Acquisition: Proposal topics: Bid management: The basics of bid management

The basics of bid management

Bidders that win a major part of their business through the proposal or tender processes have a number of procedures in place to handle their responses. The processes usually operate in the following way. The description uses the terms "request" and "proposal"; "request" includes RFPs and tenders and "proposal" includes responses to RFPs and bids against tenders.

The actions involved in constructing a proposal are:

Request Distribution

The request is distributed to all the people who could influence the proposal. This is made easier when the customer sends copies of the request out in electronic format, on diskette or CD. The bidder can then send the request out by email.

There are several people who need to see the request.

Technical Writers

Some bidders have technical writers who not only construct proposals but who often retain a library of "boiler-plates". These are standard descriptions of the bidder's products and services that are inserted into proposals.

Some consultants, who work continually in the field of acquisitions, recognize the parts of a bidder's proposal that are "boiler-plated". These consultants are sometimes retained by customers to identify whether a standard or a customized service is being offered. Depending on the service required, it may sometimes be an advantage to the customer to have a standard, established, proven service. For other services, a customized innovative service may be preferred.

Usually, technical writers can begin immediately to define those elements of the proposal that will need to be individually written.

Solution Developers

The people who develop solutions may sometimes be employed solely to perform that task. They may have a job title such as "solution developer".

In other instances, the solution developers will be the people who actually provide solutions to customers. In this case, the development of solutions for proposals will be a part of their duties.

However this is organized by the bidder, there will be people whose role on the proposal will be to describe either standard or customized services or products that will meet the customer's requirements.

For complex solutions, such as the provision of computer networks, the solution development team can involve several people. In some instances, these people can be from different disciplines, such as hardware experts, software experts and telecommunications experts.

The solution developers will "own" the overall technical solution described in the proposal.

The solution developers may write sections of the proposal for delivery to the technical writers.

Advisers

There will be other people who will provide specialist advice to the technical writers and the solution developers. They may be asked to write small segments of the proposal.

Salespeople

In some instances, the salespeople will be the primary channel for communication between the bidder and the customer during the preparation of the proposal.

The primary role of the salepeople will be to complete the pricing for the proposal, ensuring that the margins are sufficient and that any required investment by the bidder is reasonable and will recouped for an acceptable return.

Marketers

The bidder's marketers will usually be involved early in the process, to ensure that the customer is one that the bidder could deal with without prejudicing existing relationships with other customers.

They may also be involved in decisions about entering new business sectors or reinforcing the bidder's position in the customer's business sector.

Bid Manager

A bid manager will coordinate the efforts of all the other people working on the proposal, including some not mentioned above, such as the quality assurance people who will check the content of the proposal.

It may often be preferable for the bid manager to be the main channel for communication with the customer, rather than a salesperson.

First Review and Decision

The team will read the request and then meet and decide whether to develop a proposal.

This decision will be based on the following factors:

Pricing

This is whether the customer can afford to purchase a proposal put forward by the bidder.

Sector

This is whether the bidder is already an established provider in the customer's sector. If it is not, then the decision may be based on whether the bidder wishes to enter the sector and whether the proposal will enable it to do this.

Availability

Sometimes a bidder may be too busy either to respond to the request or to provide the services required.

Authenticity

The bidder may decide that the request is not "authentic".

This may occur when a customer is trying to determine the nature of the market in a service. It may use the proposal process to do this, despite having no real desire to make an acquisition at this time.

It may also occur when a customer wishes to "keep an incumbent honest". This technique is intended to convince an existing provider that it may be replaced, usually as a means of obtaining more favourable terms.

Either of these would be ample grounds for a bidder not to proceed.

Practicality

It may not be possible to put together a high-quality proposal in the time available. Some customers imagine that all bidders in all sectors can prepare proposals in a week or a fortnight. While this may be true in some sectors, it is not in others.

Major multinational outsourcers may require several weeks to prepare proposals.

As a result of all these considerations, there will be first "go" or "no-go" decision. Throughout the entire proposal process, this decision will be re-visited to ensure that it is still appropriate.

Communications Initiation

Following the first "go" decision, the bid manager will initiate communications between the bidder and the customer.

This can be a very powerful weapon in the hands of a capable bid manager.

