The bid preparation phase

In the period leading up to a formal tender process, both the client and the potential bidder will be preparing, each in their own way. 

Client preparation

The client organization will task their procurement department or organization with the job of preparing their tender and selecting a supplier. This will be based on an approved process that is meant to ensure fair competition amongst potential suppliers and in compliance with any applicable regulatory framework for their marketplace. Their procurement process is meant to ensure that the process is fully auditable and compliant with all legal requirements and financial controls, and ensures a competitively priced supply of the tendered products and or services.

The procurement organization will require information and input from several different sources from within their own organization in order to prepare and issue the tender document(s), including but not necessarily limited to:

1. Legal
2. Finance
3. Health and Safety
4. Environment
5. Logistics
6. Operations* (the client's internal user of the products or services)

*Depending on the scope of the tender, this may be a single or multiple sources.

Client's tender strategy

The client procurement team will meet with their internal customer(s) to determine the products or services that are to be tendered, in order to determine the bidding strategy. This is formulated to allow them to optimize the result, making use of a variety of factors that will influence and control the tender process. 

There are a number of things that can influence the tender strategy. An understanding of market conditions helps choose the best time to tender, e.g. avoid tendering when there is a shortage of capacity in the market (as prices will be higher). The way in which the goods and services are to be priced, the controls on service quality, key performance indicators and possible penalties. Consideration will also be given to the duration of a contract and what goods and services are included, in order to make their tender look as attractive to bidders as possible, and hopefully secure the best prices. 

The client may also develop a commercial evaluation model to be used to compare bidder's pricing on a level basis. The evaluation model will often include some what-if scenarios to model the effect of changes to the volume of work, changes to the time period, and changes to the tendered work-scope. 

Once the tender strategy is formulated, it will usually have to be internally approved by management, with the forecast tender value determining the level at which such approval is required. Once the relevant approval is secured, the work of preparing the tender documentation can begin. This will involve detailed consultation with involved internal parties to prepare the documentation that will be issued to potential bidders.

Qualification of bidders

At this stage, the client will either develop a list of prospective bidders or prepare the selection criteria that will be used to determine which companies can participate.

Bidder pre-tender preparation

Companies that wish to compete for and hopefully win the tender, will work independently and in parallel with the client – but usually follow a different timeline and path. 

This phase is usually managed by the bidder's Business Development (BD) department, with a dedicated pursuit team focused on the client and services to be tendered. They are likely to have several goals, that may include any combination of the following:

1. Secure the work without a tender process (if possible) usually through direct negotiation
2. Develop or strengthen existing relationships within the client organization
3. Determine who are likely to be key persons involved in the tender preparation and subsequent evaluation 
4. Who will be the key decision makers, technically and commercially, and who has the final sign-off on the decision
5. Develop an understanding of the potential Scope of Work and contract duration being considered
6. Discover if there are any requirements that would require investment in plant, property, technology, etc.
7. Influence the client's requirements to either include things that give them a competitive advantage, or avoid inclusion of things that would be a disadvantage
8. Promote awareness of their key or important capabilities within the client organization
9. Position their company as the preferred choice, prior to the issue of the tender documents

All of these activities are permissible in advance of a tender, but there will be a cut-off point where the client will no longer permit potential bidders to communicate with individuals or departments that are involved in the upcoming tender process. At the latest, the issue of the tender document package to bidders will close the door to these kinds of efforts, and all communication regarding the scope of the tender will now have to go through the official channels, which will be described in the tender documentation. Any attempt to circumvent this communication path is likely to be considered a breach of the tender "rules" and may in extreme cases lead to disqualification of the bidder from the tender process.

Bidder's time scale

Given that this effort is generally restricted to a time preceding the issue of the tender document package, the bidder needs to allow enough time to accomplish as much of this as possible. It is not unusual for a bidder to have an overview of expected future tenders on their radar. For some of the larger ones, their work will begin up to two years in advance of the tender – for example, if they have some technology gap that they need to close before the tender process begins. Even if they do begin two years in advance of a tender, this might only give them a 12-month head start on the client procurement team.

Bidder’s tender strategy

It is equally important for the bidder to have their own tender strategy, and this should be developed based on their own objectives of how they want to grow their business with that client. The pre-tender preparation will be used to gather a lot of relevant information, understand the opportunity and growth potential, and it can be used to direct decisions about investment, research and product development, recruitment, training and other relevant factors. The commercial offer can be strategized, for example, by considering packaging of other products and services, exclusivity, volume discounts, etc. A consideration might be at what price level to tender, and whether or not to leave space for any reduction during the post-tender clarification or negotiation phase, since offering the best price right away may leave no room for negotiation at all. 

In the same way as the client, it would be normal for the bidder to have their strategy in place in advance of the start of the tender process, so that it can be reviewed and approved by the bidder's management in accordance with their own internal procedures.