Why “Winning” Isn’t Always Winning
In the fast-moving world of UK procurement, winning a tender can feel like the ultimate achievement.
But for many SMEs, the celebration can be short-lived when the real sometimes hidden costs of delivery start to bite.
Profit margins evaporate, delivery risks escalate, and what looked like a game-changing contract turns into a financial strain.
At Tendle, we see it all too often: businesses overestimate margins, underestimate hidden costs, and overlook risk factors. This blog will help you recognise the true cost of winning a tender – before you sign on the dotted line.
1. Profit Margins That Disappear in Delivery
Even if you’ve priced your bid carefully, some of the hidden cost factors like inflation, unexpected supplier price increases, or extended payment terms can quickly erode your margin.
Key UK-specific risks:
- Long payment terms in public contracts (up to 60 days in some cases) can strain cash flow.
- Inflation adjustments may be fixed to outdated rates, leaving you exposed.
- Variations in scope that aren’t fully compensated in change requests.
2. Mobilisation and Ramp-Up Costs
Before you start delivering, there’s often a costly mobilisation period. This could include:
- Hiring or training staff.
- Buying equipment or vehicles.
- Upgrading systems to meet buyer requirements.
These pre-delivery costs can be significant and are rarely fully recoverable if the contract is cut short.
Tip: Always model your cash flow impact from contract award to first payment.
3. Compliance and Accreditation Expenses
UK public sector buyers often require specific accreditations (ISO, Cyber Essentials Plus, Constructionline Gold, etc.) or detailed policies (safeguarding, modern slavery, environmental).
Even if you already have some in place, maintaining certifications and keeping policies audit-ready can carry ongoing costs.
Related service: Tender Qualification and Pipeline Planning
4. Contract Management and Reporting Time
Winning a tender is only the beginning – delivering it to the buyer’s satisfaction often involves:
- Regular performance reporting.
- Compliance checks.
- Stakeholder meetings.
- Quality audits.
If you don’t factor administrative overhead into your bid price, you may be working for free on these tasks.
Example: A facilities management SME in the UK won a multi-site public contract but found that quarterly compliance reporting consumed the equivalent of half a full-time staff member – unbudgeted and unpaid.
5. Risk Factors That Can Undermine Profitability
Risk isn’t just about the chance of failure; it’s about cost exposure. Common UK tender delivery risks include:
- Scope creep without proportional payment.
- Supply chain instability (strikes, shortages, Brexit-related import delays).
- Buyer-side delays that force you to keep resources on standby.
- Reputation risk if delivery falls short – impacting your ability to win future tenders.
Future blog idea: “Risk Management for UK SMEs in Public Sector Contracts” – would naturally link here and provide deeper guidance.
Common Pitfalls in Calculating the Hidden Cost
- Forgetting inflation indexing: Without CPI-linked pricing clauses, inflation can eat your margin.
- Underestimating delivery complexity: Site access issues, seasonal weather impacts, or buyer change requests can add time and cost.
- Overlooking exit costs: Ending a contract early can mean penalty fees or clawbacks.
How to Protect Your Profit in UK Procurement
- Run sensitivity analyses – Model best-, worst-, and mid-case financial scenarios.
- Negotiate terms upfront – Especially around payment schedules and variation clauses.
- Include contingency in pricing – Build in risk margins for supply chain or compliance cost increases.
- Track delivery costs in real-time – Adjust future bids based on actual historical data.
Building a Sustainable Tendering Strategy
At Tendle, we help UK SMEs not only write winning bids but also price and plan them for long-term profitability. That means:
- Understanding all cost drivers before bidding.
- Qualifying opportunities where margins can be sustained.
- Avoiding the trap of “win at any cost.”
Related blog: 5 Reasons Tendering Can Supercharge Small Business Growth
Final Thoughts
In UK procurement, the real cost of winning a tender goes far beyond the bid price. By identifying hidden costs and risk factors early, you can protect your profit margins and ensure each contract contributes positively to your business growth.
Next step: Before your next bid, run a full cost and risk review – or work with Tendle to qualify opportunities and build a pricing strategy that safeguards profitability.
Book a free consultation with Tendle to ensure your next tender win is a true business success.
