What is the approval limit of your client (of the person you are submitting your proposal to)?
Getting your quote, tender or proposal accepted and awarded quickly is very important to your business. You and your team may have put in a lot of work in preparing your proposal.
However, if you don’t know what the client’s approval process is, and whether it can be approved easily, then you don’t know how likely you are to win the contract, and how long it may take.
Make yourself aware of the approval delegation limits of your client.
Can your direct client contact approve the purchase? Or does it have to go to higher level managers? What is their limit? This could make the difference between a day or two for approval compared to weeks or months.
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Problem: You don’t know your client’s approval delegation limits
When submitting a response to a request for quote or request for tender you may not know if your offer is the only one requested and you don’t know if it will be the winning offer. Your quote/offer/bid is usually competing against multiple other offers, so you need to make your offer better than your competitors. You obviously want your offer to be chosen instead of others.
You also don’t know how long it may take for the contract to be awarded. Will it be a day? A few days? A few weeks? Or perhaps months.
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The problem is that you don’t know whether the client project manager can approve the award of your contract, or whether approval must be done by a higher level manager, or perhaps by an assessment panel. These factors can make a big difference between scheduling the potential work to start soon or whether it may not start for a long time.
Solution: Find out your client’s delegation/approval limit
When submitting an offer, be aware of the delegation limits (or approval limits) of the company/department you are submitting to. This is sometimes called the “Delegation of Approval Policy”, or “Delegation of Authority Policy”. If your offer is below the delegation limit, it could be approved more easily. In fact, you could win just because it is below an acceptable price limit.
If you can, check what authority the person reviewing your tender has.
E.g. A company may have a limit of $20,000 that the project manager (or even deputy project manager) can approve without further approvals being necessary. Or the company may only require one quote up to that limit. If you respond to a request for quote and your price is below that limit, then as long as your offer meets the technical requirements, it may be accepted without further approvals being necessary (and so be accepted very quickly).
Some companies will have delegation/approval limits of something like the following:
- Under $20,000 – 1 quote required – Deputy project manager approval
- $20,000 – $50,000 – 3 quotes required – Project manager approval
- $50,000 – $100,000 – 3 quotes required – Manager approval (PM’s manager)
- $100,000 – $500,000 – Formal tender request process, minimum 3 tenderers – 2nd level manager approval
- $500,000 plus – Open published tender – Executive manager (3rd level manager) approval
You will probably find that these limits are not relevant for large value contracts (multiple millions), as those need very senior management approval (possibly CEO)
The client may be allowed to tell you the limits their procurement system has in place (both for the number of quotes required and also for the approval limits). It is often worth asking your contact there to verbally tell you these. Or the limit can sometimes be estimated by the ease of winning smaller contracts (compare wins to losses with that client, if most quickly approved were below a certain value then that may be the delegation limit). The limit can also be worked out based on comments by the client when you ask for feedback on why you didn’t win.
I generally find that if a company client is allowed to tell you the limits then they are willing to do so, as it makes the procurement process easier for them if you are within their approval limits.
I have seen proposals just $100 more than my approval limit take weeks to get approved, as it had to go through multiple layers of bureaucracy. If the proposal price had been slightly less, I could have approved and awarded the contract that same day. That early approval could save my project many thousands of dollars in project time and enable me to meet the project completion schedule, which is a big win for any project manager.
Lesson: Improve your proposal process by knowing the approval limits of your client
The client company’s approval delegation limits are one important factor in determining whether your offer is accepted. The delegation limit is the value that the person assessing the offer is allowed to approve. Make sure you are aware of the delegation limits of your client. This can make a big difference in planning when you can expect to start work on the contract.
