Inside the critical bid/no bid decision
- By David Hubler
- Apr 04, 2012
Ask business development professionals what’s the key to determining whether or not to bid on a federal contract, and the one word answer you’ll hear most often is “knowledge.”
As Bob Lohfeld, CEO of the Lohfeld Consulting Group and a Washington Technology contributor, puts it, “the best informed win.”
“The single-most important factor in making a bid decision is how well we understand the customer, the customer’s requirements and objectives,” Lohfeld said. “The better we understand the customer, the more likely we are to win.”
Jerry Hogge, senior vice president of business development at QinetiQ North America, said, “To me, the most controlling factor in making business development pursuit decisions is how well we know the customer, how well we understand their requirements, both expressed and intangibles, and what kind of credibility or experience we’ve had with that customer.”
Equally important, you need to know the competition and its capabilities, Lohfeld said.
In other words, “You have to fight in your own weight class,” said Tony Crescenzo, COO at IntelliDyne LLC, a mid-size government consulting company. “Certainly if I get in a fistfight with Northrop Grumman or Lockheed [Martin] or SRA, I’m going to be picking up my teeth with broken fingers.”
“Playing the law of large numbers does not work for small and mid-size companies,” he said. “If you shoot at everything that moves, first of all you’re not going to hit a lot. And second of all, there’ll be a negative perception of you with the contracting shops that clearly you’re not well positioned.”
But small businesses especially might be tempted to use the scattergun approach as a way to join the industry. That was the thinking of Sandra Corbett, CEO of InCadence Strategic Solutions, a government consulting company she founded almost three years ago.
In this tight budget climate, she said new small businesses like hers should invest in a solid infrastructure and bid on as many contracts as they believe they could possibly win.
“The biggest pitfall is to make the mistake of not going after opportunities,” she said. “I feel we can’t afford not to.”
Corbett uses three key indicators in deciding whether to put her company’s time and resources into a bid effort. They all involve knowledge.
“No. 1, do we understand this work?” she said. “Do we have the current talent on staff to understand this technology? No. 2 is do we know this customer? Have we worked with this customer before? Do we understand what their mission is and the direction in which they are going?”
The third crucial determinant is bandwidth. “Is this a small proposal effort that we can accomplish with our internal team? Or is this a massive IDIQ set-aside for small business? If so, do we have the team in place to provide a compliant, compelling proposal?” Corbett said.
“If we don’t have those, it’s a pretty easy decision that we won’t go after it as a prime,” Corbett said, adding that she might however pursue the award as a subcontractor as part of another prime’s team.
“For me, bid decisions are made not as a single decision but as a series of decisions,” Lohfeld said. To help companies make rational decisions, he has created a scorecard, or check list.
“First, the opportunity has to fit our company strategically in the sense that there are certain things that we want to accomplish as a company,” he said. “Indeed, the opportunities that we pursue should be building blocks to help us accomplish our strategic objectives – not procurements that are one-offs and take our company in a different direction.”
Other check-off factors include: Do we understanding the client’s requirements? Can we create the right solution to meet the client’s objectives? Do we have the right teaming partners? Do we have the right management and technical teams in-house to carry out the work? How does the customer feel about us as a bidder? Do we know the competition and can we beat them? Will pursuing this contract help us achieve our financial objectives as a company?
If the bid process moves along successfully, “when the RFP is released it’s really a perfunctory exercise to make the bid decision,” Lohfeld said.
But contractors must be ready to shut down the process if the capture team is not making technical progress toward a viable bid and never take on a project that appears to be risky. The biggest warning sign of trouble is when “you just can’t get inside and understand what this customer wants. You’re unable to get insight,” he said.
So Lohfeld advises contractors to be “risk averse” by being sure you have the right solution and that you’re well acquainted with the client and its needs.
Uncertainties also must be factored in, such as changes in mission or budget or customer leadership, said Dale Luddeke, senior vice president and chief growth officer at systems engineering firm TASC Inc.
“In each instance you should be able to identify how you’re going to answer that uncertainty and mitigate that risk,” Luddeke said. “To the degree that you can answer the uncertainties and mitigate the risks, then you’re at a point where you can say, ‘Okay, this is something worth going after or not.’ ”
Gary Loyd, CEO of Centurion Research Solutions, said his consulting company has created an analytics model based on Davenport and Harris’s 2007 book, Competing on Analytics: The New Science of Winning, that factors in tight federal budgets and other changes such as lowest price-technically acceptable awards to help make an objective bid-no bid decision early in the procurement process because of the intense competition in the federal market.
Loyd said contractors should be especially careful not to be lured into bidding on the basis of a high dollar value or the opportunity of moving into a new market. “That’s a risky strategy if that’s where you’re putting all your eggs,” he said.
When there are several bid opportunities to consider, Loyd said an objective approach is essential to quickly eliminate the two or three that offer the least chance of winning.
“To make a subjective qualitative decision isn’t going to help move the ball forward in winning more deals,” Loyd said. “To be objective, you have to have relevant business intelligence; you have to have facts and a disciplined approach.”
Speaking of pitfalls, QinetiQ’s Hogge warns not to fall prey to the trap of “incumbentitis,” which can lull incumbent contractors into thinking they have perfect information that also “perfectly informs the capture or pursuit of a new piece of work.”
For new work, Hogge said pitfalls include misjudging the actual requirements of the contract and your strengths and those of the competition.
“Trying to put an objective measure on those things so that you get the proper insight into what is the real probability of success on an opportunity generally are the pitfalls that trip teams up,” he said.
A final bid decision involves the entire QinetiQ senior management team and comes at the intersection of requirements and capabilities, Hogge said.
“At each stopping point along the way, where we make a review, reassess our decisions and decide is this a business decision that is prudent to continue to invest in the opportunity, a pattern of understanding emerges that’s either favorable or unfavorable that ultimately weighs into the judgment call,” he said.
An overall bid strategy facilitates recognizing opportunities and what the company needs to pursue them, Luddeke said. “Do I need to partner with somebody, team with somebody? Maybe there’s a particular individual with a skill set I need in order to qualify myself and make myself viable for this kind of opportunity.”
“You have to be intellectually honest around what are your parameters around the bid process, what are the go-no go guidelines you’re setting and stick to them,” Luddeke said.
If you don’t, you’ve got to change your expectations of the expected outcome, he said. “Every time you change that, you have to reset your client’s expectations,” he said. “I think a lot of times people forget that.”
Luddeke warned that by making changes the client isn’t on board with, “you may be creating for yourself more risk and uncertainty down the road.”
“Do not walk away from risks and uncertainties without first understanding how you’re going to address them,” he said. “The second thing is don’t assume anything. When you assume something, that introduces an unnecessary risk.”
If something unforeseen and critical happens, don’t be afraid to change your bid status, he said. “Don’t be afraid to say, ‘I can’t prime this, I should go sub it. Or, it’s not worth me going after this job because even if I win it, I won’t be able to work it.”
Luddeke adds, “It’s okay to get through a bid cycle and say, ‘You know what? This is just a bridge too far. I can do much better for my client by going after a different opportunity.'"