Harsh realities in a tender world, buying decisions gone awry

Vision of the company had received high visibility with an audacious plan and well-articulated fast track execution; everyone wanted to be associated with this new star which demonstrated some pioneering traits. Global consultants and local talent flocked to provide inputs to the team flooding them with goodwill and empowering them to create the hereto unknown foundations for similar future projects in the industry. The company had done well to define boundaries in which they needed to procure services and products.

Soliciting interest they were flooded with requests to partner leaving them spoilt for choices. They fell in the ambit of tender based selection which was run fair and square despite a few pushes and pulls from vested interests. As the project progressed, they also realized that success begets many leeches and catches attention of the unscrupulous; pressure from highly placed sources put the management in a spot freezing decision making. The grandiose plans which had brought them into the limelight now began to appear out of reach.

Rifts began to show between the well-meaning Advisors and the internal decision makers, who were finding it difficult to stay unaffected by the pressures. The goals had not shifted, path to achieving them now needed to traverse and overcome boulders and potholes that had suddenly appeared to slow them down. Each step required careful analysis of impact, outcomes and how to keep decisions fair with the highest levels of integrity. The friction started slowing decision making, bickering started and soured relationships within the team.

There are many types of enterprise buying behaviors; these are institutionalized based on past experience or driven by industry, geography and status of the company –private, public sector or government enterprise. Public and Government enterprise typically use tendering as a vehicle to evaluate potential vendors and solutions. They have fairly rigorous processes, documentation and compliance requirements which need to withstand pressures, regulatory scrutiny as well as challenges from sore losers.

Tenders were created as a process to bring in transparency and independence from biased buyers who may be influenced by various means – ethical or otherwise. Tenders require capture of detailed requirements, terms of reference and engagement, qualification criteria, timelines, definition of success and failure, and what have you. These voluminous and comprehensive documents also clearly define the process that will be used to select the final bidder thereby ensuring that no aspersions can be cast on the process or people.

Over a period of time the tendering scene became a vehicle to source the lowest cost services or merchandise for defined requirements or specifications. Technology led reverse auctions became a price discovery mechanism for the lowest cost after tender based selection for minimum viable product or service meeting specific requirements. Celebrations were short-lived with compromises associated with lowest price leading to even more rigor in the pre-selection stages with resultant delays in decision making.

To overcome the challenge, another stream evolved with Quality and Cost Based Selection or QCBS improving the decision making. Weightages could now be attached to quality and cost based on which mattered more. Typical scenarios ranged from 70-80% focus on quality to the advantage of the buyer to get better quality at a good price. The perceived highest quality provider needed to be competitive too to get the benefit of QCBS; similarly the lowest price did not guarantee business if comparative quality was low even if it met MVP.

The company had adopted QCBS with independent marquee advisors and evaluators providing their experience in the creation of the tender documents and subsequent assessment of MVP leaving the final decision to fate determined by price. Bidders big and small attempted no holds barred efforts to create high and low watermarks for their participation and leave out others citing highest value at one end to the lowest price at the other. Push, entice, threaten, cajole, plead, they tried everything and anything they could.

External advisors refused to put their credibility on the line, unwilling to bend or change their scores or dilute specifications; the dialogue broke down frequently, the outcomes now uncertain. Inaction was not an option; market reputation began to show signs of withering jolting into action some of the people who wielded power and influence over the direction the company could take. Mediating and helping the impacted stakeholders, they were able to fend off the undesirable elements paving way for an objective decision.

Myth or reality ? The story repeats itself every day in almost every organization attempting to stay above board, more so when there is a perception of incorrigible nature of the buyers created over a period of time. 

Buying IT, a financial decision ?

IT procurement has always been an activity that provides the CIO and IT staff with substantial power —that of a customer who defines the requirement, negotiates, and sweats the poor sales person through each interaction. There are horror stories of negotiations beginning post midnight, as well as of joyous ones with a handshake happening across the table in less than an hour. In a few cases, this negotiation is the role of a specialist IT buyer or purchase department.

The recent past has seen a lot of rigor in this process, with expectations of better deals and discounts driven by tightening budgets. In many cases, Finance teams were thrust upon the CIO to validate or take over the negotiation. The underlying assumption is that Finance has better negotiation skills, and they will fiscally protect the enterprise’s interests. It is another matter that these individuals (with best of interest) had little knowledge of the overall value propositions on the IT solutions. Another angle discussed is of governance, elimination of temptation driven by large value transactions, and keeping everything above board.

In the early days of my career, one of the executives charged irregularities in IT purchases. I welcomed the conducted audit, which validated the IT departments’ innocence and above board dealings. This set into motion a change in process with the induction of another coworker from Finance during the buying process. While she was in the initial stages an observer more than a contributor, over a period of time, she was able to start adding value. The cast aspersions were no longer a talking point, but collaboration was considering the perceived transparency that it brought to the process.

There have been not so pleasant experiences too for some CIOs facing “interference” from other functions, as they do not understand (nor make an effort to). Thus the strained relationships between IT, vendors, and largely the finance/purchase team leads to a lose-lose proposition for the enterprise—with delays, inefficient negotiations, and missing line items in the overall project charter or Bill of Material. Everyone finds this an ordeal, but is unable to change the outcome, as the value propositions are not understood.

If your organization is functioning well without involvement from other functions in IT procurement, periodically review the perception of how you are seen doing that same. It would help you address issues before they become a talking point. On the other hand, if your organization does require purchase decisions to involve a larger group, get them into the discussion from day 1. Else you may face frustrating moments in the future. Their involvement and participation will be a function of whether they are measured on this. Make sure that KRAs are aligned; else they have no reason to devote time beyond what makes them win and look good.

I also had the privilege in a company to have senior finance personnel sit through tech vendor presentations nodding knowledgeably for a while. Then they would start making excuses not to participate, or get off the meeting as some important call took them away. After a few months, they rarely turned up !