Delegation Limits

Problem:

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 get your offer to be better than your competitors. You obviously want your offer to be chosen instead of others.

Solution:

When submitting an offer, be aware of the delegation limits (or approval limits) of the company/department you are submitting to. 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.

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, as it makes the procurement process easier if you are within their approval limits.

Lesson:

The client company’s 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.

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