Now that’s a serious question.
Whether you’re the contractor invited to bid, or the customer inviting bids, this can be a touchy question. From the contractors’ side, declining to bid invitations can have serious, short and long-term implications.
From the customers’ side, requesting bids can have some risks. What if a party was held (RFP sent out) and no one bid?
Implications for Contractors Declining Bids
The following are a few negatives and positives for contractors when they decline bid invitations.
Selected bids. This doesn’t mean declining most bids, it just means being selective when saying “no”. Here’s what might happen if you decline.
(-) Remove possibility of securing that contract, revenue & profit
(-) Remove possibility of commissions & bonuses from that contract
(-) May be removed from future customer bids for that location
(-) May be removed from future bids for that customer’s other locations
(-) May offend customers who later move on to other companies and exclude the contractor from bids there
(+) Save time and money spent on bids with little chance of winning
(+) Focus efforts on customers that are a better match (in targeted vertical markets, geographies & growth industries)
(+) Keep proposal win rate high
(+) Maintain morale & enthusiasm (more wins & saying no to bad bids)
(+) Require less sales & administration resources
Implications When Not Enough Contractors Bid
Customers have skin in the game too. Here are a few customer pains when not enough contractors bid. Oh yes, this happens. Think about online reverse auctions. There are more than a few contractors not playing that game. When no one bids, customers have to rework their bid process.
Here’s what might happen when not enough contractors bid. Customers are:
(-) Unable to produce savings, negative impact on company’s costs
(-) Unable to meet company timelines for savings
(-) More time & effort required to revise & redo process for successful bid
(-) Delay in getting improvements from new contractors as rebids take time
(-) Bonuses, job stability & promotions in jeopardy
Contractors’ Considerations for Not Bidding
Deciding whether to bid or not is rarely black and white. The exceptions are for illegal or unsafe work.
The following is not an exhaustive list, but helps decision making. Typically, one consideration, by itself, is not a reason to decline a bid. However, when taken together they lead to better decisions.
Online Reverse Auction MINUS
An online reverse auction by itself may not be enough to decline. However, an auction minus the following steps smells like a Hollow RFP.
- Without proposal submissions (where’s the value?) -or-
- Without site visitations (unrealistic specs?) -or-
- Without customer contact to answer questions (shooting in the dark)
Lots of Bidders
Lots of bidders (20-40) at the bid walk/meeting indicates there’s no pre-qualification process. It’s a cattle call. Think twice about this bid unless this is the water you swim in, i.e. government bids.
Customer Reputation for Low Price
It’s a flag, of some sort, when a customer has the reputation for buying low price. However, if you compete on low price, go for it.
Less Than 2 Weeks Bid Turnaround
Proposals due in less than 2 weeks, especially for large bids with multiple sites, can have the look of Hollow RFPs. These bids need more digging to see if you want that 14-day dance.
Customers’ 60+ Day Payable History
If Dun & Bradstreet say this customer typically pays late you’ll want to add that to your calculations. Maybe you accept their slow pays as part of the bargain. Or, you increase your bid price to account for 60-120 day receivables. Or, maybe you decline.
Legality, Safety & Liability Indemnification
No question on declining illegal or unsafe work conditions (which includes unsafe parts of a city where the site is located).
Typically, contract language for liability is handled between counsels; yours and theirs. Best to figure this out before spending the effort bidding.
Not Matching Operational Capabilities
- Do you know how to do this type of work?
- Have you done it before? Do you have great references?
- Do you communicate your capabilities well in your proposal and presentation?
Not a Strategic Match
- Is this customer in one of your targeted vertical markets (i.e., high-tech, healthcare, airports, etc.)?
- Can you support this customer’s location(s)? With existing offices? New ones? Alliance partners?
- Are you willing to invest in new technologies? New processes (i.e. ISO, Green Cleaning, Day Cleaning, etc.)?
Decline Respectfully & Promptly
If you decide to decline a bid invitation, do so with tact, respect, and quickly. No sense getting removed from upcoming bids at this or other locations, or with this customer when they move to another company. And you know they will.
Notify the customer, always in writing (email works), as soon as practical. This means to make up your mind if you’ll decline immediately upon receiving the invitation. Prompt notification will give the customer a chance to replace you as a bidder when you decline.
It’s also a good idea to personally call the customer (both procurement and the end-user manager) and let them know you’re not bidding. Keep the personal and professional relationship healthy.
How do you make the decision to bid or not?