Tendering is an expensive, complex, and lengthy process. Here's how to make it easier.

It may be a matter of sink or swim for many organisations, but the tender process is often viewed with contempt by IT buyers and sellers alike. For many, it is a labour intensive, tedious but necessary evil which they would relish handing over to a third party.

Outsourcing can happen at both ends of the tender spectrum. As an IT buyer you can outsource the development of new tender processes and tender documents, the analysis and evaluation of responses and presentations, and even the management of the new system. Your IT supplier can outsource market intelligence, tender notification, response and presentation tools, and document management, which if efficiently managed, can also make the buyer's task less laborious.

But at both ends it's a fine line between risking a business process, which if done incorrectly can be expensive and damaging, and employing the services of third party consultancies, software or online tools, to ease the pain of the tender process. But with tender response times dwindling, it might be the only way to stay afloat.

Emerging trend
Over the last 12 months the average tender response lead time has decreased from three to two weeks, and there has been a dramatic increase in the number of tenders, says Peter Morrison-Dowd, group business manager of contract research and OMC (opportunity management consulting) at the TTI Group, a business information specialist with clients in Australia and Asia.

According to Morrison-Dowd, the number of tenders in Australia has increased by 38 percent across all industries whilst the number of companies outsourcing part or all of the process has risen by 60 percent. The increase in demand for tender responses coupled with the fact that there are still only 24 hours in the day, seems to have forced an increase in outsourcing.

Colin Lange, founder of Canberra-based Lange Consulting & Software, has seen the outsourcing of tendering emerge as a definite, but unexpected, trend over the last four years. Lange prepares tenders for mainly government IT buyers, ranging from government agency Centrelink, which has 24,000 staff, 6.3 million customers, and spends millions of dollars on tenders annually, right through to city councils. Clients spend on average around $35,000 for Lange's tendering services and software.

Lange says he fell into offering outsourced tendering solutions by accident. "I had the software in my back pocket, and it was a small client which didn't have the resources to manage its own tender process which suggested I do it," says Lange, who has since worked on over 35 tenders. "I generally handle the once in a blue moon complex tenders worth around $14 to $15 million. It's an eye opening trend even for me, and I'm doing it!" adds Lange.

Lange's offering starts with either tender document templates or custom-made documents, depending on the client's requirements. "Having an existing framework gives clients a bit of a momentum but I consult with the client to make sure the tender document has its fingerprints all over it," says Lange.

Once the tender documents are prepared, Lange steps back during the distribution and receiving of tenders, and busies himself with preparing the evaluation strategy for when the tenders are in. The soft copy tender responses are uploaded onto Lange's evaluation software Apet (all purpose evaluation tool), which is licensed out to the buyer and offers evaluation and risk analysis of the tenders, based on criteria set by the client.

"The client sets the goalposts and identifies which criteria are more important than others," says Lange, who then produces a report of his findings, which he calls a desk analysis. He also assists in evaluating vendor presentations, but does not get involved in contract negotiations.

Unbiased and independent
According to Luke Silcock, principle consultant at PA Consulting, which helps buyers with IT sourcing and tendering decisions, outsourcing the tendering process removes some of the human foibles and vendor tricks that can bias the outcome. For example a supplier might try to get a buyer on side by taking the IT manager round a few laps of the golf course.

"There is often a lack of probity, which results in one or two vendor solutions being considered as vanilla, when a whole scope of alternative solutions could be bypassed," says Silcock. He also warns that many consultancies offer little more than brochureware about vendors, when tendering is about asking the right questions rather than receiving canned answers.

As an IT buyer, Silcock recommends that before you even begin you need to ask yourself: what you are trying to achieve; who your potential suppliers are; what is the scope of products and services they offer; how you are going to measure the performance of the supplier; how that relationship will be managed; and what role the supplier is going to play?

“The distribution and amendment process is automatic, cutting down on paperwork and time.” --Jon Barnard, Tenders.net

With these questions at the ready, Lange believes that the IT market is now readier than ever for third party suppliers to step into the tender breach. "If the tender process is handled by an independent company, one that for whom the only thing that matters is value for money and objectivity, it increases the credibility of both the tender and the buyer," he says. "Outsourcing the process can save hundreds of thousands of dollars, or millions over a ten-year period, and for local government and small companies particularly this is huge," he adds.

Lange also claims it can take between 30 and 40 people in a large organisation to evaluate a large tender, possibly taking them away from their normal jobs.

"If people who may have never read a tender before, and have to make sense of an enormous amount of detail, are taken from each department to evaluate the tenders, it can be a huge drain on resources. I provide an opportunity for clients to shield the staff from this labour intensive desk evaluation," says Lange, who claims that in some cases up to 50 person hours a week can be saved through letting a third party company do the legwork.

