Government tenders are very competitive and many companies exist only on them. That is because they are steady work and there is a guarantee of payment. Many projects provided by central or local governments have a great deal of prestige attached to them.
The contracts can be any size from large to $multi contracts and be for anything from ditch digging to massive computer systems.
In some highly specialized areas such as some defence contracts there may only be a few bidders. In other government areas such as cleaning, road repair or staffing there may be hundreds of businesses all competing for the same work.
Winning government projects is very price dependent as a competitive price is a major factor in awarding contracts. This has led to companies offering minimal services and products that will just meet the tender requirements and then building in as many profitable extras to the project as they can manage.
This is one of the reasons that government projects often end up costing more than originally expected.
The government office originally purchases a project that it thinks will meet its needs. During the project implementation, it discovers that the service offered is only basic and then starts to ask for upgrades and changes.
The perceptive, experienced bidder knows this and has built in some extra services at a greatly enhanced price. The extras that will almost always be required are how the bidding company makes its profit.
Of course, many overruns are also caused because the government office has not specified what it requires in enough detail. Government and public tenders can be very difficult to manage when they are won. The experienced company understands this and prices to make a profit.
Many governments are keen to attract small businesses in order to improve the country’s business environment and encourage business growth. As such many tenders are only open to business within that country, although some countries have to also tender internationally.
Many countries firmly control their tenders by following a fixed format and having a common question structure. This ensures fairness and a removes the potential for corruption.
It also means that companies are faced with the same questions on multiple tenders. This makes them easier to answer but familiarity makes it more difficult to differentiate yourselves from other bidders.
Government Tenders Are Centrally Advertised
Governments usually centrally advertise their tenders, so that there will be a web site for central government contracts and another for all local government contracts. The European Community (EC) also advertises all EC contracts on one web site.
This makes it very easy for a company to identify and apply for new projects. Unfortunately, it also means that there are a considerable number of companies that all bid for the same work.Profiting from Government Tenders
To summarize then, to become that experienced company and make a good profit from such tenders ensure at least 2 things:
1. Tender a low price that covers only the basic requirements of the tender.
2. Then include build in optional services at a higher price.
Certainly this article covers the main aspects where government and public tenders are transparent. Many times depending on the country government tenders are decided by 'undertable money'. But we don't want to go into that here, as that will open a can of worms - we shall leave that subject matter to wikileaks.