TRENDING:

Whitepaper #5 Being Antifragile: 7 Procurement Trends I...
ChatGPT and DALL-E – what bidders need to know
5 tips to avoid a non-compliant tender
Bidhive
  • Product
    • End to End Process
    • Pre-Bid
      • Bid Opportunity Register
      • Content Library
      • Capture Plan
      • Bid/No Bid
    • Bid
      • Bid & Proposal Planner
      • Kick-Off Meeting
      • Bid Builder
    • Post Bid
      • Contract Negotiation Documents
      • Lessons Learned
      • Win/Loss Debrief
  • Blog
  • Use Cases
    • By Industry Sector
      • Supply Chain & Logistics
      • Construction & Engineering
      • Defence
      • Regulated Industries
      • Healthcare & Life-Sciences
      • Citizen & Human Services
      • Humanitarian Assistance & International Aid
      • Workforce Management
    • By Role
      • C-level Executives
      • Commercial Teams
      • Capture & Sales Teams
      • Bids & Proposal Teams
    • By Company Size
      • Enterprise
      • SME
    • By Type
      • Major Bids
      • Proposals and Quick Tender Responses
      • Program Funding
  • Resources
    • Resource Centre
      • Company News
      • Webinars
      • Whitepapers
    • Learning
      • Bidhive Academy
      • Best Practice with Bidhive
      • Events
    • Support
      • Help
  • Open Contracts
  • Log In
    • Asia Pacific
    • US
    • Europe / UK
  • Contact us

Select Page

Whitepaper #7: Factors Affecting the Bid No Bid Decision

Posted by Nyree McKenzie | Jun 8, 2021 | Whitepaper | 0 |

Whitepaper #7: Factors Affecting the Bid No Bid Decision

When an organisation pursues a bid opportunity it will invest significant time, cost and resources to win the contract. Therefore, the assessment, qualification, prioritisation and selection of the right opportunities is a critical decision that has direct correlation to business success.

The bid/no bid decision however, is complex and uncertain due to changing dynamics including subjective evaluation, the nature of the project or contract, market forces and company aspirations.  To aid the bid/no bid decision making process, a bid/no bid model for weighting categories and factors can be used to provide more reliable results.

Introduction

For many companies, participating in the competitive bidding process is vital for building their position in the market and securing a pipeline of work in uncertain times.

Mid to high cap public companies; multinational private entities with diversified portfolios and those operating in highly regulated industries rely on securing a high proportion of their contract revenue through the bidding process. Small to medium enterprises have less dependency on contract bidding, however for some it is a strategic growth opportunity, earning them between 10-40% of their revenue. New diversity and inclusion policies in procurement is also opening up new opportunities for SMEs to compete for contracts that are well within their reach.

With contract sizes becoming smaller and the supply chain more fragmented, the decision to pursue a procurement bidding opportunity is a complex one. Losing or forgoing an opportunity can damage reputation or lock the company out until the next contract re-bid (which can be 3-5 years); but making the wrong decision might place financial and resource stress on the organisation if they can’t service the contract with the right resources; have immature project management or contractor management processes; or haven’t factored in enough profit margin over the life of the contract for example.

The paradox of choice: revenue versus serviceability in uncertain times

As many commercial and industrial enterprises move quickly to adapt to market and workforce changes, they face the paradox of choice between balancing the need for new revenue streams versus the practicalities of finding the scale, resources and infrastructure to successfully operate in a climate of restricted movement and disrupted supply chains. When new business is the lifeblood of an organisation, building (or rebuilding) the capability and capacity to win and service a contract is a critical decider.

A bid/no bid decision will help organisations move from a shot-gun approach to a more rational decision-making process where budget, original thinking and resources need to be directed appropriately.

The bid/no bid decision: when to say yes and when to say no

The most successful strategies to win a bid is to begin by filtering out opportunities to concentrate on opportunities that will have the highest probability of winning and  translating to successful contract delivery.

It is important to know that there is no single nor right or wrong approach for a bid/no bid decision, and many companies customize their assessment questions and scoring tailored to their company’s decision criteria. They may also choose different assessment methods and criteria depending on their business or service lines, customer size, and the value of the opportunity.

