Why Are Bidding Organisations So Bad?

Bidding organisations are typically underperforming organisations and here’s why.

Bidding organisations are underperforming organisations because they are not properly set up and understood by their parent companies—they are set up with the sole strategy of securing a contract and their success is solely based on their ability to successfully perform that task.?

Bidding organisation strategy should be broadened to account for the product, market, and client intelligence they gather during the bidding process, as well as, the developmental opportunity these organisations offer to the personnel involved. A greater acceptance of this plural strategic orientation would naturally point to a different strategic approach, a different organisational structure, and different resource allocation, all of which could create better alignment between the elements of the star model (Galbraith, 2014), fewer inefficiencies, and better performance.

This case study attempts to analyse a very specific set of temporary organisations within a major programme at a very specific point in time during the delivery of a major programme. Along with examining the strategic alignment in temporary organisations set up by parent companies to pursue large, integrated Design Build Finance Operate & Maintain (DBFOM) contracts with major programme sponsors,??

The goal of this analysis is to understand why bidding organisations are typically underperforming organisations. The analysis of these organisations will be carried out using three specific frameworks.?

First, we will assess the strategic alignment using Wittington’s four approaches to strategy framework (Whittington, 2001). The relationship between strategy team and structure will also be assessed using the Galbraith star model (Galbraith, 2014) and the “iron triangle” framework (Lundin and Soderholm, 1994).?

Understanding strategic alignment in bidding organisations is important because these types of organisations often underperform despite their vital role in the successful delivery of a major programme—this is because they are created at the early stages of any major programme delivery phase. Furthermore, these bidding organisations carry out a vital function for any parent company because they create new business for the organisation and allow for additional business growth.?

This case study will advance our understanding of these types of temporary organisations, which exist in most major programme environments. By better understanding these organisations, we will be able to better structure them and improve their ability to support the delivery of major programmes and execute their intended strategies

The Strategic Alignment of Organisations

Understanding the strategic alignment of any organisation is usually the first step in identifying misalignment in the key element of an organisation’s design. Many different frameworks can assess the organisational design, but this particular case study will use the star model developed by Galbraith (Galbraith, 2014).

It is important to analyse the relationship between strategy and other organisational design elements because different strategies lead to different organisational structure, human resource selection, and process and reward (Galbraith, 2014). Certain strategies require the selection of appropriate processes in order to optimise the output of the organisation. Lack of alignment typically creates process inefficiencies, departmental friction, and general loss of productivity, if not blatant conflict (Galbraith, 2014).

Lundin and Soderholm’s (Lundin and Soderholm, 1994) framework helps us analyse processes and structures of a bidding organisation. Specifically, it allows us to expose the pitfalls of standard strategies and structures adopted by temporary organisations and their limitations in the context of temporary bidding organisations.?

Strategy is a key element for the success of any organisation, temporary or permanent. It allows organisations to focus the scarce resources available in order to achieve a predetermined set of goals (Galbraith, 2014). The goal-setting process is a key part of the strategy work that needs to occur in order for any organisation to succeed. For a temporary organisation the goal is typically assumed to be clear and singular: secure the contact for which the organisation is bidding.

Bidding Organisations Typically Are Underperforming Organisations

The sequencing concept in the theory of temporary organisations (Lundin and Soderholm, 1994) is fundamental in understanding the types of human resources, processes and structures required in major programmes at various points in time. Lundin and Soderholm’s work also helps illustrate in how a bidding organisation should function in relation to its parent companies (Lundin and Soderholm, 1994).

It is generally accepted in major programmes bids that the bidding phase is the concept phase, as defined in the Body of Knowledge of the Project Management industry (PMI, 2017). All elements of the framework developed by Lundin and Soderholm are relevant to understanding why bidding organisations are generally underperforming organisations. Of particular importance; however, are sequencing concepts such as activity-based entrepreneurialism—these concepts are not implicitly understood by practitioners and, therefore, it is quite common in bidding organisations to have a mismatch between the type of effort actually required and the type of effort actually executed. Bidding organisations are viewed as the infancy stage of a programme, so people assume that strong technical expertise is required when in reality, both technical and entrepreneurial expertise are necessary.

Planned isolation and termination are generally accepted concepts in bidding organisations because there is a clear, singular goal with a win-or-lose outcome. Termination is also not very applicable because bidding organisations have a high likelihood of being terminated at the end of the process, and this is well understood by all parties involved. (Lundin and Soderholm, 1993)

Project sequencing is normally misunderstood by practitioners—to this day, the Project Management Institute’s body of knowledge PMBOK (PMI, 2017) still focuses on fairly rudimental sequencing (PMI, 2017) that limits the understanding of temporary organisations and bidding organizations (Lundin and Soderholm, 1994).

Bidding organisations are typically underperforming organisations, and they are often overlooked by both project sponsors and parent organisations.??

