Estimated reading time: 8 minutes
Complex procurements carry significant stakes and there is much that can go wrong if your project is improperly managed. Successfully running a tender process that results in meeting both your technical and financial objectives require thorough preparation. In this blog, we reveal how you can minimise the typical risks that are present with every large-scale procurement process by fine-tuning a few key variables. We’ll look at the subtleties of criteria weighting, value for money models and the use of wargaming and sensitivity analysis to understand what could happen. Most importantly we’ll discuss the way that these techniques interact and have to be used in concert.
Why should I fine-tune my process?
Tuning your procurement can you help to foster genuine competition that delivers an acceptable solution without undue cost. Although there are a variety of ways to look at this and many different types of analysis that can be included, we’re going to focus on the point at which the tender invitation is about to be issued. We recommend this as the ideal opportunity to apply your fine-tuning actions.
Which areas of my procurement should I prioritise?
1. Fine-tuning your weighting system
We give weights to the questions that we ask of suppliers because we need to reflect the relative importance of the selection criteria. A methodical approach involving the right people being in the room should ensure that weights are set correctly first-time round. This is important as it helps to avoid a ‘whacking the mole’ scenario, where changing one weighting value in hindsight has a knock-on effect to changing the rest. Each question/criteria topic should ideally be covered by at least one subject matter expert, and a well-rounded team will mean each factor is scored collectively.
There may be functions of a solution that seem absolutely critical at face value, but if these are at the basic level of expectation that all contenders can meet, then you should subjectively give this a lower weighting than another factor that can act as a discriminator.
For example, if your procurement was to source the build of a new naval ship, it would be absolutely critical for that ship to float. But given that this is likely a requirement that all bidders’ solutions would meet, you wouldn’t award the contract based off this one (essential) factor. Instead, you’d look at the differences between what ‘added extras’ each supplier can offer and decide which of those is most valuable to the end user/goal.
It’s also worth remembering that some criteria won’t necessarily continue to hold importance once the supplier is under contract; however, taking it into account to understand the full picture helps us to select the right bid from a range of submissions.
There are a number of weighting methods, but our preferred recommendation is ‘factor-based’. This uses a scoring technique to assess a number of key factors associated with each criterion. The accumulated score is used to produce percentage weightings.
The factors considered should generally be:
- Impact – the consequences of requirements not being met
- Distinctive Capability – how hard it is for a supplier to meet a given requirement
- Certainty – how easy it is for the question to be stated clearly
- Immediacy – how soon the requirement needs to be met, relative to the awarding of a contract
You can read more about methods of weighting in the paper, Effective Weighting of Criteria.
2. Fine-tuning your MEAT (Most Economically Advantageous Tender)
Determining the MEAT is all about considering the value for money (VfM). In essence, this is finding the appropriate balance between function and cost. There are multiple methods to defining VfM, with no ‘perfect’ solution. Some methods heavily represent the importance of the technical quality of the product, and others focus on the raw cost. Some methods adopt similar considerations to the weighting process described above.
Ultimately the decision on which approach to use will largely be dependent on the reason for the tender in the first place. Whilst all aspects of the project obviously DO matter, in some procurement projects, there may be a defined reason for one element to rank above the rest.
The most popular methods include:
- The best technical outcome
- The cheapest compliant outcome
- The bang-per-buck outcome – technical scores divided by price
- A conversion of either the technical score or price given to make them more relative to each other
All of these approaches can benefit from some form of tuning, the most basic of which is the decision to set a maximum or minimum value to one or all of the variables at the beginning of the project. By ensuring that each tender bid meets a minimum value to progress within the competition, you can be more confident of a successful contract award.
The crucial element to making this decision is that your project management team, key stakeholders, and bidders all understand the chosen methodology and base their analysis/submission on meeting this outcome.
3. Fine-tuning using wargaming
Firstly, what do we mean by ‘wargaming’? Well, it’s a military term that describes the process of setting up a simulation of any given scenario to determine the most likely outcomes. In the case of a complex procurement, you’d use a wargaming session to stress test the potential performance of your bidders’ solutions and see whether the results suggest the successful outcome you’re hoping or expecting to achieve.
Done well, this practical exercise should help you to create new plans, ideas and strategies (if needed) before making full-scale investments. It will help you to determine if:
- There will be a real competition
- Suppliers will be attracted
- There is an unintended bias
- Bidders can “game” the selection process
How to create a fruitful wargaming session
Bring together a carefully selected group of people with a good knowledge of the procurement’s requirements – that is to say, a solid understanding of the end goal as well as the chosen weighting and value for money (VfM) methodologies. These people should also have a deep understanding of the market in which the end-solution will sit. Ensuring both of these areas are covered by subject matter experts will narrow down the infinite range of possible results.
Of course, this process could highlight previously unseen issues, which may lead to the need to revisit the VfM parameters, weighting scores, or perhaps even the criterion questions themselves in order to achieve a better final outcome.
A scoreboard, plus various tuning graphs can be used to show how changes to any element can affect each outcome. Attentive reporting is a must at this stage, to document the considered reason for any amends that are taken forward.
Remember, wargaming tells you what might happen, not what will happen!
In summary: Tuning your weighting structure, value for money method and wargaming strategy will be worth it
To a newcomer, the general procurement process will be daunting enough without considering the additional thought and time needed for fine-tuning each stage. However, these tuning slots are much slimmer than the resources required at other points of the wider process. So, for those aiming for the very best ultimate outcome, tuning should be a must.
By fine-tuning your weighting criteria and VfM analysis, and creating strategic simulations of each bidders’ solution, you can reduce or even remove a number of the associated risks within complex procurements. And generally, at a cost of weeks, rather than months on your timeline.
As noted at the beginning of this article, there are many opportunities throughout the full procurement process to fine-tune your decision-making, but we advocate for the point just before the tender invitation goes for approval as the best period. You may get a better return on your effort, and catching unforeseen issues early means that the future stages of your project are protected.
As with any stage of a complex procurement, tight reporting and diligent auditing are a must.
Commerce Decisions, supporting the MOD with AWARD®
Commerce Decisions has been supporting strategic procurements for over 20 years and is at the forefront of best practice processes. With a unique focus on complex evaluation, we have unrivalled experience in supplier evaluation and are a trusted provider of procurement services to the public sector, including the Ministry of Defence (MOD).
Our flagship software, AWARD®, has been used for MOD projects since 2001, and remains in place as part of the Defence Sourcing Portal (DSP) to support the evaluation activities on complex projects. These typically include those that are high-risk, high value, particularly sensitive, multi-lot, or using the ‘Willingness to Pay’ VfM method.
Our expert services team provides support from the planning stages of your project right through to the evaluation and contract award. We deliver proven methods that result in robust and defensible criteria, with effective weighting and VfM approaches. We assist with the practice of wargaming to develop risk and cost scenarios.
Commerce Decisions consultants are JAGGAER accredited and can provide expert application support across the DSP.
You can find out more about how our AWARD® software and services integrate with the DSP by reading our handy datasheet.
If you’re a procurement professional working within the MOD, we invite you to join our regular webinars that are suitable for all levels, to learn about best practices and see a demo of the AWARD® Solution. All attendees receive our full ‘Weighting, Worth and Wargaming’ resource that provides a further deep dive into the content delivered during the session.