Supplier and tender evaluation – an absolutely core procurement task (part 1)

- April 26, 2012 12:30 PM
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We’re going to look at a topic close to my heart, but one that doesn’t get the attention it deserves. We wrote about pre-qualification processes recently, and as we said then, we’ll have a research paper available in the not too distant future.

But after pre-qual comes the tender, request for proposal or whatever we might call it – basically the process through which we seek offers from our potential suppliers to provide the goods or services we require. And, whenever we have more potential suppliers than contracts to award, we have to carry out some sort of selection process.

Now, unless we make that selection on a random basis, that suggests we have to evaluate in some manner what those potential suppliers are offering, and it’s that evaluation process that we’re discussing here.  So why should we take this seriously?

Well, the most fundamental reason is – that’s simply what we do (or should do) as procurement people.  I’d argue that the most fundamental task we have as a profession, and arguably the single most important thing we do, is this;

We choose the best suppliers to meet our organisation’s specific needs.

Now of course we may not do that on our own – we may work with internal colleagues to make those decisions. Or we may play a role by providing colleagues with policies, tools, and guidance to allow them to make that selection themselves.  But if we’re not involved in that supplier selection process at all, then I’d say there’s something wrong with procurement in that organisation. Indeed, I’m not sure I’d even call it procurement.

So evaluation, done well, helps us identify and select the best supplier(s) for our needs. But there are other reasons to take it seriously.  In both public and private sector, well-designed and executed  evaluation processes provide an audit trail for how the supplier was selected. That supports good governance, protects against fraud and corruption, and even provides some assurance in terms of the Bribery Act these days.

To encourage long-term competitive markets, we’d also suggest that your suppliers and potential suppliers need to know that the selection process is fair, and that the buyers know what they’re doing!  If suppliers feel they have no chance of winning, or even that the process appears random, the chances of them withdrawing from the market of potential suppliers is high.

In the public sector, evaluation must be done even more carefully for regulatory reasons.  For instance, in the EU, it must follow basic principles such as fairness and transparency, and in many cases, there are a range of more detailed criteria and process steps that must be followed.

And finally, we would argue that this should be a process where the procurement professional can show an area of expertise, and one that is unlikely to be replicated by other parts of the business.

“How are you going to add value to what I can do myself”?

That’s the question I heard many times over the years from internal stakeholders when I tried to take procurement into a “new” spend area – marketing, IT, professional services or whatever.  Having an expert knowledge of evaluation processes and techniques, not in order to impose huge bureaucracy on your stakeholders, but to help them work out who they should be selecting, providing them with a robust audit trail, helping explain to unsuccessful bidders why they failed – these can be strong arguments in favour of procurement involvement.

So there are some very good reasons for procurement taking selection and evaluation seriously as an area of expertise, and being expert in terms of the various decision mechanisms. Yet when it comes down to the critical detail of how we should do that, there’s a limited amount of guidance available or best practice consensus across the profession.

So stay tuned for part 2, when we’ll get into this topic more deeply.

Comments

  • Paul Wright:

    Peter,
    I agree. I have been called in too many times by clients who basically say “we have put out this ITT, we are about to get bids back, but we don’t know how to evaluate it – will you sort it out for us?”. It is never the procurement department who call, but the contract managers who did not involve procurement in the beginning.
    My thoughts (written during a particularly protracted evaluation process) are at http://pawablog.blogspot.co.uk/2008/04/writing-tender-proposals-that-win_28.html

  • Dan:

    Of course, once you’ve evaluated the tenders, the client says “but I don’t know the company thats won. Can’t we use that other one? They always do a good job…”

  • Paul Wright:

    Or, “I don’t care how good their bid is, they never do a good job so I don’t want them”. Sigh.

    • TimBya:

      I think we have all been there!
      My rule, which I make clear to budget holders & evaluators, is never put any supplier on a bid list less unless you are prepared to give them an order if they are the ‘best’ evaluated offer.

  • eSourcingSensei:

    Great article Peter and as is my want I would love to add to this.

    Where I have seen tenders fail (by that I mean post event when trying to take the results back to stakeholders) I have come across many of the things Dan and Peter W mention and an almost complete disconnect between the buyer and the stakeholder. And when I dig deeper what do I find……..

    The buyer engages in a tender after carefully evaluating the market place and assessing and evaluating the suppliers they want to invite, and have done a great job, but have sadly not engaged with the stakeholder from the outset and discovered what the business needs really are.

    If the Buying population learn to network fully with the business stakeholders before they go out to tender and learn what they need, then maybe the post tender evealuation process would be a smoother road to travel.

    Certainly it means that all the business requirements can be included within the tender when posted and based on the premis that all particpants would need to satisfy all requirements, suppiers would then be on a level playing field during evaluation and assesment and stakeholders concerns would be closed out far more efficiently.

