Issues to Consider

The issues can be expressed as a set of checklists relating to:

• the competitive situation;

• bid preparation costs;

• the relationship of the contract to your business strategy;

• project costs and revenues;

• the characteristics of the client;

• the professional value of the contract;

• its implications for your workload and personnel;

• the skills and experience you can offer.

Some of the questions listed here may have been raised initially in a pre-qualification stage, or may be readily answerable by reading the client documentation and from market intelligence. If you are seeking clarification on a factual point, you should be able to talk to the managers or technical officers responsible for the tender announcement. Other questions may need to be explored through further research. Make sure your interpretation of the situation and the information you use are reliable. The issues will seldom be clear cut. In many instances the outcome will reflect a balance of commercial judgement and technical considerations. You must try to reach a decision as quickly as possible. If it is 'yes', you cannot afford to lose time; if it is 'no', you will want to target your efforts at other prospects.

Don't be dismayed by the length of these checklists. Not every question will need to be asked in every case. The lists are detailed because they aim to cover points that can be relevant to a broad range of bid opportunities, whether for the public or the private sector, in the UK or overseas.

The competitive situation

• Is there a real prospect of a contract? Do you have reason to believe that the client may not award a contract but intends to do the work in-house, taking advantage of whatever good ideas the bids may contain? Clients sometimes put out an invitation to tender just to test the market or to keep their existing contractors on their toes.

• Does the bid specification point to a hidden agenda behind the invitation? Is the client using the bid process as a front for efforts to secure financing for a project, or in an attempt to give professional respectability to political aims? There are occasions when clients seek consultancy advice only as a form of technical collateral to gain credibility for a predetermined strategy. They may want external advisers who will put the gloss of their name and reputation on a scheme without questioning too sharply its justification. Bid specifications that are biased toward obtaining a favourable outcome from a 'feasibility study' are a clear warning sign. Would you be comfortable in the role the client has in mind?

• If the information that comes with the tender invitation appears cursory or the bid specification imposes unusually restrictive conditions or the timetable seems rushed, this may indicate that the client has a particular firm in mind: the specification may have been drafted by an existing contractor and the client may be going through the formalities of a competition for procedural reasons.

• Do you know how many others you will be competing with and who they are? Is the procedure open to all and sundry, or has a shortlist been selected? If invitations have gone out to a large number of firms, it must be doubtful whether the client has the time and resources to evaluate each bid in detail. There will then be the temptation for the client to look at price not quality.

• Has the client said how the bids will be evaluated? Will the client use an evaluation procedure with which you are familiar?

• If you know the identity of your competitors, how do your strengths and weaknesses compare with theirs? Are you or is anyone else a clear front-runner? Does a competitor have a particularly close relationship with the client? Conversely, even though you may be facing an entrenched competitor, is there evidence that the client may want to take on new advisers who can offer a fresh approach?

• Is the work a continuation of an existing contract? If it is, can you realistically hope to put in a bid that is sufficiently strong in terms of quality and price to offer better value for money than the present contractor?

• How good was the last bid you produced for that client or for that type of work? What was its fate, and what does that tell you about your competitive position for this contract?

• On bids for work overseas, can you seek your government's support or endorsement for your bid? Are any of your competitors state-funded agencies rather than genuinely independent businesses? Are they able to offer the contract services as part of a programme of technical assistance? Do your competitors include firms that have a reputation for 'buying' contracts?

• In certain overseas markets, the procurement context is characterized by a nexus of interests in which contract decisions are made on the basis of financial links between politicians, administrators and developers, rather than on technical or value-for-money grounds. It is often large business groups and enterprises that hold the real levers of power and make the key decisions, because it is they that drive the mechanism of what may be termed 'patronage' in some contexts and 'corruption' in others.

You may be able to find answers to some of the questions in this list from people in your personal and professional network of contacts, or even colleagues in your firm. Do they know the client and its business practices? Have any of them worked with a competitor firm? What can they tell you about the way they are likely to approach the project?

