In the public sector procurement process, there is the requirement to evaluate all potential suppliers on both the price and quality of their goods or services. However, in the tendering world, one of the most common comments we tend to hear is: “Isn’t it a fix, and isn’t it all based on the lowest price?” – we explore low prices and the “race to the bottom”.
A recent audit report by the Institute of Chartered Accountants in England and Wales found that construction firms especially are pricing their work at unrealistically low levels, which is worrying for the industry. This may come as no shock, after a number of large firms have gone into administration over the past few years, and it is said even the largest firms are “just a few contracts away from slipping into the red”. However, this isn’t just true of the construction sector – any firm pricing their goods or services at a really low cost could find it to be extremely detrimental to large, complex contracts.
The current Crossrail project is a good example of this, as the project has now gone way over budget and is not close to being complete – this can be explained by poor pricing strategy in the tender stage.
If you are an SME bidding for a contract, it is vital to work out a price that is suitable for your company to deliver the work in question – do not try to win a bid purely based on a low price, and stick to your company’s pricing structure.
Quality elements in a bid
Although the price is one area in which a bid is judged, let us not forget about the quality questions in a tender submission. There can be different variations in the price/quality weighting in a bid’s evaluation, but typically the price/quality split is around 60%/40% weighting. This means there is still a huge area of the bid in which to score marks through quality. If a firm accepts its price is the price and is not to be changed, the focus needs to be on scoring the maximum marks in the quality evaluation.
A company needs to consider what the contracting authority is asking of it: is the tender response well written and persuasive, is your offering better than a competitor’s, and are you aligning your submission to the buyer’s priorities? There is a lot to take into consideration for the quality element in your tender bid, and professional bid writing support can ensure you score the most marks available in this section of the tender. If you score highly in the quality, it will stand you in good stead for your marks in the pricing section.
In our experience it is certainly “not a fix”!