Successful Public Sector Tenders and Grants
Pricing a public sector tender can feel like navigating a maze, but with the right approach, you can make sure your bid stands out and is competitive. Let’s break it down into some key points. The following sections have come from the main questions that our clients have asked us when we have been helping them to qualify or respond to a bid.
Tender Response specialises in expert bid writing and consultancy services for public sector tenders. We offer a range of services, including bid writing, bid management, and bid training, tailored to maximise your chances of success. When it comes to us helping you to qualify a bid, we take our clients though a simple process – although we never advise you on pricing, we can help you to understand the public sector market landscape.
The commercial response is only part of the overall bid response and should form part of your bid qualification process. We’ve got another blog that looks more into How to Qualify a bid– see here.
Should I Discount My Price to Win?
You might think that lowering your price is the best way to win a tender, but that’s not always the case. Public sector contracts can last up to 7 years, so it’s crucial to ensure your pricing is sustainable over the long term. You have the option to hold your prices fixed throughout the contract term, or to take an annual increase as set by the council/ buyer. Depending on your service or solution this could be 2-25% annual increase.
Instead of just slashing prices, focus on offering value for money. Highlight the quality of your services and any unique benefits you provide. Remember, it’s not just about being the cheapest; it’s about being the best value.
If you hold your market rate at £100 which is advertised on your website, but then offer a rate of £80 for businesses that you are responding to 12 months sales proposals, then could £75 for year 1 of a 3 year deal be viable for your business? The answer would be a resounding YES if your cost is £20 but an obvious NO is your costs are £70.
How to Work Out the Commercial Scoring
Commercial scoring is how the buyer evaluates the financial part of your bid. This is usually outlined in the bid documents. There’s often a section explaining how the scores are calculated. Be aware that buyers can exclude unusually low bids, which are typically 10-25% lower than the next lowest bid. This means buyers have a good idea of what the market rates should be, based on their benchmarking exercises. So, make sure your pricing is competitive but realistic.
Thankfully in the Public Sector space, most of this information is readily available. Phew! You do however, need to know where to find the information.
You can either spend the time and review the public records yourself, which is time intensive and potentially costly for your staff time. Or, you could use a market research tool that has collated all of the information together.
Here at Tender Response, we believe in working smart and have our own Tender Analytics tool. This online dashboard provides:
- Buyer Insight – so you can understand the behaviours of the buyer
- Competitor Insight – so you can understand your competitors and the current suppliers
- Market Research – you can assess the market and compare this bid to previous bids
You don’t have to use the Tender Response tool, Tender Analytics to find this information, there are other tools available. If you don’t have a tool yet but see the value in the information, we also offer one off reports that provide the information needed.
To speak to one of our consultants or to book a free demonstration of our Tender Analytics, click here.
Financial Modelling for Bids
Financial modelling is crucial for understanding your cash flow and planning for the project. Consider the difference between buying equipment and when you can issue invoices. Public sector tenders might have milestone payments, meaning you only get paid after completing certain parts of the project. This could mean running at a loss until the next payment, so good project management is essential to stay on time and budget.
Depending on your cashflow, you may wish to alter the pricing for different elements of the project.
It is common for Construction contracts to have a loss leading first milestone payment. If the project is to be set over 5 milestones where #5 is the project being closed, then first milestone is often set to “contract signature”. It is unusual for this payment to sufficient to cover all of the costs to get the “moving”.
Whereas in Cleaning contracts, there is often no installation milestone payment as the transitions are less than 6 weeks and are based more on TUPE and training. Most cleaning companies can cover the on-costs for this 6 week period.
How to Understand the Commercial Response
Understanding the commercial response involves breaking down the buyer’s requirements. Look at what’s most important to them and what they ask for the most. Identify what you do that your competitors don’t. This could be a unique service or a higher quality of work. Make sure to highlight these points in your bid.
Also know that the commercial response is a “beauty competition” and may not reflect the solution that will be entered into a contract. This is because the specification set by the buyer could be up to 24 months old, and there will need to be changes before contract signature.
However, as the “preferred supplier”, you will be invited to reprice for the new solution and this will be took into the contract.
Always remember that when the specification changes, the solution changes… which means that there is an opportunity for you to change your price too.
Does the price change or are the prices fixed?
One of the pitfalls here is when there is a rate card included within the submission. If you price an apple at 15p and a pear at 20p and the specification in the tender is for 5 of each, then the price is 5x (20+15)= £1.60. Should the specification change to 10 apples and 2 pears, the contract price becomes 10x15p + 2x20p = £1.90. You would also need to mindful of your cost base implications. In this example you could leverage a better price for your apples, but could also have a worse cost for your pears.
How do you mitigate implications to your cost base? Easy, get really close to your suppliers. Have 3 suppliers where possible and tell them who your are speaking with for competitive quotes.
And one that most suppliers miss… on the last few days leading up to the submission, ask for BAFO (best and final offers) and ask for prices to be guaranteed until 4 weeks after the contract award date (see the timeline in the bid pack).
Typically tenders have the option to have an annual increase offered by the buyer or you can offer to fix your pricing for the contract term. This would be at your commercial risk.
How to Complete Market Research on Buyer and Competitors
Market research is key to understanding the buyer and your competitors. Use tender analytics to study the buyer’s habits, their current suppliers, and the value of their contracts. This information can help you tailor your bid to meet their needs and stand out from the competition. Look at the costs of the current supplier and assess if you can offer a better deal without dropping your price.
Remember that we have Tender Analytics – this is online dashboard provides:
- Buyer Insight – so you can understand the behaviours of the buyer
- Competitor Insight – so you can understand your competitors and the current suppliers
- Market Research – you can assess the market and compare this bid to previous bids
It does everything that you need and more.
You don’t have to use the Tender Response tool, Tender Analytics to find this information, there are other tools available. If you don’t have a tool yet but see the value in the information, we also offer one off reports that provide the information needed.
To speak to one of our consultants or to book a free demonstration of our Tender Analytics, click here.
By following these steps, you can create a competitive and compelling bid for public sector tenders. Good luck!
A Bit About Tender Response
Tender Response specialises in expert bid writing and consultancy services for public sector tenders. Our experienced team helps businesses navigate the complexities of the bidding process, ensuring your submissions are compliant, compelling, and competitive.
Here at Tender Response, we use a tool called Tender Analytics to help us to find this information. We also provide client access so businesses can do their own research at their own pace. To book your free demo with one of our consultants click here.
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