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Calculating the Internal Cost of Bidding?

Question by: Cat Austin

Hi Pete,

I am trying to calculate what the internal cost of pitching is at my firm to help drive usage of pitch qualification and behaviour changes with our internal customers.

Do you have any suggestions or tips into how best to approach this please.

Hi Catherine, great to hear from you. Great question – money talks as they say – I hope this helps.

I suppose my first tip would be to not over engineer this at this stage. You have the advantage in a law firm of a commitment to time recording and systems that are a big part of fee earners lives. However, at this stage I suspect it would be good to simply be able to attribute an indicative financial figure that puts future chance of success considerations and bid ROI into a financial context. Whilst a major bid would be great one to track, if you are doing this exercise for the first time then I’d recommend you look at something a little lighter with less people involved. You’ll learn a lot from that as a sort of pilot, it will be more manageable and you will still be able to use that to show how much time is required to be invested in a mid size bid. The figure will still be sizable and people will get that the figure would be much greater on a major bid.

My second tip is to not just record the cost of fee earners but everyone involved and again don’t beat yourself up too much about accuracy. It’s the principle you are after. The fact is that at the early stages of doing a bid cost analysis you will be simply highlighting that “the time spent equated to ## total hours of which ## were fee earner hours and that translated into a financial investment of £##.” Ensure you capture everyone involved on the bid – you’ll find that the list of SMEs, support staff and operational input involved means the numbers of people who leave a finger print on a bid is more significant than people realise. These figures will have the impact I think you are looking for when trying to ensure resources are best utilised in the future. Add to that any production costs / travel costs as well so all direct costs are also included.

I suppose my third tip would be to also reflect the fee earner cost not just in terms of headcount cost but also in terms of opportunity cost. Those hours spent on the bid are hours that they aren’t with clients. Again, that can be a real stop-you-in-your-tracks figure when totalled.

All of the above will show that bidding can be a very costly exercise financially and importantly the amount of time people need to be able to invest is often more significant than first thought. It’s that second aspect that is my fourth tip. Often, the amount of time people will need to be able to commit to a bid is underestimated so it’s worthwhile being able to show how much time was spent by individuals on particular stages of the bid. Sharing that can also make people think twice about the decision about which bids to go for.

Of course, this can all be a platform for further analysis into bid process efficiency but I’ll leave that for another day.