Consulting Journal: Bid management - Genuine bid evaluation

Bid management: Genuine bid evaluation

by David Blakey

The bid manager must determine if the bid seems genuine.

[Monday 8 September 2003]

The bid manager must judge whether the customer's request is genuine.

If that seems a strange statement, let me explain. Sometimes a customer may become dissatisfied with the work that their existing supplier - the incumbent supplier - is doing. This may be because the incumbent supplier is not performing well or it may be because the customer imagines that it is paying too much for the incumbent supplier's services or it may be that the customer is just a ‘difficult’ customer. In any of these cases, the customer may approach alternative suppliers with a request for proposals. If the incumbent supplier is not performing well, the bids will be a reminder for them to perform better and not take the customer for granted. If the incumbent supplier's prices are too high, the bids will indicate more competitive pricing. If the customer is ‘difficult’, the bids will demonstrate that no alternative supplier could do better than the incumbent supplier.

The result will be that all the bids will be rejected and the customer will continue to use the services of the incumbent supplier.

Genuine processes

Occasionally, there may be a genuine process at work. The customer may have to ask for alternative bids because the existing contract with the incumbent supplier may be near its end. The customer may have real reasons for seeking an alternative supplier. The result of the process may be that the incumbent supplier wins the bid. The other bidders can console themselves with the thought that the process was genuine and that they were involved in a fair and equitable process.

I have seen this happen mainly when the customer wanted to extend the scope of the services that it received. Sometimes customers have ignored their incumbent suppliers and have included them in the list of bidders only as courtesy and have been surprised that the best bid came from an incumbent supplier. In a few cases, an incumbent supplier has been doing such a good job that they have almost been excluded from the list of bidders: the customer has just forgotten that they are there. Imagine having a supplier run your help desk so well that your only communication with them as a supplier is the receipt and payment of their invoices: it is easy for a customer to forgot that the supplier exists. The suppliers that customers tend to remember are the ones who give them most trouble.

How you can tell

As a bid manager, you need to be able to judge whether a request for bids is genuine.

Know the market

You should know what is happening in the market. If you know that a supplier who provides services to the utility sector is in trouble, then you can expect that its customers may look elsewhere for those services. Their requests for bids are likely to be real. If, on the other hand, you know that the supplier has recently taken on some major new customers, then you might expect that some of its other customers may feel (or be) neglected. Their requests for bids may just be reflections of that, and the situation may go away in a short time.

You should also know of new services and products. A customer may launch a request for bids just to find out what new services and products are available. There are better ways of finding out, of course, but some customers do like to have a tailored proposal to consider. These customers are similar to people in a store who browse rather than buy.

Know the customer

You should know what is happening within the customer. Many requests for bids are initiated by new people. Some of them see it as way of establishing their power. If they issue a request for bids to the market, they imagine that their incumbent supplier will be suitably cowed. They may also imagine that it gives them a reputation within their employer of being prepared to make changes. They will not have to actually make changes, of course. They just need to be seen to be prepared to make changes.

Read the business pages and check for people moving to new employers.

Know the consultant

You should be able to find out easily if the customer has engaged a consultant to manage their acquisition process. You should also already know which consultants and which consulting firms are likely to issue a request for bids with the main purpose of applying pressure to the incumbent supplier.

I know of one consulting firm that has used these tactics several times, and two consultants within that firm who rarely manage requests for bids that result in a new supplier being appointed. If you know of firms and people who do this, be wary of them in all their future assignments.

What you do

If you have not begun it already, you should do the following as soon as the request for bids arrives at the bidder.

Arrange a meeting with the bidder's management. This is the meeting at which you will also present the results of the first evaluation, described in my previous article.

You may be able to report a list of evidence that points to a request being genuine. Here is a sample list.

The incumbent suppler has just announced price rises.
The customer has been unhappy for some time.
The customer has just completed a review of its suppliers and its ROI.
The request owner is known to you as honest.

If you have no evidence, you should seek the advice of your client's management at the meeting.

If your opinion is that the request is not genuine, your client's management should decide what to do. The obvious next step is to approach the customer and ask them to confirm that the request is genuine. Some clients do not wish to do this, as they see it as confrontational. My view is that your client's money is at stake, and they should be forthright in dealing with their potential customers.

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