BEHIND CLOSED DOORS - Aurora Marketing
BEHINDCLOSED DOORSInsights from evaluation panelsA RESEARCH PROJECT UNDERTAKEN IN 2019ACROSS THE QUEENSLAND INFRASTRUCTURE SECTORResearch conducted by:
Copyright 2019Brisbane Sydney Melbourne Adelaide CanberraT 1300 976 312 E .auPublished: November 2019
CONTENTSForeword by Jon Davies.1Introduction by Leann Webb.2Factors that drive decision making .3Current state of bidder performance.5Evaluation framework. 7Bid costs.8The value of feedback.9Collaboration is the key.10Key takeaways.11
FOREWORDAt its heart, the tender process has mostly remained unchanged for decades; an RFTis released, contractors assess, ask questions, develop a tender document, present tothe buyer and a winning bid is selected.Yet projects have become larger, more complex; requiring higher levels of design,complexity, and technology, as well as considerations relating to factors such assustainability, procurement policy, participation, local content and more that werenot historically part of contractors requirements.This has caused tenders to become far more challenging for buyers to issue andmanage and for contractors to respond to. As a result we have seen the cost oftendering escalate and capability and capacity come under significant pressureacross the board.Therefore QMCA is delighted to have undertaken our first piece of research withAurora Marketing in a three-stage programme, as we seek to improve the way inwhich major programmes of works are released and responded to by the market.Focussing on the entirety of the tender process we have engaged with the majorproject owners in Queensland across private enterprise, state government, localgovernment and government-owned corporations to identify the issues, challengesand successes they have with how tenders are undertaken.This report identifies those key areas.For the second stage of our research, we will be engaging with Queensland’s majorcontractors and the wider supply chain to look at their challenges, issues andsuccesses when tendering for work. This will be undertaken from mid-Novemberonwards.In early 2020 we will cross-reference and analyse the responses from both sides ofthe tender process and make a series of recommendations about how projects ownersand industry can improve the process of tendering for major infrastructure projects.Though this three-stage approach, QMCA and Aurora Marketing believe that we canimprove every aspect of the tender process for all parties, improving collaboration,removing waste and reducing the burden of cost associated with the exercise.Thank you to everyone who has participated in this project, we look forward tosharing the findings with you as we seek to build a sustainable infrastructure sectorin Queensland.Jon DaviesCEOQueensland Major Contrators Association
INTRODUCTIONHaving worked in bids and tenders for more than 20 years, I have consistently heardour clients express frustration at the complexity of the procurement process and thechallenge in gathering real, meaningful and constructive feedback from evaluationpanels. Several years ago, we took it upon ourselves to see if we could help clientsgo ‘behind closed doors’ to improve their understanding of the procurement processand to gather feedback that might give them insight in to what bidders were doingwell and what they could do better. The case studies we produced as a result of ourfirst tranche of research revealed a few surprises, overturned a few myths of thedark art of bidding, and transformed some teams to embrace a new approach to theirsubmissions. We considered the research a resounding success and resolved to makeit a permanent part of our ongoing knowledge development.By joining forces with QMCA, we’ve been able to expand the research to a wider mixof respondents from Queensland’s infrastructure sector. The ‘Behind Closed Doors’report you hold in your hands presents the findings and insights from our inauguralQMCA Aurora Marketing research study. We conducted our research usinga combination of surveys, telephone interviews and face-to-face meetings withpeople who had served on evaluation panels for formal procurement processes fororganisations including ARTC, Aurizon, Brisbane Airport Corporation, Brisbane CityCouncil, Queensland Department of Transport and Main Roads, Port of BrisbaneCorporation, Queensland Urban Utilities, SEQ Water and Transurban.I hope the findings and insights we present prove valuable to you, by giving youconfidence in your current approach to bidding or perhaps by steering you in a newdirection which might bring more success in future.I look forward to working with QMCA to complete further stages of this researchprogram and making this report a go-to reference for bidders in Queensland.Thank you to all who participated and we look forward to continuing the conversation.Leann WebbLeann WebbManaging DirectorAurora Marketing
