Tips for Contracting Businesses: How to Tender
Pricing work in a tight construction market is notoriously difficult. Yet, many contracting businesses waste valuable time at the estimating stage, without giving full consideration to the tenders they’re pricing.
Here are our top tips on how to tender effectively to ensure the success of your business:
- Be selective – Resist the temptation to price every tender that drops on your lap.
- Introduce a Bid/No Bid process – Set selection criteria that are important to your company, evaluate the chances of success, and then only bid on the best opportunities.
- Work with suppliers – They want the work too. If they see you’re committed to a tender, they may alter their prices.
- Have a tender review process – Before submission, rate each tender against financial, commercial, operational and design risk, and ensure that either the price reflects these factors or that unacceptable clauses are excluded.
- Submit a non-compliant bid alongside your compliant bid – If the tender process allows, and you have legitimate ways of reducing the contract price (e.g. through design or alternative materials) then you should submit a non-compliant bid alongside your compliant bid. Your potential client may be attracted by significant savings.
- Know your required margins – Ensure you fully understand your costs and never accept a margin that simply won’t work for your business.
- Follow up – Muscle into the tender award process. It’s no good sitting in your office when your competitor is sitting opposite the client.
- Demand and act on feedback – If you’re losing tenders, find out why and make the necessary changes in your business.
Let’s look at an example of how refining the tendering process led to a higher tender conversion rate for a company.
Clive, a Vantage Performance client, was the Director of a $65M construction business. Clive had $800M of bids in his pipeline but was expecting to win 7% by value. He was clearly pricing too many jobs with no chance of success and therefore allocating scarce resources to futile bids.
By reducing his number of bids by 75% he freed resources to pursue cost-down opportunities within tenders, follow up bids and build client relationships. His tender success rate is now 33%.
David Bilclough, a Client Director with Vantage Performance, uses his experience as a Director of construction and contracting companies to improve business performance.