Intro: What is Combinatorial Bidding?

Hello, and welcome to Bid Ops Insights, a blog about business strategy for procurement, and the relationship between strategy and combinatorial bidding.

The name sounds scary, but combinatorial bidding is simply the idea that when buyers awards a contract to a vendor, they typically use a process that involves multiple phases to evaluate multiple vendors on multiple criteria.

Technical specifications, price, value, geographical location, quantity and vendor presentations usually play a role in the award decision, but there are often oddball considerations based on the category, and some criteria will apply to certain classes of vendors and not others (for example, localization or vendor diversity preferences).

Today, in many organizations, buyers struggle to analyze those different criteria in order to reach an award decision.

This schema — relating selection criteria to produce a sourcing outcome — is what drives the process of ‘*combinatorial bidding.’

At Bid Ops, we would argue that all bidding is combinatorial bidding. Even the simplest RFP places inherent non-price limitations on the pool of responsive vendors. Paperwork itself (e.g. the RFP itself) is an intrinsic limitation -- if a vendor doesn't have time to read a long document, they simply will not respond. This demonstrates that even the simplest RFP is a qualifying process that selects for a smaller segment of the market than would otherwise be available.  

By using software to reduce inherent limitations, masters of combinatorial bidding processes can create a "supply funnel", in much the same way that salespeople use a funnel-based approach to drive growth. That's what this blog is about, effective techniques to get the most out of your bids using design thinking, automation and artificial intelligence.

By learning to think explicitly about how a procurement process produces inherent limitations and selection criteria for the winner, we are opening a conversation about how procurement can lead from within the enterprise: on improving margins, innovation and inclusion.

These posts are not intended for a technical audience, and we welcome contributions from a diverse range of readers in the procurement, sourcing, technology and organizational & business process design community.

Our goal is to channel suggestions to transform bid processes into a race to the best, and transform procurement processes from a bottleneck into an engine for enterprise value.