Whitepaper #4: What Evaluators Want – Key Factors in the Selection of Project and Service Contractors

Understanding contractor evaluation and selection in the bidding process is a difficult and challenging task plagued with many uncertainties. It is a complex multi-attribute decision problem that requires individuals to make judgments and trade-offs between competing objectives and limited resources. 

Given  these complexities and uncertainties, how do customers choose contractors or suppliers, and what are the factors that influence their judgment and choice? With this understanding, how can bidders best prepare in advance to improve proposal development efficiency, quality, compliance and ultimately, their bid’s win rate? 

Introduction

Increased open competition and lowering margins has placed companies around the world in a shifting market where the need to win work through formal bidding and tendering has become essential to corporate survival.  This in turn has increased stress and pressure on in-house bid teams in what was already a very volatile, and increasingly high-pressure environment.

Now with demand for companies to address sustainable procurement principles and supply chain risk management, the need for better systems and processes to manage the many inputs and information requirements of this critical function has reached peak necessity.

Quality, responsibility and value for money, not just price

Competitive bidding and tendering is a purchasing model in which a prospective client (the buyer) requests multiple contractors or suppliers to submit a proposal that meets the requirements predefined by them. The requirements, which are usually developed by a team of specialists, are specified in the tender documentation, and communicated to potential suppliers along with the rules governing the proposal and selection process.

Increasing regulation, transparency and ensuring project objectives align to public interest have made bidding and tendering the most preferred method to procure public goods and services globally, making up 12 per cent of GDP (9.5 trillion^[1]).  However, bids and tenders are not exclusive to public institutions. A study by Statista data analysis² reveals that 46% of large private-sector companies and 36% of small and medium-sized companies regularly use competitive bids and tenders in their buying processes.

As bidding is a resource-intensive, high cost activity for companies, success is winning the contract, not just writing the proposal. On a global scale, widespread introduction of value for money principles, along with project-specific discriminating criteria reveals the growing shift from price-based decisions (the emphasis on spend) to non-price criterion around what the spend will achieve.

When it comes to selecting contractors and suppliers, bid evaluation criteria are the standards against which bids are assessed and which are agreed and documented in advance. Respective weightings against both price and non-price criteria mirror their importance in the selection process, providing bid evaluators with a viable means of managing the risk of non-conformance, and the failure to deliver project outcomes. Such an approach is believed to create more open competition without violating principles of fairness and transparency in procurement.

Generally, the evaluation criteria specified in the tender documentation are categorised into three areas including (i) mandatory criteria, (ii) weighted criteria and (iii) weighted criteria with mandatory elements.^[2]  Whilst these criteria are the basis for the buying decision, it is the final supplier selection phase where the influence of the purchasing or business unit manager becomes important.

In this regard, value for money ideology – the alternative to the lowest responsible bidder requirement – does not always mean choosing the lowest cost option. Here, purchasing and business unit managers consider the effective, efficient, and economic use of resources, the priority of the task, alternative or more innovative ways of achieving it, and the costs and benefits of different approaches balanced against results, outcomes and impact.

Beyond the primary contract activity, social value objectives that have wider community or public benefits are increasingly being incorporated into the procurement process by government, corporate and the not-for-profit sectors. Current examples include contribution to the local economy, reducing environmental impact, domestic and family violence prevention strategies, eliminating modern slavery, and supply chain inclusion and diversity such as small to medium business and minority business participation.

Optimising bid success with a Content Library

Procurement departments are under pressure to accelerate the source-to-contract process which has placed time, resource and cost burdens onto industry. An emerging trend is the simplification of bid evaluation processes by creating bid response templates that encourage bidders to define their value propositions more succinctly.  Procurement people can detect proposals that are copy and pasted from previous bids but content libraries of responses to ‘standard’ requirements allow sales and bid teams to filter and focus more of their scarce time on crafting tailored responses into compelling answers that can achieve the highest evaluation score.

Despite the obvious benefits of content libraries, historically, bidding companies have taken a largely ad hoc approach by creating repositories of Q & As. The problem with this approach is that it can quickly become unruly, fragmented, and filled with duplication where the challenge becomes one of search and find as opposed to a single source of truth for company. Few companies methodically map to identify the representative set of criteria (factors) suitable to their company which are aligned to evaluation and selection of contractors and suppliers in their sector.

Key factors and the branch structure

In an audit of thousands of tender documents from across the globe (over a 3 year period to represent a typical procurement and contract cycle) we identified 15 categories mapped against five evaluation criterion that best presented a cross-sector content library architecture. Broadly, the factors relate to the project dimensions of management, related experience, past projects, and approach to working with the customer, key personnel (their availability) and expertise, safety, quality and price, as illustrated below:

 

While there is no universal or optimal set of criteria, or conclusive set for all industries or sectors, by creating a content library structured into sections that align with likely factors that influence evaluators’ choice, companies can map categories to their own business entities, or business lines, that provide representation across all of their project dimensions. For companies starting from a blank canvas, a good predictor of future success is to begin with the past, and there are significant benefits in conducting an audit of ‘RFx’ (Request for – such as Request for Tender, Request for Information etc) relevant to your industry or sector.

