Consider winning the orders from five different government departments by participating in one bid that's what demand aggregation and multi-buyer bidding on GeM allow! For MSME companies that struggle with the time and expense of participating in multiple tender opportunities to offer similar products, this tool will allow for substantial efficiencies and scaling of the government business because it drastically reduces the overhead associated with bidding for multiple tenders.
The concept is simple yet very powerful. Multiple government departments with similar needs combine their requirements into one consolidated bid. As a seller, you only provide one quote, compete only once, and potentially deliver products to multiple buyers through that one bid submission. By consolidating a large volume of purchase orders, buyers will receive greater pricing discounts through buying more at once, the procurement timelines will shorten, and the sellers will benefit from larger-sized purchase orders without having to incur proportionately larger bidding costs.
Understanding Demand Aggregation: The Foundation of Multi-Buyer Bidding
Government e-marketplace (GeM)—Demand Aggregation is the official system where several government buyers put their buying requests together to create one procurement event. This initiative has been implemented as directed by the Cabinet Secretariat to provide government procurement with greater cost savings, efficiencies, and reduced effort.
In essence, GeM uses an established structure where a primary demand aggregator (often at the ministry or department level) creates an aggregate demand for commonly procured goods & services, then publishes this aggregate demand. Subsequently, those departments/ministries that fall under the same category of demand aggregation can create their own indents against this published aggregate demand with their own specific requirements, quantities, etc.
After receiving and approving all indents, the Demand Aggregator (DA) will issue a single bid on GeM for all the combined quantities. A seller can therefore enter a single bid for an aggregate quantity, just as they would on a normal tender. When all the bids are evaluated and a winner is chosen, secondary buyers will create individual contracts with the winning seller to supply their respective indents as approved by each secondary buyer.
What is especially relevant is that the total value of orders would be greater. Rather than winning a single Rs 10 lakh contract from one department, for example, you could receive Rs 50 lakh in total order value from five departments as a result of one bidding opportunity. Additionally, because the larger quantity allows for greater economies of scale, you would be able to provide a better price for the larger quantity while maintaining a healthy margin from lower logistics and administrative costs.
Aggregated Demand Works Across All Types of Government Agencies. The demand aggregation feature can be implemented by central ministries, state governments, public sector undertakings, and autonomous bodies to create a single point for tendering out goods and/or services. For example, if several different departments within a single ministry are looking to procure the same type of good or service (i.e., desktop computers, office furniture, or janitorial service), then they could work together and aggregate their demand and tender out a single tender.
How Multi-Buyer Bidding Actually Works: The Process Explained
I’ll provide detailed insight on how a multi-buyer bidding process takes place from both a buyer's and seller's perspective.
The lead buyer with a demand aggregation (DA) initiates aggregation demand on GeM by selecting product categories, defining requirements, specifying quality parameters, and setting delivery times before extending the invitation to all eligible buyers from their same ministry or related departments. This demand is published and visible to all other eligible buyers.
Meanwhile, secondary buyers who have a similar requirement search through their dashboard for active aggregation demand. Once they locate an aggregation demand that corresponds with their requirement, they can raise an indent where they will include the quantity they require, delivery location, consignee information, and any other buyer-specific conditions. All raised indents are submitted for approval by the DA buyer.
The DA buyer reviews all submitted indent requests to verify they meet the specifications established for the aggregated product and subsequently approves the quantifiable indents. Once the period for the submission of indent requests has expired, the DA buyer will collate all approved indent quantities and create a bidding opportunity on GeM to start the bidding process.
As a seller, you receive one notification of a bid—but it has a large value due to the fact that there are multiple buyers who are putting in one demand for multiple buyers.
The bid document shows that it is demand aggregation and shows the name of each participating buyer organization and the quantity that they have ordered.
When you participate in a DA Bid, you will submit a technical spec, financial quote, supporting docs, and earnest money if applicable, as you do in the same way as for any category-based bid/custom bid; however, the excitement of a DA Bid is that you will now compete for a much greater value contract for the same level of effort that you would put in for a smaller, single-buyer bid.
Once the bids have been evaluated, the DA Buyer will select the winning bidder based upon technical compliance and L1 price determination. Each of the secondary buyers will enter into separate contracts with the winning bidder for the amount they ordered. The contracts will be separate legal documents, with each contract having its own delivery schedule and payment terms, but all contracts will reference the master bid in which you were awarded.
