How to Encounter Client Lowest Bidding Strategy for Similar Projects?

In bidding and tendering, we have mainly three types of pricing; actual cost, risk-averse cost and mark up price. This article is not discussing the mark up price which is the difference between the cost of a good or services and its selling price. It is discussing the pressure to reduce the total bid price to win the bid. This pressure usually comes from not winning new work after certain time. One unique situation is when the client is having a good strategy to tender the similar projects (let’s say construction supervision projects) within a week time, of course we are talking here about low price bidding.

Let’s imaging the situation when 10 bidders submit their bids. On Monday, the bidders submit their bids, the lowest price and price ranking announced. The second submittal for similar construction supervision is due tomorrow. What do you think the reaction of the bidders is?

The lowest price bidder of course he is so happy and determine to win the next bid too. However, he is thinking about the difference between him and the second price and if he can add some profit to his bank account. The second bidder will think about how can he reduce more to win the next bid. The remaining bidders depend on their difference to the first and second bidders are in a dilemma asking themselves how the hill they can get to this low prices?

Here, the pressure is starting accumulating. The second bidder will cut from his markup price and margin and maybe reduce from his calculated actual cost. Some of the remaining will not bother to submit the next bids convincing themselves they are big to such low prices. Some will set back and think what’s going wrong in his pricing? Some will say the first and second will lose and can’t get any profit out of it and the project and client will suffer. However, the riskiest ones who will decide to go low and deal with it later.

Let’s leave the negative thinking and concentrate on the positive lesson learnt which is what’s going wrong in the bidder pricing strategy? This is the first step to encounter the client lowest bidding strategy.

Information, data, intel, whatever you call it. It is what’s required to analyze what’s happening. First data, is the lowest bidder which might be a new entrant or less classification ranking bidder. Can we compete with their prices? The answer for it is depend on understanding the market trends and the availability of other opportunities and clients. If the client classification is missed up with different bidder’s sizes, the choice to not work for this client is so crucial and it depends on the alternatives.

If the decision is to bid for this client, then the question will be why and how? The why answer will be to maintain the relationship for the right project or to keep the link to have some influence on the client bidding invitation list to have proper classification ranking and transparency on the basis of the invitation list.

The how answer comes to collecting more data and becoming ready to analyze the decision to bid or not to bid in the early stage to avoid losing time, energy and money on some bids and concentrate on the other bids where the bidding is more likely with similar companies.

However, the decision not to bid for that client for me is not an option. Whatever is the market and client condition is? This is a share of the market and any company should not ignore it unless there is enough work in hand and in the future. Collecting good data about the market, clients and future bids will help to decide what to do. Therefore, the ultimate answer to How to Encounter Client Lowest Bidding Strategy for Similar Projects is by having your database ready to make a better decision making on the early stage which is in the bid or not to bid stage a long way before you being invited to bid.

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