Loading...
 
 

Best practices for responding to international tenders

Published: 15 Nov 2013 Average Rating: unrated Print
 
This article appeared in Contracting Excellence magazine on 15 Nov 2013 view edition
 

International markets are likely to become increasingly important in the future, particularly for Chinese business.  However, to compete effectively in international business, we must understand the typically followed process and how buyers will likely make their selections.

This article, researched by IACCM, approaches best practices in two ways: summarizes steps you need to follow in any tender process and highlights considerations specific to international business.

What is a tender?

Understand the rules

Most organizations today use a competitive bidding process to select their suppliers of goods or services. The terms that are used to describe this activity vary; some refer to it as 'tendering', while other common terms are 'bid' or 'proposal'. In an abbreviated form, you may encounter ITT (Invitation to Tender) or RFP (Request for Proposal). These are essentially the same thing, with different industries tending to prefer one or the other. However, there may be a difference in the formality of the process and a first step if you are considering a response is to understand the rules that govern the tender.

The way a tendering opportunity reaches you may also vary. For example, sometimes there are public invitations to tender, usually advertised through newspapers or a specialist web site. Other times, you may have received a direct invitation from the potential customer, in which case there will be a limited number of bidders (3 or 4 would be typical).

Evaluation

Does it make sense to respond?

The first critical step is to review the tender documents to determine whether it makes sense to respond. If this is a new customer, with whom you have had little prior contact, it is very unlikely you will win the business. Perhaps they are just using you to obtain a price comparison or to put pressure on their existing supplier. However, even if you feel your chances of winning are low, you may still wish to respond, perhaps as part of getting to know that company and to increase your chances in the future.

Can you comply with the rules?

The second aspect of evaluation is to ensure you understand and can comply with the rules – for example, the closing date for submission, the right to ask questions.

The tender document should specify the customer's detailed requirements. It may also describe the benefits they want to achieve from this acquisition and will often explain the criteria to be used in deciding the winner. For example, while the price will be a significant factor, the supplier may also be concerned about issues related to quality and reliability. Many tenders operate with a weighting system, used to decide who is the best supplier. By studying these and matching them with your capabilities, it is possible to see where you may have strengths or weaknesses related to the customer requirement.

Beware 'hidden' requirements for foreigners

Customer requirements may also detail specific obligations for a foreign supplier – for example, compliance with regulations or international safety standards. But the tender may not mention all the areas in which compliance is necessary, so it is essential to be aware of these 'hidden requirements'. Many of these are covered in part two of this article.

Can you protect your own interests?

Also, consider how you are going to protect your own interests. For example, are you confident that the customer will pay you? How will you deal with any disputes you may have? Do you understand the customer's business practices and can you trust them?

If you are not confident that you can comply with requirements, or that you cannot protect your own position, it may be better not to bid. Not only is it time consuming to put together a high quality proposal, but if you fall short of customer expectations it may even damage your future opportunities. However, if you decide not to bid, it may be a good idea to write to the customer explaining your decision and expressing the hope that you will be included on other occasions.

Validation

Your questions and answers may be shared

Many times you will have questions. You may be unsure about the meaning of the requirements or need more details about the process. In general, a tender will explain how questions can be submitted and the rules related to replies. In general, customers share questions and answers with all the bidders, so you need to check and consider this. For example, will the question you are asking help other bidders by giving them a clue on the approach you plan to take?

Asking questions can be a good idea, not only to make sure you are clear about customer needs, but also because it shows your interest and may enable some level of relationship to be formed with the customer interface. However, you should not use this contact to try to influence their decision or to extract inappropriate information – for example, details about other bidders. Such action will generally be very damaging and may even result in your exclusion from the process.

Adding value

Many times, the customer is very clear about their requirement and perhaps even a detailed specification of the goods or services they wish to acquire. It is certainly essential that your proposal will satisfy these basic needs. You must first of all demonstrate that you are compliant.

Can you exceed customer needs?

But what about if you can exceed those needs? It is certainly good to highlight that you may have extra or superior capabilities, but you should not try to impose those onto the customer. They may not need these added elements. If you can offer 'added value', you need to work out how that will benefit the customer and you should describe those benefits in a way that relates to something the customer considers important. For example, perhaps your product requires lower levels of maintenance, or consumes less electricity, resulting in a lower 'cost of ownership'. Or perhaps you can offer an enhanced product that enables faster operation and therefore cuts production time and raises productivity. 

Highlight your strengths

In addition to opportunities for additional value, consider things about your company, or its products or services, that make you different from others, that are particular strengths. You will want to highlight these elements in your proposal. They could be related to your existing experience with similar customers, your detailed knowledge of the customer's industry, or perhaps the extensive investments you are making in research and new product development. It could be that you have a well-developed distribution network that makes your deliveries more reliable, or which includes an existing spare parts service near the customer's location.

Often it will be best to highlight these areas of strength and also the potential for added- value in a cover letter or the introduction to your tender response. Good practice means that you catch the customer's attention through positive differences compared to other bidders.

