Pre-qualifying a bid or tender opportunity is the first vital step in the process, but it’s rarely done. And when it is, it’s usually done badly. Yet by learning to say no to more bids than yes, you’ll boost your win-rate.

When my clients get this paradox, their win-rate almost always goes up.

SO WHAT IS ‘PRE-QUALIFICATION’?

It’s an internal process for deciding whether or not to respond to an Invitation To Tender (ITT) or Request For Proposal (RFP). When you pre-qualify an opportunity, you analyze all the reasons why you should bid and why you shouldn’t, then weigh them up to reach a Bid/No Bid decision.

It’s often referred to as an ‘opportunity analysis’ or ‘cost-benefit analysis’. You’re assessing what it will cost you to bid, in terms of (wo)manpower, management time, materials and resources, distraction from or neglect of existing clients, turning away other opportunities – in return for the potential benefits of winning the tender and delivering the contract.

(By the way, don’t confuse this with a ‘PQQ’, or Pre-Qualification Questionnaire. This is the first stage in the two-stage UK public sector ‘Restricted’ tendering procedure. It’s a form that all interested suppliers must complete. The buying organization (formally known as the ‘contracting authority’) uses this information to assess the supplier’s suitability for the contract and weed out the unsuitable ones, for reasons of capacity, financial standing or relevant experience. This means they don’t waste their time assessing non-starter bids for a popular contract that may attract lots of interest from hopeful but inappropriate suppliers. The PQQ helps the buying organization narrow the field before issuing a formal ITT (Invitation To Tender) to a select group of bidders. It assesses the bidder, not the bid.)

WHAT HAPPENS WHEN YOU DON’T PRE-QUALIFY?

In every economic downturn I’ve lived through, I’ve observed the same syndrome in the business development world: a panic-stricken compulsion to bid for every opportunity available.

And the research I’ve run among BD professionals around the world confirms this. Their biggest gripe is being told by their superiors to bid for any opportunity that comes along. “Let’s take a punt!” – “Let’s wing it!” – “It could be massive!” – are familiar refrains from naïve managers or over-enthusiastic sales people. The problem with this approach is that there’s no distinction between winnable and unwinnable opportunities. I call it ‘proposals machismo’, and it brings at least nine risks that can wreck your business:

BIG FAT RISK #1:

YOU WASTE LIMITED RESOURCES, INCLUDING THE GOODWILL OF YOUR BD TEAM

Responding to a tender – especially an onerous one with lots of questions to answer or hoops to jump through – demands high levels of energy, time, money and attention. (I once helped a major construction company respond to a public sector tender with 90 questions, many of which overlapped, but all of which demanded well-researched, comprehensive answers. Nightmare.) These resources are finite, so it’s your duty to your shareholders, investors, directors, managers or employees to use them wisely.

Winning tenders also demands huge commitment from your BD team. Forcing them to bid for unwinnable opportunities stretches their goodwill, sometimes to breaking point. Why should they give their best, if they know there’s scant chance of winning? You need your bid team running that extra mile for you, not dragging their heels.

And we neglect at our peril the impact on people’s morale, confidence and self-esteem of losing more bids than they win, thanks to a poor or nonexistent pre-qualification process.

BIG FAT RISK #2:

YOU MISS EASIER, MORE WINNABLE OPPORTUNITIES

It’s cheaper and easier to sell to existing clients than gain new ones. Your time and energy could be better spent developing relationships with your existing clients – to up-sell or cross-sell more products or services – than engaging in a time-consuming tender for a new client. Which opportunities will give you the best return on your investment of time, energy and resources?

BIG FAT RISK #3:

OPPORTUNITY COST

This is the cost to your organization of bidding for a particular opportunity – not in terms of the resources you devote to it, but in terms of the alternatives you must forgo when faced with mutually exclusive choices.

Diverting resources to a major bid may cause you to neglect existing clients or programmes; the value of that neglect is your ‘opportunity cost’. When prequalifying any opportunity, the challenge is to understand the total cost to your organization of bidding for it. This includes the value of the opportunities you have to pass on as well as the resources you will spend to respond to it.

