Pitching for government work can be complex and difficult. Simon Duff looks at the tender process, possible pitfalls, differences to the private sector and the key to successful selling
In September last year, 103 British construction firms were fined a total of 1.14% of their turnover by the Office of Fair Trading, after being found guilty of illegal price rigging and colluding with each other on bids for government-funded projects. Companies hit included Balfour Beatty, which had a turnover of about £3.5 billion when the offence took place and was fined £5.2 million. The contracts investigated by the OFT over a five-year period included public sector projects to build schools, hospitals and housing.
With the construction industry hit hard by the economic downturn, and tight margins reported across the board, it is hardly surprising that these firms were tempted to do this - and may explain why they try to give so many of their suppliers, including the audiovisual industry, a hard time on price.
The tendering process
Audio consultant Roland Hemming explains how the tender process works in the UK. "For almost all projects using public money, it is a requirement that work is tendered out. When a supplier completes a tender application, they sign a form of tender that says they have not colluded with others in putting together the bid. It is important to remember that a tender is a legal process and both sides are committed to the terms, subject to agreement of the contract."
The UK 2002 Enterprise Act makes it clear that bidders may not collude (and similar regulations were in existence before then). The excuse used by the construction firms was that, in many cases, their order books were full, but if they didn't submit a tender, they might not be asked to tender for future work.
So how do AV manufacturers and installers approach the tender process when pitching for government work? AVM is one the UK's leading providers of video and audio communications facilities and works extensively in both the public and private sector. Recent contracts for the UK Ministry of Defence (MoD) include equipment and upgrades to Service Education schools for 500 classrooms in Europe.
Lee Johnson, AVM's education director, comments on tendering at the MoD: "There are specific frameworks set up in some cases, with tendering processes going through public tender portals. For the MoD we are mandated to use the Defence Equipment and Supplies (DE&S) Framework and we are contracted to supply throughout the world through this. We have to abide by competition rules and are up against two other companies."
Throughout Europe the tender process tends to work along the same lines, albeit with slightly different regulations in different territories. TLS Communication, based in Hilden, Germany is a manufacturer of audiovisual products. One recent installation is a computer training system for the University of Moscow.
Klaus Gruendig, TLS sales area manager for southern Germany and Austria, talks about his experience: "Generally we receive the tender via a retailer or dealer. We then offer and the retailer or dealer completes the tender with other offers from various companies as well as his own services. Then there is a deadline, a submission date, bidder meetings with renegotiations, a period for objection and the placing. Depending on how professional the originator of the tender is, the delivery corresponds then to the products announced in the tender."
Another German manufacturer working in the area of conference technology is Brähler. Recently the company has provided microphones and voting systems for an install at the Egyptian People's Assembly in Cairo (see case study, page 33). Gerhard Bauer, product manager, says: "The preparation from our partner was excellent and our team was in place at the correct time during the final set-up of the system."
Against the backdrop of the economic downturn, how are companies viewing the tendering process and what effect is it having on new spend for government projects? Johnson says: "For the UK the process remains the same, however there has been a considerable increase in competition. Consequently margins are lower, and constantly being squeezed."
Willy Rudy, general director for TLS in Russia, agrees that the process has got tougher: "More competitors are coming to the table to bid on projects, and some not directly from the AV business, such as computer retailers. This is meaning that low-cost products are being used that are not always best for the job. Gruendig adds: "There are rather fewer tenders in south Germany and Austria at the moment and, according to the retailer and dealers we deal with, the big projects are missing."
Opportunities and sporting chances
Despite the economic climate, manufacturers and installers are reporting growth from the emerging markets of Russia, Eastern Europe and the Middle East, in both the public and private sectors.
Johnson believes that in the UK there remains plenty of opportunity in government sectors, especially in the education system, justice departments, MoD, and with bluelight (emergency) services and local government and councils. "The need for these organisations to communicate with public and staff, in ever more effective and efficient ways, remains high."
For large government projects, such as the building of stadiums for the 2012 London Olympics, there is of course a vast amount of work going on. But companies can't expect to walk in and win Olympic projects, just because of the perceived openness of the Olympic tendering process, when they have little experience with projects of that nature.
Hemming comments: "An important factor that many people don't understand is that it is not just the scale of large projects that limits the number of companies capable of delivering them. The high-profile ones especially are often run with a number of different goals and agendas. This requires more sophisticated management than many companies are willing to provide. So while many companies could physically install a system on the same scale, they could not deal with the political and contractual burdens put on them."
Continuing on the sporting theme, Daktronics has supplied two of its PS-23 LED video screens to the Nelson Mandela Bay Stadium in Port Elizabeth, South Africa, which will host matches for this year's FIFA World Cup. Anne Larkin, head of international marketing, explains how the tender was won. "The purchase of LED displays for the stadium was only a small part of the infrastructure project for which four companies had placed their bids with the South African government," she says.
"The company that won already had a supplier lined up for the display purchase, but not committed. Once our local reseller, Spectrum, heard, they together with Daktronics, went to the contractor to discuss our entering the tender process. Daktronics presented the government and the stadium's general contractor with a proposal that included higher specs, a superior product and a service package for the lifetime of the displays."
Public versus private
What then is the difference between the public and private sectors when it comes to bidding? Eric Hénique, director of marketing and international sales at eyevis, says: "The main difference between bids is the duration from the tendering to the planning and the final installations. This period is generally much longer with public tenders."
There are other differences. In Germany, during bidding, it is sometimes the case that for government work there will be one authority with several engineers who will give opinions and approve the presented offers. Bauer says: "The decision in the private sector is faster and less bureaucratic and very often the communication with the project responsible is much easier."
In the UK Johnson believes that the public sector is generally more realistic about what can be done, how long it will take and how much it will cost. In terms of general security, in the public sector AVM is seeing that company vetting and accreditation procedures are more comprehensive than is the case when dealing with private firms.
The key to successful selling is to understand the complexity of the market. Knowing a client is vital and it is important for bidders to understand that often it is the end user customer participating in the tender, much more than a manufacturer, who has most input and the final say. Quality, delivery times, stock level, training, internet presence and references are all vital.
Gruendig says: "It starts with the information input of the system designer and ends with intensive communication with the end user." Manufacturers and installers must offer honest consultation and trusted advice. Companies can't afford to make promises they can't keep. Building trust, and not pricing unreasonably, remains key.