Major programmes bidding entities are temporary joint ventures created by parent companies for the sole purpose of securing a contract from programme sponsors. The size and complexity of these organisations depends on the size and complexity of the programme that the bidding entity is pursuing. In order to better contextualise the complexity around major programmes bids, we shall lean on the work of Shenhar and Dvir (Shenhar and Dvir, 1996). Bidding organisations operate in programmes that are arrays with medium technology. This is important because depending on the level of technological complexity and the type of system implemented, various personnel management styles are to be expected in order to have efficiently performing organisations (Shenhar and Dvir, 1996).

The pursuit of contracts for the DBFOM of large programmes is a very expensive endeavour—the opportunity cost is very high for the parent organisation and resources are very scarce. Furthermore, major programme tenders are always uncertain and can be easily delayed, cancelled or reframed, adding additional uncertainty for the bidding organisation. Additionally, the chances of securing the contract are always low because programme sponsors typically make three entities compete for a particular contract—this means that 66 percent of bidding entities do not evolve to become programme delivery entities and are ultimately dissolved.

Similarly to internal project organisation bidding, entities must compete for the parent organisation’s resources, which are distributed across multiple pursuits and typically across multiple geographies. Parent organisations adopt different organisation structures for their business development units; for instance in a Light Transit bid, the system and vehicle supplier unit is structured around a product strategy, while the operation and maintenance supplier is structured around a geographical strategy (Galbraith, 2014).?

Organizational design for bidding entities is rare; parent organisations come together, and local business development resources are allocated to the pursuit. Availability at the beginning of the process is typically the key criterion for allocating resources—structure and process selection happens by default and always reverts to what was done in the previous pursuit or follows the lead of the most vocal joint venture partner in the bidding organisation.

The strategy typically adopted for bidding organisations has a singular outcome: to secure the contract for which it is bidding. Furthermore, bidding organisations have significant time constraints and a limited time horizon. Bidding organisations have a very high opportunity cost and operate in a very uncertain environment from a process and outcome perspective, since programme sponsors will dictate both.

Bidding Organisations: Changing The Approach

Bidding organisations tend to adopt a classical approach to strategy, with “command and control” processes and a very hierarchical structure. If the level of technological complexity is medium (Shenhar and Dvir, 1996), and there is a high level of environmental uncertainty, the bidding entity might adopt an evolutionary approach. The evolutionist approach to strategy is required to keep options open in an uncertain environment controlled by project sponsors and competitors (Whittiington, 2001).

The high opportunity cost also influences organisational structure, as parent companies are reluctant to empower bidding organisations and typically prefer strict governance that requires a high level of oversight. Bidding organisations typically develop new business in jurisdictions away from the parent companies and could therefore benefit from the independence typically granted to holding organisations (Galbraith, 2014). Tight controls and divisional structure are also used to create an “action-driven culture,” since these process controls are designed to keep the bidding entity’s management focused on the sole goal of winning the contract and away from potential disruptors (Lundin and Soderholm, 1994).?

Bidding entities are an interesting type of organisation not dissimilar from product development or Research and Development departments in the sense that all these organisations work on assignment in a temporary fashion, and all these departments are meant to generate new business for the organisation. However, these organisations are not the subject of extensive research, and the role and importance of bidding organisations are often overlooked. Selecting an appropriate implementation partner should be of key importance to programme sponsors and parent organisations alike—there are tremendous opportunities available to both programme sponsors and parent companies to improve these types of organisations by understanding strategic alignment and organisational design.

This case study analyses a unique set of temporary organisations that operate in the context of a major programme. Bidding organisations exist within a major programme environment, and there is anecdotal evidence that these organisations are typically underperforming organisations. The case study applies the model developed by Whittington (Whittington, 2001), Galbraith (Galbraith, 2014) and Lundin and Soderholm, (Lundin and Soderholm, 1993) to better understand strategic alignment as well as structure and processes in these organisations. Bidding organizations are treated as divisions of each parent organisation involved in the pursuit of a new contract— these organisations adopt a classical or evolutionary strategic approach and set up their processes, structure and human resources (Whittington, 2001).

What if these organizations were actually completely “misunderstood” from their inception, and the continued adoption of established practices has created highly inefficient organisations poorly designed for their purposes?

It would be appropriate to challenge the belief that bidding organisations exist solely to secure the contract that they are bidding for. Rather, what if the purpose was plural? Specifically, bidding organisations could gain intelligence on clients and relevant markets as well as further the knowledge and experience of the practitioners that work within the bidding organisation. If parent organisations were to consider the plurality of outcomes and actively support the pursuit of these outcomes, then bidding organisations could adopt a processual approach to strategy (Whittington, 2001), which in turn would require a different type of organisational structure (moving from a divisional organisation to a more holding company type structure). Bidding entities created by a set of companies through a consortium structure are very similar to holding organisations because they are kept outside of the large functional structure of their various sponsoring parent companies. Holding companies and bidding entities require decentralised operations and strategic control because they are hybrid organisations separate and distinct from the parent organisation (Galbraith, 2014) and they operate in different geographies and business sectors. This structure would create the appropriate alignment with a processual approach by facilitating the bottom-up rather than top-down approach to strategies, since the bidding entity (rather than the parent companies) would drive the strategy (Whittington, 2001).