To bid or not to bid screening the Whorcop project

Title: To bid or not to bid: screening the Whorcop projectAuthor: Bernard Cova;;Robert Salle;;René VincentOrgan: ESCP-EAP European School of Management, Paris, France;;Ecole de Management, Lyon, FranceCEPeriodical: European Management JournalYear: 2000Period: 5Roll: 18Keyword: Projects ; Bidding ; Project MarketingSummary: A major decision for a company selling projects-to-order is to decide whether to bid or not on a specific project. Bidding for a project, usually through a competitive bidding process, involves both a huge expense in preparing the answer to the bid and an important mobilisation of resources that can...To bid or not to bid: screening the Whorcop projectBernard Cova a, Robert Salle b, René Vincent bAbstractA major decision for a company selling projects-to-order is to decide whether to bid or not on a specific project. Bidding for a project, usually through a competitive bidding process, involves both a huge expense in preparing the answer to the bid and an important mobilisation of resources that can be damaging for other company businesses. Consequently, the so-called screening of projects or pre-bid analysis appears to be a strategic procedure of paramount importance. It aims at solving the bid/no bid or go/no go dilemma experienced by the company faced with each project. It constitutes the basis for designing the marketing action of the company on the project in a bidding or solution fashion. In this article, we will explore the case of the Catalu shipyard which screens the Whorcop project and then develops a tactic to win the bid. Keywords∙Projects;∙Bidding;∙Project MarketingWe will tell the story of the case (Brown, 1998) as lived by one of the authors who acted as part-time marketer for Catalu (participant observation). Subsequently, we will try to conceptualise and build theory from this case.1. The case study takes place in june 1993, but first of all we need to go back in time a few monthsThe Catalu Shipyard is located in the port of Atlantide City on the French Atlantic coast. It employs 40 people with an annual turnover of 30 MF (French Francs). The Atlantide port, which some years ago was a flourishing centre for tunny, has seen activity decline rapidly in the wake of E.U. directives on fishing quotas and global agreements on the number of fishing vessels. Three shipyards keep their head above water building fishing boats and service vessels, while two other yards specialise in pleasure craft. All in all, ten yards maintain a meagre existence at this time. Fishermen, as elsewhere, always buy their boats from a local yard. By `service vessels' we mean all the vessels that carry out essential services along the coastline of each country (The Zone ofExclusive Exploitation). This includes lighthouse maintenance, transport for research missions on seal reserves for a few weeks, map-making, local transport, sea rescue, fire boats, anti-pollution vessels, fishing boats, transport of passengers and cargo.Catalu was created by six people in 1987 who themselves had previously worked in local shipyards. Ever since its creation Catalu had been the subject of animated discussion concerning diversification, due to the depressed state of the market for fishing boats. With the support of the Ministry for Industry, Catalu was able to carry out, in co-operation with the `Bassin des Carènes' (The Carènes Test Centre, a State Research Centre), a series of six trials on new catamaran hulls, that substantially improved performance and reduced surface resistance by 25 per cent. Catalu rapidly came to the conclusion that its strategic development had to be based on its know-how in the construction of fishing boats, but aimed at other types of mission.The following conclusions can be drawn:•The need to develop the yard's potential in other activities, in particular that of service vessels, to replace the steady decline in the construction of fishing boats.•Carrying out a market survey on the potential business in service vessels operating within 200 miles of the coast is far from easy. This market had been targeted by Catalu.Catalu was able to obtain information to:1.Measure future trends in the fishing boat market.2.Analyse potential threats to this market.3.Carry out an initial segmentation of target markets to help clarify the yard's strategic objectives, and the positioning Catalu wished to achieve.Faced with the slump in orders for fishing vessels, senior management had come to the conclusion that Catalu should specialise in more sophisticated segments of the market. This would enable the firm to achieve greater differentiation in its offering and to be more competitive in a global market. This meant that the firm had to be present world-wide, through alliances. It was at this time that Catalu realised that most of the other yards in France were more concerned with production capacity and resources, and did not have a clear view of their markets, new trends, or how to gain access to new markets. It is worth noting that all subsidies to shipyards, including OECD type agreements and discussions generally throughout the world, have focused on notions of `vessel size', leaving aside market questions.Strategic reflection was based on a better understanding of potentially accessible markets for the yard and on an analysis of its own core competencies. Fortunately the Catalu yard had strong technical competencies based on a large research unit adapted to ship construction. The unit had access to specialised C.A.D. and C.A.M. software and could run several projects simultaneously. The firm had the expertise to produce catamarans up to 50 m long and to offer overall solutions that covered