TechArchive

Original article date: February 1998

When Asea Brown Boveri, the Zurich-based Swedish-Swiss power engineering multinational, bids for a major contract it assembles a special “capture team”. The team generally includes a design engineer, technology specialist, legal expert and other business specialists. ABB’s highly structured approach is one reason why it is among the world’s most successful contract bidders. Now new research has pinpointed the key reasons why some engineering companies are more effective at winning new business than others. The research, carried out by Policy Publications as part of the on-going research for itsWinning Major Bids: the Critical Success Factorsreport, uncovers what it is the superbidders do that the less successful don’t to make them more successful. Researchers studied 30 engineering companies with turnovers up to £500 million among a total sample of 293 from many different industries. Seven of the engineering companies – the “superbidders” – won more than half the contracts they pitched for. But the other 23 won less than half, with 12 winning less than a quarter. The survey reviewed the effectiveness of the companies across 47 key bidding activities – from positioning the company to attract bid invitations to negotiating the final contract. It showed that while the performance of the most and least successful companies was similar across many of these activities, the “superbidder” engineering firms scored heavily in certain key areas. Superbidders are nearly twice as likely to understand the value and benefits customers expect to gain from their products as the less successful. Similarly, they are twice as likely to understand the decision-making process the customer uses to make a purchase. They are also twice as likely as the less successful to develop good person-to-person relationships with the customer. They are four times more likely to understand the roles different managers at the customer company play in taking a purchasing decision. Most tellingly, the superbidders are seven times more likely to be very effective at understanding factors customers consider when making the purchase decision. The superbidders score across a whole range of other bidding activities. They are more than three times as good at establishing the superiority of their products over rivals and of developing a distinctive image of their company. They are also nearly three times as good at finding and using competitive intelligence and at preparing detailed bid documentation. And they are twice as good at guaranteeing quality, delivery dates and after-sales service. These findings come against a background of growing global competitiveness for engineering projects. Increasingly, companies may find themselves as part of an international consortium bidding against other consortia for giant contracts. For example, BT, Lockheed Martin and General Electric Company beat Racal, Logica and W S Atkins for the £1 billion contract to supply upgraded telephone networks to the British armed services. Bidding can consume huge resources. During the summer of 1996, British Aerospace had 15 000 technicians working on bid projects. BAe’s bid prizes have included a £1 billion Australian order for the supply and maintenance of Hawk trainer aircraft and a further £500 million order to supply Hawks to the Gulf States. Massive contracts, such as these, carry strategic prizes beyond their book value, points out Colin Coulson-Thomas, Willmott Dixon professor of corporate transformation at Luton University, who led the research project. “The winners are well placed to fund their R&D projects and gain export orders that may be worth many times the value of British contracts.” Yet the research suggests too many engineering companies lack the world-class bidding skills they need to beat global competitors. For example, in positioning a company so that it gets invited to bid, 72% of engineering companies say the way buyers view the quality of their products and services is “very important”. But this masks the fact that the most successful are twice as likely as the least successful to attach importance to this key factor. “The pre-bid activities are critically important because they establish the platform from which the rest of the bid will be conducted,” says Coulson-Thomas. “The superbidders help to shape the way the buyer considers the bid in a way the other bidders cannot.” This puts them in pole position as the bid process proceeds. Yet, even then, the superbidders outstrip the others in most bid management activities. What is striking is that the superbidders are significantly more successful at the “soft” issues such as understanding the buyer’s business environment or his decision-making process rather than the “hard” issues, such as communicating the value of their products – although they excel at these as well. One chief executive of a systems design consultancy pointed out that trust and confidence were key issues. “We go about creating that trust by giving the customer the impression we understand his needs and the commercial pressures that help to shape the system we design.” Not surprisingly, most superbidders excel at building effective bidding teams, although most engineering companies recognise the importance of senior management leadership, including team members with product knowledge and building team spirit. One strikingly successful aerospace sub-contractor operates a two-team strategy on bids. Each bid is “owned” by a board director and includes other managers representing all the technologies involved. When the proposal is drafted it is checked by a red team of non-involved senior managers for compliance against the tender document and company strategy. According to the company’s marketing director, the red team can tear apart a proposal put together over months and running to six or eight volumes. “It has caused grown men to weep,” he says. When the red team is happy with the proposal a black team, chaired by the marketing director and with the finance director to the fore, moves in to check the cost structure of the bid and provide a financial check. This approach, says the marketing director, makes the chances of winning contracts “measurably better”. Most engineering companies recognise the importance of a range of negotiation stage activities. And, interestingly, there is generally less differential between the superbidders and the rest. By the time a bid reaches the final negotiation stages, the superbidders often have it sewn up, says Coulson-Thomas. “The over-riding lesson is that bids are won or lost in the early stages of a bidding process, very rarely at the end negotiating stage.”

• A free brochure describingWinning Major Bids...the Critical Success Factorsis available from Policy Publications by faxing your name and company address details to 01234 357231 or telephoning 01234 328448. The 128 page report itself costs £295.

February 1998