If I were to win the tender, what percentage of my turnover would this new customer take up? As a general rule, a good buyer would not like to see their business represent more than about 25% of a new supplier's turnover. By this logic, the size of your company (in terms of turnover) is likely to dictate what you can realistically win.
* What would be the impact on my overall costs? Your costs may be under tight control but will you need to significantly increase your cost base to accommodate the requirements of a major new customer? Will the increased costs add value elsewhere or will they be servicing this new customer alone?
* Will the winning margins support the increase in costs? Inevitably, you will win new business at a significantly reduced margin and, sometimes, this will impact your ability to make a net profit from your new customer. It is especially important to also look at the impact overall on your company margin; if the winning the new customer is going to appreciably increase your turnover, at a narrow margin, then the likelihood is that your overall margin will be dragged down.
* Does my company have the right experience, skill set and personnel to effectively manage this new customer to the quality level expected? This is an extremely important question that you must be honest with yourself when answering. If the answer is "no", then you will have to consider the impact of employing the right people to manage the account and deliver the service. It is likely that your potential customer will want to see references from similar organisations where you have provided similar services under a similar commercial framework.
* Can I implement the service to my new customer at no risk to the integrity of service I provide to my existing customers? Again, an exceptionally key question. One of the most common pitfalls is to win a major new contract and then have to devote a disproportionate percentage of your available resources to ensuring that the service gets off the ground seamlessly. This can have a negative effect on your existing customer base.
* Am I going to have to "exaggerate" to win this tender? A common way of painting yourself into a corner is to "over-egg the pudding". The best policy when answering a tender is to be honest about your experience and abilities. You will probably be expected to agree to set of terms and conditions as well as sign a Service Level Agreement. This may well carry penalties if you cannot do what you say you can do. In which case, it is better to have been honest up front than to have to backtrack at a later stage.
* Do I have the mandatory accreditations? Many organisations place great store on accreditations in such areas as Environmental, Quality and People management. Do not succumb to the temptation to say you have such accreditations when you haven't. It is always wise to clearly state you are working toward accreditation and be prepared to show evidence to back this up.
* Has my company got sufficient trading history? If you are a start-up company you may have trouble providing the required trading history. Make sure that if you are a start-up, that this will not impact your chances of progressing through the tender process.
These questions are just some primary examples and you can probably think of some more. The main reasons of putting a tender through a rigorous examination when it arrives with you are:
* to ensure that it is a commercially viable proposition for you
* to ensure that you are correctly resourced to deliver the service
* to ensure that the rest of your business can cope with the demands
The most important thing to remember is to be honest with yourself.
by: Bee Primrose
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