IT Support for the Very High Value-Added Bid Pricing Process

Abstract

Amongst the highest value-added business processes in firms which operate in business-to-business markets and therefore obtain most of their sales through responding to invitations to tender is the one concerned with the pricing of each bid. Hitherto, the basis of the price-setting process is to carefully estimate the costs, add a margin, examine what one knows about the competition and about the buying organisation and from this information and business expertise determine the price of the bid. Whilst the cost estimation is relatively formalised, the rest of this process is quite ad hoc and involves manipulation of business expertise which resides in the heads of a number of actors. This business expertise includes what the salespeople know about the real factors, which the buying organisation will use in assessing each bid (e.g. technical quality, financial strength, past experience with each vendor) as well as their business expertise about each competitor. It should be possible to capture all this knowledge in a computerised form such that it could be manipulated and used for setting prices for bids, which enable, on average, a higher number of bids to be successful.

In this papers, we describe the existing business processes for setting the prices of each bid in response to an invitaion to tender and how such process could be improved in order to better utilise all the information and business expertise which is available. the focus of this work is on bid pricing in the service industries and the examples given in this paper come from the collaborating industrial partner, a large telecommunications utility company. An intelligent decision support tool has been developed to provide support for this business process. This tool is sufficiently generic to enable it to be quickly adapted to the needs of different companies and these generic aspect are also discussed.