Choosing when to bid on defence opportunities

Publication date: 2007

Bid/no-bid decisions for sales opportunities are aimed at eliminating opportunities or leads that you have a low probability of winning, permitting greater focus on opportunities that can be won. A positive bid decision initiates all bid and proposal preparation steps. Improving your bid discipline will increase your close rate, increase the total value of sales won, reduce the number of proposals submitted, and probably improve your earnings.

• Context
• Reasons to Pay Attention
• Step-by-Step Overview of the Bid Decision

Every sales representative’s objective is to win the order without submitting a competitive proposal. Leading sales training methodologies recommend avoiding proposals, and several practitioners suggest that being asked to submit a proposal is a signal that the sales representative has failed. Unfortunately, many buyers must request competitive proposals by law or organizational policy.

Proposals are used for more than just “selecting a vendor”– they are often used as a negotiating tool or a contracting vehicle. Sales professionals need to take proposal development and submission very seriously. A sound bid/no-bid decision is critical to sales effectiveness.

Bid decisions are a milestone event after a positive pursuit decision and before a bid validation decision. Use the pursuit decision to verify that the opportunity fits your organization’s strategic direction and capability before expending your time and energy on opportunities that you are unlikely to win. Use the bid decision to verify you are positioned to win before committing to an expensive sales effort. Use the bid validation decision to confirm that you have addressed all “show stoppers,” including requirements that you cannot meet, unacceptable terms and conditions, unreasonable schedule, unacceptable performance warranties or penalties, or reliable information that a competitor is pre-selected. Pursuit, bid, and bid validation decisions tend to be combined into a single bid decision when the sales cycle from opportunity identification to buying decision is less than 30 days. Customize and further define the inputs, outputs, and responsibilities for each decision milestone for your organization.

Table 1: Pursuit, Bid, and Bid Validation Decision Inputs and Outputs

Sound, consistent, disciplined bid decisions benefit you and your organization. Not all benefits are obvious from either perspective.

Look closely at your organization to see if your bid decision process discipline resembles these poor practices:

• Sales people with challenging quotas make pursuit decisions. Sales management requires no- pursuit decisions to be justified. Therefore, you find it easier to pursue everything.
• Bid decisions are initiated by receipt of bid requests. The only valid reason to no-bid is lack of resources, you or others, to prepare the bid.
• A bid validation milestone is not recognized. Any reconsideration of a prior positive bid decision is treated as a bid justification.
• If sales representatives’ bids are prepared by others, bids are free. Free items are over-consumed.

Here is the false logic:

If I no-bid, my chance of winning is greater than zero; therefore, bid everything, limited only by my resources.

Here is what best practice shows:

Improving bid discipline can double or triple win rates. Win rate is defined as the percentage of deals won divided by the number of deals you bid on. Improving the quality of the proposals submitted can improve win rates by 15 to 20 percent.

Organizations that improve their bid discipline will routinely report increased sales revenue, reduced sales cost as a percent of revenue won, improved sales quality (profit margin on sales), and reduced sales force and customer turnover rates.

The person or persons involved in bid decisions vary with the size of the opportunity, size of the organization, and the risk of the opportunity to the bidding organization.

Individual sales representatives usually have the authority to make bid/no-bid decisions for small opportunities. As the size of the opportunity increases and when support is required to prepare the bid, then sales and delivery management people become involved. When bid preparation support is not available, many organizations still let sales representatives prepare and submit bids. A best practice is to define the positions and the responsibility and authority of people in those positions to make bid decisions.

Larger organizations tend to have a written bid decision process. Typically, as the size and the risk of the bid increases, increasingly senior managers make the bid decision. The sales representative’s role is limited to making a bid/no-bid recommendation.

Use a bid/no-bid checklist or decision tree to improve the quality and consistency of your bid decisions. Bid/no-bid checklists prompt you to broadly examine each opportunity. Critical bid-killers are often overlooked, both wasting your time and squandering valuable resources.

Use the bid/no-bid checklist to identify what you do not know. Determining what you need to learn is usually more important than making the bid/no-bid decision. Tailor the generic bid/no-bid checklist in Table 2. Checklist items are grouped into four distinct areas: the prospect, the bid request, yourself, and the competition. Not all areas will apply for every opportunity.

Table 2: Bid/No-Bid Checklist

The generic bid/no-bid checklist shown above must be tailored to fit your organization and market sector. Testing each opportunity against standard bid criteria will eliminate poor opportunities, freeing time and resources to focus on opportunities you are more likely to win.

Your bid/no-bid checklist tells you what you do not know, but the bid decision is not necessarily obvious. For example, how many unknowns are needed to prompt no-bid decisions? Use decision trees to focus on the bid decision. When compared to bid checklists, bid decision trees are less information-driven and are more decision-driven. Consider using both bid/no-bid checklists and bid decision trees to establish your process.

Make the most of a no-bid decision. If you elect to bid, proceed. If you elect to no-bid, the pursuit of this opportunity stops, but your prospect strategy continues. A no-bid decision does not mean a lost prospect. Position the prospect for future opportunities.

Source: B. Douglas - LSI
Publication date: 2007

Related Defence Supplier Guidance

• Tips for writing winning proposals for defence contracts

To find out how your company can establish sound bid/no-bid decision-making capabilities for defence procurement opportunities, contact Jeffrey Strategic.