6K Method – 6 Key Questions for a Company Before Applying for a Tender

Tenders, especially for grants or subsidies, are a highly sought-after source of financing for companies at all stages of development. They are often accompanied by unrealistic expectations and a lack of knowledge of their mechanisms and purpose. Entrepreneurs who are encountering them for the first time also have difficulty identifying which tender is suitable for them.

To help everyone who wants to identify for themselves whether a particular call is suitable for them or not, we present the so-called 6K method below. These are 6 key questions that you should ask yourself before deciding to apply for a call for non-repayable or refundable funds:

1. What does the advertiser want to achieve?
2. Who are eligible applicants?
3. What are the criteria?
4. Which costs or activities are eligible?
5. How much will the co-financing be?
6. When is the application deadline?

1. What does the tenderer want to achieve? (i.e. the consistency of our project with the purpose and objectives of the tender)

First of all, we need to know what the tenderer wants to achieve with the tender. So what are the goals and purpose of the tender? Namely, the tenderer wants to achieve certain higher goals with the tender, to which our project must also contribute. Let's illustrate this with a concrete example. One of the goals of the European Union, and thus Slovenia, is the transition to a greener and more sustainable society. The purpose of the tender, which enables the acquisition of funds for investments in renewable energy sources, is to accelerate this transition. If we apply for the tender with a project that will, on the one hand, reduce energy consumption, and on the other hand, enable its acquisition from renewable sources, we can say that our project is in principle consistent with the purpose and objectives of the tender.

2. Who are the eligible applicants? (call conditions)

Each call has general and special conditions for applicants. General conditions are those that are quite similar from call to call, including, for example, the size of the company, the settlement of all obligations (taxes, contributions, etc.), the prohibition of double financing, etc. Special conditions vary from call to call. An example of a special condition is that the company must be at least 2 years old at the time of application.

When we review the general and specific conditions, we can quickly determine whether we are even eligible to apply. If we do not meet certain conditions and, despite all our efforts, will not meet them in the near future, investing time, energy, and money in applying is pointless.

3. What are the criteria?

Tenders have predefined criteria according to which projects will be evaluated. It is essential to carefully examine the criteria, as this will allow us to determine whether we have any real chance of success. The criteria are various: economic indicators of the company's business performance (e.g. credit rating), sales in foreign markets, number of employees, development orientation of the company (whether it develops, produces and markets its own developed products/services), personal presentation before the committee, etc. Each of the criteria is presented and scored, so we can at least roughly calculate how many points we could achieve. The fact is that some of these criteria are objective (e.g. credit rating), while some are quite subjective (e.g. personal presentation before the committee).

4. Which costs or activities are eligible?

Calls for proposals basically co-finance 4 types of eligible costs or activities:

• purchase of equipment (tangible and intangible fixed assets);
• personnel costs (salaries and other employee costs);
• costs of external contractors;
• indirect or flat-rate costs.

Some calls fund all types of costs, while others only fund certain types. Therefore, we must have a very clear goal of what we want to achieve with the project and whether the call will allow us to do so.

5. How much will the co-financing be?

The next question, which is quite related to the previous one, is how much co-financing will be. In other words - how much funding will we have to provide ourselves, and how much will we get through the call for tenders. The question is particularly relevant in the case of grants (subsidies), where we are talking about the so-called co-financing rate; this usually ranges between 25 and 50% of eligible costs, but can go up to 100%. We mentioned the term "eligible costs". Tenders only co-finance the latter. Ineligible costs that we have to cover ourselves include VAT in most tenders.

Another thing that we must urgently point out is that we must first secure the funds for the implementation of the project ourselves. This means, for example, that we must cover the cost of purchasing a machine, which we listed as an activity in the tender application, in the first phase from our own funds. Then, by the date specified in the contract, we prepare a report, claim and supporting documents (invoices, payment receipts, etc.). The tenderer reviews the report and all documentation and, if it is approved, we receive the money transferred or the agreed share of co-financing. Therefore, it is necessary to secure interim financing (between the day the costs are paid and the day the subsidy is transferred). One option is a bridging loan taken out from a bank.

6. When is the application deadline?

A very important question. The quality of the application and, consequently, the chance of success, largely depends on how much time we have to prepare it. Rushing when writing the application is one of the most common mistakes that applicants make. Not only from the perspective of the possibility of success of the application. It is also the case that in the case of a bad application, in which we state unrealistic goals and promise too much, the headache can begin during the implementation of the project, when we have to actually deliver on what we promised.
Therefore, it is recommended to have the project ready "in stock". This means that we have the goals, activities, estimated costs, etc. defined in advance, then we wait for the appropriate call for tenders.

Finally, something that, given its importance, could rightly be at the beginning. It is necessary to be aware that every call for proposals requires human, financial and time resources - first for the application, then for implementation and reporting. Therefore, applying for a call for proposals only makes sense if it will help us achieve the set goals, vision and achieve added value for the company more quickly. In short, we never apply for a call for proposals just because the state or the European Union offers favorable financial resources. We apply so that we can carry out activities that are consistent with the company's development goals and that we would not be able to do without the call for proposals.

If you have any additional questions about the calls for tenders for companies, we at the Online Business Incubator of Koroška (MPIK) are happy to assist you.

Author: Jure Knez, RRA Koroška doo - Network Business Incubator Koroška