You 'll know that when companies want to save money, the idea of contracting activities out always comes high up the list of things to do. Sometimes this works well - and sometimes it doesn't. It's not always easy to see why - but I've found that it often goes back to the Invitation to Tender (or ITT). A good ITT means a good contract, and a bad ITT a bad contract. So, to help you, here are three principles which will help you get the right result.
Decide What Sort Of ITT You Want - And Stick To It
In the jargon, your ITT can be either "input-based" or "output-based".
You can think of an "input-based" ITT as being like a recipe. That is, you describe exactly how you want the contractor to perform the service.
This allows you to keep control - including over the profit your contractor makes. So an "input-based" contract works well when you're contracting out an operation that already exists, and you're confident that you're already operating it efficiently.
If an "input-based" ITT is like a recipe, then an "output-based" ITT is like asking someone to cook you a meal - but letting them to decide what to cook and how to cook it. You describe the outcome you want, but you let your contractor decide how to achieve it.
If you want to do things differently, or you're looking for new ideas, this works well. But it also gives your contractor the opportunity to improve your efficiency - without passing all the benefit on to you.
What You Should Put In Your ITT
An ITT is a formal document, but that's no excuse for making it difficult to understand.
You can't expect a good response from your suppliers if they can't work out what you want. So here are the main things you need to put in your ITT to get the best results:
× a one-page introduction that explains what the ITT is all about.
× a description of what you want your supplier to do (including sample data of actual
activity and a forecast of how your business will change during the contract)
× they need information from you to do their job, and you need information back from
them to find out what they've done - list it here.
× a specification of what service level you expect your supplier to provide
× an outline of your main contractual conditions
× your format for your suppliers' response
How To Choose Your Contractor
So now you've got your responses from your contractor, how do you make sure you choose the one who's best for you?
First of all, you have to be clear about what you want. You have to know what's essential, and what is just nice to have. Now you can eliminate anyone who can't meet your essential conditions. But remember - you're doing this to find the best supplier, you're not trying to catch people out. So if you're in doubt - get your supplier to clarify their response for you.
Second, don't rely on only your suppliers' responses when you're making your choice. It's really important for you to meet the people who will be doing the job and see the place that's they're going to use. After all, every contract depends on personal relationships in the end. If those aren't right, it will never work properly.
Finally, don't rush into choosing your supplier. Remember - as soon as you've told your supplier they've got the deal, you lose 90% of your bargaining power. You'll find there are always some details you haven't covered, which may seem trivial. But sort these out first - then seal the deal.
I can't promise you that following these three principles will make your tendering process trouble-free. That would be too much to hope for! But they'll reduce the stress and help you get the outcome you want - a competent supplier at a sensible price.
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