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When you win everything your bid in the open market, question the personnel that work for you. They are either very inexperienced or possibly tainted by outsiders. Get others involved to review this bidding process and have others decide prices to bid. Step in quickly to ensure someone internally is not being paid off. There is something wrong with a near 100% win ratio. No one wins every bid unless the process is flawed and your company is hemorrhaging money with every quote.
Winning all bids means you are throwing away profits. Your firm is wasting money because of its ignorance of the market. Your bids need to hit an occasional market ceiling to see how much profit is available. You will have to lose some bids to find this out like all players in your industry. Losing bids will expose other competitors’ strategies of bidding in the market. You need to find out if any of the possibilities are correct.
Possible inside theft schemes (very effective, hard to catch in firms with lousy or ineffective internal cost systems):
- Vendor Payoff: A vendor approaches your estimator, tells them the bid number they want to spend, arranges for the bid with your estimator direct, obtains no other bids and then forwards a payoff to your estimator at his home with either cash, pre-paid debit cards, payments to relatives, payments on personal expenses, etc.
- Competitor Payoff: A competitor pays your estimator to bid low on a job they do not want. The competitor deliberately bids high which most likely favors your firm to win the low bid. Your estimator is paid off indirectly through a number of means.
Raise prices to slowly drop your win ratio down to a reasonable number. That percentage won depends upon your particular market, so begin asking as many people as possible. Ask this question of your bankers, the various candidates from the industry during interviews, industry vendors, friendly ex-employees still working in the industry and any published data available. Track your prices bid and chart where the winning spot turned out to be. Find out what margins are tolerated and which are too high.
Methods to thwart theft in sales and purchasing: One last resort to thwart internal theft through estimators is to have their bids reviewed and forwarded through 2nd parties or, simply have those estimators prepare the cost estimate and another person develops the bid. On the other side of this is when your purchasing buyers receive three bids, have those bids forwarded to a person outside purchasing.
