Better market engagement leads to better procurement

Written by Colin Marrs on 6 April 2016 in Opinion
Opinion

Customers must engage with industry to better specify and run major ICT procurements and avoid the pitfalls of poorly specified tenders, says Richard Barnes.

Imagine that for years, a customer has had a Ford Mondeo, but their needs would now be better met by the latest Ford Focus.

If that buyer then comes to market asking for “transport” then suppliers – in the absence of anything else to base a proposal on – might offer them a jet aircraft, a Bentley, a Mondeo (from the incumbent supplier), several Focuses, and a rickshaw. The customer will not be expecting these options, and probably won’t have structured their buying process to properly evaluate the different options. So what is the safest decision to make? Probably to buy another Mondeo.

If, instead, the customer takes advice only from their current supplier, they are likely to come to market asking for a Mondeo (but a bit cheaper). And who, then, is best placed to offer them a Mondeo (but a bit cheaper)? The incumbent.

And all the time the Focus, which most closely satisfies their true requirements sits there gathering dust…

A focus on procurement

The subject of procurement (and all its facets) is central to much of the work that Innopsis is focusing on this year.

The catalyst for this focus comes from our members’ collective experiences of a number of procurements that have run over the last couple of years – and which haven’t achieved the outcomes that the customers wanted.

By this I mean that either:

  • the exercise had to be stopped and re-run, with different requirements or evaluation criteria;
  • contracts were awarded, but the customer didn’t get what they actually expected or wanted, or is paying far more than they should;
  • or legacy contracts were left to roll-on.

I can think of several procurement exercises recently that fall into this latter category, worth a combined total contract value of over £200m. I won’t name them here, although many will be acquainted with the tenders I’m referring to.

So, who suffers when this happens to a procurement exercise? The taxpayer ultimately, the customer obviously, and the notion of a competitive marketplace delivering the right solutions at the right price. Who benefits? Almost always the incumbent.

As someone who has spent much of the last twenty years working to establish competitive markets, and to take big contracts away from big incumbents, this matters to me.

So what is going on? It is basically a case of procurements being poorly specified, which can be a result of a number of factors:

  • A lack of understanding of the procurement process itself;
  • A lack of understanding (or poor articulation) of requirements;
  • Specifying requirements in terms of technology or solutions, rather than desired outcomes;
  • Requesting variations from standards which aren’t necessary – and without an appreciation that this will drive cost or complexity;
  • Not structuring the evaluation process in a way which will properly assess and recognise what is important (for example price, performance, service quality);
  • Being frightened by the FUD which is (understandably from their position) often spread by the incumbent.

So it’s fairly easy to see how, if a procurement isn’t tightly written (specifying outcomes rather than technology), and being really clear on the evaluation criteria (and how they properly reflect what really matters), the customer might get a set of proposals from industry that it wasn’t expecting. Like-for-like comparison becomes impossible, and evaluators can’t see whether or how proposed solutions match the requirements (even though they might do what the customer actually needs).

Under these circumstances it is often easier, and perhaps understandably safer, to fall-back on the incumbent’s proposal – even when this doesn’t necessarily represent best value, or best fit. And in some cases, even this might not be possible, which can force the procurement to be re-run.

So how do we improve this situation? The secret isn’t really all that secret. It’s about improved communication and consultation between customers and suppliers, so that procurements:

  • contain tightly worded requirements which specify outcomes rather than technology or solutions;
  • specify what is really necessary, and what is a ‘nice to have’;
  • are really clear on the evaluation criteria (and those evaluation criteria truly reflect what matters to the customer in terms of value, quality, etc);
  • enable like-for-like comparison.

Therefore, in consultation with – and with the agreement of – its members, during the course of the year Innopsis will establish an approach to market engagement that will support both customers and suppliers.

We will provide a forum for customers and suppliers to engage pre-tender. The format will vary by customer and opportunity, but we are anticipating running workshops (face-to-face where possible), to enable full and structured discussions to take place between the customer and industry.

From this we will – as an industry group – influence procurements to be realistic and addressable by members. This will also ensure that customers get what they want and need when they come to market.

Richard Barnes is director of market engagement at public sector tech trade association Innopsis

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