If you’re an SME looking at winning a government contract. Last year, the government awarded over £19 billion of business in government tenders to small and medium-sized businesses, which is going up.
But before you dive into the world of government tendering, it’s essential to know the ins and outs. Specifically, there are risks that can occur when bidding on government tenders.
Here’s what risks to expect when you bid on contracts and some guidance on dealing with those risks.
Common Risks and Issues When Bidding on Contracts
Some risks and issues are relatively common during the bidding process. Here are the main ones you should be aware of before you start:
Lack of Information
If you haven’t had prior experience bidding on government tenders, you’ll need to familiarise yourself with the tendering process. You may also lack information on what’s required on government projects if your business intends to venture into the public sector market.
Suppliers who lack this information may leave key information out of their tender, risking a failed or incomplete bid.
Always do prior research if this is your first time bidding. Ask for clarity if something in the requirements documentation doesn’t make sense.
Public sector contracts, such as construction tenders, sometimes involve large sums of money and often strict payment terms. A small company tendering for a sizeable project could potentially experience a cash flow problem.
The other main financial risk is the cost you’ll incur putting the tender together. Many seasoned suppliers will have entire teams to create their proposals. You should always consider the time and resource cost of entering a bid.
When you’re putting together the costs for a proposal, you won’t have sight of your competitors’ bids. And it often makes it difficult to know if you’re over or under-bidding for a tender.
Overbidding could put you outside the price bracket and make your bid uncompetitive. Underbidding could leave you with too little contingency budget if the government department awards you the project.
Not Meeting the Requirements
You must always read through the requirements carefully and note every detail. You may be surprised how many suppliers miss out on winning a tender because they don’t comply with a mandatory requirement.
If something is mandatory, it’s listed for a reason. Don’t ignore it, hoping you’ll win the tender anyway, even if you can’t tick that box.
Use our contracts finder facility to ensure you have the correct information before entering a bid.
Perhaps the most costly risk on our list is the issue of non-compliance. That is the scenario in which you win the tender but fail to deliver what’s expected.
That could lead to several significant problems for your business, including withheld payment, sunk costs if the project gets cancelled, and reputational damage.
How to Spot Potential Risks During the Tendering Process
Identifying risks early in the process is the best way to mitigate them when you bid on government tenders. Here are some ways you can do that:
Research the Government Department
Not all government departments run in the same fashion. Do some research beforehand, and if you can, speak to other suppliers for their advice. Look closely for any signs of delayed projects, cancelled projects or budget issues.
We have lots of resources on our site to help support you during the research phase of your bid. (Link here?)
Research the Competition
It’s not always easy to find out what companies will bid on the same contract as you. Nevertheless, you’ll know the likely competitors in your industry, so it’s worth doing some competitive research.
Establish their strengths and weaknesses and how you can address them in your bid.
Mitigate High Risks
You should put countermeasures in place to handle any risks that pose the highest threat to your organisation.
That could include reputational damage, external economic issues and buyer cancellations. Countermeasures could consist of professional legal support or insurance coverage.
You may also want a contingency plan for your most severe risks. That could include payment delays and major changes to the requirements post-contract signature.
Read the Tender Documents
You must read the tender documents thoroughly. And pay close attention to the small detail which could prove critical in your proposal.
If the tender process asks for security clearance, for example, don’t ignore it and consider the time and costs of getting your project team through such a process. Likewise, healthcare tenders may have specific safety requirements you must meet.
Read the Contract
Always get legal advice when reviewing the contract. You’ll want to discuss finer points with the buyer and ensure that you’re adequately covered if things go wrong before, during or after the project.
Check the specifics of where your company is liable, and ensure you fully understand the financial and legal consequences before signing.
Writing a Risk Management Plan
You should always create a risk management plan when bidding for government contracts. Here’s how to do that.
Set Up a Risk Workshop
Gather your bidding team to brainstorm potential risks and issues with the tender. Once you’ve done that, write up your major risks in a spreadsheet or software to track later in the project.
When you have your list of risks, return to each one and assess each for severity and likelihood. That will help you rank them in order of priority.
Create Mitigation Steps and a Contingency Plan
Add actions to each risk that will act as mitigations.
You may also want to extract these actions and use them as part of a formal contingency plan. You’ll need to establish a budget for your contingency plan and consider that when quoting for the tender.
Every action you list must have an assigned owner, and you probably should assign an owner for each risk too. It’ll ensure that someone is checking things as circumstances change.
Monitor Your Risks
Don’t file your risk log away after you’ve completed your proposal. Risk management requires constant monitoring, so schedule time on your project team each week to review the current status.
Communicate Your Risks
Don’t forget to include risks as part of your stakeholder communication. You may need to inform the buyer as part of the proposal and once the contract is signed.
You’ll also have internal stakeholders like your senior management team who want to know the risk level of the new government contract once it’s been awarded.
Winning Government Tenders: Always Manage the Risks
Going for government tenders can feel like a big step up for an SME, and it’s an exciting time, but don’t leave your business exposed. Use this guide to help you manage and mitigate the risks you take when submitting your bid.
And don’t forget to register for free on our site. We have an up-to-date database on the latest contracts, plus plenty of resources to support you through the process.