Recently, Millstream highlighted the strength of Virgin’s approach to business development in our article featured on Energy Voice’s website. Virgin have championed diversification across sectors to generate more business opportunities: taking people to space, running the railways and providing healthcare services are just a few examples of Virgins product range.
This approach to business has resulted in staggering financial rewards for Virgin and other companies who are able to operate as primes in the prime/sub model.
The prime/sub model is when a large contractor wins the tender and are the prime contractor to the buying authority, they subcontract out elements of the tender to other suppliers, usually locally based SMEs.
So what impact does the prime/sub model have on SMES?
We all know there has been a massive drive from the government to support SMEs to benefit from the wealth of opportunities in the public sector.
This has been seen through their commitment to spend 33% of central government money with SMEs and also through the changes to the selection criteria in 2016 making it easier for SMEs to bid.
The question is – when huge prime contractors are winning huge contracts and replacing existing smaller providers, how is the government’s agenda being achieved?
The answer is it usually isn’t: when a prime contractor wins a public sector contract they are ultimately responsible for delivery and are looking to make profit. This often has a negative impact on the finances for SMEs as the prime contractor seeks to find efficiencies and cost savings through the supply chain to increase their own profit.
When a supplier is faced with the potential of the prime/sub model taking up a chunk of their business or taking away a business critical tender, many SMEs may feel they have no option but to join the supply chain if they are to survive.
However, that might not be their only option to succeed! Facing your Goliath means you have to find your inner David and seek out a new way to do business.
So what is the answer?
The answer is simple – have a strategy in place. Nothing stays the same in business and this is the next big challenge smaller providers are facing. There are a number of proactive steps suppliers can take to ready themselves for any impending changes:
Pre- Engage with the Contracting Authorities
in these situations waiting for the tender is too late. The only way suppliers can influence hearts and minds is to engage in advance of the tender being released. Use Tenders Direct to search for contract award notices (CANs) to find out when a contract is due to end, or to gain contact details from key buyers. You can also keep an eye out for prior information notices (PINS) which notify you of a future procurement exercise and give you plenty of time to pre-engage with the contracting authorities.
Form a consortium
rather than get swallowed up into the jaws of a prime contractor, suppliers can meet with other local providers to see if they can form a consortium or a special purpose vehicle and bid together. These groups of suppliers can then trade on their established infrastructure and wealth of experience and be able to trade on their own terms.
Join the team
some may relish the prospect of joining a supply chain. Suppliers will lose a lot of responsibility and liability when it isn’t their name on the contract, and some may prefer to operate with a lower steak in the contract with less risk rather than nothing at all.
These potential strategies translate across industries and sectors. Millstream meet with suppliers every day and as a qualified bid manager, I am constantly surprised how many do not have a documented and thought out bidding strategy.
I encourage suppliers to be proactive and take control of their destiny.
Working in the public sector can offer suppliers long term, well-paying business opportunities, and these deserve just as much time and attention as an internal strategy.
If you want to analyse your own bidding strategy or even create one from scratch, you should join our half day Success Simplified courses in London and Manchester and make sure you are deciding on your business’s future and not leaving it in the past.