See through tendering
Another major issue in the tender process is the need to demonstrate transparency and probity, which means that a buyer has to be accountable for the decisions it makes. Outsourcing tendering can only make the process more transparent, says Lange.

In the name of transparency, when evaluating a tender Lange's system produces two things: a numerical figure, or the score; and a reason for the score, or the accountability. "If a respondent scores 10 out of 10 no more needs to be done. If it doesn't, we need to show why it doesn't, to achieve an outcome of transparency and probity," says Lange.

On the left-hand side of Lange's report there will be the numerical score and comments, and on the right hand side there will be a copy of the original tender criteria. "The alternative is to have the original tender criteria stuck in a separate box in a cupboard somewhere, which makes it impossible to properly compare what you've got with what you wanted in the first place," says Lange. "Having the two side by side for direct comparison provides real transparency," he says.

Lange says not many people understand what transparency means. "People often say that it means everything must be documented, which in translation means ‘I don't have a clue'," says Lange. Another blunder, says Lange, is if you list "value for money" as criteria. "Value for money is an overarching principle of all tenders, not evaluation criteria on its own," he says.

And don't get him started on cost. "Why do buyers put cost as criteria? Because again, they don't have a clue," says Lange. "Public money particularly makes people do strange things, and in government it is often mandated that the buyer has to tell the board why they didn't get the cheapest IT supplier," says Lange. "Lots of clients struggle to defend an extra $5, but it's like buying a car for $100 that lasts a week or one for $500 that lasts a year," says Lange.

Software soothes a tender process
In addition to using consultancies, some IT buyers simply use tender automation software. Andre Blom, managing director of US-based Pragmatech Software, a company offering proposal automation and sales effectiveness software, believes that the tender process shouldn't be outsourced.

"Responding to tenders is an integral part of the process of winning business and to me this is a critical issue and I do not really understand why companies would want to outsource it," says Blom. "Some companies outsource their tender process, typically if they do not have the internal resources to prepare the responses or they need specialised presentation design skill. To me this means that that company does not have the business processes and intellectual property in place to effectively respond to tenders," he adds.

Pragmatech's software has been implemented by Australian customer communications company Salmat to streamline the tender process across its two separate business divisions, business process outsourcing (BPO) and customer contact solutions. "Historically, every business unit in every state conducted their own tenders, amounting to hundreds over a year, so we used Pragmatech to shorten lead times and to ensure a consistent message from all departments," says Stephen King, CIO of Salmat.

Without automation, tender documents can take hours or even days to write, and can be a fiddly case of cutting and pasting huge chunks of information from previous tenders and struggling to make it fit the new tender criteria. Tender automation products claim to fill this void and Pragmatech claims its clients generally report a 50 percent reduction in the time it takes to create customised tenders.

Blom also refers to a US survey of Fortune 1000 companies targeting the use of sales effectiveness and proposal automation software, which showed that organisations experience 47 percent time savings, spend 27 percent less time gathering background information, and turn 48 percent of their proposals into closed contracts as compared to only 26 percent of proposals by non-software users.

Supply pain management

Morrison-Dowd highlights two kinds of companies to which an IT supplier can outsource its tender responses. The first are tender notification companies, which he says use broad category search criteria to direct tenders to suppliers. "For instance an office supplies company would receive notification of every tender which had the words 'office' and 'supplies' in it, which means it will receive a lot of tenders it can't do," says Morrison-Dowd.

Morrison-Dowd says there are three things a supplier needs to bring to the tender process--capability, credibility, and value add. If the client responds to the wrong tender, which he says they invariably do because it is difficult to turn down business, they lack these three criteria and therefore they fail. They will then blame the tendering process for not working for them, says Morrison-Dowd, and as a buyer, you receive 100 tenders, of which 10 might be relevant, making your workload heavier.

"From a consulting perspective, companies should avoid any service that operates on keyword search and broad industry categories, as our experience shows that this can only lead to inaccurate information and companies responding to tenders they cannot win. Ninety percent of companies fail during the contracts process because they respond to contracts that they do not have the capacity to win," says Morrison.

Morrison claims TTI group uses high-filtering software to seek suitable tenders for clients, producing a 98 percent match. At the outset it captures market information and assists in creating a tender strategy for an IT supplier, in terms of its main industry (eg IT), its market system (eg hardware), its capabilities (eg its areas of expertise) and its critical success factors (eg what sets it apart from the competition). It then scours the market for tenders using its in-house filtering software program and produces contract reports matched against the company profile and ability to win. The report is then generated and dispatched to the vendor. The system continues to track the current and planned contracts and dispatch them to the vendor online.