the type of hull, the choice of engines and propulsion, the piping, interior design and joinery as well as scientific and refrigeration equipment. Because of this overall expertise Catalu was able to deal directly with all the players in the decision-making process, both sailors and `land lubbers', who do not use the same criteria in coming to a decision on the choice ofvessel.Catalu has a significant advantage, based on its expertise with aluminium (calculations, welding and metal working). While aluminium requires technical expertise for production, it also has the significant advantage of being much lighter than steel, a key element in boat-building. Know-how on the different shapes of vessels and the ability to make the necessary calculations were an obvious advantage for Catalu. For example, for the same function, a catamaran 30 m long offers more scope than a 50 m long mono-hull. Therefore Catalu gained an enviable reputation as a market leader in the production of mono-hull and mostly catamaran service vessels from 10 to 50 m in length.Thanks to a segmentation (see Exhibit 1) of accessible markets, Catalu could identify the market segments to be targeted, and could make a general offer backed up by sales brochures. Initially, reflection on these market segments was limited to the `Survey Missions' segment and in particular to vessels for oceanographic and hydrographic research. A specific sales approach was developed to enable Catalu to gain access to this segment and to discover a previously unknown environment, through contact with as many key players as possible.Table optionsView in workspaceDownload as CSV Hot on the heels of the strategic reflection, attention was also focused on how to be seen as technologically innovative in the late 80s, leading to new hull shapes. This technological priority brought Catalu into contact with new key players, and brought home the need to understand and exploit networks such as the IMRFCN (the World Institute for Applied Research in Ship-building), and the `Bassin des Carènes', well-known for its know-how and technology in research on ship design.2. The 1989 atrima conference and the ircho contractEach ATRIMA (Association for International Maritime Aeronautic Research and Technology) conference offers opportunities to research centres and firms to make their expertise better known and understood. In co-operation with its technical partner (`Bassin des Carènes') Catalu presented a paper on the advantages of solutions linked to professional catamarans (max. speed: 15 knots) compared to racing catamarans (max. Speed: 35 knots) for oceanographic surveys. The following are comments from this conference:Oceanographic survey vessels are special. Whereas these are floating laboratories they must also provide working conditions that are favourable for scientists involved in complex experiments. Previous vessels have frequently been unseaworthy.The success of an oceanographic survey depends directly on the scientists' ability to carry out experiments on board. The vessels they require should be both stable and quiet.What comes out of this comparison is that a catamaran would be the better choice, in particular for its stability and seaworthiness when fixed in one position. On the spot scientific work will be that much easier.From a hydrodynamic point of view, a catamaran is preferable. From a scientific point of view, a catamaran will mean an 80% increase in laboratory space and in work stations.With a catamaran, it is possible to include sophisticated oceanographic instruments between the two hulls, in an area that is particularly stable and accessible from the laboratories.During this conference M. Martinez, a leading scientist from Ircho, a research organisation that had taken the decision to have an oceanographic survey vessel built, expressed interest in this new technology (Ircho is attached both to the Ministry of Research and the Ministry ofCooperation). Ircho had sent out an offer for tender for a steel mono-hull survey vessel a few months earlier. The specification had been defined in co-operation with Bating, a research outfit specialised in ship-building. The first offer flopped as all the replies came in over budget. Catalu did not take part in the first offer for tender. After the ATRIMA conference, M. Martinez asked Catalu to supply him with the following information: `a simplified outline proposal in catamaran form'.Early 1992, Ircho launched a second offer for tender that insisted on a catamaran solution. Catalu responded to this second offer for tender with a catamaran survey vessel for Ircho, and won the contract. The Neptune project was due to be launched in Spring 1993.Catalu participated in offer tenders from other organizations with success in one case and failure in two others.3. The Whorcop call for tenderIn March 1992 Whorcop launched an offer for tender for an even larger survey vessel, with a steel mono-hull. This vessel was destined for oceanographic survey missions organised by the Ministry for Co-operation off the coast of Africa and South America. At the time Catalu was in touch with the project manager at Whorcop. They refused to envisage a catamaran solution, let alone one in aluminium. This tender was a flop as all the responses were over budget.In March 1993 a second tender was launched. The new form of the tender was both a success and a disappointment for Catalu, for bidders are authorised to submit a catamaran solution only as a variant and under the condition that they propose a steel mono-hull version as a main answer. This document presents the technical specifications of the vessel. It presents the technical requirements for the hull, its accessories, power generation and propulsion, as well as details concerning hydraulic, refrigeration and electrical equipment. Questions of comfort for research personnel are also covered.Whorcop is a State organisation with industrial and commercial activities. They are responsible for research on subjects as `the variability and evolution of the natural environment', `geodynamics and natural risks' and `living marine resources and their environment'. 