Dec 4 '14
Written by Elephant Creative associate, James McLeod.
When a law firm loses a tender bid, the focus tends to be on the bid document itself, and the firm trying to identify weaknesses and how it might improve for future opportunities. Whilst this is very important, in my experience there are two, more fundamental reasons why law firm bids fail, which arise even before firms put pen to paper:
- Lack of clear benefit: Unless there is a clear understanding of the tangible benefits an opportunity will deliver — to the firm and everyone involved in the bid — it’s unlikely the firm will commit the level of resources needed deliver a winning bid.
- Low chance of success: When selecting their legal providers, Buyers consider a wide range of criteria, some of which won’t be disclosed to bidders because they are more implicit and difficult to assess objectively (for example, the strength of its relationship with a bidder). Unless a firm holds the competitive advantage across both explicit and implicit criteria, it’s unlikely their bid will succeed regardless of the amount of resource committed or the overall strength of its bid document.
What’s needed to minimise these causes of failure?
A tender bid is a project, and like any project it needs a solid business case to justify the significant investment usually required — not just to deliver the bid but also to develop the client relationship should the firm win the tender. For these reasons, and to address the issues above, it’s critical that firms carry out a rigorous Bid/No Bid (‘BNB’) assessment of tender opportunities, which addresses the benefits the firm expects to derive as well as its chances of success.
Why don’t firms carry out a BNB?
There are a range of reasons but probably the most common ones I encounter are:
- Lack of time
- A ‘pursue every opportunity’ culture
- Lack of process.
Clearly, Reason 1 is counterintuitive when one considers the hundreds of hours of fee earner and other staff time usually needed to deliver a winning bid.
Reason 2 is more problematic, since many law firms are seeking to implement a ‘business development culture’, which often includes actively encouraging staff to spot and pursue opportunities, and appraising staff performance partly on this basis. Under these circumstances, firms won’t wish to send mixed messages or put obstacles in the way. However, in my view a key part of this cultural change should involve embedding across the firm a more commercial, strategic and objective approach to assessing business opportunities. Firms also need to consider the risk that a consistent failure to win bids (or to realise the benefits of panel appointment, should the firm be successful in some tenders but secure very little work) may cause widespread disillusionment — both with the tender process and, potentially, other BD initiatives.
Reason 3 refers to the situation where a firm simply assumes it will bid, because the tender relates either to an existing client or a previously identified target. However, it’s important that firms test and update both their projections and assumptions about a client/target at the point the tender is advertised, taking into account anything in the tender documentation that might impact on those projections/assumptions, either positively or negatively. A BNB provides the structure and process for doing this more effectively.
With respect to Reason 4, the remainder of this article is intended to assist firms with developing their process by providing some suggested criteria for evaluating tender opportunities.
When should firms carry out a BNB?
Done properly, a BNB can involve a lot of time and effort. Therefore, here are some initial screening questions firms should ask themselves first:
- Do you have an existing relationship with the Buyer?Unless it’s an existing client or you’ve in been in exploratory discussions with the key stakeholders (the decision-makers, influencers etc.), then the opportunity really doesn’t need any further assessment — quite simply, don’t bid! The tender process shouldn’t be used as a means for initial engagement. A caveat to this is where you are bidding for a purchasing consortium panel and you don’t have relationships with all of its members.
- Do you have the resources to deliver the bid within timescales? You need to assess whether there is sufficient resources available and whether you’ve already left it too late.
- Are there any ‘showstoppers‘? Briefly scan the tender documents to check for any mandatory requirements that rule you out of the process or any unacceptable contractual terms. This includes technical requirements (i.e. the range of services described in the Lot) and organisational requirements (e.g. minimum turnover, policies, accreditations such as ISO/Lexcel etc.). However, it might still be worth checking with the tendering Buyer as to whether there is any flexibility in these requirements.
- Has the decision already been made? For example, if the tender involves a single supplier, you’re not one of the main providers and it appears that the incumbent has had a hand in developing the specification, you might assess that the decision has effectively already been made.
What should a BNB involve?
If the opportunity passes this initial screening e, then here is a list of the sorts of criteria that firms might include in their BNB. I’ve grouped them into two categories: Profitability and Probability.
This involves assessing how much business the client could offer, how much they are likely to offer, and how profitable the relationship is likely to be. Here’s a list of 8 suggested Profitability criteria:
- Corporate alignment: Is the Buyer aligned with your core business or strategic direction for new business?
- ‘Size of the prize’: Assess the following:
- The Buyer’s current and projected spend within your field of play/’Lot’
- How many firms they intend to appoint within that field of play
- The estimated percentage spend with each supplier and the portion of spend your firm is likely to secure
- The projected revenue and net profit, less the attributable costs such as delivering the tender, account management, your ‘value-added’ services offering (e.g. free training and ad hoc advice etc.), and any investment needed in developing your technical expertise in particular areas or in new technologies, systems and processes.