BIG FAT RISK #4:

YOUR BD TEAM BECOMES A PROPOSALS FACTORY

When you fail to pre-qualify, you’re constantly reacting to opportunities that suddenly appear, usually with demanding and unrealistic deadlines. So you heap more and more pressure on your bid team, flooding them with a relentless stream of bids. The result? Demotivated, dispirited and exhausted staff, whose sole aim is not to create tailored, compelling responses, but to just get the bid ‘out the door’ and onto the next one. The ‘proposals factory’ or ‘production line’ is the most common syndrome I see in the BD world.

BIG FAT RISK #5:

LIKE YOUR TEAM, YOUR PROPOSALS BECOME TIRED

Because of Risk #4, you don’t have time to tailor the bid to the client, so you copy and paste from the last proposal, including doing a ‘find and replace’ on the client’s name! Your submissions become predictable, generic and dull to the client, because they haven’t been written with their business needs, culture or decision-makers in mind.

BIG FAT RISK #6:

YOU MISS WARNING SIGNS IN THE CLIENT’S BEHAVIOUR

Because you’re so fixated on submitting a response, you choose to ignore risks like long payment terms, muddled decision-making or dodgy ethics.

BIG FAT RISK #7:

YOU BECOME A SERIAL ‘FAILER’ OF BIDS

This is not uncommon in local authority tenders, where a local supplier may repeatedly fail in its bid for contracts outside its specialism or capacity. The risk here is that it may not be invited to bid for future, more winnable contracts and find itself excluded from its local market.

BIG FAT RISK #8:

YOUR TENDERING ROI (RETURN ON INVESTMENT) GOES SOUTH

If you spread yourself too thin, the overall quality of your submissions is likely to fall. This generates its own vicious circle: as your win-rate drops, there’s more pressure on you to respond to more bids to compensate for the losses. And if you’re not expanding your BD function to cope with the growing demand, your win-rate will continue to fall. This means the ROI on your tendering activity will be low, if not negative.

You want a rising return on your tendering investment, so senior management sees your BD team not as a cost centre, but as a wealthgenerator or value-adder. And if you achieve that as Head of BD, you’re more likely to get a seat at the top table of your organization.

BIG FAT RISK #9:

YOU GET NASTY SURPRISES

Finally, if you fail to pre-qualify properly and enter the fray with your eyes closed, you may discover glaring gaps in your knowledge, experience, capability or value proposition halfway through the process – but by then you’re committed and it’s too late to do anything about it, barring an ignominious withdrawal. Investing time and energy in pre-qualifying an opportunity is like planning in the writing process. It initially feels like a waste of time, as if you’re spinning your wheels. But when you start drafting and it flows smoothly because you’ve clarified your structure, purpose and main messages, then you realize it wasn’t wasted time at all, but a vital step in the process that will save you time and energy farther down the track.

So pre-qualifying every opportunity – thinking hard about how attractive, winnable and deliverable it really is – can save us from proposals insanity, exhaustion, heartache, divorce and mental breakdown. I remember seeing a senior manager at one of my clients, overloaded with his day-job and leading a massive bid, fall apart in a meeting. It wasn’t pretty and acted as a salutary reminder of how stressful a winnable bid can be, let alone one that doesn’t have your name on it.

WHY DON’T MOST ORGANIZATIONS PRE-QUALIFY?

Because they’re scared of missing an opportunity. Or because the sales culture of their organization is to chase everything. Or because they’re missing their sales targets and are starting to panic. Or because they think that if they throw enough mud at the wall, some of it has to stick.

Trouble is, they’re not throwing mud. They’re throwing money, time, management attention and other finite resources. If they worked out what it costs them to submit a bid, they’d get a shock.

Have I convinced you yet of the need to pre-qualify?

HOW DO YOU PRE-QUALIFY PROPERLY?