Form of response

Comply with requirements

The tender will tell you how to reply and in general the customer will have very specific questions they want answered. They may also specify the permitted length of the answer. It is important that you comply with these requirements. However, it is generally permissible to include a cover letter or 'executive summary' and you may be permitted to provide attachments or additional information.

It is essential that you present your replies in a professional manner. Your answers must be clear and easy to understand; but also the overall appearance and structure of your response will create a very strong impression about the quality of your company. If you are not familiar with international standards and are not expert in the language of the documents, seek external support and expertise.

Specific international considerations

There are many additional factors to consider if you wish to succeed in international business. In this article, it is only possible to discuss these at a high level and to indicate the areas for further research.

Questions you must ask yourself …

Do you have international capabilities? Can you actually deliver the required product or service to the customer's market? This question must be considered in several ways:

  • Who is responsible for shipping or delivering the product?
  • Who is responsible for managing any required export or import documentation?
  • Can you comply with local conditions and regulations – for example, does your product operate with local power supply, does it meet safety standards etc.?

Can you support the product? Do you have local presence in the customer's market, with the necessary skills or equipment? How will you deliver support services, including perhaps the need to obtain visas for employees? Might you need a local representative to work with the customer?

Do you really understand your market?

Beyond these basic questions of logistics and support, there are also some bigger concerns that customers will be considering when selecting a foreign supplier. While historically the major reason for tendering to China was because of low prices, many international companies have come to appreciate deeper values. However, international experience also means they may have specific concerns about the Chinese market and they will be looking for signs that you understand these possible issues and truly represent a reliable partner for their business.

Therefore 'best practices' in international tendering should include your consideration of the following areas, all of which will be different from those in China:

Ethics and business culture: standards and approaches around the world are very different. It is important that you understand both the behavior and the expectations of the organization to which you are tendering. For example, different cultures take very different views on the speed with which they make payment. They also vary in how demanding they are on product quality, or the timeliness of delivery and the possible consequences if you do not meet their demands.

Regulations: there are today many regulations covering trade. Some of these are national, some are regional or international and some are specific to particular industries. To do business internationally, you must study the rules that apply for your customer. Examples will be health and safety laws, environmental compliance, product standards, bribery and corruption, competition law, anti-dumping regulations, data security and many others, depending on what it is you are selling and where you are selling it to. Your customer will rapidly lose confidence if it is apparent that you are unaware of these regulations and laws, because they will naturally worry about the possible losses they could incur and the damage that there could be to their reputation.

Language: international business almost always means that someone is having to communicate in a foreign language. Do you have, or can you acquire, the language skills needed to support on-going communication with this customer?

Respect for property: a major fear for many companies is that their intellectual property will be abused or stolen. This is a particular concern when they are working with a foreign partner, where it may be difficult to protect their rights. The level of sensitivity depends on the nature of the tender. For example, if you are supplying an established product, they will have less concern. But if the relationship involves them sharing things like product designs, they will want reassurance about how you will protect their intellectual property.

Contract or negotiation skills: many times, you may face a process with which you are not familiar. Western companies especially will have a tradition of formal contracting and negotiation which you may find hard to understand and which you could even feel is offensive. This is a traditional business approach that aims to ensure understanding between the parties, but which is also designed to ensure clear rights and obligations, including in areas such as termination or compensation for failure or errors. The tender documents will often include a draft contract and will define the extent to which the terms are negotiable. You must study this contract because it could include significant risks and obligations. If you are not familiar with this process, it would be wise to obtain expert advice and also to train key personnel for the future.

Conclusion 

Like many new initiatives, developing international business is exciting. That is because it is new and unfamiliar. But that is also the reason why it is risky and demands caution and knowledge. This article has sought to explain the steps that are needed to ensure an effective response to international tender opportunities and to increase awareness of the areas in which knowledge must be obtained.

© IACCM 2013. All rights reserved.

 

TO CONTACT IACCM, please mail your question to Info IACCM or connect using the IACCM Member Search (login required)

 
 
 

Related Discussions

Please sign in or register to post on this forum

Seplat Petroleum Development Company Plc
2020-03-30 21:29:36

Legal department approach to risk

I have been having a running battle with the legal department in the company where I work for over nine months, on the need to have a simplified contract document o...
 
 
Replies: 1

Pretorius Consulting
2019-09-18 17:50:21

Pricing Article Changes

Does anyone actually price changes to the Articles of the contract? For example, changing the venue for arbitration (5% of the contract value) or the change order pro...
 
 
 
 
Replies: 3

Pretorius Consulting
2019-09-18 17:43:44

10 Pitfalls to Avoid in Contracting

I note that the post is from November 2015. Would you say that the statistics for these 10 have remained the same in 2019? Is it possible to get more information abo...
 
 
 
Replies: 2
Anonymous
2017-10-09 21:06:15

Contract Signature Responsibility for Sell-Side Contracts

For sell-side contracts in the distribution industry, we have historically allowed the sales manager/director to sign contracts on behalf of the company. The sales or...
 
 
Replies: 1
Anonymous
2016-01-21 14:10:34

Contracts Management Value - Changing the Corporate Culture

I am a new Contracts Manager at a global information services company. This is a new position to the company, so I am effectively starting from scratch. I am running...
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Replies: 15