posted on | written by Jim Walsh
One of the most misused phrases in business today is ‘value for money’.
Frequently it is an excuse for selecting the cheapest option, particularly in a procurement process.
This is not an attack on the procurement system. Centralising procurement in a large organisation has its merits. It keeps suppliers on their toes, eliminates duplication in purchasing responsibilities and helps reduce costs.
But the procurement process, particularly in the state sector in Ireland has become a sterile, one-dimensional process. Requests for tenders (RFTs) for the supply of goods are virtually identical to tender requests for professional services. Many RFTs look like a lazy cut and paste activity.
RFTs are issued for a number of reasons but often only because the organisation has a requirement to go to the market every year or at a specific time. That is irrespective of how well the relationship with their supplier is working or how satisfied the executives within the organisation are with the service they are receiving.
That in itself is not a bad thing but what is wasteful for everyone involved is the requirement for those tendering to prepare copious levels of background information about their business, financial information, insurance levels, staffing levels, references, adherence to EU regulations etc. All of which the procurement department who receive the tenders have to assess and verify.
That is all before you come to, or find among the many detailed pages of the tender document, the kernel of the tender requirements. In one recent tender document I have seen the content list alone ran to two pages.
The process could be simplified leading to greater savings for both the organisation issuing the tender and those wishing to do business with them.
It would be much simpler for example if the technical and regulatory information was isolated and those boxes could be ticked and submitted separately from the core of the tender.
That would make it easier, particularly for SMEs to decide if it is worth allocating resources to completing what, for new businesses in particular, is a very complex process.
It would also eliminate the waste of resources on both sides if the organisation issuing the tender explained more clearly why the tender was being sought. Is it to reduce costs, seek a better service level or simply seek an assessment from the market? This last suggestion might appear naïve to some but I believe that it would provide a great incentive, even for the incumbent supplier, to suggest how the current service might be improved.
The procurement process, particularly in the state sector, is also often distanced and divorced from the actual service delivery.
The marking system regularly fails to take into account the experience and track record of the incumbent in supplying services to the organisation or the quality of the product or service supplied.
This was articulated very succinctly by the owner of a small bus company on RTE Radio 1’s Liveline programme this week. The owner had tendered for a school route that her company had operated for 14 years yet scored lower on knowledge of the route than the company who won the tender. The company owner admitted that she had sought a price increase as, over the past number of years, her company had invested in additional regulatory and safety procedures at their own expense.
It appeared that in this case the decision was made on the basis of the paperwork provided to the procurement office of the organisation seeking the tender and its ‘value for money’ explanation was a misnomer for ‘cheaper’.