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How to decide whether to bid on a government RFP.
A bid/no-bid decision is the call to pursue an opportunity or pass. Made well, it protects your time and your margin. Here is how to think it through.
What a bid/no-bid decision is
It is the call to pursue a government opportunity or pass on it. That sounds simple. In practice it decides where your hours go, which contracts you end up carrying, and whether the work you win actually pays.
Most firms make it informally, once, early, under deadline pressure. The firms that bid well tend to make it deliberately, and twice: first before they invest effort, and again once they have a price and can see what it does to the margin.
The five questions behind every good decision
Work through them in order. If you cannot answer one, finding out is the next job, before anything is written.
- 1. Can we win it? How closely do you fit the mandatory requirements and the scored criteria? Is there an incumbent, and what is your standing with this buyer? Do you have past work that speaks to what is being asked?
- 2. Is it worth winning? Not the contract value. What is left after delivery cost, overhead, payment terms and risk. A large contract with thin margin can be worse than a small one that pays.
- 3. Can we deliver it? Do you have the people, the capacity and the certifications, insurance, bonding or security clearances the buyer requires, without starving your current work?
- 4. What will it cost us to bid? The hours, whose hours, and what they would have done instead. This is real money, and it is gone if you lose.
- 5. What can go wrong? Vague scope, fixed rates over a long term, heavy penalties, termination clauses, dependence on a subcontractor, data or IP terms you cannot live with.
Warning signs worth stopping for
None of these means you must pass. Each means you should know why you are going ahead.
- A mandatory requirement you cannot meet, or can only half meet.
- A specification that reads as if it was written around one supplier. This can be a sign the incumbent is wired in. Check before you spend.
- Scope that is unclear, and no appetite from the buyer to clarify it.
- A stated budget that does not cover the work as described.
- A timeline so short that only someone who already knew about it could meet it.
- You are bidding mostly because you are afraid of an empty pipeline.
Why firms bid when they should not
Sunk cost. “We have already read the whole thing.” Reading it is the cheap part.
Pipeline fear. A quiet month makes any bid look attractive.
Contract size. A large number is persuasive. Margin and risk are what you actually keep.
“We will learn something.” Sometimes true. More often it is a way of not deciding.
When a thin margin can still be a good bid
Not every bid has to maximise margin. A first reference in a new area, a foothold with a buyer you want long term, or work that keeps a strong team busy can all justify a thinner return.
The difference is doing it on purpose: name the reason, set a limit on what you will spend to get it, and do not pretend it is something else. A thin-margin bid chosen deliberately is a strategy. One you drifted into is a loss.
Three outcomes, not two
- Bid. It is winnable, it pays, and the risks are ones you can carry.
- Bid, with conditions. It works if certain things are true: a clarification from the buyer, a quote in hand, a floor price below which you do not go. This is often the most honest answer.
- No-bid. The numbers or the odds do not work. You keep the effort, and you can spend it on something better. If you pass, see how to write a no-bid letter.
One of the cheapest tools you have is the question period. Most government solicitations have a window for bidder questions. A well-aimed question can resolve the thing that was holding the decision.
Questions
What is a bid/no-bid decision?
It’s the decision to pursue a government bid or pass, based on whether you can win it and whether it’s worth winning once price, delivery cost, risk and the cost of bidding are counted.
Is bid/no-bid the same as go/no-go?
Yes. Different industries use different words for the same decision. “Go/no-go” is common in federal and capture work. “Bid/no-bid” is common in Canadian tendering.
Who should make the decision?
Whoever owns the money and the delivery: usually the owner or a senior leader, with input from the person who would run the work. It is a poor decision to leave to whoever happens to be free to write the proposal.
How long should it take?
A first pass on whether an opportunity is worth a closer look can take an hour or two. Larger or riskier bids deserve more time, and a second look once you have a price.
Is it okay to pass on a bid?
Yes. Passing on the wrong bids is how you find the time and money to do the right ones well. Most firms do not pass often enough.
Should we decide only once?
Better twice: early, before you invest effort, and again before submitting, once you know the price and what it does to your margin.
Where to go next
- Bid Economics Assessment: we make the call on one opportunity, with the price behind it.
- Capture Planning: find opportunities worth deciding on, earlier.
- Win/Loss Review: see which kinds of bids you win, and which ones pay.
- Bid Economics: the numbers behind the decision.
- The blog: more on finding, pricing and winning government contracts.
Got a bid you cannot decide on?
Send it over. You will get an honest first read and a clear next step.