Your guide to the ultimate KPI – cost per tender won

Submitting tenders for public procurements can be time-consuming and expensive. The processes often require a lot of admin, and can easily become inefficient and hard to oversee. So how do you best measure the work of submitting tenders for procurements?

We suggest you measure the ultimate KPI for bid organisations: cost per tender won.

Why measure cost per tender won?

Many teams work with one or more KPIs to measure the impact of the team's efforts. By tracking KPIs over time, you can understand which activities best contribute to reaching the team's goals. At the same time, you can spot whether something is consuming a lot of time and resources without delivering the results you want.

For bid teams, the simplest thing is obviously just to count the number of tenders won, or the win rate of submitted tenders. But that doesn't reveal the cost of getting there, which can be significant.

By measuring cost per tender won, you measure the efficiency of the team's bid work. How much resource do you spend for every contract signed? That way you're not just looking at the cost per tender submitted, and not just counting won contracts – you're calculating the cost per tender won.

This is about doing the right things and doing things right. Simply put, placing resources where they actually make a difference.

How to calculate cost per tender won

So how do you calculate the team's cost per tender won? First, of course, you need to have control of your costs. What resources do you spend finding interesting procurements, investigating them, and submitting tenders? Usually this means working hours for the team members, plus colleagues outside the team who come in at some point in the process, as well as costs for monitoring services and other digital support systems used in bid work.

Then you simply divide the cost of the bid work – including work on procurements you decide not to bid on – by the number of tenders won.

Cost per tender won = Total cost of bid work / Number of tenders won

Once you know the team's cost per tender won, that figure can also be used to calculate cost per tender won relative to the average contract value. This lets you account for the fact that large procurements with high contract values can be more time-consuming, and that small contracts shouldn't cost too much in internal resources.

First calculate the average contract value of the procurements you've won. Then divide that figure by the cost per tender won.

Cost per tender won relative to contract value = Average contract value / Cost per tender won

It's important to keep track of these metrics. When selling products and services with low profit margins, it's especially important to keep cost per tender won down to protect those margins.

From cost per tender won you can also set a minimum contract value – procurements so small it isn't worth the cost of submitting a tender.

How to optimise cost per tender won

OK, now what? Once you know the team's cost per tender won, what do you do with that information? Now you can start looking at what would give you an optimal cost per tender won.

How do you lower cost per tender won? There are three things you can do:

• Increase your hit rate

• Lower your costs

• Find more of the right business opportunities

Focus on cutting hidden costs

When talking about becoming more efficient and cutting costs, we often think of the obvious costs – time spent and salary costs. But the big potential for efficiency gains isn't in the obvious costs, it's in the hidden ones.

Bid work carries a number of hidden costs:

• Missed procurements due to an inadequate monitoring system

• Lost tenders due to disqualification, wrong business opportunities, and suboptimal pricing

• Wrong business opportunities when the team spends too much time on irrelevant procurements

• Mispriced wins – winning, but at a suboptimal price

• Unnecessary admin and coordination due to inefficient support systems

Working to reduce these hidden costs can significantly lower cost per tender won. Many of the hidden costs can be avoided with the right information easily accessible at the right stage of the bid process.

Save time and boost hit rate by making better decisions faster

A common cause of high cost per tender won is spending too much time on irrelevant procurements. If the team spends a lot of time reading documents, compiling summaries, and communicating internally, only to conclude it isn't a good business opportunity, that takes resources away from working on tenders that could lead to won contracts.

Making good decisions early about which procurements to pursue can therefore significantly lower cost per tender won.

With data-driven bid work, automatic summaries of the procurement documents are generated. The team can then quickly get up to speed on new procurements, review the requirements, and decide whether it's a relevant business opportunity.

With the right procurement information presented automatically, the risk of continuing to work on tenders that won't lead to a deal is also reduced. This raises the hit rate – the share of submitted tenders that are won – and further optimises cost per tender won.

Find more business opportunities with data-driven monitoring

To reach an optimal cost per tender won, bid teams want to handle plenty of relevant, good business opportunities. Companies commonly miss procurements because the buyer chose an unexpected CPV code or wrote an unclear notice. In that case the procurement doesn't show up in the search profile of many traditional monitoring services.

With data-driven monitoring, searches also cover the information within the procurement documents, significantly reducing the risk of missing a relevant procurement. With more relevant procurements, the chance of more won tenders increases, which lowers cost per tender won.

Switch to data-driven bid work

Working data-driven in bid work means using data to make fact-based, proactive decisions. With the right data easily accessible throughout the bid process, time-consuming admin, poor decisions, and unnecessary work can be avoided, and cost per tender won is reduced.

Data-driven work runs through the entire bid process in Tendium's bid platform. With automatic summaries, smart collaboration features, and reduced admin, the bid process becomes more efficient and simpler.

Want to try data-driven bid work? Start a free trial now.