200 researchers and 80 engineers and technicians represent a wide range of scientific competencies to conduct missions for the State or Foreign States or private firms. On many of these missions they enter in competition with Foreign State Agencies or private firms. Whorcop is attached both to the Ministry of Research and to the Ministry of Maritime Affairs.When purchasing a new scientific vessel, Whorcop establishes a Buying Committee that designs the specifications and establishes the tender. Alan Martin, the Programme Manager, heads the Buying Committee and has always been the main decision-maker in previous operations. In the case we examine, Whorcop requested the help of an engineering agency, Bating, that worked out most of the specifications. Alan Martin is a former captain of the Navy. He's been in charge of the Buying Committee for more than 10 years. He knows all the yards able to correspond to specification and shows a lot of authority when it comes to sailing and shipping.The Buying Committee is formed of three sub-committees: Technical, Economic and Legal. Martin is also leading the Technical sub-committee and they have the final say for all tenders. The seagoing personnel do not participate in any of the sub-committees. A captain, Morwall, has been appointed to the new ship. He is not known by Catalu.4. Meeting at Catalu after the Reception of the second Whorcop call for tenderThis meeting involves Patrick, C.E.O., Mark, Sales Manager and Jean, Marketing Manager. It takesplace late March 1993.Patrick: We've been had. I said Martin would do all he could to push us out. Look at the new specification; an aluminium catamaran is feasible, but only as an option! And, to rub salt into the wound, we have to offer a steel mono-hull first; if we want to offer an aluminium one as an option.Mark: Hm... That doubles our work-load.Patrick: Remember that this kind of project is `free' for the client, but that it costs us between $50000 and $80000; more if we have to offer two types of hull. Anyway, where can we find a steel mono-hull? Should we make it or not? We have the know-how, because up to now we have had more steel mono-hulls than aluminium catamarans; just look at our client portfolio. Roughly we can estimate that the catamaran will be priced $10 million against $12 million for a steel mono-hull in spite of the difference between the raw materials.Mark: I agree, but the way things are at the moment I feel we have to offer a highly competitive steel mono-hull to be in with a chance. We can outsource part of the steel production, but that's not our way of doing things. We must check whether that's feasible under the contract clauses. Patrick: OK, but the key question is whether we respond to this offer for tender or not. Whether we suggest a steel mono-hull or an aluminium catamaran is beside the point. We have to strengthen our position in this particular market. Neptune must not be our only success! What chance have we really got of bringing off the Whorcop contract? Keep in mind that we didn't reply to the first offer for tender. The client knows the other yards but not ours, he has established links with them but not with us, apart from the contacts we have had over the last two months concerning the catamaran solution.Mark: You're right. And of course our competitors have a better idea of prices in the first offer; see what I mean?Patrick:So do we go or not? Thinking of everything we've said I'm beginning to think we shouldn't even make another offer. What information do we need so as to reach a decision? Mark:Simple: Martin, the project manager, is against our idea, even though each time we've seen him he's been charming and polite. We also know that between ten and twelve other yards are interested and that the budget has probably been increased after the first unsuccessful tender. Finally we are not well-known on this market, in comparison with others.We were successful on the Ircho project, but the vessel won't be launched before September, and quite apart from the possibility of organising visits to the boat for the members of Whorcop purchasing group, we won't have time to set up sea trials.Remember that catamarans aren't very popular with people who make their money from the sea. If we were selling racing yachts for crossing the Atlantic I'd agree with you.Patrick: As usual we have to prepare our offer with great care but there is a lot at stake for Catalu in this project. On top of that, Bating is in the background and they have always been difficult to us.Jean: We already have a base for our tender.Patrick: So, you think we must go for it!Mark: I've read through the offer for tender in great detail (all 400 pages). Some of the technical requirements are in contradiction with each other. For example, the speed required of the vessel and the size of propellers. On top of that there is a prime requirement that no bubbles are created in the water that might affect sonar measurements. These constraints make it difficultfor me to submit a proposal. I feel strongly that the specification provided is a bundle of technical characteristics and references to norms from which it is impossible to design an attractive proposal.Jean: The contradictions you mention are bound to occur in a project of this