The basics of bid management
Bidders that win a major part of their business through the proposal or tender processes have a number of
procedures in place to handle their responses. The processes usually operate in the following way. The description uses the
terms "request" and "proposal"; "request" includes RFPs and tenders and
"proposal" includes responses to RFPs and bids against tenders.
The actions involved in constructing a
proposal are:
- request distribution
- first review and decision
- communications initiation
- proposal contents
- pricing strategy
- task allocation
- message control
- proposal presentation
Request Distribution
The request is distributed to all the people who could influence the proposal. This is made
easier when the customer sends copies of the request out in electronic format, on diskette or CD. The bidder can then send the
request out by email.
There are several people who need to see the request.
Technical Writers
Some bidders have technical writers who not only construct proposals but who often retain a
library of "boiler-plates". These are standard descriptions of the bidder's products and services that are inserted
into proposals.
Some consultants, who work continually in the field of acquisitions, recognize the parts of a bidder's
proposal that are "boiler-plated". These consultants are sometimes retained by customers to identify whether a
standard or a customized service is being offered. Depending on the service required, it may sometimes be an advantage to the
customer to have a standard, established, proven service. For other services, a customized innovative service may be
preferred.
Usually, technical writers can begin immediately to define those elements of the proposal that will need to be
individually written.
Solution Developers
The people who develop solutions may sometimes be employed solely to perform that
task. They may have a job title such as "solution developer".
In other instances, the solution developers will be
the people who actually provide solutions to customers. In this case, the development of solutions for proposals will be a part
of their duties.
However this is organized by the bidder, there will be people whose role on the proposal will be to describe
either standard or customized services or products that will meet the customer's requirements.
For complex solutions, such
as the provision of computer networks, the solution development team can involve several people. In some instances, these
people can be from different disciplines, such as hardware experts, software experts and telecommunications experts.
The
solution developers will "own" the overall technical solution described in the proposal.
The solution developers
may write sections of the proposal for delivery to the technical writers.
Advisers
There will be other people who will provide specialist advice to the technical writers and the solution developers. They may be asked to write small segments of the proposal.
Salespeople
In some instances, the salespeople will be the primary channel for communication between the
bidder and the customer during the preparation of the proposal.
The primary role of the salepeople will be to complete the
pricing for the proposal, ensuring that the margins are sufficient and that any required investment by the bidder is reasonable and
will recouped for an acceptable return.
Marketers
The bidder's marketers will usually be involved early in the process, to ensure that the customer is
one that the bidder could deal with without prejudicing existing relationships with other customers.
They may also be
involved in decisions about entering new business sectors or reinforcing the bidder's position in the customer's business
sector.
Bid Manager
A bid manager will coordinate the efforts of all the other people working on the proposal,
including some not mentioned above, such as the quality assurance people who will check the content of the proposal.
It
may often be preferable for the bid manager to be the main channel for communication with the customer, rather than a
salesperson.
First Review and Decision
The team will read the request and then meet and decide whether to develop a
proposal.
This decision will be based on the following factors:
Pricing
This is whether the customer can afford to purchase a proposal put forward by the bidder.
Sector
This is whether the bidder is already an established provider in the customer's sector. If it is not, then the decision may be based on whether the bidder wishes to enter the sector and whether the proposal will enable it to do this.
Availability
Sometimes a bidder may be too busy either to respond to the request or to provide the services required.
Authenticity
The bidder may decide that the request is not "authentic".
This may occur when a
customer is trying to determine the nature of the market in a service. It may use the proposal process to do this, despite having
no real desire to make an acquisition at this time.
It may also occur when a customer wishes to "keep an incumbent
honest". This technique is intended to convince an existing provider that it may be replaced, usually as a means of
obtaining more favourable terms.
Either of these would be ample grounds for a bidder not to proceed.
Practicality
It may not be possible to put together a high-quality proposal in the time available. Some
customers imagine that all bidders in all sectors can prepare proposals in a week or a fortnight. While this may be true in some
sectors, it is not in others.
Major multinational outsourcers may require several weeks to prepare proposals.
As a result of all these considerations, there will be first "go" or "no-go" decision. Throughout the entire proposal process, this decision will be re-visited to ensure that it is still appropriate.
Communications Initiation
Following the first "go" decision, the bid manager will initiate
communications between the bidder and the customer.
