Panel contracts: six tips for winning supplier panel opportunities
By David Lunn, CP APMP, MCIPS.
The seductive simplicity of panel opportunities
Time and again I encounter the assumption that winning a place on a contractor or supplier panel is a guaranteed, easy ‘road to riches’.
On the surface, it’s logical to conclude that winning a competitively tendered place on a supplier panel requires less work than winning a single publicly tendered opportunity. After all, if there are ten competitors vying for four panel contracts, the odds of winning must be better than slugging it out with ten competitors for a single tendered contract. Right?
Even better, it doesn’t really matter whether you end up notionally first or fourth on the panel, because you are pretty much guaranteed a quarter of the business on offer anyway. Right?
Wrong and wrong.
The truth about panel contracts
You might not want to hear this, but the cold, hard facts are that:
- Winning a place on a panel is as difficult as winning a publicly tendered opportunity outright – potentially even more so. There a several reasons for this, including the fact that the ‘better odds’ notion tends to attract even more competitors.
- The Pareto Principle (also known as the 80/20 rule) applies to the payback a panel contract delivers. In our experience 20% of the panellists will usually enjoy about 80% of the work. Have you thought about this when planning your pursuit and execution of the panel opportunity?
But having broken the hard news, the good news is that you can do something about it. Here are six tips to help you plan for winning your next panel contract opportunity.
Tip 1 – Resource accordingly.
Calibrate your level of investment for winning a place on a panel against a realistic assessment of the ‘size of the prize’. The general principle is to establish your investment of bidding time and resources as a proportion of the potential return. If the panel opportunity supports targeting 20% of the potential total panel spend, then establish your investment ratio on this basis. However, we generally recommend tackling the opportunity on the basis that you will be the dominant panel provider and therefore calibrate your work winning investment to suit – which leads to my next point…
Tip 2 – Adopt a sole winner focus.
Enter the panel opportunity with the mindset that you want to be the most preferred panel member – irrespective of how much business you assess will come as a result. If you bid on the basis that being a second or third placed panel member is OK, it stands to reason that more winning-focussed competitors will secure the contracts over you. Competitive context is essential. Behaving like you will be the preferred panel provider sharpens competitive focus, which is a key persuasive tool ignored by many organisations tendering for panel places.
Tip 3 – Plan for incumbency and switching risks.
The ‘liked incumbent’ rule of thumb applies equally to panels as it does to single tendered opportunities. In our profession it’s generally accepted that well-performing incumbents will re-win a contract about 70% of the time. So you’ve got to make a very strong case to knock a ‘liked’ incumbent off its perch. But in a panel context there could be multiple ‘liked’ incumbents. As an example, let’s assume a five-member panel opportunity. Unless existing panellists have uniformly underdelivered, the number of truly available slots is not really five, it’s more like one – or maybe two. You’ll therefore need to work doubly hard to overcome the buyer’s perceived switching risk, because unless you’re replacing an underperforming incumbent, winning a panel slot realistically means you’ll have to elbow an incumbent aside (hint – re-read Tip 2).
Tip 4 – Understand the point of the panel.
Explore the full range of reasons why a panel structure is being offered and frame your proposition in this context. Ensuring overall capacity is just one of many potential reasons. Others could include range/breadth of panel offerings (i.e. the assumption that a single organisation can’t supply the whole scope) or monopoly/oligopoly concerns (i.e. the reputational and operational risk of relying on a single, regular source, or a few dominant suppliers). The more insightful you are about these drivers, the better you can identify persuasive solutions to overcome them.
Tip 5 – Be super easy to do business with.
Establishing a multi-member panel of contractors/suppliers runs counterpoint to procurement’s long-standing objective of reducing contract management burden and related administrative expenses. Whether it is explicitly disclosed or not, a key consideration when choosing panel members will be to predict how effectively and efficiently you can transact with and report back to the client. If you look like you are going to be hard work, then it’s unlikely you’ll make the short list. So make sure your proposal demonstrates the ease of doing business with you.
Tip 6 – Establish who your real end-clients are.
Your end-clients are the organisations (or people) who will be using the panel to procure goods and services – not necessarily the organisation or individuals who set the panel up. Do you know who they are? How will you reach them? How are they going to learn about you? Why should they choose you and not another panellist? If competitive quoting is going to take place inside the panel, how are you going to optimise your chances of success? Reflect this understanding in your bid and include a solution that shows how you intend to engage and build relationships with your actual end-clients.
Challenging panel perceptions
Panel opportunities are great. Tendered single provider opportunities are too. But, from a work winning perspective, they aren’t much different.
Panel opportunities are not as seductively simple as many organisations perceive them to be. Tendering for a panel place requires the same focus, investment and energy as any other opportunity. And as the above shows, at times even more so.
At the risk of raining on your parade, hopefully I’ve challenged any ‘panel ease’ misconceptions you may have harboured. Speaking of which, there are plenty of other ‘bidding ease’ perceptions that I constantly challenge and confront. But we’ll save those for another day!