Winning Government Contracts with Consortiums
In Ireland, circa €15 billion was spent on public procurement contracts in 2015. As such, if you are looking to grow your business, you should not ignore the possibility of government contracts. And if you’re already winning government contracts, you should still consider the use of consortium whenever you’re looking to maximise your chances of winning even more lucrative public procurement deals.
If your business falls within the category of a small to medium-sized enterprise (SME), the probability of your company tendering for or even winning government contracts reduces as the value of the contracts increase. For big jobs, SMEs typically lose out to larger companies, who as a whole are awarded more public sector contracts than SMEs.
If you're from a large organisation, and so not an SME, don't disregard the value of consortiums. Consortiums might also be the answer to your difficulty in winning more lucrative government contracts.
A minimum turnover requirement that you simply cannot meet
What are the barriers to winning government contracts?
Government buyers evaluate bidder contracts based on a number of criteria. You can typically align these evaluation criteria along the following lines:
- Bidder stability and financial status
- Bidder capability and experience
- Experience of team members
- Approach to service delivery
- Bid cost
As an organisations tries to move beyond the realm of the drop-standard contracts to those where value-adding products and/or services are required by the contracting public sector organisation, how you respond to these evaluation criteria can determine your likelihood of winning government contracts. We will consider these evaluation criteria categories in-depth, so that you can easily identify the barriers to winning and see why consortiums might be the solution you need.
Bidder Stability and Financial Status
If you are a start-up or small business, you'll undoubtedly fall at this hurdle if you venture on your own. This criteria normally requires you to prove that you've an acceptable track record of doing business. As a result, you may be asked to state how long you've been in business, your sales turnover for the past three or five years (and by line of business on some occasions), and more. If the contract is big, you mightn't even be able to bid since there'll be a minimum turnover requirement that you simply cannot meet (e.g., between €250,000 and €500,000).
Prove that you've an acceptable track record of doing business
Here is one case where it would suit you to shop around for possible partners to form a consortium. You could team up with another small to medium-sized business, or a larger organisation. Remember, you don't need a long-term legal arrangement to move ahead with your bid. An informal agreement would suffice.
Bidder Capability and Experience
Once again, SMEs - especially those that are micro or small businesses - typically do not have enough longevity to demonstrate that, as an organisation, they have the experience needed to support the public sector organisation. This evaluation category is often another stumbling block for SMEs, as it is typically used as a prequalification criteria for larger contracts, and where a prequalification process is not in place, SMEs will likely lose to another bidder who can prove, using their references as an organisation, that they are more qualified or capable of fulfilling the needs of the contract.
Three to five references related to contracts no older than three to five years
Large established organisations may also have difficulties in this area. It has become the norm for public sector organisations to request that bidders submit three to five references related to contracts no older than three to five years. As a result, even though larger organisations may have had significant experience in the past, they may struggle to demonstrate recent examples. As a result, a collaboration may suit best. Such an organisation could consider creating a consortium with another company who specialises or has some experience in the relevant area needed when pitching for a contract. Through such an alliances, a large organinsation could gain the valuable they experience it needs as an organisation while continuing to build its reputation as a high quality contractor.
Experience of team members
This is one area, depending on the nature of the contract, where SMEs can often stand out from the crowd. They typically have team members who are specialists in the niche industry or technical areas needed by a buyer. However, if a public sector tender is of a more general nature, then SMEs who are not generalists in their field, will struggle to win such a government contract.
Staff with the level of expertise required
On the other hand, a larger organisation, even those who are able to pull out recent citations as evidence of their past performance, may struggle in this area. Perhaps they no longer have staff with the level of expertise required for the technical requirements of the relevant tender, or their experience may be relating to older jobs (e.g., more than three to five years old).
When SMEs or larger companies find themselves struggling to meet such tender requirements, consortiums could be the answer. By teaming up with other companies to form an alliance, all parties could solidify their position as a strong contender when bidding for a government contract. Find companies that complement your product or service lines in order to win big.
Approach to service delivery
There's no point in bidding for a government contract if you're not willing to invest the time needed to produce a high-quality proposal document. You must demonstrate that you understand the public sector organisation, recognise the operational or technical issues they'll need to overcome, and know how to guarantee success through the application of a systematic step-by-step approach. You should never take anything for granted, as one never knows when another company will come by with the intention to go all out to win a job that you think you have in the bag.
Convey that you have the competence to deliver
If you're not confident in your probability of winning, then that's even more of a reason to craft a good tender response. You want to give the buying public sector organisation assurance that you know what you're doing. Also, you want to convey that you have the competence to deliver high-quality services and/or products. Even more importantly, you do not want your proposal to be disqualified because you failed to comply with a mandatory condition.
You'll be surprised by how often bidders do the following:
- Fail to carry out research to better understand the challenges being faced by the public sector organisation .
- Neglect to outline how they'll meet all of the tender's requirements.
- Overlook the importance of outlining their governance model for delivering the products or services needed.
- Submit their tender responses with significant errors - some of which may even be relevant to their fees.
Pitch like an expert
These sorts of mistakes and oversight can occur quite easily. However, there are simple steps that one can take to pitch like an expert (e.g., take the time to read through the tender documents thoroughly as well as your tender response). These rules would apply even if you obtain the assistance of procurement practitioners who are experienced in the art of preparing tender documents (e.g., Keystone Procurement Group, Sluamor's parent company).
When you're part of a consortium of one or more companies, the joint team can pool their resources to work through and develop an iron-clad approach and tender response that could give the partnership the advantage in winning a government contract. In addition, a consortium approach to bidding for public sector contracts splits up the level of effort and costs required to develop the consortium proposal across all the team members, while allowing each player to get paid in the event of winning the government contract.
In today's world, if your price is too high, you're less likely to win any contract as companies are looking for the best value for money that's on offer. If you're an SME, this one area where you could set yourself apart. But be careful if you submit a bid that's too low, so low that it sounds too good to be true. You could open up yourself to being questioned as to whether or not your price is unrealistic, and that could progress even further with your tender submission disqualified on the premise of it being abnormally low.
Be careful if you submit a bid that's too low
A consortium comprising a well-established business with an SME is more likely to avoid disqualification as a result of submitting a low bid, if they've clearly outlined how they'll meet all of the tender requirements outlined by the public sector organisation, along with their rationale for the low tender price.
By bidding as a consortium with an SME, larger organisations can leverage the typically lower work rates set by smaller businesses to offset their price. In addition, for multi-national organisations who could also consider bringing in expertise from other countries, the use of local SMEs instead of overseas resources could result in a significant cut in fees, with lower rates on offer without the need to consider those additional travel and accommodation costs otherwise associated.
Consortiums are definitely worth considering
Remember to contemplate the use of consortiums if you’re interested in winning government contracts. Consortiums are definitely worth considering. Who knows, in doing do, you may open up the door to new and exciting possibilities.
Let us know if you decide to go ahead via our Contact page.
If you need help in looking for third parties to setup or join a consortium, send us a message via our Contact page to discuss, or you can forge ahead by using our online platform to pitch your idea or search the list of business opportunities published on our website.
Also let us know if you need help in preparing a pitch for a public or private sector contract.
We do not accept any liability for the consequences of any actions taken based on the information contained on this article. In addition, we strongly recommend that you do not rely on any information contained herein without taking procurement, financial, management, investment or other advice from an appropriately qualified professional adviser.
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