This can be a very powerful weapon in the hands of a capable bid
manager.
First, the bid manager can use it to set up a series of meetings with a number of the customer's people so that
these people become less available to competitors.
Second, the bid manager can use it as a check that the proposal is
meeting the customer's expectations, by presenting drafts for review and comment at these meetings.
Third, the bid manager
can use it as a two-way information flow, so that, as well as receiving information needed to prepare the proposal, the bidder
can use the meetings to pass information about its own success and track-record.
A customer may try to prevent this
happening by appointing a single point of contact with the bidders. A good bid manager will view this as:
- a restriction to protect the customer from the baleful influence of the competition, and
- a "shoe-horn" to allow the bidder to influence the customer.
Proposal Contents
Meanwhile, the proposal contents will be defined by the technical writers, who will indicate which parts of the proposal should be:
- boiler-plates, giving standard replies to standard questions that will not affect the competitiveness of the proposal,
- technical, requiring preparation by the solution developers, and
- routine, requiring preparation by the technical writers.
This last category, the "routine" parts of a proposal, will include all the answers to questions about the bidder's relevant customer base, its products and services for the customer's sector, and so on. These will not involve detailed technical parts of the proposal but will include other parts that may have an effect on the customer's decisions.
It is essential that the bid manager and the technical writers have a grasp of those parts of the proposal that will be competitive differentiators. They can ensure that other contributors to the proposal are aware of how important these parts are.
Pricing Strategy
The bid manager will also work with the sales and marketing people to develop a pricing
strategy for the proposal.
The pricing strategy can be based on one of the following.
Standard Pricing
The bidder will prepare a set of standard costs for the service and its standard margin and
offer these to the customer.
The reasoning behind this approach may be that:
- the bidder perceives itself as the market leader, and therefore more likely to be selected by the customer on grounds other than price,
- the bidder can sufficiently differentiate its services from those of its competitors for price to be a minor issue, or
- price is not a major issue anyway.
Future Pricing
There may be justification for the bidder to offer a reduced price, on the basis that it will be able
to make margins on a larger volume of future business.
It should be noted that the bidder should never see the future
business as a means of recouping the margins lost by this proposal. Lost margins can never be recouped. Rather, it should take
the position that a reduction in margins on the proposal can be taken in return for standard margins on future business.
This
can be a dangerous position to take. Some customers may insist that, if a bidder has given a discount on the proposal, it
continues to give the same discount on all future business.
Entry Pricing
The bidder may be prepared to take a reduced margin on the customer's business if this enables
the bidder to enter a new line of business.
In this instance, the decision would not be one that was made for an individual
proposal.
The bidder would already have identified the new line of business and have prepared a strategy for entering it
using one new customer as leverage. The proposal would therefore provide an opportunity to implement an existing plan, rather
than being an impetus to develop a new plan.
In this situation, the bidder may be able to offer the customer a
"gain-sharing" agreement so that the customer could benefit from the bidder's future income from the new line of
business.
There is a belief that another approach exists, which might be called "predatory pricing" or
"spoiler pricing" or something similar. In this approach, a bidder who recognises that it has no real chance of
winning business may still submit a proposal with artificially low pricing. The intention appears to be that this will cause the
customer to force the selected supplier's price down to the same level, so that the selected supplier will make a loss on the
business.
No bidder with whom I have worked would be inclined to waste valuable marketing dollars in this way.
Task Allocation
The bid manager can now allocate the various proposal-building tasks to the team members
and to any other advisers or specialists.
Each task will be handed over, together with information about
- its relative importance to the competitiveness of the proposal;
- its requirement for quality assurance and the people who will conduct the QA process on it;
- its urgency, which may, in some cases, be dictated by the QA process.
Message Control
Throughout the rest of the proposal development process, the bid manager should monitor
and control the communications from and to the customer.
Given the difference between the optimism required of
salepeople and the pragmatism required of bid managers, the bid manager is often better fitted for the role of monitoring and
controlling communication, although the salespeople may be better able to do the actual communication.
Some customers
resent the involvement of salespeople (or of those who behave like salespeople), and the bid manager should be able to identify
this and act appropriately.
Proposal Presentation
If possible, the bid manager should arrange for the proposal to be presented to the
customer rather than simply delivered by courier.
Where this is possible, the bid manager should manage the preparation
and rehearsal of the presentation.
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