Other features include a contract closing alert function, multi-delivery points (so that more than one person can receive tender notices), and an archive database of closed contracts for research purposes.

Caught in the tendering web
Perhaps the biggest overhaul of the tendering process is occurring-- where else?-- but online. Morrison-Dowd claims that within two to three years, 90 per cent of all tenders will be conducted online.

Tenders.net provides an online platform for buyers and suppliers to put out and respond to tenders. The buyer advertises on the Tenders.net network, where the tender can be made public or restricted to certain suppliers. "Buyers don't have to advertise the tender in the normal way or provide physical documentation, and the distribution and amendment process is automatic, cutting down on paperwork and time," says Jon Barnard, managing director of Tenders.net.

The buyer pays nothing for a public tender, and pays a fee if the tender is restricted. Suppliers signed up to the service, of which Barnard says there are thousands, pay a fee to be advised on open or public tenders which meet their criteria.

But this is a new trend which still has some fundamental flaws, warns Morrison-Dowd. "Most of the current e-lodgement facilities are based on a format where suppliers answer set questions, which doesn't allow any form of individuality," says Morrison-Dowd. "Tendering is a sales situation and a supplier has to have a point of difference to grab attention," he adds.

The other problem with online tendering at the moment is that it doesn't allow the respondent to include many graphics. "For example, we would suggest that a waste management company responding to a tender for an education department should include a picture of kids running up green hills with blue skies, showing the final outcome, because in a tender document organisations ultimately buy the outcome," says Morrison-Dowd.

Morrison-Dowd says state government and some federal government departments are the only ones tendering online at the moment. Peter Henry, the tender coordinator for the Open Interchange Consortium (OIC), a Sydney-based group which encourages the development of electronic technologies to automate business processes, explains that this is because the federal government is committed to all federal, state, and local government agencies providing tenders online. Henry is also concerned that SMEs are suffering from slow download times that are associated with online tenders.

But Morrison-Dowd claims that by December, TTI Group will have got the technology mastered. It is developing an e-lodgement portal, due for launch at the end of the year, which will allow suppliers to submit individualised responses, complete with security measures including time and date stamps to ensure noone submits responses after deadline.

Firm foundations
Whilst online tendering can streamline the adjudication process it does not reduce the time and effort required to prepare responses, warns Pragmatech's Blom. "The challenge is to reduce the overall time it takes to write and publish the tender as well as to significantly reduce the effort required to respond," he says.

On or offline, Lange say there are four pillars which should hold up the tender process. The first is governance, and knowing where the parameters lie. The second, he says, is the stakeholders in the tender, and looking outside the corporate sphere to the larger picture of who is affected by the tender. The third pillar is structured content. "The tender has got to be spot on" says Lange. Finally there is the technology to facilitate the process and evaluate the tender.

"Lots of our clients say they use our software because what most others offer they can just as easily do themselves in a spreadsheet. Its one thing to have clever technology but its got to add value and not just duplicate a manual process," says Lange.

And at the heart of decisions about tendering must be the tender itself. "If the tender process is represented as a human being the arms might be the evaluation tools, the brain might be the stakeholders but at the heart will be the tender," he adds. "If the tender itself is wrong, the house of cards collapses."

Tamworth outsources $2.4 million tender
		Tamworth City Council in northern NSW worked with Lange Consulting & Software to handle a tender for the replacement of its local government software solutions, including financial, property systems, and geographic information systems. "We had seven modules to fulfill and employed Lange to help build specifications, analyse responses, and generate a report based on the criteria we set," says Chris Wansink, information technology manager at Tamworth City Council. The council had not dabbled in an IT tender for 20 years so it was a new process and worth $2.4 million to the successful supplier or suppliers. The consultancy and software cost Tamworth $40,000 and gave the council "a more professional result than we could ever have achieved in that time frame," says Wansink. Lange first stepped in to offer Tamworth Council a framework of documents with which to generate a tender. "We finessed these to our own organisation through a series of workshops and then used Lange's Apet (all purpose evaluation tool) to generate evaluation criteria and an analysis database for when the tender responses came back in, in this case in electronic format," says Wansink. The tender received around a dozen responses, four of which have since been selected. The tendering process took 12 months and Lange Consulting was involved for six of those months. "The methodology used gives us a degree of independence and there is less risk of being swayed by personalities from different suppliers," says Wansink. Another important feature of the service Lange offered was the ability for staff, during the tender process, to include ad hoc comments to the final report, so for instance if Tamworth attended a demonstration of a product and made an observation about how the product performed under certain circumstances, these comments could be taken into account. "This gives us the capacity to calculate not only the business and IT best fit, but also the best fit from a specifically council perspective," explains Wansink.