First, the bid manager can use it to set up a series of meetings with a number of the customer's people so that these people become less available to competitors.

Second, the bid manager can use it as a check that the proposal is meeting the customer's expectations, by presenting drafts for review and comment at these meetings.

Third, the bid manager can use it as a two-way information flow, so that, as well as receiving information needed to prepare the proposal, the bidder can use the meetings to pass information about its own success and track-record.

A customer may try to prevent this happening by appointing a single point of contact with the bidders. A good bid manager will view this as:

a restriction to protect the customer from the baleful influence of the competition, and
a "shoe-horn" to allow the bidder to influence the customer.

Proposal Contents

Meanwhile, the proposal contents will be defined by the technical writers, who will indicate which parts of the proposal should be:

boiler-plates, giving standard replies to standard questions that will not affect the competitiveness of the proposal,
technical, requiring preparation by the solution developers, and
routine, requiring preparation by the technical writers.

This last category, the "routine" parts of a proposal, will include all the answers to questions about the bidder's relevant customer base, its products and services for the customer's sector, and so on. These will not involve detailed technical parts of the proposal but will include other parts that may have an effect on the customer's decisions.

It is essential that the bid manager and the technical writers have a grasp of those parts of the proposal that will be competitive differentiators. They can ensure that other contributors to the proposal are aware of how important these parts are.

Pricing Strategy

The bid manager will also work with the sales and marketing people to develop a pricing strategy for the proposal.

The pricing strategy can be based on one of the following.

Standard Pricing

The bidder will prepare a set of standard costs for the service and its standard margin and offer these to the customer.

The reasoning behind this approach may be that:

the bidder perceives itself as the market leader, and therefore more likely to be selected by the customer on grounds other than price,
the bidder can sufficiently differentiate its services from those of its competitors for price to be a minor issue, or
price is not a major issue anyway.

Future Pricing

There may be justification for the bidder to offer a reduced price, on the basis that it will be able to make margins on a larger volume of future business.

It should be noted that the bidder should never see the future business as a means of recouping the margins lost by this proposal. Lost margins can never be recouped. Rather, it should take the position that a reduction in margins on the proposal can be taken in return for standard margins on future business.

This can be a dangerous position to take. Some customers may insist that, if a bidder has given a discount on the proposal, it continues to give the same discount on all future business.

Entry Pricing

The bidder may be prepared to take a reduced margin on the customer's business if this enables the bidder to enter a new line of business.

In this instance, the decision would not be one that was made for an individual proposal.

The bidder would already have identified the new line of business and have prepared a strategy for entering it using one new customer as leverage. The proposal would therefore provide an opportunity to implement an existing plan, rather than being an impetus to develop a new plan.

In this situation, the bidder may be able to offer the customer a "gain-sharing" agreement so that the customer could benefit from the bidder's future income from the new line of business.

There is a belief that another approach exists, which might be called "predatory pricing" or "spoiler pricing" or something similar. In this approach, a bidder who recognises that it has no real chance of winning business may still submit a proposal with artificially low pricing. The intention appears to be that this will cause the customer to force the selected supplier's price down to the same level, so that the selected supplier will make a loss on the business.

No bidder with whom I have worked would be inclined to waste valuable marketing dollars in this way.

Task Allocation

The bid manager can now allocate the various proposal-building tasks to the team members and to any other advisers or specialists.

Each task will be handed over, together with information about

its relative importance to the competitiveness of the proposal;
its requirement for quality assurance and the people who will conduct the QA process on it;
its urgency, which may, in some cases, be dictated by the QA process.

Message Control

Throughout the rest of the proposal development process, the bid manager should monitor and control the communications from and to the customer.

Given the difference between the optimism required of salepeople and the pragmatism required of bid managers, the bid manager is often better fitted for the role of monitoring and controlling communication, although the salespeople may be better able to do the actual communication.

Some customers resent the involvement of salespeople (or of those who behave like salespeople), and the bid manager should be able to identify this and act appropriately.

Proposal Presentation

If possible, the bid manager should arrange for the proposal to be presented to the customer rather than simply delivered by courier.

Where this is possible, the bid manager should manage the preparation and rehearsal of the presentation.