Considering bidding for a foreign tender? Great opportunities are out there but you need to manage your risk…
There are great opportunities to be found if your expertise is transportable across borders and your organisation is geared for international delivery.
But before you invest time and resources in tendering for an overseas opportunity, it’s important to consider how your offering will compete with that of a local service provider. Read here about how you can best maximise your chances ...
Thanks to communication and collaboration technology, the world has become a much smaller place and there are more opportunities for crossing the border than ever before. New Zealand contractors are known and admired by overseas customers as having a sense of integrity and trustworthiness1, with Forbes magazine ranking New Zealand second on its 2015 list of the Best Countries for Business. This is a great base from which Kiwi businesses can tender services internationally.
There are great opportunities to be found ‘out there’ if your expertise is transportable across borders and your organisation can be geared for international delivery. And going offshore can be a significant vehicle for growing your business. With one successful project implementation under your belt, you’ll have the track record you need to launch into a new geographic market.
Consider your competition
But before you invest time and resources in tendering for an overseas opportunity, it’s important to consider how your offering will compete with that of a local service provider. Do you have a significant specialisation that will outweigh the travel and overhead costs that will impact on your price competitiveness? How will you manage the risk associated with lack of local knowledge?
Just like tendering locally, an understanding of the potential customer and the local market is essential. Make up for a lack of local knowledge by spending some time on desktop research to understand your customer’s challenges and requirements. Look at their annual reports, review their case studies and organisational structure, and read white papers about the local industry.
If you already have a branch established overseas, even in a neighbouring country, incorporate your international colleagues into the project team (even if they won’t play a key project role). Use them for account management or project management, or use them to provide valuable local insight to the project team. And a local presence who is geographically close or can speak the language gives your customer confidence. They can also help to fulfil local content requirements.
If you don’t have a branch overseas, consider collaborating with local contractors who know the customer and will give you the local presence you need.
Understand and manage the risks
There can be significant risks in tendering in a foreign country if you don’t understand their laws. You also need to comply with applicable technical regulations and product standards. When we tender in New Zealand, for example, widely-used contract frameworks like NZS 3910 for the building and civil engineering industry help to manage risk. Clients can spend less time considering contract terms and conditions – they know the requirements they are contracting under and sometimes are already familiar with the preferred tender response format.
When tendering for international business under different procurement and contractual frameworks, you need to have confidence that you are aware of the contractual conditions you are committing your business to. Even seasoned contract reviewers can require assistance to understand the legal definitions that lie behind terms in a contract. Engage local lawyers and expertise to review the contract and participate in any contract negotiations. Consider also proposing a neutral legal venue and governing law so that neither party has an advantage in the event of a conflict.
If your potential customer has a branch in New Zealand, capitalise on this. Propose that the contract be held with the local entity if possible, this makes contract administration and negotiation much easier.
Now, onto the writing
When responding to the tender, consider the following:
- Your audience may not have English as their first language. It is even more important in foreign bids that you use language that is simple and clear; avoiding jargon and local expressions.
- Foreign tenders often have more stringent requirements in terms of certified copies and statutory declarations. You may need to get documents notarised at a local embassy. Make sure you allocate sufficient time to organise these requirements before the due date.
- Bidding in non-English speaking countries can require that contract and project documentation is provided in a foreign language. Even if an English translation is included, qualify that the English version of the contract and any project reports will prevail over the foreign translation. This protects you when you are using translators who are not key project team members.
- Some countries have withholding tax and other sales tax requirements to take into account. This may obligate your customer to withhold a percentage of your project fee for tax purposes. So you need to ensure that this is taken into account in setting your rates and invoicing. Tax advisory firms such as EY, Deloitte and PwC publicise applicable global tax rates, or consult international tax expertise.
- Not only do visas for your staff need to be considered, but there can also be significant rules in some countries regarding ‘residency’. This governs how many days your company can consecutively conduct business and still be considered a non-resident for tax purposes. Make sure you engage tax experts to assist you.
- Consider currency movements when setting your pricing. Especially for long-term contracts, currency values can drastically impact on your margin if they swing the wrong way. One strategy is to tie your pricing to the exchange rate on a given date, allowing for rate adjustment if the exchange rates change with more or less than, for example, 5%. Your bank may also offer advice on hedging currency risks.
- Watch also for the financial viability of the customer and structure your payment plans so you receive the first payment at any early project milestone or commencement. Make sure there are contract mechanisms you can employ if they don’t make a payment. And that you are not obliged to keep working on the project before payment is received.
Interested in finding international opportunities that might be applicable to your business?
The best place to start is identifying global opportunities within your current customer accounts. Offer your local clients a global perspective and help them champion the solution throughout their organisation. Here you have the advantage of an already established relationship, a great reference story and internal advocates to help you along the way.
Alternatively, ask if your local clients have a global approved supplier database on their Intranet that you can register for. You would be surprised how often local suppliers are excluded from these databases just because they are not on the radar of head office procurement. There may be an opportunity to develop a framework agreement applicable for their foreign entities to make it easier for them to purchase your services.
You can also find foreign tender opportunities by registering with government websites in each country, as well as EU procurement pages. A plethora of websites offer tender alert services for international tender opportunities, both government and non-government. Try out tenders.com or prequalified supplier services like the Achilles suite of databases.
Currently around 80 New Zealand exporters are selling to the international public sector, and the Minister for Economic Development, Steven Joyce, is confident this number will grow to around 300 exporters in the coming three years.2 Will your business be one of them by 2019?
Manage your key contract risks in tendering and there could be some great opportunities out there for you!
1 New Zealand Trade and Enterprise, Report: Perceptions of NZ from 7 Countries (Oct 2008)
2 Guide to winning Government business within the European Union, New Zealand Trade and Enterprise, September 2015.