Bidding is an essential and vital aspect of project management. Not only do the organizations and the project managers have to engage with the prospective clients by specifying at what rates they would undertake the project but also would need to be aware of how much their competitors are bidding though they might not have the exact information in this regard.
Indeed, it is a cat and mouse game as far as bidding for projects is concerned since project managers have to both bid at a rate that is acceptable to the client and at the same time would result in profits to their organizations but they would also have to ensure that they do not lose out on lucrative projects because they either bid too high or too low. Therefore, bidding is considered an important and vital skill that project managers have to possess.
Continuing on the same theme, upcoming projects usually entail initial tendering and procuring offering documents wherein the vendors either receive the project information from the prospective clients or are sent the same because they have worked together in the past and hence, are part of the clients’ vendor list.
In any case, the process of bidding starts with obtaining the relevant information from the clients and then proceeds to understanding the project requirements, the likely time for completion as well as the expectations from the clients about the delivery schedules.
In addition, feasibility analysis is usually done to gauge whether the vendors can indeed undertake the project and whether they have the necessary technical expertise and human resources to complete the project.
In all these phases, the project manager has to do a balancing act wherein they balance the need of the clients with that of the internal capabilities of their organization.
Once the tendering and information stage is completed, then the project managers have to get down to the task of preparing bid documents and offer documents which can be considered as the “meat” of the entire process since their costing and the respective bids would determine how much they bid for as well as whether they would be considered for the project and ultimately whether they would bag the project.
In this stage, the project managers have to as accurate and as skillful in determining the “fair value” or the “fair cost” at which they can undertake the project since their bid should not result in losses for them and at the same time, their bids should be competitive meaning that they must match or beat the bids made by their rivals.
As mentioned earlier, in this stage, the project managers are essentially working on incomplete information since they do not yet know the offers by their rivals. Therefore, it is advisable that organizations entrust the bidding stage to project managers who are especially skillful and adroit and more importantly, experienced since bidding is a skill that is refined with experience.
In recent years, clients are increasingly preferring fixed cost bids wherein they expect the vendors to bid on their projects on a total cost basis rather than billing them hourly or sequentially for the work done.
Indeed, with the recession and the resultant cost cutting measures, clients want the vendors to bid as aggressively as possible so that they (the clients) end up with the best possible terms and conditions. Indeed, with the time and material costing almost discarded, the vendor project managers have to very careful when bidding for fixed cost projects since delays and cost overruns are not covered by the clients.
This is the reason why many project managers create “buffers” in their cost estimates since they need these “cushions” for any possible delays and overruns so that they do not incur losses.
Having said that, it is also the case that many project managers under pressure to show results often bid unrealistically which can create problems for them down the road later since they have to stick to the bid even if it means that they “squeeze” the employees to the maximum.
Talking about aggressive bidding, it has also become the norm for project managers to involve senior management and leadership as well as executive personnel in the bidding process so that the “credibility” of their bids is enhanced.
Indeed, given the fact that personal relationships between the decision makers in the client organizations and the senior leadership in the vendors often “swing” the bids in their favor. While not commenting on the appropriates of this method, we nonetheless want to note that as long as the lower ranks do not have to pay the price for such aggressive bidding, then everything is fair as the business landscape is extremely competitive.
However, bidding is also about the match between external competitive drivers and internal capabilities. Therefore, project managers have to ensure that they do not overpromise and under deliver and at the same time, do not lose out to competition.
It is for these reasons that we note that bidding is both an art and a science wherein the fine art of balancing competing needs has to go hand in hand with the science of estimating and costing how much the bid amount is.
In addition, bidding is also about ensuring fairness to all stakeholders and resulting in a win-win situation where neither the client nor the vendor takes a hit. In conclusion, as wine tastes better with age, similarly, the practice of bidding is something that matures with experience.
