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Will Freelancer Platforms eat your Request for Proposals?

Request for proposals could be a thing of the past as freelancer bidding platforms gain prominence. This article tells you how and what you can do to change your tender practices and save money for your organization.

Tender inefficiency

Tendering is the preferred way for many enterprises to secure competition among service providers when purchasing services to products. Tender processes are institutionalized and considered the best practice in enterprises as well as public organizations to increase competition and avoid corruption. 

While tendering surely has its merits when the solution is complex and when the buyer lacks knowledge of the solution, it’s also slow and expensive both on the buyer-side and for the bidders. Preparing tender material is often a painstaking exercise involving the line of business, procurement, and legal. It entails preparing tender documents, inviting service providers, hosting Q&A sessions, screening proposals, conducting interviews, and evaluating proposals. For service providers –large and small–, proposals are costly to prepare, and participating in tenders don’t offer any certainty of winning the business. 

To compete for tendered assignments, most agencies must invest in specialized units or people fully dedicated to managing calls for tender processes and proposal writing. It’s a highly specialized skill set knowing the processes and presenting solutions to various levels of stakeholders in enterprise organizations. For that reason, many competitive agencies and freelancers won’t participate in these competitions. 

Before a winning proposal is awarded the contract, the hours and resources spent on either side can easily amount to a significant percentage of the contract value reducing the overall saving potential for the buyer as well as leaving a large cost with the winner as well as an opportunity cost for all the losers in the tender. Losses must be recuperated on other contracts increasing the price of the services provided overall in the market. 

Also, tender processes typically involve less than ten service providers, as the process otherwise becomes too complex to manage. The actual gain from the competition is therefore questionable as the competition is limited. Finally, a buyer must consider the overhead cost of conducting a tender versus the contract size.

The Alternative of the Bidding Platform

The market for digital services is characterized by its global nature because services can be delivered online from anywhere in the world. Many digital services are now offered by the digital freelance workforce competing on global platforms such as Upwork, TopTal or Freelancer.com. These services comprise anything from design, IT development, translation, personal assistance, video production, administrative tasks, etc. Freelancers can work independently on ad hoc and well-defined tasks, or whole teams of remote workers can be employed, including project managers, to build complex IT services on an on-demand basis. 

The platforms showcase freelancers and provide transparency about their references from previous jobs, rankings, job satisfaction, responsiveness, and several other factors that matter when deciding on a service provider. 

Compared to traditional tenders, the buyer essentially uploads a job description, budget, and deadline on the platform and makes it available to some or all freelancers on the platform. The buyer can add specific questions in the ‘tender material’ that the freelancers must respond to. Because of the global scale of these platforms, the first bids are available within a short while. The buyer can interact with the freelancers before hiring the best candidate. 

Because the tender is essentially global and has transparent freelancer profiles, the buyer has a better chance of finding the best service provider at the best value for money. Platform tendering is particularly effective when the buyer’s knowledge of the need and the solution is high. However, open-ended tenders can work just as well on freelancer platforms as in traditional tenders. 

Because the tender material, budget, and timeline are streamlined by the platforms when jobs are uploaded, it significantly reduces the workload on the buyer and bidder. The process makes it easier for freelancers to bid on the job without essentially repeating what was stated in the tender material – which seems to be a general practice in tender processes. 

The volume of freelancers and agencies on the platforms allow for a fast and competitive turnaround of bids. Therefore, a buyer saves time and money because he doesn’t have to prepare the tender material. But the platforms also enable the buyer to purchase on-demand and in a much faster and more agile way compared to traditional tendering.

Change Corporate Practice and Save Money

Tendering will never go away for complex and critical digital services or framework contracts with large suppliers. But the indirect spend on ad hoc and smaller digital services is considerable in enterprises and mid-size companies. Services such as videos, e-learnings, designs, SharePoint sites, Excel data crunching, temporary labor, standalone apps etc. can all be procured effectively using freelancer platforms.

Shifting tender processes away from request-for-proposals including only a few invited agency bidders towards using freelance platforms and on-demand talent requires a change in mindset and culture. 

Here are a few rules to go by for buyers of digital services to reduce the costs of tendering by using freelancer platforms: 

  1. You need to be clear about what you want, approximately what the price should be, and when you want it. You should have a pretty good idea about the solution and possibly give examples of what you are looking for. 
  2. Consider the overhead cost of conducting a tender versus the contract size. Making tender material for two short videos will quickly end up costing your organization a lot in comparison to the actual price of making two videos. 
  3. Use bidding platforms when the nature of the service allows it, i.e. when the service is standalone and non-business critical, ad hoc, or less complex in nature.

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