A bid/no bid model that captures common key factors as well as different judgments from decision makers combined into one final decision – as opposed to a single person’s gut feel –  can be achieved to identify the most beneficial opportunities for the company.

This model will often include a combination of capability and contract-specific criterion, along with risk factors that impact on the execution of corporate strategy.

Building a bid/no bid model

Any organisation that has previously had an unstructured decision making process will not want their model to be too rigid, but to serve as a tool for improved transparency, reliability and replicability of decisions.  Important to this process is enabling decision makers to be entrepreneurial in extraordinary circumstances, and having a tool that is flexible enough to be tailored to company’s own dynamics.

Bid/no bid models to aid in rational decision making can be built in a number of ways using different structures and methodologies, including the multi-attribute decision-making approach; artificial intelligence-based; and statistical modelling. These models share the common goal of working to identify the most beneficial opportunity for the organisation for the short and long term.

Whilst bid/no bid decision checklists are commonly used and ask the right questions, often the answers aren’t leveraged to inform future bid decisions. An improvement on this method is multi-attribute decision-making. This simple model is easy to develop and implement due to its ability to accommodate a wide range of criteria on different scale types that can be transformed into weighted criteria. There is also the ability to change factors and apply the tool to other lines of business within a diversified business.

This bid/no bid methodology might not be applied to every bid, but it could be recommended, or officially adopted above a certain threshold, such as a minimum contract value where risk is higher.

Step 1. Set the threshold

 The risk threshold for a bid/no bid decision quantifies an organisation’s tolerance for risk as a quantifiable figure. Depending on an organisation’s risk appetite, this figure can be a set number, or there may be tolerance for an acceptable variance (eg. 5-10% range). The threshold sets the limit beyond which the organisation will not accept the risk. Results falling either side of the threshold will inform the bid/no bid recommendation.

Step 2. Validate mandatory requirements

 A multi-attribute bid/no bid method can accommodate a wide range of criteria on different scale types and allow preference information to be transformed into weighted criteria. To ensure a company doesn’t waste time and resources on an opportunity qualifying that you will pass the minimum eligibility criteria (yes/no or pass/fail), including a conflict of interest search should be undertaken up front.

Owing to the high risk and cost of bidding, bid documents, and the ultimate decision around eligibility is usually filtered and evaluated by experienced personnel with years of bidding experience.

Step 3. Create your factors

Because of a multi-attribute model’s ability to use both quantitative and qualitative data, weightings and the possibility of a large number of criteria, the tools can be used to build discrete decision criteria (or factors). These can be tailored to lines of business, or to opportunities that vary from project to project where no single criteria or uniform weighting neatly fits the unique situation or requirements.

Factors are usually categorised and grouped by internal (organisational-related) and external (contract and project related) considerations including:

  • Internal: current workload, track record, financial capacity, need for work, technical know-how, alignment to corporate strategy
  • External: contract/project size, duration of work, location of the work, work type, contract conditions and type of contract, and customer profile and reputation.

For illustrative purposes, we have presented an example of a framework highlighting commercial, strategic and practical factors with the most influence and relative significance to bid and contract success.

Company related internal factors
Current workload Commitment and capacity to resource the bid, and the resulting contract if we win
Previous track record and experience Demonstrated experience working for similar types of customers doing similar work
Financial capacity Financial capacity to bid and service the contract including cash reserves and working capital

 

Need for work Our company’s commitment to winning the bid for longer-term continuity of workforce employment
Technical knowhow How well our company matches the technical skills and experience requirements
Alignment with company’s corporate strategy How well the contract deliverables fit with our company’s core competencies, business strategy (short-term direction and future vision)
Future opportunities Degree to which the opportunity may open up new market and new customers
Contract / project related external factors 
Contract value Contract value represents the minimum percentage of current company turnover and profit margin
Contract or project benefits Contract may improve reputation, help to enter new markets and/or increase experience of personnel
Contract duration The likely impact of the contract duration on existing workforce capacity
Project/contract implementation Ability to deliver the contract with the right people and experience (including sub-contractors, partners and location of where the contract needs to be serviced)
Contract type and conditions Degree of rigidity of specifications and contract conditions (including ability to modify)
Customer identity Customer reputation and alignment with our company’s values, vision and mission.
Competition Strength of our company compared to potential competitors (relationship with customer, solution, pricing)

There are no magic number of factors you should choose and they will vary across industries and different market conditions. However, a comparison of international studies reveal that 14 to 18 factors is a fairly standard guide for construction companies whereas professional services will likely have less.

