How to Make Sure You’re Value for Money

You spend time thinking about your bid and how your solution will meet your customers needs…you think about the cost of your goods or services so you price your bid at a level that market research and your expertise tells you ought to win…you also think about the benefits your approach will bring to your customer…but do you think about how your customer will understand and measure value for money (VFM) in your solution?

Bid assessors are increasingly demanding VFM as a requirement from bidders…but what exactly is it and how can you really demonstrate it to stand out from your competitors?

Too often, value for money becomes simple cost cutting exercises- slashing internal costs without consulting delivery teams and beating up your supply chain just to undermine the opposition. Of course, supermarkets have done this for years and in some situations, provided you have a carefully thought out strategy, it can be valid. But if done badly it can also have the negative effect of reducing profit, damaging relationships even before you’ve started work and placing your prospective client at risk when things change. Bidders can also be left feeling that they have been forced into a low cost bid to win the work, which potentially reduces any chance of offering real value for money later on.

It is a human trait that we want to do well so starting from this position is not usually going to be beneficial to either party. However, no one is going to pay more than necessary so we must look at how efficient our service or operation is so that it provides real a value for money solution.

True value for money is a balance of a number of issues and can be a win-win situation for both parties if handled well. With complex PPP projects there is an ideal opportunity for the public sector to benefit from the expertise and innovation that the private sector can offer. This is one of the most important reasons for engaging with them in the first place and the contract needs to be sufficiently flexible to allow for this input. Smaller contracts are not excluded and they too can benefit in similar ways by using the expertise and input from the private sector partner.

To start, you must really understand what you are offering; how much your services or goods cost, which must include your integrated supply chain who must share your objectives; and, where value might be gained against the desired outcomes of the project or commission.

I can give you a good example from a visit I recently made to a prospective client we’ll call ‘FM Solutions’. The MD complained of losing out to larger organisations seeking new opportunities below its usual operating level. Whilst this is not uncommon in the market it is important to note that their strategy may be to buy work and perhaps seek compensation later against claims to recover their costs.

In FM Solutions’ tender, they achieved a high score in the value responses but having completed the standard schedule of rates they were not the lowest when compared with their competitors. I completed a review of their bid and it was evident that FM Solutions whole operation was much slicker than the winning bidder. Most importantly, during my interview with the MD I discovered that FM Solutions achieved considerably higher “right first time” scores than their competitors- this meant that when they attended a client’s site they were able to fix the problem without needing to return 8.3% more times than their competitors. However, they didn’t make this distinction anywhere in their bid and, consequently, lost the contract!

To put this into perspective, on a £6m ($9) bid their client would have saved just under £190,000 ($285,000) by these efficiencies! If they had thought to tell their prospective client about this it would have blown the opposition away and FM Solutions would have won the contract without any reduction in their profit. What they failed to do was help their prospective client to understand why they were better value for money than their rivals and then show them in a way could be measured against the value of the contract.

When you really understand your operational business model and how you perform in the market in relation to your rivals, you can gain a top down understanding of where you are value for money and why this is important to your prospective customers.

Good luck with your bid and if you need help in differentiating yourselves from your rivals just give me a call. If you have found this blog useful please send it to a friend who may also benefit and let’s get VFM firmly in our bids!

Top Tip

Demonstrate the specific value you will bring to a project rather than bid on the lowest price. Show examples of how/where/what/for whom you have done it before and answer that all important question “…what’s in it for me…”