TENDER SUBMISSIONS:Factors that drive decision makingCriticality of formal tender submissionsEvaluators recognised the criticality of the formal submission processto their procurement decisions. On average, the respondents scored theimportance of the formal tender submission at 93% and described theformal tender submissions as ‘absolutely ential considerationsAlmost one third of respondents considered the relationship between thebuyer and the bidder – meaning their ability to work well together – to bethe most important factor in the decision making process. This was closelyfollowed by the perceived suitability of the bidder’s team to the project.Even so, the spread of responses across these considerations showsthat all elements are important to the evaluators.THE SUITABILITY OF THE TEAM – having theright people to deliver the project: 23%18%AN APPROPRIATE TRACK RECORD – relevantexperience to the project: 18%A PARTNERSHIP RELATIONSHIP – confidence thebuyer and bidder can work together long term: 29%12%COMMITMENT TO THE PROJECT – confidence inthe bidder’s ability to deliver as promised: 12%AN APPROPRIATE SOLUTION – proposing a solutiontailored to the specific project: 18%3 Behind Closed Doors23%18%29%
Elements of a strong proposal76% I Demonstrating ability to deliver to project objectives76% I D emonstrating understanding of and ability to manageprojects risks and challenges71% I Providing a comprehensive and clear response71% I Providing evidence of likely project successVerbatimPrice is clearly an important aspect butit is about overall Value for Money which is not just price!Team fit is very important. The team does not necessarilyhave to have worked on a particular asset class, but theyhave to demonstrate that they are collaborative in natureand excellent decision makers or solution identifiers.The bidder must show they understand therisk allocation and objectives, they understandwhat the measure of success of the project is,understand the expectations of the buyer andshow how they will commit and meet theseexpectations throughout the project delivery.The bid outcome is about getting value formoney, ensuring the risk allocation is adequatelyunderstood, controls are clear to manage the risks,and the buyer expectations are met.Behind Closed Doors 4
QUALITY OF SUBMISSIONS:Current state of bidder performanceImportance of submission qualityEvaluators recognised the importance of submittinga high quality formal submission. On average, therespondents scored the importance of the submissionquality at 61% and described the quality of the formalsubmissions as SOLUTELYESSENTIALDemonstrating understanding of project needsBidders have an opportunity to do better in how they demonstrate theirunderstanding of project needs. While almost two-thirds of respondentsbelieve that bidders do a reasonable job of demonstrating their understanding,NONE considered that it is being done very well. This provides bidders withan opportunity to stand out from competitors in a key area of importanceto evaluators.6%29%65%NOT WELL 6% ADEQUATE 29% REASONABLE 65% VERY WELL 0%Overall quality of submission12%Bidders can be pleased that the quality of their bids is generally consideredto be of a high standard with 88% considering bids to be somewhat high qualityor better. No-one considered that the overall quality of bids they received wereof a low quality. However, bidders still have an opportunity to stand out fromtheir competitors given that only 6% of evaluators considered bids to be ofa very high quality. Having said that, evaluators recognised that the higher thecontract value, the better the quality was of typical submissions reflectingthe increasing competitive nature of high value contracts.6%41%41%VERY HIGH QUALITY 6% HIGH QUALITY 41% SOMEWHAT HIGH QUALITY 41% NEITHER HIGH NOR LOW QUALITY 12% LOW QUALITY 0%“A large portion of submissions do not contain the requested information.”“ More focus should be put into demonstrating the bidder understands the risk allocationand that the value of the bid is right.”5 Behind Closed Doors
Common failingsAccording to evaluators, there are some consistent failings in formal tender submissions:82% I Written explanations aren’t clear or are lacking detail47% I Evidence is missing35% I Capability of the bidder isn’t apparent35% I Suitability of the team isn’t apparentReflections“It was impressive when a bidderunderstood our objectives and alignedtheir solutions to them by redesigningan interchange to reduce the resumptionfootprint.”“It was great when a bidder presentedtheir team ‘as they were’ and articulatedwhat the team could bring to the project.”“On a particular project, the bidder useda clear writing style without clutter or fillerand answered the questions asked whichshowed that they understood the questionwhile still providing a comprehensiveanswer.”“When bidders provide a business-asusual response, at best they score 5/10.Many bidders have done good workbefore and have the experience, but thequestions are designed to get the besttenderers for the project. Bidders need totell their story to illustrate that they haveexperience and knowledge specificallyrelevant to the project.”