Each consignment will be delivered and fulfilled separately. You will receive a separate purchase order from each participating buyer, and you will have to deliver to the buyer and create a separate invoice for each buyer. You will also receive separate payments from each buyer's department, although all payments will take place through the same GeM timeline and will have the same guarantee of timelines for payment.
Why MSMEs Should Prioritize Multi-Buyer Bids
For small and medium enterprises, multi-buyer bidding offers advantages beyond just larger order values.
Firstly, you may leverage the benefits of aggregation by getting the price of multiple items at once, allowing you to obtain the larger value of the aggregated bid without having to do additional work to bid for each individual item separately.
Secondly, if you are able to participate in the aggregated bidding process, you can leverage the economy of scale of multiple orders to create pricing opportunities for yourself. For example, if you are a small manufacturer and you have a government contract to produce the same item for five different departments, you may negotiate pricing with your suppliers that allows you to offer better pricing to your customers than if you were only fulfilling one order.
Thirdly, if you are able to aggregate your bid with other MSMEs, you will not only benefit from the opportunity to bid on larger orders, but you will also benefit from MSME Purchasing Preference Benefits on all of the bids that are consolidated under the volume of the aggregated order.
Fourth, if you win a multi-buyer bid, your seller ratings and credibility on the platform will be significantly improved. It shows future buyers that you have the ability to fulfill orders to multiple government departments at the same time. Thus, with this solid track record, you'll have a greater chance of winning additional bids when potential future buyers look at your profile.
Fifth, demand aggregation bids tend to have a larger percentage of standardized specifications. By participating in a demand aggregation bid, all buyers have agreed to a set of standards instead of each requiring a set of unique specifications. Having standardized specifications makes it easier to manufacture or source products, reduces the possibility of disputes related to specifications, and allows you to use one fulfillment process for multiple orders.
Lastly, payment risk is spread out among multiple buyers. If one buyer is unable to pay due to various reasons (budget delays and procedural holdups), you still have at least partially received payment from the other buyers. Because of this diversification of cash flow, you will have better cash flow predictability compared to relying on one buyer's large order.
Identifying Demand Aggregation Opportunities on GeM
When searching for multiple buyer bids, you will follow a different method in GeM than in the typical case of a normal tender. The GeM platform has a separate section for these types of bids and will enable you to identify these opportunities; however, you need to learn how to find them.
In order to locate these types of bids, you should first log in to your Seller Dashboard and go to the Bids tab and then use the filter options located at the top right-hand section of your dashboard to filter for certain terms that will indicate that the bid has been issued as an "Aggregated Demand" or "A.D." Although this type of bid may not be clearly identified within the title of the item offer, the item description provides some insight into the number of buyers who are participating in the bid. You can confirm that multiple buyers are participating in this type of bid by reviewing the list of participating organizations included in the bid document.
Typically, aggregated bids tend to have much larger quantities than individual bids; for example, it is not unusual for an aggregated demand bid to have an order quantity of 500 desktops when individual bids typically only consist of 50 desktops. Therefore, if you see bid opportunities for 500 desktops instead of the normal 50, it is highly likely that these orders are from multiple buyers from one ministry.
You may also want to consider the delivery location field. A single-buyer bid will usually have one or two delivery addresses, while demand aggregation bids will typically include several delivery addresses for each participating buyer's location(s), which are usually located in separate geographic areas (cities/states).
Buyer Organization Name—One thing to look for would be how the buyer organization is listed. If it is listed as a ministry-level or department-level buyer rather than being listed as an individual office/unit, you are likely seeing a demand aggregation bid where the ministry (or department-level organization) is acting as the primary or central buyer for coordination of procurement/collaboration among subordinate organizations that will purchase through them.
Certain types of products have an increased incidence of demand aggregation. Frequently, office supplies, consumables (paper, pens), cleaning supplies, and office equipment (computers, printers) are all put together under one contract. Other common products include office furniture, IT hardware (computers/monitors), and vehicles and services related to building management. If you provide supplies, check back frequently for aggregation opportunities within the types of products that you sell.
Pricing Strategy for Multi-Buyer Bids: Getting the Math Right
The calculation method used to quote for aggregated demand will be different from that of a single buyer bid. If you price too high, you'll lose out on the bids, and if you win but the margins are so low that you can't sustain the profit, you've wasted your effort.
