Procurement

5 tips for running a successful tender

The process of putting together a successful tender involves a lot of moving parts. With each stage having a big impact on the next, there's a lot to get right from the very beginning.

Here are 5 tips for running a successful tender.

1. Do your market research

The first thing to do in any tender process is make sure you've done your due diligence in researching the market. You can't develop a fit-for-market tender if you have no idea what it's capable of. Who are the biggest suppliers? What are their offerings? What kind of prices can you expect to pay? These are the kinds of questions that can be answered by researching your market.

This early research should be a mixture of straightforward internet searches, talking to firms in your industry about their suppliers and looking on specialist platforms like IBISWorld.

2. Engage the market, early

As useful as the above desktop research is, it can't match the knowledge of the market that the suppliers themselves have. By engaging with the market in a transparent manner, you'll be able to identify the capability of the market, potential innovations to the goods or services, or potential challenges the market might be facing as a whole.

Interaction with the prospective market, ensuring probity requirements are adhered to, usually delivers a better outcome. These interactions provide greater understanding to both parties of the requirements and provides suppliers with advanced notice of the upcoming tender so they can resource appropriately.

Engaging suppliers directly allows you to tailor a tender to your market well.Engaging suppliers directly allows you to tailor a tender to your market.

3. Select the right procurement strategy

What should you include in the tender? What tier suppliers should you target? Should you approach a limited number of suppliers directly or launch the tender publicly because there's a lot of competition? The procurement strategy should be customised to the specific goods and services to be tendered and should not just be a duplication of what has occurred historically.

These are the kinds of things you need to think about as part of a procurement strategy and potentially address in the early market interactions in items 1 and 2 above.  The market research and sounding you conduct as part of the strategy development allows for a more comprehensive procurement strategy that aligns with the market capabilities.

4. Make your tender work for suppliers, not against them 

When you put a tender into the market, it's important to remember the time and effort suppliers have to invest into responding They are usually very busy servicing other organisations, so always be sure to set realistic timeframes for a tender's duration.

Ensure the tender response requirements are in accordance with the value of the contract to the market and that the information being requested is actually required for evaluations. Too often the tender template utilised is not tailored to the process and suppliers are requested to provide information that is irrelevant to the particular good or service tendered.

Outlining response expectations and/or page limits on each criteria also enables suppliers to focus on the important elements of the tender in forming their response.

5. Choose a relevant evaluation strategy

It's critical that you adopt a strategy for evaluating the tender responses that is relevant to your business objectives and the outcome you wish to get from the process. Consider the elements that are most critical and provide these with a greater weighting in the evaluation scoring. Too often a business criticises or challenges the outcome of an evaluation process without properly detailing the required outcome and contributing to the development of the evaluation criteria and weightings.

Be realistic regarding evaluation and award timings too. The tendering company will program their workload and resourcing to account for when the contracted services are required. If award is then delayed by a lengthy period, it should come as no surprise that elements of their tender response have been impacted by this delay i.e. available resources, etc.

To learn more about how RESOURCE2SOURCE can help you run a successful tender, get in touch with a member of the team today.

How to measure your procurement team’s performance

To get the best from a business unit, you always need to be measuring its performance. Whether it's sales, marketing or product development, using KPIs to track how a business unit is performing gives you the information needed to make improvements where necessary. The same is true for your procurement team.

We spoke with Heath Jess and Ryan Jackson, co-directors of RESOURCE2SOURCE, to find out exactly how this can be accomplished.

Performance metrics must be tailored to the organisation

There's no cookie cutter approach to measuring performance.

How procurement performance is measured is always going to vary from organisation to organisation. As Heath explained, ''it has to align with the most critical elements the business needs its procurement team to deliver. So there's no cookie cutter approach to measuring performance, because you could roll out the same measurements to all organisations but there will be only a few that matter for each. What's important is going to depend on what the organisation does and what they're procuring."

