How to improve your odds of winning work

Bidding to win work can represent a significant proportion of the value of a project for contractors. Philip Collard explains how targeted investment raises the odds of winning.

It has been my mission over many years to help construction organisations to be more effective in their work-winning activities and enhance their win rates. Our consultancy advises contractors to be analytical of their market and their work-winning behaviours, as there is enormous potential for greater effectiveness. Refocusing resources on enhancing the quality of those bids that have the highest chance of winning can help to avoid waste and maximise profitability.

As the industry began to emerge from recession in 2014, I decided it was a good time to update research we had undertaken in 2003, in association with Will Hughes, professor at the School of Construction Management and Engineering at the University of Reading. The aim was to see what we could learn about successful work-winning behaviours within the construction industry and how we could use that insight to help clients.

The survey results indicate that, when consultants and contractors invest more in work winning, they are, to put it simply, more likely to win. Respondents contributed data on projects worth a total of £8.05bn, with a total bidding bill of £7.17m. The average cost for the contractor of a winning bid is £60,000. The average losing bid costs £44,000.

But as these average bid costs cover a broad range of project values – from projects valued at less than £2m to more than £250m – looking at bid costs as a percentage of the project value gives a more useful perspective. Bid costs, across winning and losing bids, worked out to be 0.57% of the total project value. However, the cost of a losing bid averaged out at 0.48% of the project value, while winning bidders spent 0.65%.

The figures may not seem substantial at first glance, but where contractors subcontract a large proportion of the work, bid costs can make a considerable impact on operating turnover.

Although these contractors undertake significant management activity and risk, most of the work – and clients’ money – in effect passes through the contractors to subcontractors and suppliers. This can often represent as much as 90% of the total value of the project, says Hughes. If 87% of work is subcontracted, that leaves 13% of the value of work that is not subcontracted – mostly management and coordination that is carried out by the contractor.

High stakes

Taking the survey results that the average contractor’s bid cost is 0.57% of project value, a contractor that wins a £2bn project will have spent an average of £11.4m on the bid.

Since, in this illustration, the contractor only carries out 13% of the work in house, it will have cost £11.4m to win £260m of in-house work. In other words, the bid cost for this £260m of in-house work is actually 4%. So, taking a typical win rate of one project in five, a contractor could be spending £57m – 22% of its in-house operational turnover on this project, or £260m – on winning this piece of work.

This represents an opportunity for gaining profitable efficiencies. First, contractors need to focus more on how much of the project value is likely to be subcontracted and this factor should be part of a go/no-go decision.

Second, improving efficiency in bidding and improving win rates – for example, from the average 1:5 used here – combined with refinements in the management of the bid spend, will have an appreciable impact on retained operational income.

In our experience, it is not only the amount of time spent that results in winning bids: it is also important that this investment is focused on the activities that create success. Apart from strategy and pre-qualification questionnaire (PQQ), the winning contractors in this survey spent much more across the board than the losers, particularly on:

• The decision to bid;
• Selecting/briefing the bid manager;
• Planning and pursuit (intelligence gathering and relationship building);
• Identifying proposal requirements, developing content, finalising CVs, case studies and document design/production;
• Interview preparation;
• Internal reviews/governance, post-bid evaluation and dissemination of lessons learnt.

The survey substantiates our belief that work-winning efficiencies are achieved through a combination of improved effectiveness – resulting in fewer abortive bids – and increased rigour in bid selectivity, and subsequent focusing of available resources.

Achieving these efficiencies need not be onerous: clients can acquire the tools and processes to capture and apply this learning in house, apply rigour to their selection processes, and gain an understanding of where to invest effort by studying variables such as client, sector or procurement route.

Philip Collard is managing director of MarketingWorks, a consultancy that specialises in winning work in construction