“Almost every tender has at least onebidder that provides an ‘off the shelf’submission that describes what they didon another project but doesn’t link it tothe specific project being tendered.”VerbatimBuyers expect fair value (in the overall tenderincluding solution, team, methodology and price)to be bid and that commitment to be kept. Tenderprocesses should not be a “race to the bottom”.There is a tendency for successful tenderers toexpect the buyer to bail them out when they winand cannot deliver.These have all happened: Didn’t answer thequestion asked; Provided poor or business-as-usualanswers; Didn’t demonstrate a skill or experience;Didn’t demonstrate they understood the projectscope/objectives; Exceeded the page limit. Bidderssometimes forget that the criterion are designedto reduce the field and pick the best tenderers forthe project. A business-as-usual response is not acompetitive response.“Bidders regularly promise the “A Team”to deliver the project and subsequentlysubstitute them for the “F Troop”.Behind Closed Doors 6
TENDER STRUCTURE AND PROCESSES:Evaluation frameworkPanel membershipA typical evaluation panel comprises representatives from a mix of disciplines drawn from:THE ORGANISATIONAL PROJECT TEAMTHE BROADER ORGANISATION, ANDEXTERNAL INDEPENDENT CONSULTANTS.Typically, an evaluation panel is supported by a broader evaluation team that provides specialist advice onspecific subjects. In most cases, the members of an evaluation panel score returnable schedules individually,then convene to moderate, discuss the evaluation and reach a moderated score through consensus scoring.A probity advisor is always present in these sessions.Evaluation PlanSignificant thought and effort is placed in the development of an Evaluation Plan. The plan sets out the evaluationframework including criteria/weighting, interactive and Q&A processes and probity. The process set out in the planis then followed. The plan is developed and agreed prior to the public tender process commencing.Evaluation panel members have full access to the submission but in some instances only getaccess to the pricing component after the non-price components are scored.All the evaluation panel members will typically read the submission from cover to cover.More often than not, members score submissions individually first then come togetherfor a moderated scoring session which is typically overseen by a probity advisor.VerbatimThe observations we gather frominteractives are very important as theyare a good indicator of the potentialrelationships that may be expectedduring delivery. A blasé attitude duringthese sessions may not demonstratecompetency.7 Behind Closed DoorsWe do not assess their presentation skills i.e. a person who reads fromtheir prompt cards is not rated down as opposed to the fluent 'toastmaster expert.' Presentations can, after all, be nerve racking. The bestpresentation I have seen is the proposed team being themselves.The proposed team were not slick executive or sales people they wereengineers and project managers. They managed to really convey this.
Bid costsReducing the pressure on biddersBuyers understand the mammoth effort required from bidders who participate in formal procurement processes.To minimise the impact on bidders and reduce the cost of procurement, buyers are: Publishing procurement forecasts so that bidders can plan and prepare Increasing the prevalence of panel and standing offer arrangements to reduce full-scale bidding Producing higher quality request documentation Contributing to tender costs to support bidders to do a thorough job Shortlisting fewer bidders to proceed through to the formal tender processSOPHISTICATED BUYERS Buyers are increasingly sophisticated and professional when it comesto their procurement processes, particularly in developing comprehensive, carefully considered requestdocuments for bidders to respond to. There are tight linkages between the project scope and requirements,the evaluation plan, the scoring matrix and the returnable schedules, and most buyers stated that they onlyask questions that they believe are directly relevant to assessing the capability and capacity of the bidders.When preparing their request documents, some buyers described a process of writing exemplar responsesbefore reverse engineering the questions that would most likely result in the kind of answers they areseeking. Furthermore, some buyers even engaged independent academics to conduct peer reviews on thedraft returnable schedules to ensure the questions and instructions are as clear as possible.Effectiveness of procurement phasesPost-submission processesBuyers recognise that some phases of the procurement processare done better than others. The formal tender process (RFT), theformal expression of interest process (EOI), interactive presentations,negotiations and the final delivery phase are all seen as being quiteeffective. On the other hand, perhaps not surprisingly, the leasteffective phases are those that bookend the formal procurementprocess, as well as the clarifications process.Buyers recognise that post-submissionprocesses such as clarifications andnegotiations can drive significant increasesto a bidder’s costs, however almost 50%of buyers said that the poor quality of thebidder’s documentation was one reason thatextended post-submission engagement wasneeded. They cited the following issues:Early bidder discussionsExpression of interestRequest for tenderInteractive presentationsRequests for additional informationNegotiationsProject delivery Proposals are vague or ambiguous Proposals are missing key information Proposals do not address the specifictender requirements Risk allocation, assumptions and warrantiesare not clearly defined The transition between bid team anddelivery team is not clearly planned.Post project activitiesBehind Closed Doors 8
