Many company talk about having robust bid/no bid processes, factoring in chance of winning, market competition and commercials, but in my experience, most fail to apply these consistently and still end up bidding bad jobs.
It's interest then that the article below from Zak Garner-Purkis suggests main contractors in the construction industry are starting to apply more scrutiny over the deals they pursue and in particular the likelihood of making profit. In the past lots of people have talked about being more selective, but rarely filters down the chain to the lower levels of major firms. Perhaps these more open and honest statements from CEOs will change that?
Being selective is and simplest way the best way to improve win rates.
You can argue that your bid team, commercial strategy and technical ability all make a difference, but in my view, getting the bid/no bid decision right is the key to success. Often people will counter (and you'll see it in the comments in the article below) that you may have to bid because there's nothing in the pipeline, but having a weak pipeline doesn't improve your chances of winning. If anything it makes it more likely you'll make a mistake and end up with a bad bid.
Whilst at Pick Everard we focused heavily on getting the bid / no bid right, and it drove up the average win rate by volume and value across the firm. A few of the things we implemented to make sure the process stuck were:
- The decision to bid was held by the bid team and Partners, not business unit directors, regional directors or other staff. This meant for any bid that didn't pass the bid/no bid threshold (calculated by my team), they had to 'challenge' the decision by demonstrating how they'd win the bid. This meant they had to read the documents and formulate a win strategy before committing significant resource to bidding the work
- The bid/no bid threshold was set very high, and designed to stop cold bidding. Rather than ranking bids on a gold/silver/bronze, bids either scored 'Bid' or 'No Bid', with the bid threshold set as such that if you hadn't met the client, didn't have significant experience or if the client was evaluating price with a greater than 30% weighting, you were scoring No Bid.
- We weren't afraid to walk away mid-bid. Once we had committed, if the bid wasn't going in the right direction, we walked away. This mainly happened at between Kick Off and the first Pink Review, but reinforcing this as a positive decision, removing the macho "we've committed so we'll do what it takes to win it" bravado really helped to drive up the quality of bids and focus people on the ones that matter.
If you want a final measure of success, when I left, staff utilisation at Pick Everard was at one of it's highest levels in years. We'd cut the waste from the bidding process, stopped focusing on dumb stuff and made sure every speculative hour spent was spent correctly. Combined with other efforts across the business to cut waste, this made a substantial improvement to profit levels.
More generally, the trouble is that it can be difficult to identify projects that have been underbid until the problems emerge mid-construction. Industry gossip always provides a bit of a guide – you’ll frequently hear how two firms had been, says, £20m apart in their valuation of a job. It’s an indicator, but it’s hardly a science. You don’t know the strategy that’s being pursued by a particular firm – maybe they have priced it better than their rival; maybe they plan to hit the client with a load of hidden costs; maybe they have just got it wrong. Many winning bidders only get a sense of whether a job will be profitable once they are past the halfway mark, when they [hopefully] start to make more money than they are spending.