nature that includes technical characteristics based on a variety of specifications.Patrick: So what's your idea?Jean: We need to be much closer in touch with the people who fix the specifications. We need to identify with them the real nature of their expectations and what they hope to do with the vessel. We need to have a much better understanding of what the vessel is expected to do and what the scientists expect to be able to accomplish with their own research.Mark: That seems pretty difficult; we're still at the tender stage, so contact is virtually impossible. In addition we may upset the purchasing group. There's also the risk that if we adopt this approach we may be seen to be questioning the competence of the designers of the tender; I'm not sure I agree with this approach.Jean:But if we limit our contacts to technical questions concerning the tender, we aren't complaining, we're making a positive contribution, trying to find solutions that are acceptable to the designers of the tender.Mark: There's a limit to how far you can go in querying the specification. Can you see yourself going to see Martin and saying: `Your specification is wrong, the people from Catalu will show you what to do!'Jean: My suggestion is that of a `softly, softly' approach, more with marketing in mind. Patrick: I basically agree with you, but in our trade, marketing is not a cure for all. Remember our attempt to study market tendencies? The difficulty we had with unreliable data in Europe, and the exorbitant prices demanded by outside consultants!Jean: But I still think we don't have enough data on the purchasing group in the Whorcop project and on the decision-making process.Mark:We know that Martin has the real power of decision. I heard recently from one of our suppliers that Martin is proclaiming far and wide that the project will be a steel mono-hull and that Catalus ideas have not yet been proved in practice. Such a vessel has never been seen on the open sea, and that anyway the catamaran solution is way off mark. So you see what we are up against!Jean:We need to bear that in mind when taking our decision. But remember what happened with Ircho. We got in touch with the specialists in Ircho at a conference. As a result of these discussions the possibility of a catamaran solution emerged, and finally Ircho suggested a catamaran solution for the second offer for tender. At the outset, the solution was also seen in terms of a steel mono-hull.Patrick:What you're saying is that we need to meet the technical specialists; or should we contact other people?Mark: Our problem is that we don't know enough about the purchasing group. We're familiar with the process that is in line with the French Code for Public Procurement. On the other hand we know very little about the scientists who will use the vessel.Patrick:I've heard rumours from an engine manufacturer that Steelship is likely to get the contract, and that they reckon it's in the bag. They seem to have had some backing in various quarters.Mark: What ministries are concerned with Whorcop? Certainly Co-operation and Research, but who grants the budget? Are we really familiar with the different stages in the decision-making process?Patrick: We've got our work cut out if we decide to submit a proposal.Jean: We also need to think more clearly about our competitive environment.Mark: And twelve firms submitted a proposal in response to the first tender.Jean: Yes, but it would be more constructive to analyse the two or three yards that have a real chance of clinching the contract. We've decided on our market `niche', we've carried out a market segmentation and we've made progress on our marketing approach. We are clear on our yard's positioning and our differentiation in comparison with our competitors.Exhibit 2: Competition on the Whorcop Call for TenderEight to twelve European shipyards are bound to call for this new tender. From what is known of the results of the first tender, it is generally thought that Steelship, and Socrato would be shortlisted. The other yards have neither the necessary expertise nor the image to be successful. But they anyway run after tenders because of their desperate search for work. They may tender at rather low prices but they are nevertheless not likely to be considered.SteelshipIt is a yard with a long experience of ships for survey and surveillance missions. Their expertise is mono-hull steel ships. They have strong links with Martin at Whorcop, for they have sold some 5 to 6 vessels to this organism under Martin's supervision. They also have strong links with Bating who approached them when preparing the specifications for the Whorcop tender. They benefit from strong support from the Ministry of Maritime Affairs at a very high level.SocratoThey also have a strong knowledge and expertise in survey and surveillance vessels. One of their top management is said to have good contacts with the Ministry of Maritime Affairs and the Ministry of Finance. They presently have excess capacity and they are eagerly approaching local and regional politicians they know very well in order to be favoured with the Whorcop tender. They threaten lay offs if they are not successful. Table optionsView in workspaceDownload as CSV Mark: For me the key criteria is price, particularly as the purchasing group attaches so much importance to a low-cost solution.Patrick: Anyway, with a catamaran proposal, we'll be able to offer more flexible solutions at a lower price with lower running costs. Just the shape of a catamaran with it's bulbous bow reduces water resistance by 25 per cent, reducing energy consumption.At this stage of the process, the issue is to decide whether or not it is worthwhile for Catalu to