OPPORTUNITIES FOR IMPROVEMENT:The value of feedbackA delicate balanceBuyers recognise that constructive and meaningful feedback is essential to help bidders succeed in future projects,but it is a challenge to balance probity and openness. Some of the challenges buyers identified include:The time between the submission, approval and announcementThe need for feedback to be factual and specifically relatedto the submissionConfidentiality requirements which lead to comments beinggeneral and vagueHostility from losing biddersDiscomfort providing feedback where it relates to the teammembers proposedRisk of legal or political actionVerbatimDo something with the feedbackyou receive. Make sure the rightpeople are at the debrief to takethe feedback on board and makeit happen. In one contract, it wasevident that one of the biddershad taken on board past feedback,whereas the others hadn’t despitebeing told multiple times.9 Behind Closed DoorsOnly submit tenders for projectsyou are serious about wantingto win and deliver. Don’t feel theneed to make a tender just toshow interest and commitmentfor future opportunities.Clients understand thesebusiness decisions if openlycommunicated.Collaboration is seen by somebidders as a willingness tocompromise quality and lowerstandards in order to preservemargin. But collaboration is notabout softer or ‘watered down’contract conditions – it is anattitude that all parties honestlycommit to delivering their bestpossible outcomes.
Collaboration is the keyImproving genuine collaborationA consistent theme from buyers is a desire for genuine collaboration with bidders in order to reduce costs, streamlineprocesses and improve project success. Buyers recognised that both parties needed to step up their game forcollaboration to improve.BUYERS NEED TO:BIDDERS NEED TO:Take collaboration more seriously and genuinelycommit to itInvolve stakeholders in order to develop a broaderperspectiveDo a better job of defining and communicatingexpectationsMake more effort to understand the challengesfaced by biddersDeliver on their promisesBe honest and behave in a way that creates trustAsk more questions to clarify expectationsBe clear, precise and realisticDemonstrate how proposals will translate tooutcomesTailor the delivery model to suit each projectWhile company experienceis important, we are moreconcerned about the team’sability to get the job done andwork with us.Tenderers should submitrealistic tenders even ifit means losing the bid.Aggressive low bid/claimstrategies are unsustainableand not good for industry.Bidders need to make sure theirresponses address the questionsbeing asked. If they don’t understandthe question, they need to askquestions and seek clarifications tounderstand what the buyer is askingfor. Be honest – don’t try to bluff yourway through.Behind Closed Doors 10
OPPORTUNITIES FOR IMPROVEMENT:Key takeawaysSumming up this first round of research with evaluators from the Queensland infrastructuresector, there are 6 key lessons for bidders. What makes these findings interesting is howsimple they are, indicating that there are some fundamental failings from bidders that causedelays, increase costs and ultimately undermine their likelihood of success in bidding.12Provide a comprehensive answer to every questionAsk questionsOne of the biggest frustrations for buyers is anincomplete tender. When a question is left blank, oran aspect of the scope is not addressed, it introducesconfusion and risk to the buyer – is it a mistake, hasit been left out intentionally, doesn’t the bidder knowthe answer, or can’t they be bothered to respond?Even when the question doesn’t seem relevant tothe bidder, they need to provide an answer, even ifit means providing an explanation about why it isn’trelevant or why they can’t answer it at the moment.Buyers were frequently baffled by one particularaspect of bidder behaviour: their reluctance toask questions. Buyers hold briefing sessions andsite visits for the express purpose of providinginformation, outlining their priorities, settingboundaries and defining their risk profile in orderto save bidders time and effort in the tenderperiod and drive better project outcomes duringdelivery. Unfortunately, bidders’ reluctance toask questions – because they don’t want to looksilly or because they