By Edw. Pete Brozowski.

A recent UK study of the capital project tender process showed that “...even without allowing for any overheads or profit, the shortest possible supply chain, incorporated around 18% of cost attributable to buying and selling of goods and services”

This paper reviews emerging technologies that can assist in reducing these costs through automation.

 

The cost of tendering

Major equipment manufacturers have calculated that it costs them up to US$75,000 to bid on a complex tender. These costs are eventually passed on to the customer although be it indirectly.

Project engineers and tender managers are generally highly paid, skilled people that end up spending much of their time doing secretarial and administrative work managing the tender process rather than adding value to it.

 

The major contributing factors

                   Long lead-time of the process - There are many time consuming tasks that contribute to the long lead-time of tendering including: internal collaboration within a multi-disciplinary group of people within a single organization (but often geographically distributed), obtaining approvals (both financial and technical), preparing the tender specifications and documents, interfacing between customers and suppliers, interfacing with other companies, third party consultants, partners in a consortium and sub-contractors, assembling accurate bidding documents and calculating prices and time estimations.

                    The quality of tendering and bidding documents - This is a crucial element for successful and efficient tendering and involves criteria such as the clarity of requirements and specifications, compliance with quality certification standards, clarity of the bid, exhaustiveness, adequate structure, nice presentation, compliance with specific requirements set-out in the tender, completeness of the information provided, etc.

                    Inability to quickly and reliably assess the bids - Differences and inconsistencies in the bid formats make it very difficult to asses the bids and compare apples with apples. A large amount of time is often spent collating data from the various bidders into a format that allows for proper comparison and evaluation.

                    Reliability of the cost and time estimate - Ultimately companies who are consistently accurate in their pricing and delivery estimates will win in the long run. The ability to provide reliable estimates depends both upon the capability of the bidders and the clarity and unambiguousness of the tenders. Clear, complete and non-ambiguous tenders will also naturally lead to lower bidding prices. As uncertainty diminishes, so does the “safety price” or padding added to the actual estimate.

                   Monitoring delivery of the works - The ability of the customer to continuously and transparently monitor the current status of the works is a definite advantage in that it reduces delays and ensures delivery in compliance with the contract.

                   Project information is scattered on computers throughout the organization - As many parties are involved on both sides (customer and supplier) and typically cover multidisciplinary groups, the information and expertise is often geographically distributed and located on computers throughout the organization. This leads both to wasted time and incomplete or out-of-date information.

 

The procurement process

At the abstract level, all industry sectors are identical, but looking in more detail, differences can be observed. However, for purposes of brevity we intend to address the procurement process by looking at the technologies available to support the following 3 key areas of:

•   Tendering

•   Bidding

•   Monitoring of the works (delivery)

Historically the above processes were performed in a totally isolated manner using boxes of printed documents shipped off to suppliers, who then submitted their bids (and often still do) by delivering multiple copies of printed documents to a central location, and so on. Paper mail, faxes and telexes were traditionally used for correspondence/clarifications and huge filing cabinets for storage and retrieval of this information.

                                                 

The advent of e-mail has largely alleviated this process, allowing the tender documents, clarifications and correspondence (and in some instances even the bids) to be delivered electronically.

However, the process is still predominantly based on people experience, possibly with some form of informal re-use of materials and results generated in past tenders and/or bids. In any case there is no real and proactive coordination and synchronisation of the activities and parties, and no support in integrating the processes and activities - particularly the tendering, bidding and delivery processes.

 

What to look for in a solution

To take the next step in the evolution of the capital procurement tendering process, we require a system that fully integrates the three key steps in the process, namely tendering, bidding and delivery. The system must also standardize and automate as much of these processes as possible in order to reduce the effort required to manage them as well as eliminating human error wherever possible.

   To provide an effective solution we need to address the major contributing factors mentioned earlier.

