Good Practice
Why Suppliers Bid For Public Sector Contracts (Or Don’t) ….

“You are the Managing Director of a mid-sized services firm (maybe £25M / €30M annual revenue), trying to decide whether to respond to a Government ITT (Invitation to Tender). Currently operating at 93% capacity in terms of your internal workforce, you are on track to hit target profit for this year, which is 20% up on last year. You provide services to private, voluntary and public sector organisations for which demand is slowly increasing year-on-year.

The ITT recently received requires a lengthy written response within 10 calendar days. The indicative budget for this contract is significant, the winning of which would increase your annual turnover by 20%.  You assess that you have sufficient in-house expertise to meet 60% of the technical demands of this project and are confident that sub-contractors could address technical shortfalls and temporarily increase capacity.

As the MD; what do you think are the five most important criteria to consider when you and your management team decide whether to respond”?

That is the briefing for an exercise I have used a number of times during training events, for procurement professionals but also for other stakeholders in the government sector organisations: budget holders, specifiers, project or operational managers who work with suppliers and so on.

The reason for the exercise is in part purely to get delegates to put themselves in the shoes of a supplier, something that doesn’t happen as often as it should. Even procurement executives don’t tend to make that mental leap very often. Once the question is considered from the supplier’s perspective, then we can get into the key decision factors which will be considered.

Understanding those then helps the buyer to understand how they can position contract opportunities in a manner that gets the right potential suppliers to bid, creating healthy competition. What often emerges from doing this as a training exercise is that stakeholders just assume that suppliers are “sitting waiting for our tender” – that there is automatically a market of multiple, capable firms who will want to bid for our work.

The concept that we should not take this for granted is one that has rightly gained more attention in recent years. Going back 20 years or so, most government organisations (certainly in the UK) just defined their needs and put out an advert – “OJEU” or equivalent – then waited to see who responded. Now, there is much more awareness of the need for market engagement, or even market making, with the pre-procurement phase seen as vitally important in many cases.

Whilst we don’t want too many suppliers to respond, or at least we don’t want suppliers who have no chance of actually winning the work to waste our time and theirs, we are even more concerned that we get enough credible suppliers bidding in order to run a robust competition. That is essential if we want to ultimately achieve a contract that offers good value for money, with a supplier who can meet our needs effectively.

So this exercise is useful as it gets stakeholders to consider the points that matter to a potential supplier. What it highlights is that the decision is often a combination of both very strategic questions and very operational issues.

“Would this contract, if we won, take is into either new clients or new market areas, and if so, do we want to make that move”?  That is an example of a strategic issue the potential bidder may consider.

“Do we have anyone available to complete this bid in the next ten days” is at the other extreme – yet that sort of detailed issue is remarkably often the reason for a “no bid” decision.

So in part 2 we will come back and outline the factors that we believe most suppliers consider, or, turning it round, should consider (if you are reading this from the supply side)!

 

 

 

 

First Voice

  1. Digby Barker says:

    I think the exercise you describe, Peter, is one which should be gone through – at least as a ‘thought experiment’ by every procurement team every time they begin to frame their procurement strategy and again as a ‘realism’ check before they commit to the various stages in the procurement. The point about EOs not just sitting around waiting for opportunities to arise is one I have made over the last 16 years during the seminars/workshops I’ve run for the public sector. Another constant element has been to encourage attendees to think about the implications of the timescale they allow for the degree of effective competition they should expect and hence for the VfM they can achieve.