70/30 price-to-quality split: what does this mean for your tender?

Tender writing for a contract can be a time-consuming and resource-hungry exercise for even the largest business, which is why we always recommend to clients at the outset that they weigh up whether the tender is worth it or not by undertaking a ‘bid/no bid’ process.

Assuming you meet the qualifying criteria, one of the most important aspects to look at is the price-to-quality split. This will give you an immediate insight into the mind of the contracting authority and how they are viewing the overall procurement process.

Setting aside ‘lowest price’ as the awarding criteria, and focusing on ‘most economically advantageous tender’, if the marking criteria shows a split of 40% price to 60% quality, you know that the client is taking other factors into consideration that could have a substantial impact on who is awarded the contract. Conversely, if the split is 70/30 in favour of price, you need to ask yourself some questions before making the commitment to proceed.

Key things to consider are:

• Can you deliver a profit? – carefully evaluate what the potential profit will be if you win the contract at the price tendered.
• Is it worth it? – if you are forced to bid low, is the return you make worth it. Could the resources you are putting into delivering the contract be better used elsewhere?
• What is the cost to fulfil the contract? – how much will it cost you to prepare the bid and implement the contract – this can impact your profit margins considerably.
• How might the contract affect your other work? – for example, staffing and ability to take on other new, more profitable business.
• How crucial is the customer to your long-term goals? – is this a good potential client that could generate more work in the future?

Of course, there are some instances when bidding low could be part of your organisational strategy. Companies who want to get a foothold in a region dominated by a competitor, for example, might decide to put in an intentionally low price so they can establish a presence. Once the contract is underway they will leverage this to win more profitable work – hopefully.

Quality still counts

If you do decide to go ahead and bid for a contract where the scoring is heavily weighted towards the price, it’s important not to take your eye off the quality marks that are available. Price might be a priority, but the contracting authority will still be considering other factors that are important to them, such as quality, added value and competency.

To be in with a strong chance of success, your submission will still need to be competitive and stand out from your competitors, which means being able to compete on all levels, not just price. Ultimately it can come down to just a few marks between winning a contract and losing one, so ensuring that you maximise your score in the quality questionnaire can be just as important as submitting a low price.

If you are bidding low, you can’t be certain that your price will be the lowest, and the difference between a winning and losing bid only has to be half a point for the whole exercise to be fruitless.

Executive Compass offers an informed and experienced view of the tender process, and can provide you with an appraisal of the suitability of your business to tender for a contract.