To begin, you should calculate your base cost for the total quantity of the bid, not your typical base cost per unit. There is a significant difference between the two costs. For example, the per-unit costs for material will generally decrease and become lower due to volume (bulk). Your fixed cost for manufacturing setup will be spread across a higher number of units; therefore, the cost per unit will decrease; and finally, your shipping costs (logistics) will decrease because you can ship a greater quantity than if you were shipping them individually.
Furthermore, don't assume you can use the same percentage discount from your standard prices simply because you have a larger number of units. Your quote should be developed from the ground up as a specific case. What are your actual costs? What are the efficiencies you will have by producing this larger quantity? Therefore, your pricing should be based on these actual costs and not based on arbitrary percentage discounts.
Make sure that when estimating your delivery distribution costs, you treat the delivery distribution costs as they are for each individual bid, rather than simply treating them as an average of each individual bid. In most cases multiple occupancy bids are for deliveries going to multiple locations instead of just one location, so you should be calculating the actual cost of transportation for each individual delivery location instead of using the average cost of transportation. Therefore, if you have multiple locations within your local area where deliveries are going to be going to but also have a couple that are quite far away (distant states), then your logistics cost per unit will be much higher/less consistent compared to those that are located within your local area.
Consider your required working capital as a function of staggered delivery schedules. In most cases, demand aggregation contracts do not require delivery to buyers at the same time; therefore, your working capital needs are going to differ depending on how you stagger your delivery dates. For example, you may find it more beneficial to deliver to Buyer A on week one, then to Buyer B on week three, and so forth. As you can see, if you had to fulfill the request of all buyers all at once, you would have a much broader cash flow requirement compared to being able to stagger your delivery timing.
Carefully study the L1 + 15% price preference mechanism for MSME bids if you are eligible. For example, in demand aggregation bids, if you are an MSME and your quoted price is within 15% of the L1 bid, you will be afforded the opportunity to match that price and to win 25% of the total quantity of the order. While it is great to be able to win 100% of a volume of orders, even if you win only 25% of an Rs 50,000,000.00 contract (i.e., win Rs 12,500,000.00), that is still a huge opportunity and represents significant business potential with just one bid effort!
Delivery and Fulfillment Across Multiple Buyers: Managing Complexity
Winning a bid with several different buyers is only the first step; efficiently fulfilling orders for many government agencies at the same time will require the proper operational planning & discipline to execute those operations.
Your first step is to create an overall fulfillment schedule immediately following the award of the contract(s). Although each separate buyer will have its own established delivery date/time, you should lay all deliveries out on one timeline so that you can see the entire schedule. You should be able to find out what delivery windows overlap and create a plan for production or procurement based on the respective buyer(s)' requirements, as well as determine whether or not you are going to overextend your resources in any given week.
You should make sure that you maintain separate documentation for each buyer's contract (even though they are all part of the same bid). Each buyer is a separate legal entity; they each have their own contract with you, distinct delivery terms, and method of payment. In order for you to have the most streamlined process possible from receipt of the buyer's purchase order through payment of the invoice, if you mix documentation that relates to the different buyers, you will cause yourself a lot of delay and problems when fulfilling orders and receiving payment. You can also create a naming convention and folder structure that will keep all documentation organized and easy to find.
Be sure to communicate directly with each buyer and to not rely on the assumption that anything you share with one buyer will necessarily reach another buyer. For instance, if you are experiencing delays in procuring raw materials that could delay shipments for all of your buyers, it is your responsibility to warn them individually about how this will impact their specific deliveries. Open lines of communication will help to eliminate surprises and maintain buyer confidence.
You must also review the aggregate specifications to identify which buyer-specific requirements exist. Core product specification is generally consistent for every buyer; however, individual buyers may have additional requests for installation, training and support, documentation, or warranty activation. It is imperative that each individual contract be carefully reviewed instead of automatically assuming all contracts contain the same conditions. If you neglect to identify a requirement from an individual buyer, it can lead to the rejection of your delivery.
You should make sure you are using GeM's delivery tracking and Consignee Receipt and Acceptance Certificate (CRAC) system properly on a per-consignee basis. The Consignee Receipt and Acceptance Certificate (CRAC) process is a safeguard for you, preventing payment delays on your invoice by obtaining the Consignee Receipt and Acceptance Certificate from each buyer right after delivery. If you do not obtain the Consignee Receipt and Acceptance Certificate (CRAC) from each buyer, your invoices will not be processed even though you have fulfilled the order perfectly.
