An engineer
recently expressed to me his disappointment that after working on a bid
specification for over a year and involving a number of OEMs in reviewing the
specifications, when it finally came out to bid he had only 2 bidders. I feel
for the engineer who put a lot of work into the specification and felt shunned
by some of the OEMs. But on the other hand, engineers and owners have to
realize that equipment manufacturers are working on many other projects and
sometimes have to be selective on where they allocate their limited engineering
resources, especially if several projects are bidding at once.
Here are a number of reasons why an OEM may not choose to bid a project even though the project seems like a good fit:
Timing: If
there is a flood of bids due at the same time, an OEM may not have engineering
resources available to chase all of these and has to pick and choose which
projects it has the best chance of winning and/or are potentially the most
profitable. Also, if the project has a tight submittal and delivery schedule
that overlaps an already busy production schedule, the OEM may have to pass on
the project to minimize the risk of liquidated damages and chase projects that
better fit into the engineering and factory schedule.
Bid
Requirements: So the engineering firm has spent 12 months in pulling the
specifications together, then gives the OEMs 4 weeks or less to review a 1000
page specification, do a detailed cost estimate, provide P&IDs, General
Arrangement drawings, Layout drawings and I even saw a spec recently where bids
had to provide electrical drawings! You get the impression the engineers think
the OEMs are just sitting waiting for the bid to come out with nothing else to
do…. I had three projects due within 2 weeks this spring where we were required
to provide this much information with our proposal. Typically the same firms
are invited to bid these projects so they all have the same work load and
therefore they are all going to pick and choose what to bid. In some cases, if
one proposal requires a lot more work, that one may end up having the least
bidders.
Too Much
Competition: One thing that really pisses me off is when I help an engineer
pull together a specification, estimate electrical loads, prepare drawings to help him with building
sizing etc, do iterations on all of this, then the final bid spec comes out and
he has listed every possible competitor, including some known to provide
inferior, low cost equipment… So you gained no benefit from helping the
engineer and to win the project you will have to be at a low margin with no
way to recoup the significant engineering work already provided. This is not
always what happens and there are many cases where your assistance is rewarded
by a specification that somehow gives you an advantage in the bidding process.
Commercial
Terms: OEMs all have different levels of risk tolerance, financial resources,
insurance coverage, etc. Bigger public firms have deeper pockets and wider
insurance coverage and more readily accessible financial data but also have
large teams of lawyers which will not budge on some T&Cs. Larger bureaucratic
firms may also not be able to meet tight schedules. Smaller firms and private
firms may not be willing to share financial data and not be able to do every
project that is bidding due to more limited resources but they can be a lot
more flexible on T&Cs and if work load is light, can deliver on tighter
schedules.
How do you ensure a competitive bid?
In summary, engineers and owners have to realize that there are many other projects bidding and OEMs do not have unlimited engineering resources to bid everything that hits the street as well as do submittals and build equipment they already have orders for. As an OEM, you are better to focus on a few bids and do them well and win some of them rather than try bid everything and win nothing…
So how do engineers ensure they get as many good quality bids as possible? First of all, I suggest giving advanced notice (say a month) when a bid will be advertised so the OEM can perhaps get a head start on some of the proposal requirements and costing based on draft specs they have reviewed. During the spec review process, I would also not only show the equipment specs, but get feedback on the commercial terms and information required to be submitted with the bid. Often this information is not shared prior to the bid, but it can help flush out concerns of OEMs that may prevent them from bidding so these can either be addressed, or you accept you won’t have as many bidders in advance.
Many times when I have asked for an extension of the bid date the engineer has said it is not possible due the tight schedule to deliver the project. It seems stupid to me that the engineer spent so much time agonizing over every detail of the specs for a year, often in a vacuum, and then gives the OEMs a fixed 3-4 week schedule to bid with no flexibility – it would make a lot more sense to leave some slack in the bid schedule to give OEMs more time if needed and ensure more bids and better quality bids!