In 2014, I decided to invest our resources in updating our MarketingWorks 2003 research, evaluating how bid cost investment affects work winning within the construction industry. Over many years, it has been my mission to help construction organisations to uplift their win rates and become more effective in their work-winning activities which, in turn, improves win work efficiencies. So I wanted to see what we could usefully learn about successful work winning behaviours in 2014 and how we could use that insight to help our clients.
The research programme was developed in association with Professor Will Hughes of the University of Reading and the data was collected by reference to actual projects. It was analysed to discover what can be learnt, not only about the cost of bidding for work, but also how different behaviours and approaches have influenced whether a bid has been won or lost.
In addition to providing some interesting indications as to how and why a bid is successful, the survey also reveals that many companies fail to capture bid cost information and to fully evaluate their own specific market and processes. This has a real impact on profitability and, if addressed, could deliver significant value to the industry.
Uplifting Win Rates
There are many variables influencing how effort or bid spend affect outcomes for different types of project, so it is important for contractors and consultants to be analytical of their market and rigorous in the management of their work-winning and bidding behaviours. The resulting knowledge can be applied to enhance their effectiveness.
The research reinforces our view that there is potential for this type of data to help in decisions which could identify:
- Where to invest effort (in activities that will win the work)
- How this varies by client/ sector/ procurement route
- How to exploit selectivity to maximise profitability
- How this would influence strategic organisation
In most cases activities focused on the specific client (i.e. client-centric, aligned activities) win the most work, in the most cost effective manner.
Work winning efficiencies are achieved through a combination of improved effectiveness (resulting in fewer abortive bids) and increased rigour in selectivity and focusing of available resources. The 2014 survey gives pointers on where winning bidders focus their resources and the MarketingWorks Work Winning Solutions help organisations to apply this learning for greater work winning effectiveness.
- The total project value of the bids submitted with data is £11.3 billion of which £8 billion has full cost data. Significantly this includes £4.3 billion of winning bids.
- The sample represents a large proportion of the construction work carried out last year in the UK and is a good representation in the key areas of measurement.
- The approximate cost of a contractor’s average winning bid is £60k in 2014 and consultants average £24k.
- In 11% of bids won and 15% of bids lost, the reasons for winning or losing are apparently unknown.
- Price was given as the single reason on 50% of losing bids but only 30% of winning ones.
- Almost 40% of winning bids identified a combination of factors as the reason for the win, compared with 21% of losing responses citing a combination of factors for the loss.
- Winning bidders invest more in their bids.
- The investment of time or money needs to be focused on the activities identified as creating a winning bid.
- The activities identified as helping to create a winning bid are those that are client-focused.
- The bid cost worked out, across winning and losing bids, to be 0.57% of the total project value.
- The bid cost percentage has significant impact on a contractor’s retained operating turnover.
So, as different behaviours may result in different outcomes for different kinds of project, it is vital to create and manage the bid process to capture good feedback, learn from past mistakes and apply the knowledge gained to maximise success in future bids.
In the survey, we asked ‘What reasons were given as to why you won or lost the bid?’ As this was an open question, we took the reasons given and grouped them under broader headings (Graph 1) and where a combination of factors was given, we then analysed them further in Graph 2 (below).
Feedback and Continuous Improvement
The survey found that for 11% of bids won and 15% of bids lost, the reasons for winning or losing are apparently unknown (See Graph 1 above). It is our experience that, without a clear, fact-based understanding of why bids do or don’t succeed, companies can’t make improvements for the future. Losing bidders may repeat mistakes and may be bidding for projects they could never win. Winning bidders may not be proactively applying to future bids the factors that have in the past led to success.
Long-standing government guidance advises governmental bodies to provide feedback to both winning and losing bidders as a matter of good practice. Anecdotal examples from the industry suggest that in some cases clients do not provide clear and accurate feedback whilst in others the bidders fail to ask. This leads to the conclusion that the industry as a whole (both sides of the work-winning process) are not valuing the role that feedback plays in improving the efficiency of work-winning approaches and behaviours.
Focusing on Price can be Self-Fulfilling
Half of reasons given for losing the bids in this survey were price related (Graph 1). In practise, the suggestion is that price is often a default position: if all bidders are aiming to win on price or are differentiating in similar ways, then clients will revert to price as the most clearly defined way of choosing the winning bid. This result could also imply that these bids were lost because the bidders’ focus was purely on price.
Whilst there were other single, overriding reasons given for losing, it was extremely interesting that 21% of responses identified a combination of factors. The picture is quite different when reviewing the reasons given for winning. Here, whereas single, overriding factors were also mentioned, with almost a third of responses being price related, in almost 40% of responses, a combination of factors were given as the reason for winning.
Focusing on a Combination of Winning Factors
We have broken down the responses mentioned within the category ‘combination of factors’ in Graph 2, to see the frequency with which different factors are mentioned. When we drill down into the combination of factors we can see that whilst price was mentioned in 25% of cases for winning bids and 27% for losing bids, many other reasons were also given.
The important thing to take away is that contractors and consultants shouldn’t try to win on one single thing, but that a better winning strategy would be to focus on a combination of winning factors. This requires an empowered and enthused team focused on understanding their clients’ needs and objectives and then developing the right combination of key themes that will be successful for that client and project. This will significantly improve win rates and thus reduce the associated cost of abortive bids.
The conclusion that clients tend to consider a range of factors in their decision also raises one more consideration in the bidding process – if it is not possible for the bidders to score highly across all elements, should they be bidding at all?
The survey data deals with headline results across a complex industry with a lot of variables. This highlights the opportunity for an ongoing research programme addressing bid assessment in the context of a company’s own market situation, thus offering benefits in achieving greater effectiveness and efficiency in work-winning tools, processes and behaviours.
MarketingWorks offers a range of solutions to help our clients achieve these objectives including:
- Creating bespoke win work flow processes and guidance that support company-wide adoption of a work winning culture with embedded client centric behaviours and attitudes that improve win rates and work winning efficiencies.MarketingWorks works with you to identify desirable changes in behaviours and processes and then works with your teams to uplift their capability, achieving rapid buy-in to desired behavioural change resulting in dramatic and immediate improvement.
- Bespoke easy-to-use bid selection tools that help contractors and consultants to quickly evaluate their bidding opportunities, enabling consistency and transparency in decision taking.By using MarketingWorks’ Selectivity and Reporting Tools you will be able to avoid waste by refocusing resources and effort on enhancing the quality of those bids where they have the highest chance of winning.
To discuss this further, contact:
Philip Collard, Managing Director, MarketingWorks Training & Consultancy Ltd, Business development solutions for the construction industry
Telephone: 07973 501599
Follow: Philip Collard @Win_Work
Active Supporters of the Bid Cost Survey 2014
Barbour ABI, Building Magazine, CIOB, Construct UK, Constructing Excellence, Construction News, Designing Buildings WIKI, Glenigan, KMS, RIBA, RICS, Satellite mpr.
Simon White, Head of Business Development, Arup. Reviewer and contributor to the analysis and interpretation for the 2003 and the 2014 Bid Cost Surveys.