Everyone, who has not had experience, in competitive bidding, assumes the lowest price will get the deal but that is frequently not the case. Competitive bidding is designed to select the “lowest priced qualified” vendor, not just the lowest price. An example of this would be a bid for a government entity that wants a road grader, which must be delivered within 90 days after the contract is awarded to meet a seasonal need. But if the lowest cost bidder cannot deliver for 180 days, he is judged to be not qualified, and his bid is disqualified.
Therefore, the answering of the questions contained in the bid is critical. Typically, bids are developed by the purchaser with a ranking system where points are assigned to each question and weighted according to importance. For example saying a product is not made in the U.S. when that was clearly stated as a requirement may cause disqualification. Saying you can’t deliver for 45 days, when 30 were asked for, may not be fatal to the bid. But you have, to be honest, being caught not answering truthfully may cause you to not only be disqualified from this bid but all future ones as well.
And now the dirty little secret of bidding...
If you just sit in your office and wait for a bid to arrive in the mail, you are probably not going to win it. While you were sitting in your office, your competitor was in the purchaser’s office. Your competitor was in there to influence the way the questions were written. For example, if a bid says the job requires a 50 gal. pump, when you know it only needs a 25 gal. pump and that is the largest one you sell; that means your competitor was in there and convinced them of that knowing that he would be eliminating you as a competitor. It is extremely hard to change a bid once it is written and if you have not been helping to influence the writing portion, you may be eliminated before you even get a chance to bid.
Getting on bidding lists and the important subject of getting paid...
Bids can come from the federal government, state, county and municipal governments, public utilities, and anywhere “public money” is being spent and possibly even private business. The question you may have is “how do I get on the bidders list?” That question is best answered this simple way, call the purchasing department, ask them two questions:
- Do you maintain a bidders list and
- What do I have to do to get on it?
A morning's worth of calls may bring many dollars of potential business to your desk.
The bidding agency will usually send you a package that contains the registration materials.
It is pretty basic, and all they care about is who you are, where to find you, and what you sell. Nearly every product you can imagine has an individual number known as SIC or NAICS codes. They are industry classification codes that identify specific products or classes of products. The purchaser may provide a list of them, or you may get them in any library and online. If you sell office products, for example, you can check that general large category, or if you only sell copiers you can put in that specific subcategory number. It is important to list the correct specific numbers because you will save time looking at bids that don’t apply. Now for a big word of caution, if you don’t want to bid be sure to return the bid as a “no bid”. If you are sent bids and do not reply at all, they bidding agency will eventually drop you off of its bidders list.
Therefore, figure out who you want to sell to (based on requirements like service areas, etc) and get on the bidding lists.
Finally, consider carefully the payment and delivery requirements. Analyze the payment and delivery terms to make sure you calculate those issues into you pricing. In a bid where you only have to order from your supplier and drop ship straight to the buyer, without ever taking possession of the product, you to want to price that product differently than one you have to order and warehouse prior to delivery. Careful thinking is the key to good bidding.
This is where all or part of a potential bid is set aside for small businesses, woman, minority, veteran or disadvantaged owned businesses. Sometimes an advantage is also given to companies who are local. The federal government has led the way in these programs and most states, counties and cities and others follow. In fact if any federal money is involved in a project, it must follow federal set aside guidelines. Click here for current set asides for the federal government....
Every federal government purchase between $10,000 and $250,000 is automatically set aside for small businesses, as long as there are at least two companies that can provide the product or service at a fair and reasonable price. Source
The bidding agency may specify their individual definition in the bid or will be happy to answer your question regarding your qualifications.
If you are organizing your company, and know you want to participate in competitive bids, or have an existing company, it would be good to consider your ownership structure to gain an advantage when it comes woman or disadvantaged bidding. Winning a bid may depend on being able to check a box “Yes” to the question: Are you a small business?, or are you woman owned or local?
Another huge opportunity for small businesses is partnering with larger firms on bids. For example if you have a small business that operates a company that can do low voltage wiring, and a bid comes out for a huge electronic security system, you could partner with a national security provider who gains an edge in the bid when he has a partner that is a small business or woman or disadvantaged owned.
The amount of business that a small business can earn by competitive bidding is very large. All it takes is getting on bidders lists and then answering the bid questions correctly and then making sure you have accumulated all the advantage you can by being a small business and with ownership that will give you an edge.
Learning to be a successful competitive bidder can be done, and SCORE would like to help.
Please feel free to contact us to have a qualified Mentor contact you and begin helping you with this import sales channel.
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.