If you have no needed or desirable products or goods to sell, then you are selling a service. Your abilities.

This is where the concept of competitive tendering comes in.

The client has a need. They will put together documents outlining that need. Specifications for what, where and when will be detailed. How often and for how long. The client will then invite purveyors, or contractors, of their required service to submit costing quotes for the specifications. For the client’s consideration.

The contractor’s process is quite simple and generally adheres to the following model.

• The Contract Manager will put together a pricing model for the tender. Costing for the specifications will be pared down to the bone and, often, made up on the fly.
• The required profit percentage will be added to the costs and a grand total will be calculated.
• The resulting tender document will be passed upstairs to the Business Manager for approval, assuming that they haven’t already been getting in the way.
• The Business Manager will examine the tender and state, “They’ll never pay that.”
• The Business Manager will then draw a line through the contract price, and put in a new, expertly bumbled, much lower number.
• This quote will then be submitted to the client.
• The client will say, “Oh! We can’t possibly afford that!”
• The Contract Manager will panic and say, “Dur! Okay!”
• The Business Manager will then knock some more off the price.
• The client will then say, “Well why didn’t you do that in the first place?”

The client now has all the specifications, for half the price.

Once the contract is won, and legally bound, the Contract Manager will subtract the desired profit margin from the price and then, staff and equip the contract to cost. Not specification. That’s the important bit.

Because it is now your problem. The contract that you are working, however many of you there are, requires at least three times as many staff in order to meet its specifications.

This happens because the client expects to purchase a brand new, top of the line, Rolls Royce, for the price of a second-hand Yugo with no engine. Or wheels.

Keeping prices down for the client, whilst providing best quality.

Specifications are not met and the client is disappointed with the service, but not with the price.

The lifetime of the contract will be limited, and it costs the client actual money to compile a tender. So, in order to keep the work, the contractor will make the client an offer.

“If you let us keep the contract for another period, you can keep the same price.”

The client, rubbing their hands in glee, nods so hard that their wig falls off.

Contract retained. With no uplift on the price.

This will continue for years, or possibly decades, until somebody notices that the company isn’t making any money.

This is when the phrase, “We got our pricing model out of a Christmas cracker”, becomes pertinent.

Practice it. You’ll need it one day.

ALL HAIL THE SHAREHOLDER!