The challenge of competitive tenders for SMEs

If you pitch for an opportunity of any size and scale with a business or government customer, it is likely you will need to do so via a competitive tender.

For example, Commonwealth Government procurement thresholds trigger competitive tenders at $80,000 for non-corporate entities, such as departments of state and parliamentary departments.

According to AusTender, the federal government alone spent $47,354 million buying goods and services in the last financial year, and issued 64,092 supplier contracts. Its target for SME participation by contract value is 10%, and last year, 26% of contracts ($12,309 million) were awarded to SMEs.

All this sounds very promising.

Yet you are not alone if you find competitive tenders a source of strain, and a massive drain on your business.

Competitive tenders have been around for a long time now. And buyers will argue that they are working — to a point.

Unfortunately, however, the competitive tendering system is broken in ways that buyers simply don’t get to see, because suppliers are too scared to tell them.

Recently I surveyed a range of suppliers I work with to find out what they really think of competitive tenders and dealing with procurement; 37% of respondents were SMEs.

The resulting comprehensive report, Smiling But Sinking, shows competitive tendering is increasingly challenging and difficult for suppliers, mostly in ways that are entirely preventable.

Here are some of the key findings from this study.

Firstly, tender timeframes have dramatically decreased, and suppliers are now given only half the time that they need to respond.

Almost all survey respondents (97.6%) said tender deadlines are getting shorter, while response requirements either have not changed or have increased.

Most said they are given two weeks to respond to a tender in their business or industry (52.8%), while almost the same percentage (50%) said they believe four weeks is reasonable.

A third of respondents said they had “very often” been forced to take staff out of their day jobs for a significant period of time when they were not expecting to, in order to cope with the demands of a tender.

A whopping 72.2% also said they had “often” or “very often” received a tender at a difficult time, such as the week before Christmas, with a requirement to respond over a holiday period or peak working period when they were short of resources.

Secondly, vague, inadequate and confusing tender documentation is putting pressure on suppliers to figure out what buyers want, while their requests for clarification frequently go unanswered.

Three quarters of respondents had “often” or “very often” seen poorly defined tender requirements that generated confusion among, and questions from, themselves or other suppliers.

A third said that they had “often” or “very often” asked clarifying questions about a tender, only to receive no answer, or an answer that came too late to be useful.  

Finally, despite the significant effort they expend in responding to tenders, suppliers continue to get inadequate feedback to help them improve.

A solid majority (63.9%) had been told they lost a tender because of their ‘price’, without any other useful feedback on their submission.

In the past 12 months, 50% of suppliers said they “often” or “very often” received no feedback; a further third said that they didn’t receive feedback on some occasions, and only a small minority had not had this experience.

As one respondent put it: “Any feedback would be great”.

Why is this happening, and what can we do about it?

Smiling But Sinking aims to lift the lid on what’s wrong with competitive tenders, because they are the very first transaction that sets the tone for how buyers and suppliers do business together.

For buyers, it contains nine quick wins they can implement immediately.

My hope is that this study will start to break down some of the communication barriers that exist between buyers and suppliers, helping buyers to make improvements to the competitive tendering system that will generate goodwill, collaboration, and better results for everyone.

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