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Every company, large or small, has an approach for conducting bid/no-bid decision-making. On one end of the spectrum, some companies employ a simple direct approach called
we bid everything or the shotgun approach, which generally results in high bid and
proposal costs and a relatively low bid-win rate (number of bids won versus the number of
bids submitted). While at the other end of the spectrum, there are companies who practice
the no-blind-bids approach.This approach means the company only bids on opportunities that they knew were coming before the solicitation being awarded, and have helped in
an ethical way to influence the buyers requirement planning. Companies who practice the
no-blind-bids approach typically have a higher bid-win rate and a higher capture rate
(total value of bids won versus the total value of all bids submitted).
So, why is it that every company does not use the no-blind-bids approach? The answer is
simple it costs more upfront to proactively staff a team of people to perform business development than to reactively develop and submit bids or proposals in response to request
for quotes or request for proposals. This article focuses on the inherent opportunity versus
risk assessment that every company must conduct, either formally or informally, as part of
the bid/no-bid decision-making process. Plus, this article includes a few simple yet proven
highly effective tools and techniques that have benefited both large and small businesses in
reducing bid and proposal (B&P) costs, increasing bid-win rates, and increasing bid-capture rates.
Elements of Opportunity
Elements of Risk
Corporate Direction
Customer Commitment
Competitive Environment
Corporate Competence
Potential Profitability
Opportunity Engagement
Period of Performance
Probability of Success
Resource Coordination
Overall Feasibility
Revenue Value
External Obstacles
In-house Content
Resources to Bid
Delivery Schedule
Collateral Benefit
Non-performance Penalties
Opportunity Risk
Assessment Tool
The real key to successful bid/no-bid decision-making is engaging your integrated
project team (IPT) or integrated solutions
team, typically composed of members from
sales, business development, contracts, accounting or finance, technical staff, operations or project management, proposal or
capture management, etc. Then ask the
members of the IPT to take each of the formerly mentioned elements of opportunity,
and use a four-point scale to assess each element, as shown in Form 1 on page 6. Since
all elements do not have equal importance,
we must also multiply this raw one-to-four
score by a weight to develop a weighted
score. These weighted scores can then be
totaled to derive a Total Weighted Opportunity Score that can then be plotted on the
opportunity axis of the Opportunity-Risk
Assessment Grid.
Opportunity Risk
Assessment Grid
There will often be more opportunities than
you have resources to pursue, so you must
prioritize and direct resources to those opportunities that have the highest probability
of success and payback versus those that do
not. Since you will need to compare opportunities to make choices, it is necessary to
develop a methodology to assess and compare specific opportunities. This can be done
using an x-y coordinate grid, see Figure 1 on
page 8, which plots opportunity on the yaxis and risk on the x-axis. The grid has been
further subdivided into quadrants to characterize different types of opportunities.
Quadrant A contains those opportunities
that have a high opportunity value and are
also low risk. Quadrant A opportunities
should be the highest priority, as they have
the highest probability of success with the
best potential payback. In contrast, Quadrant D contains those opportunities that
have low opportunity value yet have high
risk. Quadrant D opportunities are likely
to be projects you should avoid and do not
want to waste resources on pursuing as they
have a low probability of success and a low
potential payback. Clearly, Quadrants B and
C fall in between and require greater analysis and discussion amongst the members of
the IPT to determine whether the organization should pursue the opportunity or not.
Production Supply-chain
management of a large number of
subcontractors without impacting cost,
schedule, quality, or safety.
Score
Weight
Core Business/
Corporate Direction
Counter to core
business and corporate
direction
Neutral to core
business and corporate
direction
Competitive
Environment
Competitor is clear
leader and is favored
by customer
Customer favors
the competitor and
is neutral to your
company
Revenue Value
Over $5M
Potential Profitability
Profitability is negative
or break-even
Profitability is between
050% of corporate
requirements
Profitability is between
50100% of corporate
requirements
Profitability is over
100% of corporate
requirements
In-House Content
Between 5075% of
content is from your
company
Between 7590% of
content is from your
company
Future Business
Potential
Little or no connection
to future business
Assured or mandatory
link to future business
Resources to Bid
Probability of
Success
Probability of success
is near zero
Probability of success
is less than 50%
Probability of success
is over 50%
Success is almost
certain
Collateral Benefit
Little or no benefit to
other projects or new
company skills
Significant benefit to
other projects or new
company skills
Overall Strategic
Value
It is of low importance
that your company win
this business
It is somewhat
important that your
company win this
business
It is of high importance
that your company win
this business
Weighted
Score
Score
1
Weight
3
Customer
Commitment
Customer has assigned Customer has assigned Customer has assigned Customer has not
budget and personnel
budget but not
personnel but not
assigned personnel or
personnel
budget
budget
Corporate
Competence
Complete replication of
past projects done by
your company
No replication of past
projects done by your
company
External Obstacles
No obstacles exist
which are outside
control of customer
Some obstacles
customer is actively
working to address
each
Some obstacles
customer has plan to
address each
Significant obstacles,
customer has no plan
developed to address
each
Opportunity
Engagement
Your company
developed
requirements for the
customer
Your company
guided customer
in development of
requirements
Solution Life-Cycle/
Match
Between 3070%
of products will be
pre-released or new
products
Period of
Performance
Contract is between 1
year and 3 years
Delivery Schedule
Delivery schedule is
flexible and will be set
by your company
Delivery schedule is
fixed, but no penalties
for missed dates
Delivery schedule is
fixed and penalties
exist for missed dates
Resource
Coordination
Need to coordinate
company groups
and up to 2 outside
suppliers
Need to coordinate
company groups and
3 or more outside
suppliers
Nonperformance
Penalties
No penalties for
nonperformance
Penalties to be
negotiated between
customer and your
company
Fixed monetary
penalties for
nonperformance with
a limit
Fixed monetary
penalties for
nonperformance with
no limit
Overall Feasibility/
Risk
Project has
questionable feasibility
and very high risks
Delivery schedule to be
negotiated by customer
and your company
Weighted
Score
Conclusion
In retrospect, effective bid/no-bid decisionmaking requires a company to form a preliminary integrated project team (IPT) to
conduct an opportunity and risk assessment
using simple yet effective tools and techniques like those discussed in this article.
Then, the IPT should present the facts to
company stakeholders so they can understand the opportunity and risks and make an
High Opportunity
High Risk
120
A
C
40
Low
Opportunity
160
Low
Low Opportunity
Low Risk
40
Low
Low Opportunity
High Risk
120
Risk
160
Low