Tenders provide €9bn in new business opportunities in Ireland but not all tenders are awarded — costing Irish companies at least €300m a year.
Figures for 2016 show that 5,191 tenders were published on the eTenders website. According to data from ted.europa.eu, 3% of these were formally cancelled. More alarming is that the status of a whopping 53% of tenders is unknown. These tenders were not formally cancelled. Although reliable statistics become scarce at this point, it’s reasonable to assume that 10% of these tenders never went ahead.
SMEs lose at least €60m a year on cancelled tenders.
This figure is reached by the statistics that are readily available. If 3% of tenders are cancelled, and tenders in Ireland are worth €9bn annually, that equates to €300m worth of public contracts that are cancelled.
The Office of Public Works (OPW) has stated that most tenders attract 4.5 submissions, while TenderScout research shows SMEs spend between 3% and 6% of the tender value on their tender proposal. Using a median figure of 4.5%, we arrive at the €60m cost SMEs incur for cancelled tenders.
The operative word here is cancelled. When we consider the cost of non-awarded tenders, the €60m figure grows as high as €1.5bn, using the same mathematical logic. There is a large range between €60m and €1.5bn, but neither is a figure SMEs can afford to lose.
Much of the responsibility for cancelled and non-awarded tenders lies at the feet of procurement officers. Poor planning on the part of buyers costs SMEs dearly.
This consists of a lack of pre-tender market engagement — very few buyers run supplier meetings; incorrect focus — the Office of Government Procurement (OGP) holds occasional supplier briefings but focuses instead on the tender process rather than ensuring requests for proposals (RFPs) are well-written and of substance; budget/expectation mismatch — buyers underestimate how much budget is required to fulfil projects (TenderScout recently worked with a UK buyer who y believed they could find a supplier to complete a £500,000 project for a £50,000 budget); and legal challenges — RFPs are generally poorly written and there is always a risk that a legal challenge will be brought.
The reasons listed above are out of the control of SMEs, but there are ways to mitigate much of the risk associated with competing for tenders. It is important to meet the supplier. A tiny number of businesses meet with buyers, although this is one of the easiest ways to increase tender win rates. It’s the age old story of people wanting to do business with people they like. Contacting the buyer to set up a meeting and engaging meaningfully about how the tender brief can be fulfilled is a strong way to position an SME in the buyer’s mind.
Next, choose tenders carefully — set up a qualifying process for tender opportunities. Knowing which tenders to compete for and which to disregard is the strongest way to reduce the cost of applying for tenders.
Set up a tender library — a lot of the work involved with competing for tenders needs to be done only once if done well. Make sure to establish a tender library of CVs (not simply copied and pasted from LinkedIn), gather and store your accreditation certificates, and document project management and grievance procedures. These are elements required for most tender proposals, and having them on file means time only needs to be spent for each new proposal on crafting value propositions.
Finally, ask for feedback. SMEs are allowed to ask for feedback on why their proposal did not win a tender competition. Few do this even though the feedback is often valuable and will clearly highlight what needs to be improved for a future tender proposal to be successful. This feedback is not available in the private sector.
No one would argue that tenders are a perfect process but governments are always going to need to procure goods and services from SMEs. Winning tenders helps SMEs ensure the sustainability of their businesses, protect jobs and create more. These are not insignificant considerations and tenders represent the largest sales pipeline globally.
Tony Corrigan is chief executive of TenderScout which is on track to help 200 businesses win more than €200m in public contracts in 2017.
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