We have often been asked to help a public-sector client out of a jam with a multi-million-dollar system procurement effort. Each time, it was too late because their procurement design or evaluation resulted in the selection of a vendor that did not meet their needs.
These agencies constructed their procurement around a typical strategy—identify three or four categories of things that matter to them (for example, solution provider experience and viability, solution fit with requirements, and cost), weight those criteria, and score the vendors. Here is the problem—in tight economic times, cost is often seen as critical, and it is weighted accordingly. Vendors know this, so they offer a minimally acceptable technical solution with the lowest possible cost. And they fully expect to make up this lost revenue through change orders.
How do you make sure an inferior product does not come out on top? The following tactics can help you procure the system your agency needs:
- Define your requirements well. This will allow you to better compare the solutions vendors propose. It is difficult and time-consuming to develop a detailed set of requirements. Because you rarely develop requirements, you might not have the skills in-house to do it well. Working with a third party that specializes in developing requirements is worth the expense.
- Unless you are buying a commodity, consider a value-based procurement instead of basing your procurement strictly on cost. There are many ways to evaluate value. For example, score the value of a proposed solution by considering the cost per technical point. This will minimize cost-based gaming.
- We’re not suggesting that you ignore total cost. Leave yourself room to negotiate the total cost. Pick the vendor with the highest value while maintaining the option to cut the total cost of the solution by reducing scope. Or if your regulations allow, consider a best and final officer solution.
- Consider publishing your budget. Releasing your true budget in the procurement ensures you can score the responses on the best solution and customer service.
- Test your procurement strategy. Consider all possible scenarios before you release your procurement (for example, a scenario in which a vendor has a low total cost and high technical scores or perhaps a high cost and high technical score), document them, and run an evaluation of the results. Are the results what you expected? Perhaps you should revise your scoring strategy.
The most import lesson here is HAVE a strategy before you release a systems procurement. If you don’t procure major systems regularly (and who procures multi-million dollar systems regularly?) get some assistance with your procurement.