What does value for money mean in tenders?

There are a lot of words spoken (and written) about tenders not being judged on price alone, but to be frank, that’s not always the case.  

However, putting that aside for the moment, when working on a tender response, ‘value for money’ is a term you’ll see and hear bandied about in requests for tender, by procurement and professional tender writers and proposal writers. 

But what does value for money really mean when you’re responding to a tender request? It simply means that the organisation that’s issued the request for tender wants to be sure that it’s getting the best service, project outcome or product for its level of investment. This means a service, project or product that offers the most beneficial combination of cost, quality and sustainability. 

The procurement team assessing your tender response will look at your proposed pricing in the context of: 

  • Your proposed cost for the product, service or project compared to its deliverables or proposed results.  
  • Your cost compared to other tenderers’. 
  • The cost over the whole life of the product, service or project. 
  • The risk of your product, service or project not meeting needs or failing to do what promised. 
  • The usually unseen benefits such as minimising risk of economic, social and environmental, or alternatively, creating economic, social and environmental benefits. 

These factors are never more important than in government tenders, as government at any level is spending tax payers’ and, in the case of local government, rate payers’ money. 

The Australian Government’s procurement website is a good place to go for information on government tenders. 

Procurement teams first ensure that tenders comply with the mandatory requirements so it’s important to understand what procurement is looking for.   

Think about value for money when you’re writing a tender response, just as you would in your own life  

When you’re making a big ticket purchase such as a car or holiday, you want to be sure that you’re getting the best value for money. You decide upon the different features that are most important to you and then make a choice that offers as many of these features as possible within your budget. However, whilst in theory our budget is important, as long as the car or hotel has some of the features we are looking for, if we love the look of it we’ll stretch our budget to purchase it. 

Rationality is not, despite what people may like to think, always the basis for our decision making when it comes to money. For procurement teams assessing tenders, however, the decision making process follows a defined structure.  

How to get the pricing right in your tender 

First up, procurement will check that the tender complies. If it does, then it goes through to the next assessment. This is where all responses in the tender are scored against the evaluation criteria.  

Last is the price assessment. Basically, you want your pricing to be in the mid-range; neither too high nor too low. In other words, your pricing needs to cost competitive. Easier said than done, of course. If you don’t know the fees or charges that your competitors are likely to be proposing, or how much they’ve likely discounted by, then it can be very hard to pitch your pricing in tenders. 

Bear in mind that government will always err on the lower side. So even if you’ve done a brilliant job of addressing all the questions properly and met all the compliance, your tender may still not succeed if the pricing is out. You can ask the advice of your tender writer, although pricing is often something companies like to take care of themselves when writing tenders. 

Keep value for money in mind when writing a tender response 

Keeping value for money in mind when writing a tender, or having a tender writer prepare your response for you, means making sure that your tender response emphasises what the organisation will gain by choosing you:   

  • The genuine outcomes you deliver will give them what they want. 
  • Your excellent track record means that you’re a safe pair of hands. 
  • Your comply with legislation and regulations. 
  • You guard against environmental issues, support sustainability and have an ethical supply chain. 
  • Your pricing is just right. 

Bear in mind too that there’s rarely an opportunity to negotiate pricing after your tender has been submitted. So the pricing in your tender has to be your best and final offer.  

If you would like help writing, editing or proofreading your tenders and proposals, head to the contact page or call Rosemary Gillespie on 02 8036 5532 or 0411 123 216.

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