First of all, you need to call a meeting of all the main stakeholders in the particular opportunity, e.g. the person who will lead the bid, the core bid team and the account manager, or whoever has been tasked with building a relationship with the client. You might also consider inviting other people in your organization not directly involved in the bid, but who know the client or have had contact with them, such as fee earners who may have worked with another part of the organization. The purpose of this ‘pre-qual’ meeting is to pool everything you know about the client so that you can make an informed Bid/No Bid decision.

The pre-qualification meeting must be positioned and scheduled as an important commitment in people’s diaries. It’s much more than a quick chat around the coffee machine, or an afterthought to another meeting. The bid manager’s job is to persuade sceptical colleagues that, in the long run, investing a little time up-front could save them loads of time and money.

There are several ways to pre-qualify, but here are two. One is conceptual and encourages you to assess four ‘abilities’: is the opportunity winnable, desirable, deliverable and profitable?

The other is numerical, where you score different elements of the opportunity. This is shown later in this chapter as a numerical form that gives you a total score for reasons to bid and reasons not to bid, with a ‘bid zone’ at the end that indicates what your decision should be.

You may choose to combine the two, i.e. create a numerical form for each of the four conceptual ‘abilities’ listed above and described in detail below. Either way, I’m sure you’ll want to tailor your own pre-qualification tool to your particular team, organization, industry and/or sector.

A CONCEPTUAL TAKE ON PRE-QUALIFICATION

(THE FOUR ‘ABILITIES’)

Winnability:

For clarity, I’ve broken this ability down into four areas: track record/capability, team, relationship and competition.

Track record/capability

• Do you have recent and relevant experience in the particular type of work that the contract demands?

• Have you done similar jobs successfully?

• Can you provide superb, relevant references from delighted clients?

If the client is risk-averse, showing that you’re a safe pair of hands with their type of work is essential. That’s why buyers want to see evidence of your claims, rather than marketing fluff.

Team

Research we conducted at Ernst & Young found that clients buy the team before the organization. Making it clear that you’re putting your best people on the team shows the client that you’re committed to winning and to doing the best possible job.

• Can you field the best team for the particular client, as opposed to the one merely available?

• Do you have the resources or ‘band-width’ to bid?

• Will the right subject matter experts be available at the right time to contribute?

• Is the ideal bid leader going to be available throughout the tender, or will they be on annual leave at a critical point in the process?

Relationship with the client

How well you know and get on with the client are vital factors in your success or failure. Bidders that don’t have a pre-existing relationship with most of the client decision-makers will have a hard time building that rapport under the pressure of the tendering process.

If you’re going in cold, you’ll have to work hard to gain their trust, especially if access to them is limited. And if a competitor is already in there, dislodging them could be hard. The client may find the idea of switching to a new supplier just too painful, uncertain and risky. Several of my clients simply won’t bid if they don’t already have a strong relationship with the buying organization.

• Does the client know you, like you and trust you?

• Can you ‘level-sell’, i.e. match your team members with their opposite number in the client?

• Is access to the client open, limited or even denied altogether?

• Do you know them well enough to be able to identify each decisionmaker’s agenda?

Competition

• Do you know the strengths and weaknesses of the other bidders?

• Do you know how many other bidders you’re up against?

If the field is large and you’re making up the numbers, think twice – especially if the client doesn’t know you or you have no track record to point to.

Desirability:

• Does the contract fit with your business plan or BD strategy?

• Is it core to your business, or a wild deviation with a dose of wishful thinking?

The clearer your target market(s), the easier it is to see if an opportunity fits it or not.

• Have you calculated the opportunity cost of bidding?

The risk is that you miss out on easier opportunities, or neglect existing clients or programmes because your attention was diverted to the bid.

• Will the client be a breeze or a nightmare to work with?

If they’re known for being demanding or unreliable, with unrealistic expectations of their suppliers, it may be best to leave well alone. Speak to other organizations that have worked with them.

• Do you like them as people?

• Can you see yourself working with them in three, five, seven years?

• Is there rapport and chemistry there, or are you already sensing tension, either in you or them?

