2014 Bid Cost Survey

Constructing Excellence

It has been my mission over many years to help construction organisations to be more effective in their work-winning activities and enhance their win rates, which play a significant role in improving win work efficiencies.

In 2003 MarketingWorks undertook research assessing how the bid cost investment affects work winning within the construction industry.

In 2014 I decided to invest MarketingWorks’ resources in updating this research, in association with Professor Will Hughes of the University of Reading. I wanted to see what we could usefully learn about successful work winning behaviours and how we could use that insight to help our clients.

The data was collected by reference to actual projects and was analysed to discover what can be learnt, not only in the cost of bidding for work, but also how differing behaviours and approaches have influenced whether a company wins or loses the bid.

In addition to providing some interesting indications on how and why a bid is successful, the survey also highlights that many companies fail to capture bid cost information and to fully evaluate their own specific market and processes. This has a real and clear impact on the profitability of the company and is an issue from which the industry could greatly profit, if addressed.

Constructing Excellence

Improving the win rate

As there are many variables influencing how effort or bid spend affect outcomes for different types of project it is important for contractors and consultants to be analytical of their market and rigorous in the management of their work-winning and bidding behaviours. The resulting knowledge can be applied to enhance work-winning effectiveness.

The research reinforces our view that there is enormous potential for this type of data to help in decisions which could identify:

  • o Where to invest effort (in activities that will win the work)
  • o How this varies by client/ sector/ procurement route
  • o How to exploit selectivity to maximise profitability
  • o How this would influence strategic organisation

In most cases activities focused on the specific client (i.e. client-centric, aligned activities) win the most work, in the most cost effective manner.

Work winning efficiencies are achieved through a combination of improved effectiveness (resulting in fewer abortive bids) and increased rigour in selectivity and focusing of available resources. The 2014 survey gives pointers on where winning bidders focus their resources and the MarketingWorks Work Winning Solutions help organisations to apply this learning for greater work winning effectiveness.

Key Findings

  • The total project value of the bids submitted with data is £11.3 billion of which £8 billion has full cost data. Significantly this includes £4.3 billion of winning bids.
  • The sample represents a large proportion of the construction work carried out last year in the UK and is a good representation in the key areas of measurement.
  • The approximate cost of a contractor’s average winning bid is £60k in 2014 and consultants average £24k.
  •  In 11% of bids won and 15% of bids lost, the reasons for winning or losing are apparently unknown.
  • Price was given as the single reason on 50% of losing bids but only 30% of winning ones.
  • Almost 40% of winning bids identified a combination of factors as the reason for the win, compared with 21% of losing responses citing a combination of factors for the loss.
  • Winning bidders invest more in their bids.
  • The investment of time or money needs to be focused on the activities identified as creating a winning bid.
  • The activities identified as helping create a winning bid are importantly those that are client-focused.
  • The bid cost worked out, across winning and losing bids, to be 0.57% of the total project value.
  • The bid cost percentage has significant impact on a contractor’s retained operating turnover.

Constructing ExcellenceConclusion

The survey data deals with headline results across a complex industry with a lot of variables. This highlights the opportunity for an ongoing research programme addressing bid assessment in the context of a company’s own market situation, thus offering benefits in achieving greater effectiveness and efficiency in work-winning tools, processes and behaviours.

MarketingWorks offers a range of solutions to help our clients achieve these objectives including:

Creating bespoke win work flow processes and guidance that supports company-wide adoption of a work winning culture with embedded client centric behaviours and attitudes that improve win rates and work winning efficiencies.

  • MarketingWorks works with you to identify desirable changes in behaviours and processes and then works with your teams to uplift their capability, achieving rapid buy-in to desired behavioural change resulting in dramatic and immediate improvement. Read More.
  • Bespoke easy-to-use bid selection tools that help contractors and consultants to quickly evaluate their bidding opportunities, enabling consistency and transparency in decision taking.
  • By using MarketingWorks’ Selectivity and Reporting Tools you will be able to avoid waste by refocusing resources and effort on enhancing the quality of those bids where they have the highest chance of winning. Read More.

To discuss the outcomes from the survey further, contact [email protected]