Rarely if ever will you know exactly what your competitors are doing in a given pursuit. Like you, they will try to hold closely their vital competitive information, restricting access to only trusted people usually on a need to know basis. What you are able to learn about them is usually learned inferentially from past behavior and sources of general information such as SEC filings, corporate quarterly reports, industry newsletters, newspaper articles, former employees, etc. Sometimes you may be able to hire or interview a former employee and glean some “inside” information, but often it is dated or incomplete information and may have been overtaken by events.
Sometimes competitor presentations at trade shows and professional societies will give clues. Other times competitor press releases or data “stolen” by reporters with inside contacts will contain information that you wouldn’t have otherwise known. The “rumor mill” also may contain useful information, but it could just as easily contain misinformation.
Some project teams spend considerable intellectual energy trying to figure out what a particular competitor will bid. This is made doubly difficult by the fact that the competitor may not decide on a bid amount until the last minute. And that bid amount could be strongly influenced by the strength of the competitor’s desire to win and aversion to risk at a certain point in time, both of which could be subject to countless unknown variables.
It is precisely because of the dense fog that typically surrounds the competitive bidding situation that we recommend use of the Best Bid model, a competitive analysis process that demands relatively little specific information about individual competitors. The information that is wanted is fairly general and can often be pretty well guessed or subjectively assigned with reasonable confidence based on the occasional fleeting glimpses we are able to get into the competitor’s inner sanctum.
A key piece of information required by the Best Bid model is the count of competitors, N. N represents the number of effective competitors (other than “us.”) Assuming that we judge ourselves to be an effective competitor, the expected total number of effective bidders is N+1. N does not include bidders who are judged not to be effective, that is, who are not qualified or who may intend to bid, but have little or no chance of winning the bidding competition.
An effective bidder is one whose mastery of the technology is credible, whose resources are adequate to perform the work, and who is likely to offer a competitive bid, as that concept is later defined. A bidder whose technical offering is likely to be unsatisfactory to the customer probably should be considered ineffective. A bidder who is in political disfavor or who has other problems with the customer might be considered ineffective. That is a judgment call, because sometimes political disfavor is a temporary condition that can be overcome in various ways.
While N may be a bit difficult to nail down in some smaller projects that have many bidders, it’s usually pretty easy to determine in major projects. Typically only a few companies can handle a given major project, and they tend to be highly visible. Sources often available are bidder’s lists, lists of attendees at bidder’s conferences, news articles, and the “grapevine.” Sometimes CEOs can just ask other CEOs and get a straight answer.
Why is N important? Clearly if the field is crowded, each bidder has a lower win probability than in a field that is not crowded. In a field of N+1 equal competitors each competitor presumably has a win probability of 1 / (N+1). In this book we define a competitive bid as one having a win probability of 1 / (N+1) or better. If our win probability is consistently uncompetitive in this sense, it’s likely we will eventually have to subsidize our contracting business or get out of it. To get “our share” of the work our win probability should average at least 1 / (N+1) across all bids we make.
The larger the number of competitors, the better our proposal will have to be in order to win. Having a “better” proposal means, in general terms, having a lower price and a better offering technologically speaking. For all of these reasons, N is a very important number. Please take care in determining it.
An important issue dealt with by the Best Bid model is the “competitive pressure.” While N is certainly a form of competitive pressure, there is another form that is based in part on the mood of the bidders. If a single one of the effective bidders is “hungry” and has a “must win” attitude, including us, competitive pressure might be said to be moderate. If several bidders are hungry and need the win, we could say that it is high. If bidders in general have about all of the business they want, of the kind they want, and can do without the instant project, it can be said to be low.
Typically, the effect of increasing competitive pressure is to cluster the assumed bids more tightly near the bottom of the competitive bid range. The overall effect is to force us to cut our costs or improve our competitive posture relative to our competitors. Competitive posture has nothing to do with bid price. It is a consideration of all of the other factors that are likely to influence the customer to award us the project, or award it to someone else.
Chapter 12 Review Questions
- Did you know the number of competitors N in your most recent pursuit? If yes, how did you come to know it? If no, why not?
- How would you evaluate the overall competitive pressure in your most recent pursuit? Consider both the number of competitors and their aggressiveness.
 The model is described in more detail in Chapter 13. It is available free from the author in the form of an Excel® spreadsheet.