Be aware of potential conflicts of interest and other unintended effects of winning. A recruitment agency I know had to turn down a lucrative opportunity because the skillset the buyer sought was almost identical to that of an existing client. And bidding to a tobacco manufacturer or a pharmaceutical company that practises vivisection might create internal tension or moral ambiguity.

• Would winning the contract create any conflicts of interest?

• And might winning it affect staff morale?

Finally…

• In your heart of hearts, how badly do you really want them as a client?

Your desire to win is the motive force behind the late nights, the meticulous attention to detail, the readiness to go the extra mile. If you lack desire and you’re going through the motions, the client and your team will pick up on that.

Deliverability:

You must be able to deliver the contract to the client’s satisfaction. Don’t be seduced by short-term gain if your reputation could be damaged by a less than excellent job.

• Your organization may have the right skills, but does it have them in sufficient quantity to deliver?

• Do you have the right geographical coverage?

• If a key team member leaves or goes off sick, does your squad have strength in depth?

• Is your technical expertise current and up to the job? Have you got the right skills?

• Do you have the resources to deliver, especially if the contract is larger than you’re used to?

• Are there particular technical, cultural, political or geographical constraints?

Having to bring in special experts to deliver key parts of the contract may complicate delivery and affect your pricing.

Profitability:

• Will it boost or batter the bottom line? Will your gross profit margin be acceptable to you?

• If the contract is in a new market, what are the typical margins?

• Is there repeat business lurking within, justifying a longer game?

• How prescriptive is the contract? Will you have room to move, or will you be cutting corners or clawing back costs through contract variations?

• Will the account take so much time, care and management attention that your ROI will be poor?

• If you’re going to have to bid low to win, what’s your walk-away price?

A NUMERICAL TAKE ON PRE-QUALIFICATION

The following tool forces you to score different aspects of an opportunity and see clearly if it falls into or outside the ‘bid zone’.

Investigate their payment terms: working for an organization with 90-day terms may impair your cash flow, or even bankrupt you.

Whatever conclusion you come to at the end of the pre-qualification meeting – whether to stick or twist, even if you agree to ignore your own numerical score for sound reasons – I want you to be able to say hand on heart that you looked long and hard at the opportunity. Only then will you be able to claim that, if you decide to proceed, you are doing so with your eyes wide open.

Once you’ve pre-qualified and decided to bid, whoever’s in charge of tracking your organization’s BD activity needs to post the tender on the sales pipeline. Now you’ve done your due diligence, that ITT or RFP has become a real tender with immovable deadlines. Posting it to your pipeline should spark the locomotive of your tendering function into life.

If you’ve followed it properly and you’ve decided to bid, your prequalification process should already have got you thinking about the ideal bid team, which is what the next chapter deals with.

WINNER TAKES ALL BOTTOM LINE:

Every bid you submit – and the process leading up to it – must be nothing short of excellent. One way of doing that is to be choosier about the opportunities you go for through systematic, rigorous and consistent pre-qualification. Everyone in your organization who has anything to do with bids, tenders and proposals must understand that pre-qualifying opportunities is a cornerstone of best practice. This understanding needs to be in your organization’s DNA.

[ FOOD FOR THOUGHT ]

Let’s map your organization’s genome.

Please score each of the following three statements out of 10, where 1 = totally disagree and 10 = totally agree:

1. Your organization, including its senior managers, has an established understanding, culture and habitual practice of pre-qualifying every major bid, tender or proposal opportunity.	/10
2. Every bid, tender or proposal opportunity gets pre-qualified via a structured, facilitated meeting of all the key stakeholders in the opportunity, against clear Bid/No Bid criteria.	/10
3. Every pre-qualification meeting concludes with a Bid/No Bid decision, or at least a set of actions with clear accountabilities and deadlines (e.g. to get back to the team with more information before taking the decision).	/10
Total:	/30

If your total score out of 30 is 15 or less, it’s likely that your organization is not pre-qualifying properly. As a result, you may be bidding for unwinnable or undesirable opportunities. Consider implementing a more rigorous approach to pre-qualifying ‘pyrite’ opportunities: they glitter in the sunshine of your optimism, but they’re not gold.