Bid preparation costs

• What will be the costs of preparing an effective bid and then negotiating a contract, with all the delays and difficulties that may arise? Can you afford to put in a tender? Will a conscientious and committed bid be feasible if the fee value of the work is low?

• How do these costs compare with the profit you might realistically expect from the job?

• If the contract involves a large-scale project, do you have associates with whom you can divide the costs in proportion to your share of the expected fee income?

• Have you already invested large amounts of time, money and other resources in the process of pre-qualifying or in marketing to the client? Are your chances good enough to expect an adequate return on that investment, or might you simply be throwing good money after bad? These questions become particularly critical when cash flow problems arise, when resources are stretched and overdraft facilities are under pressure. There are rules of thumb that you can apply to help determine the viability of bids and control bid costs. The rules may be expressed in various forms: for example, spending on bid preparation up to a set percentage of the expected fee income from the job - say up to 5 per cent in the case of small or medium contracts or up to 1.5 per cent for large contracts; or spending up to a set amount per staff-month of expected input, defined in relation to the total available marketing budget and the firm's overall success rate in competitive bidding.

• Even within the EU procurement framework, clients may insist that bids are written in their own language. If you do not have appropriate language skills in-house you may need to use a translation service, which can be expensive as well as risking quality problems if the translators are not experienced in the terminology of your sector.

Relationship to business strategy

• Is the contract in line with your business objectives and marketing strategy? Is it in a target sector of your market and a core field of activity or does it have only peripheral relevance?

• Is it likely to bring you sustained and reliable income? Will it take you into new markets with good prospects for long-term growth and profitability? Does it involve an area of expertise where there is an unsatisfied demand for services? Will it help you develop a new and distinctive package of benefits for clients?

• Will the contract give you the opportunity to form a valuable strategic alliance with other companies?

• Will it help lock your competitors out of a niche market?

• Might the contract involve a conflict of interest with your work for other clients?

• Do the procurement terms mean that winning this contract will disqualify or exclude you from bidding for other work such as related or downstream contracts?

Project costs and revenues

• Is it clear what the type of contract will be - fixed price, time-based fees plus expenses or some hybrid form? Does the client documentation include a draft or specimen contract, and are its terms acceptable? Conditions of contract that are unfamiliar may require you to obtain legal advice before going ahead with the bid.

• What is the total fee income and profit you can expect from the contract? How does it match your estimate of the professional effort required?

• Do you have sufficient information to prepare a cash flow profile for the contract?

• Is there a risk that winning the contract might strain your financial resources? Will the requirements for working capital be manageably even throughout the contract or will you be faced with sharp peaks? What effect is the contract likely to have on your cash flow, particularly in the event of late payment?

• What do your provisional costings tell you about the lowest price at which it will be feasible for you to undertake the work? What is the highest price you can put in while remaining competitive?

• Are there reasons to bid low or even take on the work at a marginal price - for example, if it will keep your staff employed or reinforce your position in a particular sector of expertise?

• Are competitors likely to undercut your bid through some form of overt or hidden subsidy from their parent companies or governments?

• Would the assignment be expensive to start or hard to support logistically?

• Is the assignment likely to require your taking on contractual responsibilities for a large consortium, perhaps receiving a minor share of the fee but shouldering the financial risks and ultimate accountability for the work of the consortium? Or is there scope for you to limit your exposure to risk by working as a subcontractor to a larger firm?

• If the bid is for an overseas client:

  • In what currency will you receive payment?

  • Will you require special financial services such as foreign currency loans and overdrafts, short-term finance and export funding or risk management services to guard against transaction exposure? The effects of swings in exchange rates can dwarf the scale of profits or losses from the contract itself.

  • If the contract involves a long-term assignment in an economy prone to inflation, is there a credible local index to which you can link contract prices?

  • Are there specific insurance costs that you will incur?

  • How dependent will you be on local associates to facilitate the receipt of payments, remittance of fees or repatriation of profits (Chapter 10)?

  • Is a third party such as a donor agency or funding institution involved? If so, how will its participation affect your costings and the conditions of payment? Will the contract be with the agency or the client? Some agencies apply standard rates of remuneration in particular countries and regions.

