When you are the incumbent contractor approaching your rebid you have a lot of potential advantages over any challengers. One of those advantages is that you should be the lowest risk choice for your customer. Lots of incumbents use risk of change in their rebid, and quite rightly so. But you can overdo it by emphasising too much the risk and cost to the customer of changing to a new supplier –potentially giving them the impression you see them as a hostage, not a valued client. Here are some guidelines from our experience of how (and how not) to use risk in your rebid.
Why choosing the incumbent should reduce the customer’s risk
The obvious (and much used) reasons why choosing the incumbent for the next contract is the lower risk option include:
- The customer already knows you can deliver the work;
- The customer already knows your culture and how you approach them and the delivery of the contract;
- Your staff and management team are experienced in delivering the work;
- You know the ins and outs of the contract so are less likely to put in a solution that doesn’t work or a price that is too low to deliver the work;
- Your team, equipment, processes etc are already in place so the time, cost and risks of a successful transition should be lower than a new contractor setting up from scratch.
How important is risk of change to the customer?
If you are going to use risk of change as one of the reasons for choosing you, you need to understand how important the customer sees risk as being in their decision. Generally the customer’s view of the level of risk in choosing a new supplier will vary depending on:
- How ‘mission critical’ the contract is to the customer’s business – they will see less risk in a contract which doesn’t impact on their ability to succeed as a business
- What other criteria are important to the customer –for instance if reducing the cost of the contract is absolutely vital, the customer is more likely to risk making a change if someone else offers a lower price than you. The same applies to quality or any other vital criteria
- How much of a commodity the customer perceives your services or product as. If the customer sees little difference between suppliers and their offerings, and that there are plenty of options in the market, they will be less worried about changing to another supplier. Note – it’s the customer’s view that counts, no matter how much you think your offering is different to the competition
- How well the customer feels they understand the service – if they feel they have a strong understanding of the service or product themselves they will feel less troubled by bringing someone new to deliver it
- Where the decision on who will win is being made – generally operational customers who are close to the contract and will have to manage it themselves can be more averse to changing than those from a procurement or financial team who might not have to live with the consequences day to day. If the latter have more influence on the decision (as they often do) then you are potentially in a weaker position
- How much change the customer is making in the new contract – if they are making a lot of changes (for instance increasing the breadth of services or the geography covered), they will generally see less risk in not keeping you – as your experience only covers a smaller part of the new contract and you will need to make a significant transition to move to the new contract delivery, nullifying your transition advantage.
If you are planning to use risk of change as a reason for keeping you, make sure you understand where that risk lies and how important it really is to the customer, otherwise you could waste time writing about things the customer isn’t interested in (and waste their time having to read it). Spend time well before the rebid is due to understand your customer’s position and their aims and needs for the next contract. Once you understand those future needs you will be able to put risk into context in your solution and proposal.
Your performance on the contract to date counts
Of course if you have been performing poorly on the contract all bets could be off regarding risk of change. In fact the customer could see their biggest risk as being keeping you as the contractor. And as with all other things it’s the customer’s view that counts. In our recent survey of procurers only 12% said performance on the existing contract is not a factor in their decision of who wins the rebid. 70% said it has an impact. Almost one in five said it is the single most important factor in their decision.
As part of your preparation for the rebid (if you haven’t been doing this regularly throughout the contract anyway) you should get an objective view of how the customer sees you and your performance. Use an external organisation (or at least people in your company external to the contract) to get the feedback. And don’t just ask the contacts you deal with daily – as we’ve said above they might not be the decision makers for the rebid. The earlier you do this the more time you have to resolve any problems. And don’t feel safe if the responses you get are along the lines that the customer is ‘satisfied’ with you. Unless they are significantly more impressed than ‘satisfied’ they’re unlikely to be loyal to you when it comes to the rebid decision.
You should also use your preparation period before the rebid starts to influence the customer. Part of that process might be to make sure they understand the real risks of the contract and the risks of change (whatever they may be), so they go into the rebid process already alert to the potential issues
Using risk of change effectively in the rebid proposal
When you actually get to the rebid, how you express the lower risk you present as the incumbent is vital. Here are some of the ‘do’s and don’ts’ from our experience:
- Do focus on the areas of risk the customer is likely to see as important, not just risk in general. Your rebid preparation should have given you chance to understand what areas are of concern to the customer. Use that knowledge.