don’t want to give awaya competitive advantage – means that theymiss their opportunity to learn more. Severalbuyers spoke about the deep level of projectand site knowledge that is held within their teamand their knowledge of possible innovations,but this expertise is frustratingly ignored orneglected, resulting in poorer quality solutionsbeing proposed than could otherwise be possible.Buyers recognised that there is a potential forsmart ideas to be ‘stolen’ by competitors, but theteam with the stronger capability should alwayscome through in the end.Furthermore, buyers can only score submissions onwhat is included in the documentation. If informationisn’t included in the formal submission, it cannotbe assessed. Numerous buyers provided examplesof submissions that assumed the evaluators knewimportant information about the bidder such asrelevant experience or team capability. With vitalinformation missing, the bidder’s proposals fellshort. Buyers were adamant that they need biddersto submit comprehensive information on proposedmethodology, delivery approach, previous experience,team capability etc to demonstrate how the projectobjectives will be achieved, as well as how risks andchallenges will be managed. The general rule of thumbis to go beyond basic compliance and providea deeper, broader and more comprehensive answer.11 Behind Closed Doors
3Provide a clear commercial responseAnother common theme from buyers was theirfrustration at bidders who avoid the commercialconversation. A surprising number of bidderssubmit responses that ignore the contract andremain completely silent on commercial terms,assumptions, qualifications and departures. Buyersexpect to receive a mature commercial response,including detailed departure information, frombidders at the time of submission so that theycan understand the bidder’s approach and adjustthe pricing proposal to account for the bidder’sacceptance of risk.4Keep it togetherA common misconception in tendering is that biddocuments are ‘divided up’ in to specific subjectsor schedules and distributed to sub-panels ofevaluators who only review their separate silo ofinformation. In reality, evaluation panels aren’t as‘clear cut’ as this. Indeed, most buyers confirmedthat they have access to the entire submissionand typically read responses from cover to cover.This means that bidders need to ensure theirsubmissions are fully integrated and cohesive asbuyers are easily able to spot inconsistencies orconflicts in the proposal.5Steer clear of the ‘bait and switch’ ruseVirtually every buyer had an experience of beingsold an “A Team” of delivery experts, only to findthat those individuals were not available when itcame time for project delivery.Buyers understand that circumstances changeand they have realistic expectations, but theyexpect bidders to be open and honest about likelyavailability and potential competing engagements.If a person can’t be guaranteed, provide a backup aswell as a transition plan. Furthermore, buyers expectthat team member substitutions are of comparablecapability – swapping an “A” player for another “A”player. And one last tip: don’t nominate someonethat could be named on a competitor’s submission –it’s not a good look.6Offer value for moneyThe topic of pricing was a strong theme, withbuyers firmly stating that there is a big differencebetween price and value. The bidder mantra of‘it all comes down to price’ is frustrating andinaccurate. Multiple buyers provided definitionsof value that included achieving project objectives,meeting buyer expectations and adequatelymanaging risks. Indeed, a low price is more likelyto raise suspicions and concerns rather thancreate excitement. Several buyers stated that ifa proposal is significantly lower than competitors,it usually signals that the bidder has shifted risk,not adequately scoped the job or will take anaggressive approach to variations to cover theirlow bid price.Furthermore, buyers offered a warning to bidderswho try to drive a low cost through shifting riskor making departures to the commercial terms: itjust means you lose control of the cost of that risk.The typical evaluation process involves buyersfactoring in their own costs to manage risks thataren’t being adequately managed by bidders,meaning that the end price bidders are assessedon (the ‘risk adjusted price’) includes the cost ofthe risk anyway. Buyers recommend that bidderstake more control over appropriate risks as theyare able to drive better project outcomes as wellas a lower overall cost.Behind Closed Doors 12
Research undertaken byQueensland Major Contrators AssociationTENDERS BIDS PROPOSALS SUBMISSIONSGPO Box 3254 Brisbane QLD 4001Brisbane Sydney Melbourne Adelaide CanberraTel 07 3211 4900 Email admin@qmca.com.auTel 1300 976 312 Email ramarketing.com.au
Behind Closed Doors 6 Buyers expect fair value (in the overall tender including solution, team, methodology and price) to be bid and that commitment to be kept. Tender processes should not be a “race to the
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