Additionally, more complex bids such as those in international markets and/or the construction sector where risk and cost is high might include a multistage sequence (or ‘gates’) rather than one singular decider step. These bids might consider country and/or market risk vulnerability, company performance, profitability and probability of winning based on specific scope of work.

Step 4. Assessing and ranking relative importance of the bid/no bid factors

Once the categories and factors have been selected, the organisation needs to rank them and identify their weights of importance in line with the organistion’s characteristics and strategies. This might include, for example, the relative importance against competitor offerings. Each factor is then scored, and a final overall score is generated.

This approach to weighting and ranking provides a more rational basis upon which to make the decision and ultimately, improve the accuracy level of the organisation’s assessment.

Step 5.  Who makes the bid/no bid decision?

It is important to involve bid and delivery teams in the bid/no bid process, with ultimate executive decision making at the bid committee and/or delegated level. Bid and delivery teams have combined market knowledge about competition and experiences, as well as having sales insight on the customer. Subject matter experts bring knowledge of the approach and solutions while project managers have knowledge of timelines and resource availability. Legal personnel can also bring expertise around contractual conditions.

Introducing different perspectives and input into the bid/no bid assessment reduces bias, and can also uncover broader insights on risk perception that might otherwise have been overlooked. Important to the process is the ability to override the model’s recommendation with a supporting business case for a decision. Ultimately, gaining consensus is key to the successful business operations and the team work involved in bidding and contract delivery, especially if the bid decision is a strategic one.

Practical benefits and implications

Utilizing bid/no bid techniques such as the multi-attribute model and tools which combine market analysis and historical decisions along with supporting rationale has several advantages:

  1. The method gives bidding companies more objective and reliable results. The range of values delivers a clearer picture of the probability of bidding success so that the bid/no-bid decision is less biased.
  2. The method speeds up the bid/no-bid decision process. With a simple and systematic structure where limited training is required, bidding companies can more quickly and consistently evaluate and weight based on a set of clear terms, or factors.
  3. The method can deliver cost savings by either reducing the time it takes to prepare the proposal (up to 15% to 20%), or allowing for more time to spend on preparing higher quality proposals by allocating optimum bidding resources to improve the win ratio.

Whilst the bid/no bid decision is greatly influenced by organisational size and financial resourcing, improved knowledge and understanding of bid/no bid factors and the scoring methodology can provide more convincing and reliable results that reduce risk and deliver cost savings for a company in the long run.

Use of the tool can also reveal decision makers’ subjective preferences which can be useful for diagnosing bias. Where there is a decision dilemma the tool can be run independently across multiple decision makers and the results can be compared to support a final bidding decision.

Technology advancements to the bid/no bid process

An advancement on current bid-no bid decision model that we are working on is the closed loop process which solves the dilemma of inaccurate results. This loop learns from hindsight enabled by machine learning/artificial intelligence to deliver predictive analytics to rank opportunities, determine win probability and highlight strategic differentiators. By analysing historical data, companies can better identify which bids they should be going after based on aggregated trends data, and insights from lessons learned and post-bid debriefs. Over time this model can extend variables to contract KPIs.

An enabler to this process is the methodological completion of other key steps in the end-to-end process, including capture plan and post-bid reviews which should take learnings from failed projects as well as from successful projects. By aggregating and analysing historical data from end-to-end of the bid lifecycle we can correlate bid scores to project success to arrive at an optimum process that helps organisations to secure their competitive position to increase win rates and importantly, their profit margin without leaving money on the table.

Bidhive end-to-end process dashboard

Enter your email to unlock this content

If you'd like to read this locked content in full just enter your email and click unlock.
It's as simple as that.

