What Does It Really Cost Your Business to Bid for a Contract?

SME Assumption: Bid Consultancy is expensive.

Reality: It's probably costing you more to manage tendering in-house.

Most businesses know exactly what a new contract is worth. Far fewer know what it cost them to bid for it.

Tendering takes time. Often a lot of it. For SMEs, much of that time sits with some of the most expensive and commercially valuable people in the business.

The Managing Director. The Operations Director. Finance. HR. Contract Managers. Subject matter experts.

Add those hours together and bidding becomes a significant business cost.

Start with time

Think about your last tender.

How long did it take to read the tender documentation?

Specification. Instructions. Pricing schedules. Terms and conditions. Policies. TUPE information. Supporting documents.

Then there is the work required to turn those documents into a submission:

• Reviewing the opportunity and making the Bid/No Bid decision

• Identifying requirements, risks and potential compliance issues

• Raising clarification questions

• Managing the procurement portal

• Planning and storyboarding responses

• Gathering operational information and evidence

• Finding case studies, statistics and examples

• Drafting responses

• Using AI to develop or accelerate first drafts

• Checking AI-generated content for accuracy

• Tailoring responses to the buyer, specification and evaluation criteria

• Reviewing and strengthening answers

• Completing pricing and supporting schedules

• Checking compliance

• Proofreading and formatting

• Uploading and submitting everything correctly and on time.

Across a mid-sized ITT, around 10 working days of internal resource is entirely realistic once contributions from the wider team are included.

For larger or more complex tenders, the total resource requirement can readily reach 70, 100 or more hours across the business.

Now put a price on those hours

Imagine an MD earning £100,000 a year spends eight working days on a tender.

Eight days represents around £3,500 of MD salary spent on one bid. Then add everyone else; an Operations Director contributes eight hours, Finance spends five hours completing financial information and pricing. HR provides four hours of support with recruitment, training, TUPE and people-related questions, a Contract Manager spends six hours providing operational detail and evidence. The cost of producing that tender starts adding up quickly. And that is before considering the commercial value of the time being taken away from the business. And this matters. Because the business has made an investment.

Your most valuable people have a day job

There is another figure worth considering. What is an hour of your MD's time actually worth to the business? Salary gives you one number. Commercial value gives you another. Every hour spent working on a tender is an hour of senior management resource allocated to winning work.

Multiply that across eight working days and a significant block of senior management time has been committed. For an SME, that is significant. Those eight days have a value far beyond the MD's salary cost. They could have been spent meeting clients, pursuing new opportunities, solving operational problems, developing the team or protecting existing contracts. That lost capacity is the opportunity cost of bidding. It will be different for every business, and it deserves to be part of the calculation.

The same applies to operational teams.

A tender draws resource from across the business. Every person involved is being taken away from something else that matters. That resource has a value.

There is a human cost too. For someone with a demanding day job, a tender rarely arrives with a clear week in the diary. It has to be fitted around client meetings, operational issues, emails, calls and everything else the role already demands.

That creates pressure. It also makes it harder to give the submission the uninterrupted time, concentration and energy it needs. Tender deadlines do not move because the MD has had a difficult operational week.

The result can be late nights, rushed drafting and important review time squeezed into the final days before submission.

Then consider what you are buying with that investment

Once you know what a tender costs to produce, there is another useful question to ask:

Is the submission giving that commitment the best possible chance of producing a return?

Up to this point, our example has assumed the tender is being managed internally. Eight working days of MD time, plus input from other areas of the business, means the internal resource cost can readily run into several thousand pounds. Then add the opportunity cost of taking those people away from running the business, managing clients, protecting contracts and generating revenue.

Now change the model. Bring in a bid expert and the business is investing in specialist resource to take on much of that tender workload. The MD and operational team provide the knowledge only they can provide. The bid expert manages the process and turns that knowledge into a compelling tender response.

The biggest return from a tender is winning the contract. An unsuccessful bid can therefore carry a much greater commercial cost than the hours spent producing it. The business loses its bidding investment and the opportunity to secure the revenue and value that contract could have generated.

Specialist bid expertise increases the chances of success by strengthening the strategy, compliance, evidence, scoring potential and overall quality of the submission.

A bid expert:

• Develops the bid strategy, win theme and storyboards responses to build a clear, compelling case for the buyer

• Understands how evaluators assess responses.

• Identifies exactly what the question requires.

• Checks every element of the specification has been addressed.

• Develops evidence around claims.

• Aligns responses with the buyer's objectives, risks and requirements.

• Tests whether an answer provides enough information to achieve the targeted score.

That is what the commitment to bid expertise is buying: specialist capability, stronger control over the factors that influence the score, an increased chance of winning and more of the MD's and wider team's time left in the business.

AI belongs in the calculation too

AI has changed the economics of tender writing. Used well, it can accelerate research, structure information, interrogate documents and support first-draft development. That can save valuable time.

Used poorly, without a strong understanding of bidding and evaluation, it can introduce a different set of risks. A response can read well and still miss part of the question, overlook a requirement, make an unsupported commitment, rely on generic evidence or fail to give an evaluator what they need to award the higher marks.

AI can produce an answer. Knowing whether it is a good tender answer requires bid expertise.

The quality of the final submission still depends on the information, judgement and control applied to it.

Calculate the cost across a year

One tender may not look particularly expensive. Across a year, the spend becomes much more significant.

If internal resource on each submission runs into several thousand pounds, ten tenders a year quickly become a substantial work-winning investment, before putting any value on the opportunity cost of taking key people away from their day jobs.

That makes win rate, Bid/No Bid discipline and the quality of each submission commercially important.

The question becomes:

What return are we getting from our work-winning investment?

Work out the real number

• Take your last three tenders.

• List everyone who worked on them.

• Estimate their hours.

• Apply an appropriate hourly employment cost.

• Include management, operations, finance, HR and technical input.

• Then consider what those people would otherwise have been doing during those hours and what that time is worth to the business.

Now look at the return.

• How many of those three tenders did you win?

• What was the value of the contracts secured?

• If you won one, was the return proportionate to what you invested across all three bids?

• If you won none, add up what the business spent pursuing those opportunities. Then consider the value of the contracts you were competing to secure.

  
  

That is the real equation: what did you invest in bidding, and what did that investment return?

You may find that your business is already spending considerably more on bidding than you realised.

Before weighing up the cost of specialist bid support, work out what doing it internally is already costing your business. Then decide where that investment is best spent.

Bidology provides experienced bid and tender support to businesses competing for public and private sector contracts. With 27+ years of bid expertise, we support clients from opportunity and bid strategy through to writing, review and final submission.

Thinking about your next tender? Contact emmasmallwood@bidologyconsulting.com.