To tender, or not to tender? That is the question!
Let’s set the scene: You have a project and you want to ensure you get the best supplier at the right cost and in a fair way. Sounds great – I feel a Request For Proposal (RFP) coming! And what better way to structure the process than a full tender process? Simply send out the RFP, get a load of agencies to pitch, score their responses and just pick the best one. Easy, right?
Well not really…
Although this may sound like the ideal way to choose an agency or supplier, this isn’t necessarily the case. There can be several challenges that both sides of the tender process can face. In this blog, discover the challenges and some potential solutions to improve the tender process for everyone involved.
Why use the tender process?
I think the reasons for a tender process are well established. In some ways, it makes a lot of sense to create a set framework for proposals to be submitted and evaluated. It gives the supplier a structure to work towards and you (the buyer) a framework for assessing and evaluating.
Other parts of the process can also be useful to a project, such as a formal brief and a clear idea of what the buyer is looking for.
Different levels of tender
There can be different levels of tender, from a simple RFP to a full procurement framework. There can be advantages and disadvantages to the different forms, but why are there different levels?
This can partly be down to governance and legal requirements. Public sector procurement is a regulated process and has legal obligations, this often dictates the level of tender used and the requirements set out for it. However, as with many things, this can be open to some interpretation, so an organisation may choose to use a specific set of requirements or processes to satisfy the procurement requirements. Usually, these forms of tender are the most robust and will often be run through a tender platform.
However, not all organisations will fall into this category and may prefer to use a reduced version of this process. Private sector organisations have the choice of how to procure suppliers, but they may choose to run a form of tender process to create a set structure and to standardise evaluations. These often won’t use a tender platform and won’t be full of different tenders, but may instead be a form of RFP, with its own set of requirements and instructions.
Key challenges with the tender processes
The tender process can present a range of challenges that can hinder a project, including:
- Limited flow of information – Good communication is vital when putting together a proposal, but the tender process can be very constraining and hinder the quality of a proposal.
- Difficulty understanding the briefs – Detailed briefs can sometimes be more complicated, and even with clarification questions, there can still be areas of confusion or elements that need extra information. This can delay the proposal process and sometimes, even after the response, the agency still isn’t clear on the requirements.
- Limited access to relevant suppliers – The tender process may not be considered by the whole market, limiting access to the necessary skills.
- The process doesn’t guarantee you’ll get the best supplier – the process can still be biased towards suppliers that are set up to fulfil the tender process rather than deliver the project. Some of the selection criteria can be quite arbitrary and irrelevant to the project.
- Challenging minimum criteria – In some cases, some of the minimum criteria can be difficult to meet, and often aren’t related to the project itself.
- Undervalues relationships and compatibility – Good results come from strong and effective relationships, so these elements can be really important to the success of a project. The tender process’s constraints and lack of two-way communication can have an impact on the quality of relationships.
- It’s very time-consuming – The tender process takes a lot of time and effort from the supplier, with a limited chance of success, forcing them to consider whether it’s worth taking part.
- The proposed solution may not be the right one – The lack of initial collaboration can lead to the proposed solutions not being as appropriate or effective for your business. We usually find the more initial collaboration, the more effective the proposed solution.
- Restricting scoring system – In my opinion, this is one of the biggest challenges of the tender process. Not only can this system heavily skew the result, but it’s also not always clear how to fulfil it. The scoring system is also often very “price” focussed, which can effectively compromise on quality and performance over cost. Lower costs don’t always mean good value!
Value vs cost
I think a common misinterpretation is the concept of cost vs value for money. I often hear buyers say that they want to make sure they’re getting the “best value for money”, which of course makes sense. Although, this often really means, wanting to get the most for the least amount of money – which usually isn’t the same thing.
While something that costs more isn’t always better, usually higher quality and more time costs more money, but this doesn’t mean less value. Whether it’s good value or not will largely depend on your goals, objectives, and expectations.
A higher cost will often mean more experience and a better service in terms of things like account management, communication and customer service. The main things to consider are:
- Whether the supplier is aligned with your organisation
- Whether they have the right experience and capabilities
- If they can provide the desired level of service and support
- Whether they can deliver on your goals and objectives
For example, if a bridge needed to be built and a leading supplier said it would cost X and the buyer said the budget was only Y, what would we rather do here? Increase the budget to meet X, to build the bridge safely, or decrease the quality to meet Y, essentially cutting corners and jeopardising the integrity of the project.
Although this isn’t always directly the case, there are plenty of well-documented examples of where the winning supplier wasn’t the best option, particularly in the Public Sector. Some high-profile examples include the cladding scandal, the G4S security fiasco of the 2012 Olympics and the significant collapse of Carillion.
Regardless of the actual cost, none of these could be seen as good value for money or represent good value for the public. The real question is whether the solution is fit for purpose.
Is there a better option?
In a lot of cases, the answer to this is probably not – particularly in the Public Sector, where there are legal requirements. Although, it’s always worth checking what the exact requirements are to ensure no unnecessary work is being carried out.
It’s also worth considering the interpretation of your requirements, as there may be alternative ways to comply with them. I think the main thing is, if a full tender isn’t necessary, then it’s probably best to avoid it.
If a full tender is needed, then it might be a good idea to use a two-stage process. With a first-round selection questionnaire (SQ, that’s much easier to submit), then only inviting agencies that pass the first round to take part in the full RFP, through an Invitation To Tender (ITT).
Even if a form of RFP is chosen, it’s best to avoid using a set scoring system to make the selection or even just using scoring for guidance, and try not to make the cost element a significant factor in the overall weighting.
Another good option is to reach out to a supplier before creating an RFP to sense-check the project and help shape your brief.
In essence, you should:
- Avoid tender platforms if possible
- Avoid a full tender process if it’s not required
- Avoid unrelated criteria
- Consult with a supplier to help shape the brief, before launching the RFP
- Use a two-stage tender process, a SQ followed by ITT, if required
- Consider the criteria in the scoring system, how it’s distributed and weighted
- Consider the weighting on the cost element
- Allow plenty of time for the response
- Ideally, use a simpler, more flexible RFP, or use a competitive pitch process
- Make sure the budget is clear and aligned with the project, deliverables and objectives
- The upcoming procurement reform bill
We’ll be keeping an eye on the incoming procurement reform bill, which aims to improve the Public Sector procurement process. One of the potential benefits is increasing flexibility, however, from initial indications of the proposed bill, it does sound like the new process will still be very cost driven.
While I completely understand the need to ensure value for money, as mentioned above, the two aren’t always linked and costs shouldn’t be the sole factor in procurement decisions.
We look forward to seeing how the reforms unfold, and while they do look to be an improvement, it may still fall short of the ideal tender process.
Whether you’re in the early stages of planning or have a well-defined project in mind, we’re always here to provide guidance and support. Get in touch with our New Business team to get helpful guidance on your briefs, or find out how our incredible digital marketing services can help your project succeed.