It’s no great surprise that most companies dread the tendering process, a lot of time spent ticking boxes, writing long winded profiles with no guarantee of success and a ridiculously long waiting process for the result. So why do it? The Australian Commonwealth Government spends $41 billion dollars each year in procurement on everything from barbed wire to helicopters, let alone what the state governments spend – surely your business is deserving of a share?
Despite the effort, resource and expense, government tenders have their unique advantages.
Government Pays – In business when cash flow is king, it’s important to have a customer that pays on time. Government is bound by mandatory regulations such as the “Pay on Time or Pay Interest Policy” that require payments to be made within a 30 day period. In some cases there is a penalty on government for any delay which sees you being paid interest for any delayed payment. When tendering, in most cases you can determine your payment structure to ensure the cash flow you require. This includes mobilization payments if your projects require funding upon contract signature to purchase long lead materials or establish facilities. At the end of the day, this is one customer for which you will not have to chase up payment.
Government pays well – Not only will you be paid on time, but you will be paid a fair amount. Government is not in the business of driving down profit margins to unsustainable levels just to get value for money, they aren’t ruthless negotiators. Conversely, government actually has an obligation to ensure the industry that supports it continues to thrive. So yes, costs will be investigated, but all they will look for is to ensure profit margins and labour rates are in line with industry benchmarks for similar risk profile projects. So price your bid competitively, but fairly.
Long Term Contracts – With the administrative burden of the tendering process, government departments usually seek long term contracts which usually range from 3 to 7 years with the option for extensions (up to another 3 years). So once you’re in, you’ve guaranteed a solid block of income for future years. Furthermore, if you perform well, this puts you ahead of the pack when the job is being retendered 5 to 10 years down the track.
Introducing Diversity – For too long it’s always been the same players that get the Defence work, the Health work, the Education work, its time new players came into the market. Government needs some extra competition to raise the standard and ensure they are achieving value for money. So industry should not be discouraged from trying to enter this space. How many times have you heard of a government project go wrong and think “we could have done a better job!”?.
Altruism-the ‘feel good moment’ – Everyone likes to feel good about the work they do. Doing government work means you are directly adding value to the community. Government work forms an integral part of Australia’s landscape and lifestyle, impacting on the lives of all Australia’s in some way. Whether it be making sure the elderly have the right medical footwear issued, our borders are adequately protected, the local school gets a new science lab or the harbor bridge is maintained, it’s a direct impact on Australia’s health, defence, communications, education, infrastructure etc, and you have the opportunity to be a part of that.
There are many considerations one needs to take before investing the effort in submitting a tender, however with the range of goods and services being procured, somewhere you’ll find a match, and should you get one right, it’s usually worth your while for a long time.