Why and When do Companies Put Contracts Out to Bid?

  • By Debbie Ouellet
  • 10 Nov, 2016

Why would an organization put a contract out to bid in the first place? Financial transparency, due diligence and cost control are the main reasons that companies and organizations go out to bid in the private sector. Simply put; the bid process:

  • keeps transactions at arm’s-length and discourages ‘back-door’ deals
  • creates an opportunity to reduce costs through volume pricing and competitive bidding by vendors
  • allows purchasers to test the market and find creative solutions

In the public sector, organizations are mandated to go out to bid. Since it’s most often tax dollars funding these purchases, the bid process is designed to keep transactions above-board, transparent and to offer vendors equal access to opportunities.

When do contracts go out to bid?

Most companies and organizations have purchasing standards that dictate when they should or must go out to bid before purchasing products or services. A common format for purchasing is to divide total annual spend on a product or service into 3 categories and will look something like this:

  • Category #1- Low-spend* purchases : A dollar limit is set and as long as the total spend is under this dollar limit, the department making the purchase chooses the vendor directly. These may be preferred vendors pre-qualified by the company or organization, or the department may source the vendor as the need arises. This usually involves issuing a purchase order (PO) when the purchase is made.
  • Category #2- Medium-spend* purchases : A second, higher dollar range is set and any purchases that fall into this category must have a minimum of 3 quotes before a purchase is made. As in Category #1, these may be preferred vendors pre-qualified by the company or organization, or the department may source the 3 vendors as the need arises. This usually involves issuing a purchase order (PO) when the purchase is made.
  • Category #3 – Large-spend* purchases : In this third category, if the total spend goes above the set limit, the purchaser is mandated to source a vendor through the formal bid process which can include issuing an RFQ, RFT or RFP depending on what best suits the project. This usually involves signing a contract with the chosen vendor and is often for a period of 3-5 years, sometimes with options to extend based on satisfactory performance.

*Companies typically consider “spend” to be the total projected costs to complete a project, or if products and services are purchased regularly, the total accumulated costs for the year for those products or services.

For example : A purchasing process might look like this:

  • Under $10,000 spend : Left up to the department lead or purchasing manager to source a vendor and complete the purchase.
  • Over $10,000 but under $100,000 spend: Department lead or purchasing manager must obtain 3 bids, with the successful vendor often being the most qualified vendor who provides the best value related to cost.
  • Over $100,000 spend: Purchasing manager or bid coordinator creates a bid document and the opportunity goes out to bid in the form of an RFQ, RFT or RFP.

Note that dollar limits and spending categories can differ greatly between companies, organizations and the public sector. If you’re a vendor and want to do business with a specific organization, try and discover what their purchasing process is. That will help you determine where you fit within the bid process.

By Debbie Ouellet 27 Sep, 2017

Before you respond to an RFP bid or send out a proposal, it’s a good idea to know who will be reading it. Often an RFP document will outline:

  • the decision making team,
  • their project goals and
  • the decision-making criteria.
That’s not always the case, though. Some RFPs take more digging than others to find out what’s important to your potential client. To better target your RFP response, do some research in the early stages of the project. It saves time and effort in the long run. It also provides valuable clues on the best way to ‘package’ your solution.
By Debbie Ouellet 07 Sep, 2017

As an RFP consultant and RFP writer who’s read hundreds of RFPs (request for proposal), there are some things that raise alarm bells for me. If you come across one of these in an RFP, take a moment to consider how it could impact your business, or your chances of winning. You may decide to go ahead and respond, hoping to win a contract, but at least you’ll be doing so with a better idea of what you’re getting into.

Here are 3 red flags commonly seen in RFPs…

By Debbie Ouellet 22 Aug, 2017

When was the last time you reviewed your company’s competitive advantage? Can you state it simply and confidently? Is it still relevant to today’s customer?

Your competitive advantage is that special something about your business that makes you shine above the competition. It’s the one thing that helps a customer choose you when deciding to make a purchase.

Here are two things you can do to add some sparkle to your competitive advantage.

By Debbie Ouellet 21 Jun, 2017

Key performance indicators (KPIs).

If you are fortunate enough to land a contract with a government or large corporate client, chances are good that part of that contract will include KPIs.

By Debbie Ouellet 17 May, 2017

Writing a great RFP (Request for Proposal) response is a critical piece of the puzzle for bringing home a win. However, the way that you approach the RFP process can also have a big impact on how often you win.

If your company regularly responds to RFPs, take a moment to gauge how well you do in the following three areas. If you find yourself coming up short, work at improving in these areas. Pair those improvements with a great solution and well-written response and then watch your percentage of wins increase.
By Debbie Ouellet 05 May, 2017

We all heard them growing up. Those eye-rolling, words of advice that Mom would say ad nauseam: aka Momisms. The truth is; Mom said them because she wanted you to be safe, happy and the best you that you could be. It got me wondering how much of Mom’s sage advice was transferable to running a business.

With Mother’s Day just around the corner, here are three of Mom’s nuggets of wisdom that just might help you build endurance, survive and thrive in business.

By Debbie Ouellet 17 Apr, 2017

You’ve received an RFP, read through it and are ready to begin your RFP response document. Before you start your RFP response, make sure that you don’t fall prey to these three common mistakes.

By Debbie Ouellet 03 Apr, 2017

An RFP (Request for Proposal) has just come out and your company is a perfect fit to put in a bid. Unfortunately, the lengthy document you have to review in order to do so can be overwhelming. Here are some tips on how to review an RFP to ensure that you’re compliant with the requirements…and to improve your chances of winning.

By Debbie Ouellet 28 Mar, 2017

A website’s About page can be one of the most visited pages. It’s often where a potential client will go to check you out before making that first contact. Here are 4 tips to help you make the most out of your About page.

By Debbie Ouellet 13 Mar, 2017

Recently I’ve been plagued by a feeling of guilt for not being busy enough. I know; it seems odd even as I write this. The fact is, I’m meeting my monthly goals and my clients are happy.

So why the guilt? It’s because I have time left in my day that isn’t bookmarked for a project or task.

Upon realizing this, it occurred to me that, perhaps now that I’m my own boss, I’m taking this ‘boss’ thing too far.

Let me backtrack a bit to tell you where I’m coming from. I got my first district manager’s job at the ripe old age of 26. Ever since then, right up until I left the corporate world nine years ago, I’ve been someone’s boss, fiscally responsible for the company’s district, then a region, then the country.

I like to think that I was a good boss for the many staff I had the great fortune to work with through the years. I don’t, however, think I’m a great boss for myself.

When you’re a boss, it’s all about productivity, profitability and results. And, I’ve never been able to walk away from the “measure it and you’ll be sure to pay attention to it” mentality of a boss’s role. Even today, eight years into my business, I measure how I spend my time daily, where my customers come from, what marketing brings the best results and a gaggle of other matrices for keeping me and my business successful.

That’s what bosses do. Right?

I’ve come to realize, though, that measuring success to prove that you’ve obtained it isn’t the same as having success. And, that some successes, in fact the most important ones, just can’t be measured. Like having a rewarding family life. Or giving something back of yourself to a world that needs it.

So, I’ve decided to stop being my own boss and start being my own best friend.

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