So while there's no one KPI for procurement teams that will suit every organisation, there are a number of commonly used metrics, such as:

  • Negotiated savings.
  • Time taken to conduct a procurement process.
  • Customer satisfaction.
  • ROI of procurement savings vs procurement team cost.
There's no cookie cutter approach to choosing performance metrics for your procurement team.There's no cookie cutter approach to choosing performance metrics for your procurement team.

Balancing short and long term measurement

Whatever the metrics you choose, it's important they align with the strategic objectives of the business, and are updated if and when those objectives change. Just having one rolling KPI that never changes can be difficult for employees to focus on, and subsequently much easier to ignore. Instead, Ryan explained, "there's an opportunity to hone a procurement team's focus and give them a three month KPI that aligns to a sprint or campaign, or a business objective. It can be targeted to achieve outcomes over a short period of time."

That said, it's still important to have longer term KPIs as well. Heath noted that ''they can help the procurement team understand their own performance, so when the business asks them how long a tender will take, they know from their metrics it'll take them, say, three months and they can stand by that.'' Finding the balance between shorter-term targeted metrics and longer-term general performance tracking is therefore key. 

Increasing the returns to procurement

All this performance measurement isn't worth conducting if it not reviewed and reported. Procurement is a service provider to an organisation, so it's important to ensure the procurement function is providing a service which meets or exceeds business requirements. Establishing measures and targets ensures performance can be tracked and reviewed in a clear and transparent manner.

Ryan explained the importance of taking a service-provider view of procurement within a business.

''Procurement functions are generally an overhead to the organisation, or a business support cost to a business unit. As such, its important from an overall profitability perspective that organisation's understand the performance of their procurement teams, to ensure that the level of service being supplied to the business is efficient and of high quality."

 A high quality procurement service is one that provides a good return on investment. A study from the Chartered Institute of Procurement and Supply (CIPS) found top Australian procurement teams delivered a 7x return on investment to their firms. RESOURCE2SOURCE has been able to double this, bringing their clients a 14x return on investment.

To learn more about how RESOURCE2SOURCE and how they can work with you to get more from your procurement team, get in touch today.

The benefits of doing market research before developing a procurement strategy

Before you can develop an effective procurement strategy or tender, it's important you understand the state of the market you're about to enter. Without this knowledge, the chances of not achieving the desired outcome, and instead just wasting time and money are greatly increased.

We spoke with RESOURCE2SOURCE directors, Heath Jess and Ryan Jackson, to find out more about the importance of market research for procurement.

What does market research entail and why is it vital?

As Heath explained, it's about gaining ''a better understanding of what's available in the market prior to actually developing your procurement strategy and/or tender''.

This understanding can come from a variety of places:

  • Internet research on suppliers and their capabilities.
  • Reaching out to similar organisations to see what they do to source a particular good or service.
  • Industry research on specialist platforms such as IBISWorld to understand who the major players are, the services they offer and how the good or service is evolving with new technologies.

Undertaking this market research brings a host of benefits. Principally, it ensures that your procurement strategy as a whole aligns with the capabilities of the market; there's no point building a strategy around something the market can't actually deliver. Once you know what the market can do, Ryan explained, you can then tailor your procurement approach to achieve the best outcome.

''Market research helps you decide whether the solution you're looking for is best outsourced to the market, delivered internally or a combination of both. You can't really know which option is best until you've done your due diligence on what the supply capabilities of both the market and your own firm are,'' Ryan said.

The internet is a great place to start researching potential suppliers and their capabilties.The internet is a great place to start researching potential suppliers and their capabilities.

Market research also provides a chance to consider alternative solutions, new innovations or opportunities for collaboration, if some parts of the market are ahead of the others. Heath provided an apt example: "New technology is changing so fast, so you don't want what you're procuring to be redundant within a year – there may be opportunities to future-proof that service by finding new and innovative suppliers, but you have to do your research first to find them.''

Finally, market research also provides the opportunity to find out the likely costs of the goods and services you're seeking, so you can determine whether a tender can be delivered within allocated budgets.

As important as it is, doing market research takes time and specialised knowledge. One of the services RESOURCE2SOURCE provides is doing this research for you.

