With the news full of questions about how Carillion continued to be awarded huge contracts despite multiple warning signs of financial failure, we look at what it takes to win the tendering game.
In times of uncertainty in the wider economy the public sector can look like an attractive source of stable income and successive Governments have prioritised spending on new public projects as a means of filtering money through to the private sector.
But tendering requires huge time and financial commitment and so as an SME you have to prioritise and ask yourself if you can really compete? Having worked with many contractors and companies that have been successful in securing contracts through open tendering we thought it would be useful to look at some of rules for tendering.
One of the reasons Carillion continued to win contracts was because of its recent turnover, not its balance sheet. Whilst the last 2-3 years were starting to show some issues, the sheer scale of their revenues suggested stability – too big to fail perhaps? The unwritten rule of public sector contracting is that the value of the contract to be awarded should not equate to more than one third of mean turnover of the contractor. In some cases this will be stretched to 40% but either way no one is going to award you a contract that could break you – even if you know it would ‘make’ you. So the first test is to look at the contract value and your last 3 years’ turnover and as the Americans say ‘do the math’. If the result is 30-40% it’s worth a try but be aware others will have a lower risk ratio. Anything above 40%, leave it alone and invest your time more wisely elsewhere.
As we now know, Carillion had contracts all around the world in a range of different sectors including construction, maintenance, contracting and outsourcing. Very few, if any, were unique in their form and the reason being Carillion could hold up handfuls of examples where they were already delivering the identical, same or similar service/project elsewhere.
When reviewing tender notices, it is very easy to convince yourself that you could do the work and probably deliver it to a very high standard. But unless you HAVE done the work recently, for multiple parties or to a similar financial level, it doesn’t matter if you are the best thing since sliced bread. The public sector is not known for risk and innovation and there are no maverick commissioners willing to ‘give it a try because you seem like nice people’. So tangible evidence of experience at the same level is key.
- Award criteria
A good tender will outline the scoring that will be applied to choose the successful bidder. At a summary level the tender may simply say the most financially advantageous, but some contracts have a fixed budget and so the focus will be turned onto ability, experience, method and delivery.
For all those contracts that Carillion won, there will be plenty that they turned down having carried out an internal evaluation exercise to see where they were weakest/strongest. There is no such thing as 100% in tendering unless of course you are a monopoly or duopoly operator. So you need to run the rule over the points and mix in some constructive criticism to try and arrive at an honest evaluation of your chances. Once you have your figure, you then need to decide if that level of probability is worth the effort.
- Get to know the project and people
Carillion will have known about the contracts they were going to bid for years in advance and will have done some ‘bed warming’ of the buyers/commissioners. This is not collusion nor bribery, but simple contract marketing. Account Directors will have been building an intricate knowledge of the sector, project, client and demands and will be able to share this with the bid team when the tender eventually arrives. They will be looking beyond that contract or project and will understand the wider strategy into which it fits e.g. school improvement, a new hospital build programme etc.
If the tender has come as a bit of a surprise to you or you have had to go and find it using an alerts system you are potentially already at a disadvantage as others may have already been bed warming. You may just be making up the numbers, unless 1-3 above all align and you arrive as the outside contender.
If there is an opportunity to ask questions either electronically or face-to-face, take the opportunity. Under tendering rules, all questions and answers have to be shared with all prospective bidders and so by asking questions you will be able to see what else is being asked. You may then be able to gauge who that might be, how many other bidders there are and what their thinking/approach is. The answers will also help you qualify the opportunity and refine your own method or pitch.
If you are thinking of going for contracts or you are sitting there wondering why you have been unsuccessful in past attempts, use the following questions to evaluate your chances before you invest the time and money.
- Did they come to you or did you find the opportunity? Who else might be in the running and how do you compete?
- Have you done the work before to a similar delivery or financial level? Don’t confuse this with COULD you do it
- What is the published contract value? Is it more than one third of your mean turnover for the last 3 years? If so, say no!
- What are your actual chances against the scoring criteria? Would you accept that probability in anything else?
- Is there an opportunity to add value and what are your true differentiators?
- Do you actually want it? Is it profitable or does it give you a stepping stone to greater things or could it actually just be a pain in the proverbial? Don’t confuse needing it with wanting it.