If you get it right, a tender application can bring huge rewards to your business. If you get it wrong, you will have wasted a lot of time and effort, and failed tender might cast a shadow over future tender applications. Domini Stuart looks at what buyers want, how to find them, and how to avoid expensive tendering mistakes.
The success stories say it all—tendering can be a rewarding way to acquire international business. But, while some companies regularly win major contracts, others struggle to get a grip on the process, eventually dismissing it as too complex, difficult, obscure, or unfair.
In fact, tendering successfully is as much a skill to be learned as any other aspect of business, and help is at hand. “The first thing to understand is that there are a number of different kinds of tender opportunities overseas,” says Martin Walsh, national manager for infrastructure at Austrade. “One category is International Development Agencies (IDAs) such as the World Bank, the Asian Development Bank or AusAid, typically consultancy-type opportunities in the developing world.
“You generally need to be pre-qualified before you can submit this type of tender, and Austrade recommends checking the relevant organisation’s website for these requirements. Once you’re confident you can meet them you can register online.
“Austrade also organises missions to both the World Bank and the Asian Development Bank to help companies gain a clear understanding of the process, priority countries and priority areas.”
While some businesses call for tenders, these days they’re more likely to use business-to-business processes such as online purchasing from pre-qualified suppliers. A more viable source of opportunity is government. However, Walsh warns that by the time a tender is published, there’s a good chance that the government involved already knows who they want to use.
“The best strategy is to know your business area and try to identify opportunities in advance,” he says. “For example, if you build dams, you need to be finding out where money is likely to be spent. Austrade can help by ringing authorities and asking whether they plan to build any dams.”
Walsh also says that if you make the effort to get to know the decision-makers, you may even be able to influence the way the tender is written. “If you’re good at building concrete dams and can convince the authorities that a concrete dam would be more appropriate than a steel one, the specs will be in your favour,” he says.
Through their network of overseas offices, Austrade searches out government tendering opportunities and then posts these on austrade.gov.au under ‘opportunities online’. They also feed information to TenderSearch, Australia’s leading provider of tender notification, response and training services. “We’re very happy to work with them,” says Walsh. “The more vehicles we use to get information out the better.”
As national operations manager of TenderSearch, Fabian Kempter agrees that the key to succeeding through tenders is understanding both the process and what buyers are looking for. “Businesses that succeed in the tender process may not always be the best supplier for the job,” he says. “What they are able to do is clearly demonstrate compliance with the specifications and conditions of the tender, value for money, benefits of their solution to the buyer, and how their proposal eliminates risk for the buyer.”
The first stage of tender evaluation is eliminating any that do not comply with the mandatory requirements. These might include the specifications of the goods or services, acceptance of the contract conditions, or even the format in which the tender is presented.
“Evaluators often use this early stage of evaluation to reduce the overall number of tender responses they will need to read in detail,” says Kempter. “Even minor discrepancies may cause a tender to be eliminated before it is fully evaluated. The rationale behind this is that organisations that do not follow instructions in the tender to the letter will make the same oversights when they perform the services.”
According to Kempter, tenderers often focus on what their organisation has to offer rather than what the buyer is actually looking for. “Try to imagine yourself in the place of the buyer, evaluating a series of tender responses and trying to determine which one offers the most value,” he says. “If each one simply reflects the exact specifications with no additional value, the only factor then is price.”
He recommends that you highlight as many benefits as possible across a range of different areas. These might include your experience, quality control, technical capabilities and qualifications, cost savings, ongoing support, financial and corporate stability, and innovation, research and development.
It’s also important to remember that buyers are risk averse. However impressive your proposal, if they perceive high levels of risk they may settle for a safer option.
Is your business relatively new? You may be considered ‘fly by night’ or lacking in experience. Are you new to the sector? Buyers may believe that their needs are unique, but they like to see that you have worked with clients of a similar size and nature.
Do you have the financial capability for capital investment and positive cash flow throughout the contract? Does your company comply with government regulations, including occupational health and safety, industry licensing requirements, workplace relations and employment policies?
By identifying in advance anything that may be perceived as a risk you have an opportunity to reassure the evaluators with evidence of your reliability. This might include client references, letters of support from associated organisations and details of your insurances, work procedures and company policies.
The Health Insurance Commission (HIC) consultancy services draw on HIC’s expertise in administering health insurance, health financing, and health information management as well as developing strategic plans for implementing major changes to government policy. Since the Canberra branch was formed in 1989, they have won some 35 overseas projects ranging in value from half million to three million dollars.
“Many of our clients have been central European governments,” says Karl Karol, HIC consultancy services manager. “However, we’ve also won many projects in Eastern Europe and, over the next few years, we expect to deal more with countries from the Balkans between Greece and Croatia and former Soviet Union countries.”
Karol says HIC must submit a tender for every project. “Once we identify a project either through advertisements, referrals or the internet, we express an interest,” he says. “Usually within two or three months you get an invitation to tender. You then get about six to eight weeks tendering time, and it takes about six weeks to write a tender. The evaluation process can take up to six months, then negotiation can take six weeks. Once everything’s signed, we can usually mobilise to get things moving within four weeks.
“Tendering for projects is very competitive, and is evaluated by a two-level technical and financial process. The technical proposal is worth around 70 to 80 percent and the financial scores at around 30 percent.”
Strategic Marine designs and produces service vessels for a number of industries, including commercial shipping and fishing. They were one of the first companies in the world to use aluminium for boats and, now, around 95 percent of their production goes to international clients including the Singapore Coastguard and the Malaysian Police. However, according to managing director of international business Ron Anderson, any government project is challenging.
“There’s a lot to gain if you win a tender, and a lot to lose if you don’t,” he says. “To be successful, your product should be home-grown and tested in the domestic market before you go offshore. Quality is absolutely critical when tendering for government.”
Select tenders that align with your business niche in the market and tailor your response to suit the needs of the buyer.
In your application, make sure you complete every question and satisfy every request for information even if you don’t have a complete answer at the time. The evaluation panel is more likely to request clarification than to accept an incomplete tender document.
Follow all instructions for preparation and submission regardless of how trivial they seem. Even something as minor as using the wrong font could cause your tender to be eliminated without further consideration.
Have someone not involved in the preparation of the tender review your final response against the original request.
Before you begin to write your response, list the buyer’s motivations along with the pros and cons of your solution. Refer to this for inspiration as you respond.
Every time you make a statement ask yourself: ‘so what?’ This will help you to ensure that all the information is relevant and that you have clearly identified the benefits you can offer.
Identify anything that might be perceived as a weakness in your organisation and include additional material or information to counteract these issues.
Use failed tenders to see whether the buyer identified potential risks that you have overlooked.
Prepare and include detailed project plans, rosters and methodologies that show exactly how you will deliver your services.
Know where you stand on the world stage, your own capabilities and those of your major competitors.