What can happen if you don't do your research?

Ryan explained a number of negative consequences not doing the necessary market research can bring.

''If you run a tender without understanding the market, you can end up with an unexpected or unsuccessful outcome, resulting in wasted time and money.''

There's also potential for damage to your reputation ''if the tender's aborted because the strategy wasn't properly thought through, or you don't have adequate budget to procure the services tendered, it may reduce the markets likelihood of tendering for future work you release.''

Finally, as Heath pointed out, a lack of research can bring about lost opportunity costs: "You potentially miss out on a better service or improved pricing if you just roll over a similar strategy from last time you tendered to the same suppliers. For all you know, there could be 10 new suppliers out there who do a better job at a better price, or can offer you something your current supplier doesn't. But unless you do the research and understand how the market has changed since last time you tendered, those opportunities will be lost.

To learn more about how the team at RESOURCE2SOURCE can help with your market research, get in touch with a member of the team today.

4 reasons why probity is critical in procurement

Operating fairly and with integrity when running a tender is vital for businesses that want to succeed. Probity is not something that can be ignored, as it directly impacts the viability of each tender process, as well as the reputation of your business in the wider industry.

Here are four reasons probity is of the utmost importance in procurement.

1. It protects you from legal and financial risk

With an unfair tender process comes the potential for legal and financial risk. For Government procurement in particular, probity requires that all parties have a fair opportunity at being awarded contracts. If there is evidence that one supplier has been favoured for reasons unrelated to the evaluation criteria, there's potential for legal action to be taken against the awarding party.

Running a fair tender in accordance with probity ensures that risks of this kind are minimised as much as possible. Working with the team at RESOURCE2SOURCE provides you with a source of independent oversight – giving you peace of mind that you're running your tenders in accordance with market expectations.

To build and maintain a strong relationship, suppliers need to trust you run your tenders fairly.To build and maintain a strong relationship, suppliers need to trust you run your tenders fairly.

2. It promotes and supports a healthy and competitive marketplace

When the industry is healthy, it improves the quality and number of tender responses through greater competition.

Not only does working in accordance with probity promote good outcomes for your business, it also helps support industry. When an industry is free from corruption and all suppliers are on equal footing in a tender process, it makes a big difference to the industry. If suppliers trust that they have an equal chance of being awarded contracts, they'll be more willing to put a higher level of effort into their tender responses. Whereas suppliers that don't believe they have a chance based on the fairness of the tender process and the tendering company, may choose to either not tender, build a risk premium into their pricing or participate in unethical activities to increase their chance of success.

When the industry is healthy, it improves the quality and number of tender responses through greater competition. When suppliers know they will be awarded a contract on merit, they're going to work harder to lower their prices and provide new innovations.

3. It builds trust with industry

The best supplier relationships are the ones where both parties get something out of it beyond just an everyday commercial engagement. A relationship that becomes strategic instead of merely transactional opens a line of communication between client and supplier that otherwise wouldn't exist. Each side becomes willing to share more information about what they think is going well. What may need to change and where they think improvements to efficiency could be made.

The benefits these kinds of supplier relationships bring are worth pursuing. But to bring such a relationship about, suppliers need to be able to trust you, and this requires running your tender processes in a fair and principled way. If you show a supplier you're the kind of business that doesn't operate with integrity, they may be reluctant to build a strategic relationship with you. Reputational damage is hard to repair, so it's best to avoid it in the first place.

4. It's the right thing to do

Integrity in business shouldn't just be something you pursue because it benefits you in the long run. Operating fair and ethical tenders is important simply because it's the right thing to do. The commercial benefits that come hand-in-hand with having a reputation for honest conduct are simply an added bonus.

At RESOURCE2SOURCE, we work together with our clients to make sure their procurement activities are held to the highest standards of probity. To learn more about what we can offer your business, get in touch with a member of our team today.

Should my business outsource its procurement?

 

Backed by 13 years of procurement experience in the public and private sector, RESOURE2SOURCE co-director Heath Jess has seen many businesses come around to the idea of outsourced procurement.

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