To Bid or Not to Bid?

What to do when you are only listed to keep the preferred vendor honest
As the dust settles on the annual end-year bidding frenzy where I probably bid on a few projects that were set up for other companies and we were just making up the numbers, I wonder if there is any value in bidding when you know your company is just listed so the owner can get a competitive bid. In some cases there are benefits in putting in a bid even when you know you have no chance of being selected over a preferred supplier but at some point when you have limited resources to spread between projects you have to make the decision – to Bid or Not to Bid?

There can be a number of reasons a company/supplier may be listed in a specification but have no chance of being selected:

• Another company has a good existing relationship with the end user through previous equipment supply and the owner wants to continue to deal with this company and the service personnel rather than work with a new company. This is especially the case where the project is an expansion of a facility, but as it is a large capital expenditure, it still needs to be competitively bid.

• Another company conducted a pilot study that the full-scale equipment design is based on, has developed a good relationship with the owner and was able to help write the specifications for the full-scale system. These specifications may require certain system features that are proprietary to the other company or difficult and costly for you to provide. This includes components that you may not typically use, so you do not have good OEM pricing.

• A service center must be within a certain distance of the project site or response times are required that can only be provided by one of the companies listed.

• The amount of information required to be submitted with the bid (detailed drawings, custom operating protocols, etc.) cannot possibly be provided by the bid date unless you had been working on these prior to the bid being advertised.

• Even though you are listed as an approved supplier, the first time you hear about the project is when it is advertised…

Even if you recognize you are just making up the numbers for one or more of the above reasons, there can be a number of reasons why you may still want to put in a bid as follows:

• It is an opportunity for the owner and consulting engineer to see the quality of your work through your proposal and the references provided. This may help you to be more seriously considered when the next project comes up.
• By putting in a bid you may be sent a post-bid tab with all bid prices listed and other competitive information that you can use to your advantage next time (you may also not want to give away that information if you don't think you can win).
• The preferred supplier may get overconfident and greedy and provide a price way over budget resulting in your proposal being considered seriously. Along the same lines, the preferred supplier and owner may not be able to agree on contractual terms forcing the owner to look for an alternative.
• The bid may come at a time when the other companies listed are very busy and there is not the incentive for them to put in a competitive bid.

The last two points are like playing the lottery and you do not want to be hoping for these scenarios every time you bid. I think the first two points are a better reason for bidding, as you have no false hopes and are working to build sales in the long term rather than hoping for a lucky windfall.

I am coming from the perspective of selling large custom capital-built equipment where a lot of engineering effort and time is required to prepare a bid proposal. So when it appears the specification is written around an alternative supplier, you really have to decide if it is worth diverting these valuable resources from existing projects that you have orders for, or from bids where you know you have a better chance of winning. I have worked on bids where the owner or owner’s engineer has assured me that there is no preferred bidder and everyone will be considered on their merits, then when the bid award notice comes out there is no pricing listed, the company it appeared was preferred is selected and you get some patronizing statement that the proposals were very close but in the end the owner went with the company they were familiar with or had closer service personnel, or some sort of subjective reason that is difficult to argue against.

Don’t get the impression that I resent the owner or their engineer for trying to get us to make up the numbers and bid. I get it that for public entities they have to have at least 2 if not 3 bidders, so the customer will encourage other bidders even if they have a preferred company in mind. As a manufacturer you always want to be in the position of having the specs written around your equipment and you should be in that position at least 25% of the time or you won’t win many jobs and will spend a lot of wasted engineering time on failed bids… The question is, when you know you are not the preferred supplier, do you bid or not? You then have to go through the possible upsides of putting in a futile bid listed above. There is also the possibility that there truly in not a preferred supplier and the engineer/owner has used a generic specification that may not suit any bidders perfectly. You then have a good chance in winning the job if the other bidders put in a halfhearted effort on their proposals. I see that in possibly one out of ten bid specs. The challenge is identifying if this is the case, and if you can the job may be yours for the taking.

We all have our ways to try get our equipment specified or find out if the specs are written around someone else and sometimes this works and sometimes you completely misread what you think you see between the lines. I have elected to not bid a few projects and then found out the company I thought was the preferred bidder didn’t bid either… I am still learning through the school of hard knocks how best to play the bidding game as I am sure my competitors are. I could write a lot more about this topic, but I don’t want to give away any more of my trade secrets until I retire so these can’t be used against me!