Common Pitfalls and How to Avoid Them
New entrants to demand aggregation bidding processes for MSMEs are susceptible to several common, recurring issues. If an MSME can learn from another's experiences and errors, it will avoid or at least reduce the chances of experiencing these same obstacles.
The leading error MSMEs make is underestimating the complexity of logistics pertaining to multiple locations for delivery. Delivering 500 units to five locations may be an easy concept on paper; however, coordinating transportation, finding local delivery agents, ensuring appropriate packing to cover the different time frames for delivery, and complying with each delivery location's delivery protocol(s) can be daunting for an unprepared supplier. Therefore, when reviewing a bid, MSMEs should take an honest evaluation of their own logistics ability within the range of locations specified in the bid.
Another common mistake that MSMEs make is assuming that all participating buyers will process payments within the same time frame. Although the Government eMarketplace (GeM) has established a standard for time frames associated with payment processing, there could be significant differences in the actual days from purchase order to receipt of funds by the supplier, depending on whether the buyer is a Central Ministry (GOM), a State Public Sector Undertaking (PSU), or an Autonomous Body. Therefore, these time variances will impact the cash flow needed for MSME working capital requirements. MSMEs should calculate their working capital assuming the payment processing will take place in a staggered manner, rather than all at once.
Sellers sometimes overlook invoice and documentation requirements that should be tailored to the buyer. While GeM uses a standard template, a number of departments have their approved document and invoice styles as well as internal guidelines for payment approval and processing. So even though a document/invoice works perfectly for one department, it may not work for another due to minor differences between the two. Allow enough flexibility to build into your invoicing procedure to allow departments to accept what is required based upon their internal documentation requirements.
Some often overlooked issues by MSMEs are inadequate production or inventory planning to satisfy aggregated volume requirements. Your company may have won a significant contract for multiple buyers, and you started delivering, but halfway through, you find that you do not have sufficient inventory or capacity to fulfill all of the delivery dates. This may create delays, penalties, and negative evaluations of your products. If bidding on aggregated demand, ensure you have a detailed plan for sourcing or manufacturing the total items that you will be required to deliver by the established distribution time.
The Bottom Line: Efficiency at Scale
Demand aggregation is a method of multi-buyer bidding and provides a major opportunity to enable MSMEs (micro, small, and medium enterprises) to successfully grow their government business via a more cost-effective manner by allowing MSMEs to participate in a single bid for multiple departments and thus change the business economics of selling to the government for MSMEs.
MSMEs have traditionally found the workload associated with monitoring and managing various tender submissions as a barrier to effectively marketing and growing the government business. Demand aggregation enables MSMEs to participate in a single event while meeting the needs of many different buyers.
Commercial buyers submit multiple bids, or "multi-buyer bids," to facilitate the scaling of Small and Medium-Sized Enterprises' (SME) manufacturing and service delivery, which exceeds what each company is currently utilizing in their order books. The advantages of combining orders in this manner accrue to the buyer, who benefits from volume pricing, while the sellers benefit from larger order sizes.
When it comes to aggregating bids from buyers, successful demand aggregation means SMEs have intermediates with operational maturity; not only do they have high-quality products and competitive pricing but also a supply chain that is robust and well-organized, a logistics system that is coordinated and sophisticated, a systematic approach to paperwork, and financial capabilities to allow for large contract values. Having these capabilities is essential for the operations of GeM, but there are other benefits that can be seen well beyond that.
Commercial buyers submit multiple bids, or "multi-buyer bids," to facilitate the scaling of Small and Medium-Sized Enterprises' (SME) manufacturing and service delivery, which exceeds what each company is currently utilizing in their order books. The advantages of combining orders in this manner accrue to the buyer, who benefits from volume pricing, while the sellers benefit from larger order sizes.
When it comes to aggregating bids from buyers, successful demand aggregation means SMEs have intermediates with operational maturity; not only do they have high-quality products and competitive pricing but also a supply chain that is robust and well-organized, a logistics system that is coordinated and sophisticated, a systematic approach to paperwork, and financial capabilities to allow for large contract values. Having these capabilities is essential for the operations of GeM, but there are other benefits that can be seen well beyond that.
