What to expect from single source bidding
Updated: Nov 21, 2020
Wouldn’t it be great if you could bid without competitors? That’s right – just you and the customer...
I am of course talking about the world of single source contract regulations and qualifying defence contracts (QDCs).
The use of QDCs is rising: In 2019/20 there were 70 new QDCs worth £8.9bn and there have been 15 in the first quarter of 2020/21 worth £887m.
Post-Brexit we may see more of them if the government disentangles itself from the EU Procurement Directives and pursues its policy of ‘British first’ when awarding contracts. Furthermore, the COVID-19 pandemic has seen an increase in contracts being awarded without competition.
They’re a very nuanced form of bidding that require a different approach. So, what can we expect as bid and capture professionals?
What is it?
A qualifying defence contract (QDC), including qualifying sub-contracts (QSC), is a contract that has a value of £5 million or more (£25m for QSCs), under which the government procures goods, works or services for defence purposes.
The regulatory body that oversees this process is called the Single Source Regulations Office, or SSRO for short. The SSRO is an executive non-departmental public body, sponsored by the Ministry of Defence. Its role is to ensure that ‘good value for money is obtained in government expenditure on qualifying defence contracts, and that persons who are parties to qualifying defence contracts are paid a fair and reasonable price under those contracts’.
It aims to strike a balance between achieving value for money on government expenditure and fair and reasonable prices for contractors, by subjecting qualifying contracts to price control and by requiring suppliers to provide an increased level of transparency.
I’ve never heard of this, is it a new thing?
The Defence Reform Act 2014 achieved Royal Assent on 14th May 2014, which led to the creation of the SSRO. QDC/QSCs began on 1st April 2015.
As of June 2020, the SSRO was notified of 315 contracts that became QDCs/QSCs. The SSRO has stats on 304 of these qualifying contracts. The estimated total contract price of all 304 QDCs/QSCs was £43.1 billion. No small beer.
120 companies have been awarded a QDC/QSC, 19 of which (~16%) are SMEs. It’s worth noting that the average profit rate across all QDCs/QSCs was 9.42 per cent and the average contract duration is 4.4 years.
Is it easier if there’s no competition?
It’s wrong to say there’s ‘no competition’. If you are the chosen one, then you can be certain that your competitors are lobbying hard against that decision. They may even be successful through the courts and force a delay, cancellation, or competitive procurement. Will they win? Maybe, maybe not. Either way, their actions will have a negative impact on you and your customer.
There’s also a ‘do nothing’ option if the requirement recedes or you can’t offer a compliant solution within budget and time.
Another form of competition is a reduction in scope brought about by budget pressure elsewhere. This is often the case where the MoD’s priorities change and the fleet of 200 becomes 50, for example.
Do I still need a win strategy?
It’d be more appropriate to call it a ‘contract award strategy’. As I’ve already described, there are many threats to going the distance and signing on the dotted line. Your strategy should therefore be about mitigating risks, building customer trust, removing challenges, being technically and commercially compliant, offering a solution that delivers the specified outcomes, and making sure you understand and apply the rules of a QDC - especially around defined pricing structures.
Do I still need to worry about win themes, value propositions and other forms of competitive messaging?
Yes, but in a different way. There should still be clear messaging supported by quantified evidence that gives the customer the ammo it needs to get through their approval gates and fend off any anxiety about awarding a QDC to you in the first place. Remember those competitors lobbying hard? Or the concerns about whether you can deliver a compliant solution within budget and time? Or the competing pressures for money? That’s what your messaging is defending against.
Should I still write an executive summary?
Yes, but with a different emphasis. This isn’t the time for jargon, superlatives, and hyperbole. That’s true of any executive summary, but it’s especially so here.
The emphasis should be more on your solution and how it meets the customer’s requirements. In that regard, it’s more of a solution summary, than the traditional sales-focussed executive summary. Remember, the customer has been through the process of selecting your company, so you don’t need to cover that again by saying how great you are.
The executive summary will be the only place in the whole proposal where you can convey your messaging. Normally, these messages are used throughout a proposal, but not here. This is because the purpose of the proposal is to form a contract that you’ll deliver against. The content should therefore be a factual description of what you will do, how you will do it and when. There’s no room for superfluous information and ‘win themes’ are unnecessary.
Can I make more money if there’s no competition?
In the words of the SSRO: ‘The Single Source Contract Regulations require contractors to provide to the SSRO a cost breakdown of the contract price for a QDC or QSC by a defined pricing structure (DPS). The objective of the DPS is to establish a single, centrally available, comprehensive data set that, in conjunction with other contract data, can be used to determine relationships between costs and outputs, and record the estimated and outturn costs, for every QDC and QSC. This will enable future analysis such as parametric and benchmarking analysis, while assisting effective contract monitoring.’
So, the answer’s “no”.
Should I still manage it like a ‘normal’ bid?
Yes, absolutely! You still need to organise and lead a diverse team of experts to create a written and costed proposal, just like any bid. This means doing all the things you’d normally do, for example: planning, team management, reviewing, governance, and submitting by a set deadline.
One notable difference is that bid costs are classed as 'allowable costs' that you can charge for, which are then deducted from the customer’s budget. The more you spend on the bid, the less you’ll have to play with in delivery.
What about reviews? How do they change?
The focus of reviews changes from win themes, value propositions and scoring to technical and commercial compliance, clarity, viability, and risk. That means you’ll need to think about who’s suitably qualified and experienced to be a reviewer, how to instruct them, and when. It might even be possible to ask the customer to review a draft, as it’s in their interests to get the best possible bid without fear of being unfair to competing bidders.
What about customer interaction?
Your interaction with the customer is likely to be far more frequent, but no less formal. In fact, the increased scrutiny from the SSRO can make the relationship more formal and regulated than normal.
It’s possible to have regular clarification meetings to run through any questions with them and it’s also common to have regular solution review workshops; otherwise the relationship and interaction is similar to a competitive dialogue type bid with structured sessions on defined topics throughout the procurement.
Will they still issue an invitation to tender?
Yes. The ITT will mostly look and feel familiar to a competitive defence bid with some differences: There’ll be a Specification of Requirements rather than a Q&A style format, and there won’t be a scoring criteria. The usual inconsistencies and complicated instructions will still be there…
What about things like writing style and design?
Good writing practices are just as important as they are with any bid. Writing with clarity and purpose improves understanding and reduces ambiguity. Remember, the proposal will form the contract, so everything that’s written has consequence. It’s never a waste of time to ask your commercial team to review the proposal as they’ll be responsible for negotiating the contract on which it’s based.
The proposal content is likely to be very technical and method-statement based. Be very careful that any non-technical bid writers don’t materially change the content without understanding the consequences or seeking confirmation from the subject matter expert first.
As for design, it still has a part to play if it helps improves understanding, reduce the word count, and convey complex messages. It’s far less important to spend money on fancy binders and other materials.
Can I still have a win party?
It’d be rude not to! You might need to do it remotely, but you should find a way to celebrate the effort that goes into developing the bid.