- Growth potential: Given what you know about how the Buyer traditionally views its supplier relationships:
- What type/level of relationship can you feasibly attain?
- Will the Buyer be a strategic partner or will it view your services as ‘commoditisable’ and continuously seek to drive you down on price?
- Has the Buyer responded favourably to the added value you’ve delivered or has it been ‘all take’?
- Does it appear to be genuinely open to working with new firms?
Be careful where tender documentation suggests that the Buyer is changing its approach in how it views its relationship with panel firms, since the documentation is often written by people (either internal or external to the business) who aren’t the instructing officers and either haven’t engaged effectively with these officers (in assessing their wants/needs) or planned for the organisational change usually needed to implement the new approach.
- Opportunities for new business: Will the opportunity create new opportunities with potential or existing clients, for example through enhanced reputation or development of new skills/expertise?
- Drain on resources/opportunity cost: How much resource is required to deliver the bid and how will this impact on your ability to pursue upcoming opportunities (particularly for business critical clients) and, should you be successful, your ability to service other key clients? In any event, firms should generally avoid opportunities where projected revenue exceeds 20%-30% of turnover.
- Strength of existing relationship: How strong is the relationship in terms of helping to ensure you achieve projected revenue? This should involve mapping out your relationships with the Buyer’s staff and assess their strength in number, longevity and quality (both within your field of play and across the business).
- Financial/business strength: Looking at the Buyer’s size, turnover, projected growth and its corporate strategies for delivering growth, are there any significant opportunities or threats that might impact on revenue long-term, either positively or negatively?
- Conflicts of interest: Are conflicts likely? If so, can they be effectively managed?
This relates to your firm’s competitive advantage, in terms of the probability you will be successful in the tender. It’s important that firms put themselves in the Buyer’s shoes, by developing criteria the Buyer would apply and assigning weightings to each criterion that they expect the Buyer will assign. Here’s a list of 8 suggested Probability criteria:
- Technical competence: This involves assessing the following:
- How do you compare with the competition in terms of technical competence?
- Do you possess high levels of expertise across the full range of services within your field of play?
- Do you possess particular expertise in a highly specialised and sought-after area?
- Based or your knowledge of the Buyer’s business strategies, are there any areas of anticipated future need where you possess particular expertise?
- Will you need to team up with another firm as a consortium to deliver the full range of services and, if so, do you have a past working relationship with the partner such that will allay any concerns the Buyer might have?
- Capacity: Do you possess sufficient resources to deliver the anticipated work volumes? Can you service the Buyer’s various geographic locations (including internationally)?
- Sector experience, prominence and reputation: Do you possess relevant sector experience? Are your lawyers recognised industry experts? Do you have relationships with/influence over other key players within the Buyer’s sector/market that might be considered attractive (e.g. potential suppliers and business partners, regulators, policymakers)?
- Price: How do you compare on price? What weighting that has been allocated to price in the tender documentation? For example, if your rates are generally higher, does the weighting of price over quality render it practically impossible for you to win regardless of your quality score?
- Track record/’embeddedness’: Do you have a strong track record with the buyer? Have you delivered significant value in the past? Do you possess a deep understanding of the Buyer’s business? How embedded are you in their business and would switching legal providers cause them pain? It’s important that firms are brutally honest in this assessment, particularly in terms of track record and how they are viewed at different levels of the Buyer’s business.
- Strength of your value proposition: What is your value proposition for the Buyer and how does it compare with the competition? This assessment should cover your firm’s operational effectiveness, the added value you can deliver at both the strategic and operational levels of the buyer’s business, and anything innovative and unique in your proposed solution. Also, does the tender documentation play to your strengths in these areas?
- Perceived bias: Are there any biases the Buyer might hold in respect of its suppliers? E.g. some Buyers place a premium on a firm’s geographic proximity to their office (even if it’s unnecessary for the services) or their ties to the local community, which might be gleamed by looking at the locations of key suppliers across other parts of the buyer’s business.
- Cultural fit: Is there a good cultural fit with the Buyer e.g. a technology-driven culture, global focus or – particularly for firms operating in the public sector – a commitment to the community and environment etc.
In assessing the above criteria, firms might develop a scorecard (e.g. scoring Profitability against Probability) and attach different weightings to each criterion.
A BNB assessment that involves the kind of rigour outlined above will help to ensure that tender opportunities (and indeed existing client relationships) are assessed objectively and dispassionately, so that resources can be prioritised, the bid team is fully engaged/committed, and the chances of success are high. In addition to informing the decision on whether or not to bid, a BNB will also play an important role in developing a firm’s bid strategy and, should it be successful, planning for and making future decisions about the client account.