Beyond the evaluation and section criteria should be consideration of all background documentation including project overviews and Statements of Requirement / Scopes of Work to ensure content library content is suitably broad, relevant and able to be reused, repurposed and strategically tailored for future responses.

Who ‘owns’ the content library?

Leading the content library development process should be a dedicated resource (or resources) to oversee the taxonomy and the ontology, and the curation of content. Simply put, this critical activity involves set up of the branch structure, the data and classification of the digital assets through metadata / tagging to effectively manage the lifecycle of information, from creation to publication, and from reviews to updates and archive.

The content librarian(s) are crucial members of the bid team who support the development, implementation and maintenance of the content library strategy and all associated workflows, including permissions.  The content library team typically work across multiple business lines and offices to manage the digital assets through the entirety of their archival lifecycle ensure relevance, findability and governance at every stage. Undoubtedly, once a content library is established it creates significant efficiencies across the company, allowing more time for strategic input into the proposal.

“While there is no universal or optimal set of criteria, or conclusive set for all industries or sectors, by creating a content library structured into sections that align with likely factors that influence evaluators’ choice, companies can map categories to their own business entities, or business lines, that provide representation across all of their project dimensions.”

How sales and bid teams can work better together to influence selection

Governance has resulted in customers directing more of their spend portfolio towards a procurement process. The role of B2B sales and their client relationships in a bidding and tender context brings a range of benefits that can influence contractor and supplier selection. Firstly, grasping a solid understanding of the customer issues at hand can be achieved by investing in relationship-building initiatives that improve insight into the buying organisation’s members, and especially the purchasing manager and business unit buyer.

Sales teams can use the procurement process as a key opportunity to influence the definition of ‘value’ and shape requirements before they go to market so that so that their expectations are aligned around their company’s solution. It is important to emphasise that once procurement has commenced, procedural integrity (including probity principles) must be followed to reduce the likelihood of poor procurement decisions and/or exclusion from the process. Whilst it becomes an arm’s length transaction, evidence has found that the effect of relationship-building on proposal evaluation increases when customer or product knowledge is written into the proposal. Proposal comprehensibility becomes even higher when customer ‘hot buttons’ – the consolidated issues and motivators for the request for bid – are addressed more explicitly.

Secondly, there is an opportunity for sales and bid teams to capture client feedback through debriefs about opportunities for improvement, and ‘closing the loop’ with actionable insights can inform the bid team on important content library updates. Capturing and sharing debrief feedback as well as customer and account management insights into a capture plan at the opportunity planning phase also dramatically shifts the proposal from being descriptive to being customer-centric and persuasive.

Thirdly, as contracts might be structured as two years plus one year (option to extend) duration, often customers try and simplify the lengthy procurement cycle by renegotiating with the incumbent contractor or supplier. Rather than waiting until the end of the contract term, contractors should be proactively pursuing the strategy from day one. By keeping abreast of market changes, sales teams have an opportunity to help customers scale during the contract period, and help to increase the renewal probability by helping them understand the risks of re-bidding and the resulting switching costs.

This integrated, end-to-end approach to bidding outside of the proposal window helps companies better prepare and optimise their bidding at the early stage by bringing together sales and bid teams, including field and technical experts, thereby increasing process efficiency through better communication. When the company does make the decision to bid, it affords the bid team more time to workshop and strategically analyse the selection criteria to develop win themes before the proposal is prepared.   

Conclusion

Whatever the influence, choosing one contractor or supplier over another is largely dependent on the customer’s preferences in terms of the evaluation criteria and weightings used, and the trade-offs they are willing to make.  In our extensive study, price was found to be no longer a dominant criterion for contractor and supplier selection on the whole. Rather, the overall results found prevalent use of ‘soft’ criteria or categories for evaluations, as evidenced by the relatively high number of criteria noted in the areas of management expertise, experience and performance.

Companies that systematically and routinely assess, capture, organise, find and connect their most important information in one place are best positioned to optimise this collective and tacit knowledge for bid response efficiency. Central to this activity is the content library, which forms the foundation of any organisational-wide work winning strategy.

Supporting and enabling the strategy is the end-to-end bid management process which involves a cross-functional commitment to capturing and sharing evidence of customer success, knowledge of ‘hot buttons’ and continuous improvement opportunities to ensure proposed solutions align and adapt to customer and market requirements. A good bid/no bid decision process to qualify bids that have the highest probability of winning is important for large, complex bids that require significant investment in time and resources. Concentrating on these bids allows bid teams to develop better bid win strategies and ensure a cohesive overall response.

Those companies that go beyond the sharing of information and set out to understand and map the key factors in the evaluation and selection process most relevant to their business stand to discover associations and relationships from cross-linkages that might otherwise have remained unrecognised. To help busy bid teams keep up in the competitive bidding world they need to be not just supported, but enhanced by the right capabilities where data, information and communication, and the unique workflows within them, are dynamically coordinated.

 

References

[1] OECD, (217) 2 Statista (2015)

[2] UN Procurement Practitioner’s Handbook