Competitive tendering 101

It is peak competitive tendering season in Australia from January until the end of May, particularly for government and private sector contracts that roll over on July 1.

So what is competitive tendering, and how can your business take advantage of the opportunities on offer?

Over the next few weeks, I’ll be sharing some of my best tips for responding to – and winning – competitive tenders.

Let’s start with the basics first.

What is a competitive tender?

A competitive tender is a type of procurement practice – a device that corporate and government buyers use to purchase what they need.

Competitive tenders are commonplace for large, high-value purchases. They are also used for goods and services that have become commoditised, where buyers believe that a larger pool of competitors will drive down the price.

Tenders usually take the form of a written briefing, to which you, as the prospective supplier, must respond. The briefing document is usually called something like a Request for Tender (RFT), Request for Proposal (RFP), or Request for Quote (RFQ).

Alternatively, if there is no specific buying requirement at the time, the tender briefing could invite you to apply to join a preferred supplier panel and earn the right to pitch for future work.

Why do buyers issue tenders?

Fundamentally, because they want to create competition, and get the best value for money for something they have decided they want to buy.

For high-value purchases, competitive tenders also offer an audit trail that supports the buyer’s decision to go with a particular vendor or supplier. This type of governance is also known as “probity”, and is particularly important for government and large organisations that are ultimately responsible to the public or to a corporate board.

Why would I want to bid for a tender?

Competitive tenders can be a lucrative source of new business for your business. Last year, one of Australia’s largest buyers – the Federal government – spent $59.447 billion buying goods and services through Austender, and issued 69,236 supplier contracts.

If you're already a large business, you probably have no choice but to compete through bids and tenders because the size and scale of the contracts or projects you deal with.

If you want to grow your business, competitive tenders can be a good way of increasing the value of the work you do. For example, the Victorian government is required to put contracts over $150,000 out to market via competitive tender.

Where can I find opportunities to bid for?

Tenders are often publicly advertised.

You can find government tenders here. Or, sign up for a tender aggregation service like TenderLink, which finds tenders at all levels of government (federal, state, and local) and also advertises corporate and private tenders.

Are there any traps to watch out for?

Competitive tenders aren’t a simple way to win business. For starters, it’s easy to be overwhelmed by the number of opportunities in your inbox, and not all are worth pursuing. So, here are three traps to be wary of:

1.     Do your homework and understand the competitive landscape. Some tenders aren’t a real opportunity, but a tick-the-box exercise where the contract has come to an end and the buyer is obliged to put it back out to market again. This doesn't mean they have any intention of changing suppliers, but they could use your tender to beat their current supplier down on price or delivery factors.

2.     Tender responses will never substitute for good old-fashioned face-to-face relationship building. A competitive tender is the last step in the procurement process, and at this point it’s difficult to convince a buyer to change their minds about what they want to buy. Preferred supplier panels are no guarantee of business, and you'll still need to get in front of buyers to let them know who you are and why they should brief you for future work.

3.     Make sure your business is up to scratch, and meets all of the mandatory or minimum requirements. For example, if buyers are asking for ISO quality accreditation, and you don't have it, then you will never win against competitors who do.

When you’re smart about it, though, there is lucrative business to be won when you play your cards right.

Next week, we'll look at how to decide which opportunities to bid for.