And we promise we won't bombard you with emails and newsletters.

Sure we might send you one every now and then.

But it's ok... you can opt out at any time.

Unlocked!

 

 

 

Share:

Rate:

PreviousWhitepaper #6: Towards Procurement 4.0 – How Digitisation is Transforming Modern Bid Management
NextOn demand webinar: Managing Digital Bid Transformation

About The Author

Nyree McKenzie

Nyree McKenzie

Nyree McKenzie is the co-founder and CEO of Bidhive. With more than 25+ years’ experience as a Bid Manager and Management Consultant, Nyree has gained significant international experience leading bid teams through complex, high value contract pursuits as well leading enterprise process improvement and change initiatives. Having worked in the bid management industry for many years, Nyree was motivated to help companies scale and transform their painful manual bid processes to achieve more through automation.

Related Posts

Whitepaper #2: Go Digital or Die – Bid Management Doesn’t Have a Choice

Whitepaper #2: Go Digital or Die – Bid Management Doesn’t Have a Choice

October 6, 2022

Whitepaper #9: Tracking bid metrics to improve bid economics and outcomes

Whitepaper #9: Tracking bid metrics to improve bid economics and outcomes

June 17, 2022

Tender Trends: Then and Now Chapter 5 – Citizens 

Tender Trends: Then and Now Chapter 5 – Citizens 

October 4, 2021

Whitepaper #3: Rethinking the SME Bidding Advantage – Helping SMEs Improve Access to Procurement Markets

Whitepaper #3: Rethinking the SME Bidding Advantage – Helping SMEs Improve Access to Procurement Markets

August 20, 2019

Recent Posts

  • ChatGPT and DALL-E – what bidders need to know
  • Bidding trends in 2023: What’s here, what’s next and what’s coming (and it’s sooner than the Jetsons predicted)
  • 6 strategies for winning government tenders
  • Bidhive awarded Crown Commercial service G-Cloud 13 contract
  • What makes a good Bid Manager?

Archives

  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • December 2020
  • September 2020
  • July 2020
  • June 2020
  • March 2020
  • January 2020
  • August 2019
  • July 2019
  • June 2019
  • April 2019
  • February 2019
  • January 2019
  • November 2018
  • October 2018
  • September 2018
  • March 2018
  • January 2018

Categories

  • Best Practice
  • Company News
  • Industry
  • Legislation
  • Lesson
  • Product Update
  • Real Stories
  • Technology
  • Trends
  • Uncategorised
  • Webinar
  • Whitepaper
  • World

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org

HOW WE HELP

Digital Bid Management Transformation

Read blog

Learn to Bid

Best practice with Bidhive

Join Bidhive Academy

Articles

5 tips to avoid a non-compliant tender

How digitisation is tranforming modern bid management

End to end process

Data driven bid management: how technology is reshaping the profession

6 signs that you’re a reactive bid organisation

Coronavirus and public procurement spend: the unreported costs

Fighting for our limes – e-scooter wars get juicy

Bid storyboarding: Whyis it so challenging to get it right?

Post-bid presentations, clarifications and negotiation

Open contracts

Planning your bid response

Tender Trends: Then and Now Chapter 2 – Corruption and Cost Cuts

Tender Trends: Then and Now Chapter 4 – Chains of Command

The human cost of bidding and tendering

How to build a content library

What makes a good bid manager?

What’s the difference between an EOI, RFP, RFT and RFQ?

What’s the difference between public and private sector bids?

Why procurement targets won’t fix the SME participation problem

Winning big. The masterplan for winning bids and RFPs

WHAT WE OFFER

Tender search

Contract award search

Opportunity management system

Bid board

Capture management

Bid no bid

Bid tracking

Content and knowledge library

Proposal management

Win loss outcome

WHO WE ARE

Bidhive

About us

Contact us

Community

Events

Receive Updates

Help

Privacy policy

Copyright 2023All right reserved
  • Follow
  • Follow
  • Follow

Security

Terms and conditions

Share This
  • Facebook
  • Twitter
  • LinkedIn
  • Like