The real cost of tendering
For small companies, dealing with tender invitations can be a real headache. Driven by a requirement for accountability, procurement via the tender process continues to increase.Responding to tenders can often be complicated, time-consuming and costly, with the same preparation involved whatever the size of contract. Industry evidence suggests companies may be spending as much as 6% of their turnover on fulfilling tender requirements with at best a chance of winning one out of three and often much lower conversion rates!
We are led to believe that every effort is being made to level the playing field for small businesses in order to ensure they have a fair chance of winning such contracts. However, it’s hard not to feel the odds are stacked against you when complicated tenders arrive with impossible deadlines, not to mention detailed Health and Safety, insurance and other documentary requirements.
Counting the cost
While there are clearly advantages to the tender process, not least the prospect of fair choice against an objective set of criteria, the reality is that the costs incurred – on both sides – may not be proportional to the value of the contract.
Part of the reason behind the continuing ambivalence towards tendering is the difficulty of identifying and quantifying the internal expenses associated with the process. What is certain is that the process requires an investment of time and money on both sides: the prospective client in preparing the tender documents for issue and the subsequent assessment and selection of supplier, and the supplier in responding to the tender.
Action is long overdue, and there are some immediate measures that can be taken on both sides to improve the situation.
Purchasers need to avoid excessive documentation which often calls for the same information in several places in different formats; purchasers should also ensure time frames for reply are reasonable.
For suppliers, the onerous task of responding to tenders can be streamlined by maintaining a central data bank for generic company information and proof of compliance/copies of certification. Equally, where resources are limited, it is important that the risk assessment process for a particular contract takes into account the chances of success. Prior involvement with the prospective client can be an advantage where reputation is a factor in the final selection.
Of course, showing value for money is important – but let’s find an easier way to prove it.
Let me know if you’ve any tips on taking the pain out of tendering.