Client characteristics

• Is the client a single entity or a group of organizations with different responsibilities? If it is a multiple client, what will be the contracting authority? Is it a form of public-private partnership? These points will have a material influence on many aspects of the working relationship.

• Do you have past experience of the client's operational procedures? Is it a good client to work for? Has it paid on time or argued about invoices? Have you got on well with its managers and other personnel? Do you know what client managers think of you? Has the client had occasion to criticize the way your business has performed on previous contracts - for example, your capacity to deliver on schedule or the effectiveness of your team management? If so, what impact is your past record likely to have on your chances of success?

• How well do you understand the business needs and attitudes of decision makers in the client organization? Where does this contract sit in relation to their overall procurement plan?

• Would you feel unhappy about turning down an invitation from that client? Do you believe a 'no' decision is likely to prejudice your chances of receiving further invitations?

• Are there discriminatory or politically questionable aspects of the client or work environment?

• Is the client or the contract located in a place that you would find particularly congenial or particularly unpleasant? Are there unusual risks involved, such as working in areas affected by political unrest or health risks?

• Do you have information about the type of people the client prefers for this contract - known quantities or new faces?

• Are there unusual features of the work specification or problems that are unlikely to be resolved either by discussions with the client or in negotiations?

• On projects overseas, does the client have a reputation for seldom or never awarding a contract to an expatriate firm, or for habitual late payment? Will the work be paid for entirely from the client's own resources or will an international financing institution or donor agency provide counterpart funds? Is there a contractual requirement to associate with a local firm?

Professional value

• Will the contract offer a particularly interesting or stimulating professional challenge?

• Will it have social, developmental or environmental benefits that you regard as professionally important? Is it for a good cause - for example, helping a local community to save an environmental resource or combating disease?

• Will the contract bring you useful political or business contacts, enhance your professional standing and raise your profile in the market?

Workload and personnel implications

• Is the contract likely to involve you in risks that you are unable to accept, to manage or to transfer to the client? Does the client's view of the work rest on dubious assumptions?

• How does the proposed time frame relate to your existing work and other business opportunities? What impact would it have on the performance of your other contracts and your ability to field key staff?

• What is the current state of your workload? Do you need the contract to keep your staff not just employed but chargeable, or are they fully committed to other work? Would the contract overextend your personnel resources?

• Do you have enough time to prepare an adequately competitive bid? Are there other bids on the drawing board? Do you have someone available who can manage the bid effectively?

• Do you have on your staff an appropriately qualified manager or team leader for the contract? If not, can you obtain the right sort of person?

• Does the bid specification call for a team formed of permanent in-house staff? Can you meet this requirement? Would the contract mean that you have to take on specialist staff whom you might have difficulty in employing on other work?

• Would the contract necessitate a change in the management structure of your company - for example, if you need to give the team leader the status (and rewards) of a senior manager, might that become a source of tension within your staff?

Skills and experience

• Will the contract mean a steep learning curve or do you have all the necessary competencies? Are particular non-technical skills required, such as an aptitude for motivating people and facilitating change or interpersonal and communications skills? Can you bring in additional competencies, for example from associates?

• How does the contract relate to your mainstream activities? Will it give greater breadth and depth to your capabilities, or is it an unfamiliar area of expertise that might put your reputation at risk?

• Does your experience match the demands of the job? Identify with the client: ask yourself 'If I were the client, would I hire me?'

• Does the bid specification indicate requirements for quality accreditation and indemnity insurance cover, statements on matters such as equal opportunities policy, health and safety matters, or declarations about professional conduct, TUPE issues, industrial relations and so forth that you might have difficulty in complying with? Does the client require a level of indemnity insurance cover that is out of proportion to the value of the contract?

• Does past experience of working in a similar contract environment suggest any likely problems?

• Projects overseas may need the collaboration of local associates. Are they available or have they been signed up by competitors? If there is a requirement for foreign language skills, do people in your team possess them?