go on investing on Whorcop's tender and what should the ways be if the answer is positive.5. Screening definitionThe pre-bid analysis (Paranka, 1971) or screening process is the intermediate stage (see Fig. 1) between the anticipatory work of project marketing that has already been carried out by the company (namely relational investments in order to develop a good network position) and the intense effort required, at all levels, to develop an offering strategy and win the bid (Cova andHoskins, 1997).Fig. 1.The Pre-Bid Analysis as an Intermediate Stage in the Project Marketing ProcessFigure options∙Download full-size imageDownload as PowerPoint slide The main criteria used to assess project opportunities are:•Attractiveness of the project to the bidder in terms of the alignment with company goals and objectives, the anticipated resource and expertise requirements, the importance of the project to the client, security of funding, client attitudes towards the bidder, risk/reward judgements, likelihood of follow-on projects, opportunity costs etc...•Competitive Strengths of the bidder on the project in terms of its credibility and past experience, the level of influence among key project stakeholders, the ability to satisfy customer business objectives and/or generate innovative solutions, the availability of knowledgeable staff and strong partners, readiness to proceed etc.The principle aims of the screening process are two fold:•To enable project opportunities to be prioritised and informed decisions made as to the allocation of internal resources.•To determine the optimum mode of entry into the project system and any corresponding external resource requirements.The screening process is multibid in scope and aims at positioning a specific project opportunity in front of other project opportunities in a portfolio of projects which can be represented as a matrix, similar to what is done for portfolios of clients (Fiocca, 1982).6. The Whorcop project's screening for CataluA screening process for Catalu on the Whorcop project can go through the following stages:1.Assessment of the `relational position' or `network position' (Mattsson, 1985) of Catalu through the analysis of the enlarged buying centre (or buying network) and the assessment of the level of interaction allowed by Whorcop to Catalu. The network analysis (Fig. 2) shows that Catalu holds a weak position (peripheral) in the buying network which contrasts with the strong position (central) of some of its competitors which are close to the client and its engineering company. In the same vein, Whorcop is not open to the interaction with Catalu whereas it is open to interact with other bidders such as Steelship. Consequently, we can assume that the overall relational position of Catalu is weak.Fig. 2.The Whorcop Project Buying NetworkFigure options∙Download full-size imageDownload as PowerPoint slide2.Assessment of the `functional position' of Catalu on the Whorcop project through the analysis ofthe strengths and weaknesses of the catamaran solution in front of the needs expressed by the buying centre. Let's remind readers here that the users of the vessel (sailors and scientsts) hold only a limited role in the decision-making process. Thus, the functional position appears to be medium/weak in spite of an innovative (maybe too innovative!) technical solution.3.Assessment of the `competitive strengths' of Catalu, combining its relational and its functional positions. The competitive strengths of Catalu on the Whorcop project can be said to be weak or medium/weak.4.Assessment of the `attractiveness' of the Whorcop project for Catalu both in a long-term strategic perspective and in a short-term business one. The Whorcop project is totally in tune with the Catalu strategy and it will bring business and references. Thus, the project is very attractive for Catalu.Having reached this point, two scenarios are possible.Scenario 1: high level of projects portfolio for Catalu. In this situation, the Whorcop project (identified as P4 in the screening matrix) is a real dilemma for Catalu because it is positioned on the borderline between go and no go projects (see Fig. 3).Fig. 3.Screening Matrix with a High Level of Projects' Portfolio in CataluFigure options∙Download full-size imageDownload as PowerPoint slide Scenario 2: low level of projects portfolio for Catalu. In this situation, there is no dilemma. The Whorcop project (P4) is worthwhile to bid. Catalu has to bid while maximising its chances of success ( Fig. 4). Fig. 4.Screening Matrix with a Low Level of Projects' Portfolio in CataluFigure options∙Download full-size imageDownload as PowerPoint slide Two ways can be followed for scenario 2:1.Into the present limits of the project, Catalu can increase its relational position through a joint offering with one of its competitors (Socrato?) and through the mobilisation of Ircho in order to play a positive role in the buying network.2.Catalu does not accept the present limits of the project. It considers that it has a chance to modify it and especially to modify decision-making criteria in its favour. That was the way chosen by Catalu. Faced with this particularly attractive project, Catalu is more likely to expend a great deal of effort and resources to maximise its influence on the project and to shape the rules of the game to its advantage through a solution approach.7. How did Catalu manage to win the bid?Catalu undertakes an approach in order to deconstruct and then reconstruct the buying center and consequently the project, according to its strengths. Remember that they were successful on the Ircho project, and that this vessel is to be launched in April for a first sea trial. Ircho accepts。