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Decision matrix for industrial proposals

In the first step of the bidding process we must decide whether or not to bid, which is known as “Bid / No Bid” decision. In large industrial companies, it is usual to use a decision matrix to aid analysis and usually consists of question forms that are given a score based on the response.

The resulting decision matrix may look like the image. As you see, what it does is to cross two variables, on the vertical axis “the attractiveness of the client or project” and horizontally “the probability of getting the order“.

decision matrix

At the beginning of the analysis, it is normal to check if any of the exclusion criteria is met, such as:

  • If the project or solution requested by the client is technically not feasible.
  • If there are legal restrictions or the country risk is high.
  • If we do not have sufficient resources available or the required delivery time is impossible to meet.
  • If there is any unforeseen commercial or contractual risk (customer insolvency, etc.)
  • If it is not our “core business“.
Questionnaire to evaluate the attractiveness of the client or project.

1-Commercial complexity:

  • Legal issues, language, licenses, etc.
  • Guarantee of payment.
  • Due to our partner and / or subcontractors.

2-Market complexity:

  • Political and economic situation of the country.
  • Previous experience in the country and / or the market.
  • Cost of local content required by the client.

3-Complexity of technical risk:

  • Our knowledge and experience of specifications.
  • The feasibility of meeting the required deadlines.
  • Technical demands, performance parameters, applicable standards, environmental requirements, etc.
  • The cost of development and engineering if the project is new.
  • The risks of third parties (partners, subcontractors, etc.)

4-What is the probable Ebit?

5-What is the future potential?

  • For after sales business.
  • For similar orders.
  • Etc.

6-What is the current relationship with the customer?

Questionnaire to evaluate the probability of obtaining the order.

1-Probability that the project is carried out.

Is there a budget, a location, etc.?

2-Our relationship with the client.

What is our success rate with this client?

How does the client see us in this project?

3-Competitors.

  • How many there are? Do we have any advantages?
  • Is the specification oriented towards our products or solutions?
  • Do we have more references than our competitors?

Each answer will have a higher or lower score. The total of each questionnaire will place us in the previous decision matrix and will help us make the decision to offer or decline. Turnkey projects or solutions offers, where there is equipment supply, engineering and commissioning, is where it is most important to carry out such an evaluation.