Bidding as the Incumbent: Advantage or Disadvantage?
Analyzing the Position of the Incumbent Contractor
In a previous post, I discussed the importance of making bid versus no-bid decisions when trying to win new business. Healthcare agencies can spend significant resources developing proposals for business they are not likely to win or that they really do not even want to win. Of course, avoiding this is of key importance. This also brings to mind another issue that arises for companies when bidding for business. What is the relative advantage or disadvantage of the incumbent contractor when rebidding for business?
In general, incumbents have the overall advantage when a contract comes up for bid. However, many factors impact the degree of advantage. Ask these questions to understand the position of the incumbent compared to its competitors:
1) What is the current relationship between the incumbent and the contracting entity?
Many people think that the critical relationship necessary to secure a rebid occurs between the contracting officer and the account or contracting manager of the incumbent. Unfortunately, the working relationship at this level and the upper levels of the organization only touch the surface when it comes to the functional relationship necessary for a rebid win.
I believe an important functional relationship occurs between the middle managers of the contracting entity and those of the contractor. This is because contracting agency middle managers are often bid evaluators and their scoring is influenced by how they feel about contractor staff with whom they work on a daily basis. Regardless of whether a bid is well-written and the solution is great, if the evaluator does not like the counterpart on the contractor side, the thought of working with that person for another 3 – 5 years can change the score enough to affect the result, even if this is only by a few points.
2) How is the contractor perceived by other key stakeholders?
Key stakeholders can influence the result of the bid. If a healthcare incumbent has a history of problems paying claims, providers who have been inconsistently paid are likely to complain to other high-profile stakeholders, such as the governor’s office, to legislators, or even to the contracting entity. For example, I have seen, especially in the case of not-for-profit provider organizations, members of their Board of Directors voice complaints to individuals key in making award decisions. When this occurs, the incumbent contractor loses their advantage.
3) How has the incumbent contractor performed operationally?
When the incumbent has received frequent contract deficiencies resulting in requests for corrective actions or notices to remedy and even fines, rebid efforts are seriously impacted.
4) Has the incumbent contractor been a good steward of state or government funds?
When the contractor has had a history of maximizing profits, they can be perceived negatively by the contracting office. This is a particular issue when a large national for-profit entity holds a state contract and both profits and corporate contributions generated from the contract are sent to a corporate parent located in another state. Bid evaluators are likely to view this as mismanagement, or worse, misappropriation of funds.
Whether you are an incumbent rebidding for a contract or an organization that is bidding against an incumbent, answering these four questions can help the bid decision team best understand the advantage or disadvantage it has relative to competitors. Frankly answering these questions before submitting a final proposal may also help an incumbent discover ways to mitigate the negative effects of any of the types of problems described above.