                   Lead time - In order to reduce the lead time of the process, we need a technology that enables all parties, globally, to collaborate seamlessly and without delays and without having to install or support additional software. Only a centralized web-based application can achieve this. The solution should encompass all aspects of the process including approvals, automated reminders, key-performance-indicators and other productivity enhancing functions.

                   The quality of tendering and bidding documents - Standardized approved templates subject to constant review by functional experts should be available as the basis for all tenders. These templates should consist of a single copy document centrally available to all players by way of controlled access. These templates should also contain rules with automated validation both for tendering and bid submissions, thus ensuring that no incomplete tenders or bids can be published or submitted.

                   Inability to quickly and reliably assess the bids - The use of standardized templates with standard formats for both tendering and bid submission (as described above), plus the use of a database format for the documents rather than just a Word type document is key. This would allow for easy reporting, comparison and evaluation criteria and through the use of additional tools can simplify and speed up the process of evaluation and negotiations on a clause level basis.

                   Reliability of the cost and time estimate - Use of the templates and tools described above would assist in the publication of clear tenders and the submission of more precise bids. Negotiation tools and a comprehensive audit trail will also enhance clarity and be invaluable in the resolving of disputes (both internal and external).

                   Monitoring delivery of the works - Some form of delivery tracking, inspections, commissioning and acceptance testing reporting system that is fully integrated with the contract and specifications will ultimately improve the delivery and monitoring process thereby insuring timely delivery of a project that actually matches what was ordered as well as the efficient management of any issues that may arise.

                   Project information is scattered on computers throughout the organization - To ensure optimal use of the organization’s human capital and expertise, all information related to a project, should be stored centrally and available at the click of a button rather than through a prolonged search process.

 

One such solution is iSpec/TenderWiz Enterprise

iSpec/TenderWiz Enterprise is an online web-based specification, tender and contract management system - It is an automated electronic version of the entire specification, contract and tender management process. From master template creation, through tender preparation, approvals (financial and technical), vendor invitation, publication, clarifications, bid submissions, bid opening, evaluation and awarding of contract, as well as delivery tracking, performance testing, commissioning, inspection and final acceptance. ALL documentation, negotiations and correspondence is recorded in the database - creating a comprehensive audit trail and a record of the entire process. 

iSpec/TenderWiz Enterprise does not use Word documents, but rather stores all paragraphs/clauses in a database. All submissions are done online into the same database allowing for clause level control and easy reporting, analysis and evaluation. It also ensures probity and complete transparency. The entire history (discussions, clarifications, negotiations, email) of an item/clause can be retrieved with a single-click. Supporting data in any format (Word, Excel, CAD, etc.) can be attached to clauses or submission information. It is however possible to export the entire contract in Word format.

iSpec/TenderWiz Enterprise is completely scalable and configurable to suit the requirements of smaller organizations as well as  those of global enterprises.

 

A case study                     

A case study involving a large global enterprise revealed an ROI (Return on Investment) of 400% in the first 18 months.

 Other results from the study are shown below:

Action	Current Practice	Using iSpec/TenderWiz Enterprise
How long does it take to prepare your tender documents for publication?	67 days avg.	13 days avg.                   (2 days best case)
How do you ensure standardization and compliance?	Tedious	Approved master templates
How do you keep track of tender progress? (validation, correspondence, reminders)	Manual process	Automated
How do you keep track of supplier clarifications, negotiations, correspondence and deliverables?	E-mails and other	Centralized - full audit trail
How do you resolve disputes? (internal and supplier)	Manual search of e-mails and documents	Centralized - full audit trail
What percentage of your time is spent doing clerical work rather than adding value to the process?	High percentage, with little added value	Low percentage, great value added

Unlike most enterprise systems that require multiple unrelated modules to be installed for proper operations, iSpec/TenderWiz Enterprise can be run as a standalone solution as well as being integrated with other key applications. This significantly reduces total solution cost.

For more information see www.remy-is.com