Creating tenders is a stressful task. It has so many components from deliverables to costs. Tender inclusions are comprehensive and submissions are usually delivered under tight deadlines over long working hours. A key component of tender submissions is the tender price and underquoting the competition can lead to grave consequences post-project if you haven’t analysed your costs and data thoroughly throughout your tender creation. These key 5 steps go back to basics to assist your business in developing a strong and competitive tender price.
1. Tender rules and requirements #101
Not all projects are the same, so neither should your tender submission. It is vital, irrespective of how long you have been creating tenders, to thoroughly read through tender documentation. From the draft contract, scope of works and the suggested pricing instruction and model. Depth understanding of tender rules and requirements will help set a strong foundation for your bid cost.
2. Map out actions and tasks
Projects have complex tasks across multiple stakeholders. It is important that as part of your tender bid you map out a clear plan with actions and tasks. Each requirement should be quite granular, including who is responsible for each task/action and completion time for each activity. This is beneficial for not only your tender bid but also once you start the project. It creates accountability and a manageable timeline that doesn’t stretch resources because it wasn’t properly planned out initially. Consequently leading to project delays and major losses.
3. Strong pricing framework and model
The traditional price-focused lowest bid is no longer the industry norm. More and more General Contractors and Government bodies are moving towards the best value tendering process. This is where a pricing framework is key to setting yourself apart from the competition. It takes into account competitors pricing or industry benchmarks. A recommended resource is Awarded tenders by Australian tenders.
In terms of the pricing model, it should be dynamic (easy to update and has an inter-related model where outputs update simultaneously based on a single change). Make sure that you test your model with dummy numbers to see output related fluctuations in the numbers. This assists when swift action is needed for the model during a project. Similar to your planned actions and tasks, your model should have a distinct format that clearly differentiates between cost inputs and outputs.
4. Tender price approval
The traditional price-focused lowest bid is no longer the industry norm. More and more contractors are moving towards best value tender bids which are a combination of process, procedure, systems, price, experience and delivery. The right combination provides a competitive edge during tenders. To get the right balance, all stakeholders within the tender team need to workshop the pricing model. This ensures buy-in from all members from deliverables to price. Support from the wider team early on strengthens the morale towards the project and conducting a pricing workshop creates efficient discussion as opposed to passing each section between team members. Furthermore, submitting the tender price for approval with the senior executives should be done with enough time for adjustments. Executives require a sufficient amount of time to make sure that the tender price aligns with their overall business strategy.
5. Invest time early
Tender processes can be all-consuming and often rushed due to time constraints. Tender team members usually work on tender bids in addition to their everyday role. Whether that is the operations manager, business development manager, estimators or a business owner. That means constrained resources are further stretched thin to deliver a very demanding job – the tender. That is why investing time early into the tender process is crucial. The industry is so dynamic and key tender team members can be pulled into incidents onsite, onto different projects or last-minute meetings. Investing time early gets everyone on the same page towards the same goal, and gives leeway to potential interruptions during the pricing workshops or activity/task scoping.
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