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But are suppliers really making the most out of the these opportunities that arise?
In today’s modern procurement world – especially in the Government sector – suppliers need to be brave to get more work, and to demonstrate more value to customers.
There are four areas we believe suppliers can improve in to get more success in customer procurement situations.
The innovative RFP response
So often the joy and excitement of getting an RFP from a customer or prospect overcomes the obvious point of reflecting on what the customer has said they want, and then asking ourselves “Is this what is really needed ?”
It is a brave supplier that goes back to a customer to ask whether they have got their RFP requirements correct but actually this is exactly what suppliers should be doing.
Most customers have spent considerable time and money reflecting on their needs, analysing the market, producing a business case and issuing an RFP with what they think they need from the market, and what they think the market can deliver to them.
RFPs are typically prescriptive in response format, and will require answers and information around set topics – this obviously allows comparability between potential suppliers and assists in evaluation and selection.
It would not be at all helpful for vendors not to appreciate this when responding as required to an RFP. Making it difficult for a customer to assess your capabilities is a risky strategy for a supplier.
But if there was an alternative approach or in fact a completely different way the customer could solve their underlying needs or problems apart from as set out in the RFP, then the brave supplier should suggest this as well in their RFP response.
No customer would pretend to have the monopoly on good ideas or how to solve complex issues. For a vendor to show interest, and then go the extra mile to look for alternatives for a customer is a clear demonstration of value-add. Maybe there is a cheaper option, a new technology, a staged implementation, a less-risky strategy, or a more adaptable or future proof solution.
Brave suppliers are not afraid to question customer requirements. And to some extent, this even applies in the Government sector.
Apart from being part of normal good procurement practice, the New Zealand Audit-General in their Good Practice Guide deals with these innovative ideas in addition to conforming responses to an RFP, and states that alternatives can either be provided for by the customer in the tender expressly, or they can simply be an 'optional extra' provided by a supplier. In all cases, as long as they are evaluated consistently and equitably between suppliers, and otherwise meet the general procurement principles[*], these innovative alternatives can be considered.
The only issue in Government procurements is that if the alternative substantially changes the underlying procurement needs of the customer themselves. In that case, then fairness and transparency would dictate that the tendering process is re-opened to the other suppliers to consider and respond to any redefined or new Government requirements which have been brought to light through an alternative proposal.
Active engagement
So often we hear the complaint from vendors that they have not been allowed to actively engage with the customer or their users during the procurement cycle.
We have heard and seen first-hand vendor demonstrations and product run-throughs where the customer audience has been told not to ask any questions as it may be seen to favour one potential supplier over another – particularly in the Government sector.
Yet there is nothing in the Mandatory Rules for Procurement by Departments, or in the various guidelines for good procurement practice in the public sector[2], that would support taking this approach.
Yes, a public entity must be seen to act in a fair, open and unbiased manner. Yes, under the Auditor-General’s Good Practice Guide it states that a public entity should ensure all communication between evaluation personnel and potential suppliers is formalised.
But in our view, this does not stop open and honest engagement at presentations and allowing users to interact with potential vendors. As long as all vendors are allowed an equal opportunity to interact, and the questions and answers are noted in some way for a formal record, then the vendors are all being offered the same full and fair opportunity.
The only issue may be with the Auditor General’s Good Practice Guide where it states any additional information provided by a public entity to one supplier must be made available to all potential suppliers.
We would argue that this was not intended to apply to interactive sessions between Government agency users and potential suppliers where it is an actual run-through of that supplier’s solution or product. The relevant principles under the Good Practice Guide are able to be satisfied – ensuring consistent information is given to all suppliers (through using the same user group audience for each presentation) and treating all suppliers fairly and equally (with all suppliers given the same right to present if they wish).
But to lessen the risk in the public sector, suppliers should try and ensure this right is added in the RFP process itself as a separate and confidential part of the overall evaluation process – meaning there is no requirement to share the information gleaned from the session.
For brave suppliers, pushing for this open interactive session with the entity’s users as part of the RFP process is a great idea, as it will mean you get the chance to really showcase the relative strengths of your solution or product, and also demonstrate you are the right party to be working with the customer’s team – showing you listen, care and deliver to your customers.
Discovering the budget
Nothing shocks customers more than being asked by a potential supplier how much they have budgeted for the planned procurement.
Customers seem to think that it is a closely guarded secret. To let a supplier know what your budget is, will mean that that is what they will charge you, and you could potentially pay more than the supplier would otherwise have charged.
But to a supplier, knowing the customer’s requirements and their budget leads to a better response to an RFP.
First, it will actually help the supplier respond appropriately to the stated requirements in the RFP. Most RFPs are not actually that clear as they could be around the scope of goods or services. But coupled with the budget, it will guide the supplier in responding – is this a big job or a small one? Are high-level solutions required or a complete A to Z How many resources is the customer expecting to be committed to this project? Is this actually a project we should be pitching for ?
Second, competitive pressure will actually work in the customer’s favour. The budget as a single sum, or even expressed in a range of values, becomes the default maximum price. The clever supplier will have to be within this range or less to potentially win the work. Few procurements occur these days without intense completion, and only a foolish supplier would simply assume the maximum price will represent good value for money against other suppliers’ bids.
Lastly, the brave supplier can actually add true value to a customer by looking for real cost savings or offering alternatives to the budgeted level proposed. Can the initial price be smoothed over time? Can some aspects be combined to deliver efficiencies? Can process changes in the customer mean a more efficient and effective alternative could be provided? What is really needed by the customer and what can actually be provided for the budgeted price or less?
Good procurement is all about providing improved value beyond cost, but you need to know first what the baseline costs are in order to achieve this.
The power of the consortia
While many RFPs push suppliers to respond by themselves, actually the power of many may give the customer a better result in some circumstances.
There is nothing wrong in procurement practice in having suppliers form consortia to respond to an RFP or procurement project. Often this can bring a well-rounded, end-to-end and complete skill-set to bear, meaning a better solution, product or service for the customer.
However, many RFPs do not actively promote or encourage consortia. Customers are usually open to the idea, but have not expressly said so or accommodated the possibility in their RFP terms and process. Sometimes consortia need to be formed after the initial supplier responses are received, and it becomes clear to a customer that one supplier cannot provide for all their requirements. These options should be foreshadowed in well-constructed and flexible RFPs.
But really it is the suppliers who must take most of the blame. Forming consortia takes a large degree of trust amongst suppliers. You cannot make this happen overnight, nor does it always work between some organisations and some lead individuals.
Again suppliers need to be brave, by actively looking for situations where they could partner or otherwise involve another supplier. It may take one or two joint approaches to work out where the synergies are between organisations and where the strengths lie in joint bidding.
It will not always be appropriate to join forces with other suppliers, and many times you can still be competitors with them, but a well thought-through consortia bid to a complex RFP is attractive to a customer where you can show the added value of the team, that the consortia approach will work and you can deliver the power of many to solve the customer’s requirements in a far more effective and efficient way.
Conclusion
Bravery is hard. It means doing the uncomfortable.
Yet in the current business climate, suppliers and customers alike are facing difficult times in the procurement landscape and so shaking things up a little might be a first step towards an improved position for both.
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[1] These include the principles of best value for money over the whole of life, open and effective completion, full and fair opportunity for domestic suppliers (subject to international obligations) and improving business capabilities.
[2] For example, the Good Practice Guide , and the Ministry of Economic Development's Government Procurement in New Zealand – Policy Guide for Purchasers (amended in February 2010).
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