- Do focus on the lower risk you present, rather than the higher risk others present. You are unlikely to know what your competitors will be putting forward in their proposals and solutions so guessing could backfire. And you want to give the customer positive reasons to choose you – not attempt to scaremonger them into rejecting other bids (they are likely to see through your approach and not appreciate it). If you can convince the customer through evidence that your solution offers a lower risk to them, the implication that other suppliers and solutions are higher risk will be clear enough without you having to go on about it.
- Do, as we say above, use evidence to back up your claims. Bland statements like ‘our transition offers a low risk of failure’ won’t wash. Why will it be low risk? What specific aspects of what you are proposing reduce the risk? Where is the evidence?
- Similarly bland statements such as ‘our five years experience of delivery of this contract ensure our solution and future delivery will be of high quality and low risk’ (an actual quote from a rebid we saw some time ago) are only likely to raise questions in the mind of the evaluator such as: ‘What has the last five years’ delivery taught you?’ ‘How is that learning reflected in your solution?’ ‘What specific benefits does that experience offer me?’ ‘ Where is the evidence to back up those benefits?’ Another ‘lazy’ statement we sometimes see is ‘our staff are highly experienced in delivery of this contract’. Fine. But in a world where TUPE applies those staff will be able to use that experience when they transfer to the competitor who beats you. What is it about how you manage your staff that leverages their experience to deliver a better service for the customer than your competitors would be able to?
- As an extension of the above point, do use your understanding of the details of delivering the contract to highlight areas where there could be risk to delivery not covered in the specification. For example if demand spikes on a Tuesday, show the evidence you have from the contract of this spike - and how your solution ensures this demand spike is met without causing a fall off in performance. If competitors have not spotted this spike and not covered it in their solutions then you may have helped the customer see a risk in choosing them. Of course if this means your solution is more expensive you have to beware. Perhaps it would be better to highlight to the customer before the specification is published about this spike so all bidders have to cover it in their solutions and costs. Sometimes the risk to you of accounting for something in your costs that others don't, and losing the rebid on price, is greater than the benefit of pointing out a risk in competitors' solutions.
- Don't fall into the trap that some incumbents do, of thinking that risk of change trumps a solution that meets the customers needs. We often see incumbents not making changes to their existing solutions which could help meet the customers needs much better than they do at present. They do this because they are too focused on an approach that is based on 'keeping things the same (us as the incumbent, our existing solution) reduces the risk of change - and if we change too much we lose this advantage'. But customers are usually less focused on risk of change than they are on getting the best possible solution and price to meet their future needs. If your competitors offer solutions and prices better fitted to the customers needs, and all you offer is 'more of the same' then the customer is much more likely to take the risk of change to get what they want.
- Do, if you have the opportunity, create and present a risk matrix collating all the key risks for the contract and showing how you mitigate those risks. This can provide a useful summary that the customer can use to check whether your competitors have also attended to these risks.
- Don’t completely ignore issues you may have had on the contract. As long as the contract hasn’t been dominated by issues of your making you can use problems that have occurred to your benefit. Showing what the problem was, why it came about and (crucially) how you resolved it and have put into your solution a fix to make sure it doesn’t happen again sets the question for the evaluator of whether your competitors have taken this area of risk into account in their proposals.
Most importantly – do give the customer plenty of other reasons other than risk of change to want to pick you as the winner. Meet their needs, be innovative, focus on the future, put in the best price possible, show how you are helping them achieve their wider goals as well as delivery of the contract specifics. These are the most important aspects of your rebid solution that will encourage your customer not to change to another supplier.
Using risk of change subtly, appropriately and intelligently as a part of your wider offering to the customer in your rebid is a sensible thing to do. Relying on it as the main reason why the customer should keep you as their contractor is...risky.
You can find more information on how to use risk effectively, in your rebid proposal as well as thoughout your contract, in the Rebid Centre and in the Rebid Guide.