The Role of Risk Management in Bid and Tender Opportunities

Purchasing authorities incur significant risk when opening an opportunity up for tender or appointing a new supplier, including:

• Preserving relationships with residents, service users and other stakeholders by ensuring required works and services are seamless and uninterrupted, thereby maintaining levels of satisfaction.
• Staying within budget particularly if the buyer is a government authority as they will have little flexibility to commit extra funding to a contract or project.
• Delivering the scope of works without slippage, delays to the overall programme or poor quality/performance from contractors.

Consequently, they will expect tender responses to address these concerns and demonstrate appropriate control measures for managing and overcoming risks inherent to service delivery.

Risk management in quality responses

Providing a risk register for commonly encountered hazards to service delivery is a common fixture for questions around mobilisation and health and safety – however, acknowledging potential risks and mitigation measures to overcome challenges will be a beneficial ‘bid theme’ across all responses within the quality portion of the tender.

Business continuity planning

Questions around business continuity plans form a common element of quality responses, and hold perhaps the most direct relevance to risk management. Evaluators will wish to know which procedures are in place for events which threaten continuity of service, in addition to common issues relating to disruption. This can consist of:

• Instances of inclement weather can be mitigated by identifying access to specialist vehicles and weather kits, capacity to adjust planned schedules to avoid forecasts and localising contract staff in proximity to affected areas.
• Planned and unplanned absences will be a common occurrence on any contract – so you should demonstrate your risk management measures to authorities through procedures for booking annual leave and reallocating staff with identical qualifications from a wider pool of resources.
• Communication systems and IT failure may also be a concern for authorities, particularly as digitised information databases, communications and reporting are becoming the norm. Consequently, outlining proactive measures such as penetration testing and cloud-based systems are beneficial to showing data is protected and easily recoverable.
• Supply chain shortages are continuing to afflict many industries within the UK, due to a confluence of factors such as the aftereffects of the COVID-19 pandemic, changes to procurement regulations following Brexit and the ongoing conflict in Ukraine. Difficulties in procuring materials can be avoided by demonstrating sufficient suppliers for all contract specific plant/parts, in addition to capacity to hold stock levels which can outlast the shortage.

ISO 22301:2019 provides formal certification that your organisation is equipped with an optimised business continuity management system, assuring evaluators of your ability to mitigate or swiftly recover from disruptive incidents. If you do not possess ISO certification, a copy of a formal business continuity plan, signed and reviewed annually by the relevant manager or director can be used as evidence of risk management.

Quality management and contract performance

The purchasing authority will want sufficient reassurance that works will not only be delivered on time, but in accordance with quality standards outlined in the contract specification. To demonstrate how your quality management system will manage risks to achieve a consistent and high standard of quality in service delivery, consider demonstrating how your organisation promotes excellence via:

• Appointing specialist, highly qualified and experienced staff to the contract, limiting any obstacles which may arise due to inexperience.
• Developing a prescribed checklist to ensure works or services align with the requirements of the specification.
• Implementing scheduled and unscheduled audits or post-work inspections by supervisors and contract managers to verify compliance before handovers are completed.

ISO 9001:2015 is the universally recognised standard for quality management systems, demonstrating to authorities that any quality risks are effectively evaluated, controlled and communicated.

Health and safety

For obvious reasons, the core principle of health and safety is minimising risk to protect employees and members of the public from hazards. A minimum requirement for a high-quality response would include your methodology for producing RAMS, implementing a safe system of work and the details, qualifications and experience of your nominated H&S representative.

However, demonstrating effective risk management for health and safety can be bolstered by the following:

• Outlining procedures for residents/service users such as using barriers to segregate active worksites, and extra considerations for the vulnerable by using PPE or sanitising all working areas prior to leaving an active worksite.
• How staff are trained to perform dynamic risk assessments to determine if there have been changes to control measures within the working environment – for example, due to severe weather.
• Methodology for communicating changes to working practices to all employees and subcontractors and how it may impact a safe system of work.
• Including successes of your health and safety system, such as zero RIDDOR-reportable incidents over a defined period of time.

As always, health and safety accreditations will improve your organisation’s standing from the evaluators’ perspective, with common certifications including ISO 45001:2018, Constructionline Gold and CHAS.

Social value

Introduced by the Social Value Act 2012, social value refers to actions businesses engage in to promote positive change or growth within communities. This can include boosting local employment, supply chain spend with local businesses, volunteering or charitable donations and in-kind contributions. Social value responses constitute 10% of the evaluation criteria for contracts from central government authorities and typically range between 5 to 20% for sub-central authorities such as local councils or NHS trusts.

Although social value may not be immediately associated with managing risk, authorities will want to know about your systems and procedures in place for delivering on proposed commitments, as offerings will form a contractual KPI. Minimising risk can be demonstrated by:

• Assigning a member of your organisation task ownership of monitoring and reviewing social value commitments, ensuring they remain relevant to the opportunity.
• Identifying potential partner organisations within the quality response, such as charities or third sector bodies for volunteering or local colleges to source apprenticeships.
• Detailing frequency and medium of progress reports to authority representatives, allowing them to monitor your progress against proposals.

Furthermore, by committing to social value opportunities which are feasible and proportionate to the contract value, authorities will be reassured that the risks to proposed benefits will not impede overall delivery.

Risk management when considering tender opportunities

Lastly, it is equally important to consider any risks which your organisation may incur as part of the bidding process, such as submitting a low pricing schedule which would result in long-term issues. For example, the practice of suicide bidding – submitting tenders at-cost or at a loss in order to maintain turnover and keep the workforce employed – was particularly prevalent following the 2008 financial crisis to obtain contracts.

This famously resulted in the large construction company Carillion going into liquidation in January 2018, after reaching a debt balance of £900 million and failing to obtain additional lending from banks. Prior to its insolvency, the firm supported over 40,000 jobs worldwide, 19,500 of which were based in the UK.

To perform your own risk management diligence, ensure that you undertake a detailed ‘bid/no-bid’ decision prior to beginning the tender exercise, with all relevant stakeholders involved. Generally speaking, this will comprise:

• Performing a resourcing analysis to verify you can assure delivery of all contractual workstreams, scrutinise the strength and skillset of your labour force and subcontracting partners, accounting for rates of attrition over the contract lifecycle. Commit a figure which is achievable with the scope of works but does not risk noncompliance with the opportunity or existing contracts and service agreements.
• Determining suitability of supply chain and operational base: will your current offices and depots be able to deliver in accordance with KPIs and specification details (for example, if there are KPIs for emergency response times)? If you will need to expand supply chain partners or open a new base of operations, reflect on whether this is financially viable or if any resultant efficiencies would be achieved, such as servicing a nearby contract or one which requires the same parts/materials.
• Considering if the opportunity aligns with your long-term organisational strategy: although the tendered contract may be high-value or particularly prestigious, it may not line up with long-term plans, for example, if it will cause an imbalance in services provided, leading to resourcing shortages further down the line. This may save time and resources in the future by avoiding a ‘sunk cost’ on contractual commitments which were not a part of the company’s primary objectives.

Once you have completed this process, it should become clearer whether the opportunity is achievable and sensible to pursue.

Bid and tender support

Backed by 14 years’ experience, 7,000 ITT and SQ submissions and a fully auditable 85% success rate, Executive Compass provides a range of bid and tender management services, including a no-obligation call to support your bid/no-bid decision. To find out more, our sales and marketing team are contactable at 0800 612 5563, or alternatively via email info@executivecompass.co.uk.