India is developing on a level that it had never tried before. Roads, rail, power plants, residential, smart cities, water systems. All these projects start way before the setting of concrete or the steel being set. It starts at the bidding phase. And this is where it is determined who lives, who drains cash and who develops.
Bidding is no longer a paperwork to contractors, EPC firms, suppliers and consultants. It is strategy.
The Hidden Cost of Poor Bidding Decisions
The loss of money by many companies is not as a result of them performing poorly, but as they offer poor bids.
On the paper a tender may appear alluring. It has a high value of the project, the client is reputed, and the timeline appears reasonable. However, hidden beneath the sheets there are clues which are frequently overlooked: unrealistic BOQs, penalty clauses which are hostile, vague technical specifications, or milestones which burden working capital.
Assuming that bidding is an equation, then it is not:
Profit = Value of Project Minus Cost of execution.
It is closer to:
Profit = Project Value = (Execution Cost + Risk Cost + Time Cost + Capital Lock-in)
The majority of the losses occur due to the underestimation or even utter disregard of the last three variables.
Why Data-Driven Tender Evaluation Is Becoming Essential
Previously, bidding was done based on experience and intuition. The senior managers would have a feel of whether this tender was good or bad. That is still important, but intuition is not a scaling factor.
Today, smart bidders analyze:
- Past win-lose ratio-department or client.
- Time taken on average to make payments by authority.
- Patterns of deviation of estimated and actual quantities.
- Frequency of change orders
- History of legal disputes of tendering body.
This transforms bidding into gambling to probability management.
This is psychologically lessened, in terms of decision fatigue. Instead of pursuing all tenders, teams now only pursue those where the opportunities are good.
The Strategic Mistake of Chasing Turnover
Mistaking growth with volume is one of the most frequently occurring pitfalls in contracting.
Excessive turnover having shallow or negative margins generates strain, cash flow tension and operational mess. Teams hurry up in their work, safety is lost, and conflicts grow. This, in the long run, causes a harm to reputation and credibility of bidding.
A more healthy method is selective aggression: to bid fewer projects, make them good bids.
When viewed mathematically, one gets better to win under 3 projects with a margin of 12 percent than 10 projects with a margin of 3 percent and with great uncertainty.
Understanding Risk Allocation in Tender Documents
Any tender is a silent discussion of risk.
To whom is the risk of price escalation assigned?
Who is the bearer of geological uncertainty?
Who pays for design changes?
Who takes on latencies due to approvals?
Good bidders read tender documents not only to find the scope, but also in order to transfer risk. An apparent cheap project that presents inappropriate distribution of risks is usually costly as compared to a high quoted but moderate contract.
This is the place where newcomers fail. They only price visible costs not hidden liabilities.
Technology’s Role in Smarter Bidding
Tender portal online, electronic document management and central bid tracking has transformed the manner in which teams operate. However, the actual benefit is achieved by using technology to make connections.
Patterns to be discovered are revealed when bidding data is tabulated and searchable:
- What are the areas of persistent underperformance?
- What are the departments that make delayed LOAs?
- What are the types of projects that result in arbitration?
This feedback loop enhances all subsequent bids. With time you become more accurate in your bidding, margins even, and you get less stressed.
The Long-Term Advantage of Process Discipline
Firms that have survived several business cycles in the market have one thing in common, which is discipline.
They possess well-defined bid-no-bid structures.
They document assumptions.
They look at unsuccessful bids realistically and not emotionally.
This forms institutional memory. The learning is retained even in the face of change.
Psychologically, this creates confidence between teams. When the engineers, finance, and management have confidence in the bidding process, it will be easy to execute it given that there will be no differences in expectations at the very beginning.
Bidding Is Not a Cost Center. It Is a Profit Engine.
It is wrong to consider bidding as a back-office activity. It is the entrance door to profitability.
This is not the case to be a low-bidder as far as competition is stiff and margins are tight the winning ones will be the ones who bid smart.
Ultimately, it is all about clarity in bidding. Simplicity of data, simplicity of risk and simplicity of purpose. Once they do, growth ceases being accidental and begins to become repeatable.
