People Talk About Price When There’s Nothing Else

People Talk About Price When There’s Nothing Else

How often do you get a new enquiry and read in the instructions that your potential client is seeking the ‘most economically advantageous tender’? But this is so open to misinterpretation by procurement teams and by bidders- I’ve heard many disgruntled bidders say that they lost on price alone and that the client just wasn’t interested in the quality of their services.
Most procurement professionals I’ve spoken with want to get the best value for money solution within their budgets and for the minimum risk. But, some will only interpret this as being the lowest price and will not consider the added value of your approach. Without removing this block there is little you can do but keep repeating the same process of ever decreasing profits, so it’s important to remember that…

Price is only important when there’s nothing else to talk about

For years, the construction industry has operated on low profit margins driven down by competitive tendering that other industries just wouldn’t accept. Of course, the market is changing, but historically very little has been done to tackle low margins in what is a high-risk industry. If the market dictates that you must bid a very low margin to get the work then the benchmark for your profit has been set well before you start construction. And this means that you’re in danger of a downward spiral for following bids with tightening margins and having to cut corners just to survive.

So, when that tender arrives you’ll spend time thinking about your bid and how your solution will meet your potential client’s needs…you’ll think about the cost of your goods or services and price your bid at a level that market research and your expertise tells you ought to win…you’ll also think about the benefits your approach will bring to your client.

The difficulty is that your competitors are offering what appears to be the same service, which makes it hard to choose and so it all comes down to price. Your differentiator is to understand how your client will measure value for money and then align your offer to meet that criterion.

Recently, the MD of a facilities management company we’ll call ‘FM Solutions’ complained to me about losing out to larger organisations seeking to ‘buy’ work below market value. Whilst FM Solutions’ bid scored well in the value responses they were not the lowest when compared with their competitor. FM Solutions whole operation was seemingly much slicker than the winning bidder and 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.

To put this into perspective, on a £6m contract their client would have saved just under £190,000 by these efficiencies but they didn’t make this distinction anywhere in their bid! 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 the client to understand why they were better value for money than their rivals.

The price to value relationship is much more than a simple cost cutting exercise of slashing internal costs without consulting delivery teams or beating up your supply chain just to undermine your opposition. You can learn more by reading ‘Where’s Your Value’ and ‘The Price is Right’ in Win More Bids.

Once you’ve identified the things that are important to your client you must demonstrate how you will meet or exceed them in your bid. You can do this best by using real examples that are backed by irrefutable evidence that can be measured against the value of the contract.

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 that every client wants to know, “what’s in it for me?”

Until Next Time!

In our next instalment, we’ll look at the subliminal messages you give your assessors in your bid and how this can influence the outcome for better or worse!


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