    The other part of post event evaluation that I also see not being seen as a key requirement is feedback to the suppliers particularly those suppliers who do not secure business from the tender.

    Failure to be clear with feedback to all involved detailng why they did or did not win business, and areas they could improve upon in the future, will lead to dissenchantment among particpants, and we should not be surprised if suppliers feel less inclined to particpate in future events.

    I know good feedback does not guarantee future particpation, but I beleive it to be as vital in good sourcing techniques as the preparation of the data at the start of the entire process

    Actually these are subjects I could spout on about for hours but I will leave them again as thoughts to maybe come back to in the future one day :-)

  • bitter and twisted:

    Everybody, enough with the procurement arrogance already.

    If the stakeholders dont want your winning supplier, and they are competent, then its your tender that was wrong.

    • Plan Bee:

      OOOh so much wrong with that statement and you know it.

      It may be they are competent (I assume you mean the stakeholder) but maybe they are measured incorrectly. Maybe their budget is too generous. Maybe they are not encouraged to take enough risk

  • bitter and twisted:

    Has nobody ever worked somewhere where they sided with the stakeholders rather than their own function?

  • Final Furlong:

    Cross-functional teams deliver the most successful outcomes from any procurement.

    Where internal stakeholders have declared their favourite/s from the outset, you take them on a journey, and always take them with you. Where they haven’t, you must never influence opinion towards one potential supplier or another. During evaluation, you should always guide stakeholders using facts and evidence, and never by emotion or instinct.

    I recall a very simple example of a CEO who was extremely close to selecting a consultancy based upon the credibility of the lead partner because “he was so impressive”, until I showed him that, buried in the detail on a spreadsheet within their proposal, we wouldn’t be getting any of his time. The project would be delivered by the other members of the team who hadn’t said a word during the whole presentation. (He intimated how he had been “stung like that” before.)

  • ezequiel:

    Yes, it is a core part of procurement indeed. It has its time which is short and intense -ideally, or at least- in comparison with the wide array of activities one sees in procurement or the time it all together takes in the end, at least in the public sector. But anyhow, everywhere the talk is the same, about growing, adding value, being at board level, so there is not much difference private-public. Also as the stakeholders are most of them well established functions so the new mind in town that we may be have to make an extra effort, I’d say. We’ll get there

  • Supplier and tender evaluation – a core procurement task (part 2) — Spend Matters UK/Europe:

    […] highlighted in part 1 of this series why procurement should take the process of tender evaluation seriously, given it is so important to […]

  • TimBya:

    This is a very important issue in the public sector given the need for the evaluation process to be totally transparent. We need to publish the evaluation criteria (with weightings) in the bid documentation and then be prepared to provide detailed feedback to the unsuccessful bidders. This forces us to develop and document an objective evaluation process that reduces the opportunity for prejudice, favouritism etc.
    We develop this with the internal stakeholder based on their business objectives (e.g. relative importance of price, quality, delivery etc). We then prepare a more detailed evaluation template, again working with the stakeholder (but providing our expertise!), to document how each of the assessment criteria will be evaluated. Individual evaluators use this to score the bids and we then meet to harmonise the scores, discussing differences and agreeing an overall score (we try to avoid averaging where we can – its better to discuss as people see different things.) This process churns out a winner which is supported by the whole evaluation team as they have been involved throughout. The internal approval process has little option but to accept the recommendation, given the thorough and well documented evaluation!
    There was an interesting reaction when I first explained to our Board that they wouldn’t actually be choosing the winning bidder but noting the outcome of the evaluation! The skill is ensuring you get the right evaluation criteria at the outset and ensuring all the stakeholders understand that these will determine the outcome.

    • bitter and twisted:

      How do you decide whether a requirement needs to be a pass/fail item at prequalification stage, or only a weightable item at tender stage?

      • TimBya:

        During pre-qual we are looking at the capability of the supplier and hence suitability for the job in question (e.g. financial standing, previous track record in this area etc etc). We also hope for a degree of self selection following an early market engagement exercise (yes we have been doing these in the public sector for years despite what certain ministers think!) or by sending out a project brief to set their expectations.
        For bid evaluation, we get the internal stakeholder to classify their requirements as Essential (pass/fail) or Desirable (weightable). We challenge the Essentials – “would you really reject an offer if that was the only issue?)

        • Dan:

          B&T – at Pre-qual stage we’re only allowed to take into account things like financial standing, experience, capacity etc. At the tender stage we ask them for their prices, proposals etc. If you try to use a ‘selection criteria’ at the tender stage, it could invalidate the whole tender.

  • Supplier and tender evaluation (part 3) – how to score price — Spend Matters UK/Europe:

    […] == "undefined"){ addthis_share = [];}In part 3 of our series on tender evaluation, (parts 1 and 2 here) we’ll look at one particular knotty issue – scoring “price” (or whole life […]

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