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Start at the very beginning

According to recent research, public sector organisations could save 15% of their budget if they adhered to procurement best practice – that equates to a staggering $1.5 trillion globally. And whilst the full impact of the COVID-19 pandemic on global supply chains is still to be seen, one thing’s for certain – there is more emphasis than ever on the need to demonstrate that what’s being spent is being spent wisely. If the last financial crisis back in 2008 taught us anything, it was that in times of economic uncertainty, there is more scrutiny on public spend than ever, combined with a greater focus on transparency.

With this in mind, taking a fresh look at how you manage your procurements to ensure you achieve the best possible value for money has never seemed a more valuable exercise.

Having spent the past 20 years supporting global procurement teams and witnessing first-hand the challenges that come with managing strategic complex procurements, our biggest tip for getting best possible outcomes (including value for money) on your projects is to begin with the end in mind. Over the years, we’ve seen the pitfalls of going straight into the evaluation stage without thinking carefully about what comes before. It’s the familiar cliché, of ‘fail to prepare, prepare to fail’.

Our proven and successful approach to strategic procurement places firm importance on this planning stage, and it’s this that assures the delivery of the best possible outcomes for our clients. Having a clear understanding of what success looks like from the start helps you test your assumptions and technical requirements to ensure your procurement objectives are achievable. Key considerations include:

  • Clarity among stakeholders around what the requirement is, and how that evolves to become the basis of your decision
  • Accurate and appropriately weighted criteria, for each individual procurement
  • Absolute certainty that the outcome will be the solution required, regardless of who wins the competition

Good market engagement helps you explore how best to achieve value for money from your upcoming procurement, this can include the capture of rough cost data to check affordability and ease passage through approval gates. Effective early engagement leaves suppliers better informed and primed to respond effectively to your tendered contract.

And for each potential project, you’ll need to consider what the high-level drivers are, as well as the market engagement themes. These could include Procurement Approach, Solution Performance, Information Sharing, Deliverability, Commercial Approach and Value Management threads. Every aspect of this is critical as it will underpin any decisions and choices that are made, informing the pro­curement strategy, scenario testing (Value for Money), negotiation and eventually contract management.

Criteria Development methodology can also be deployed right at the outset of a procurement – in fact, the earlier the process is started, the better the outcome is likely to be. By capturing all the available information and providing stakeholders with a unified view of your project’s objectives you will ensure that all project goals and requirements are clear, avoiding any unnecessary delays further down the line.

And digging a little deeper into the planning process, it’s important to consider the full range of potential bid profiles, perhaps the ‘usual suspects’ plus a handful of low cost and some gold standard options. Most scoring methodologies would relate all bids to the cheapest compliant, but what happens if this bid is suddenly out of the competition? Not always what you’d expect, rarely what you’d hope. We frequently read stories of bidder collusion in the media and it’s often the scoring method that gives power and effectiveness to their attempts to defraud competitions. One option is to remove the connection between bidders’ scores.

One example of the above is a road dualling construction project where previous road section projects hadn’t considered the implications of making incorrect assumptions about the experience of interested bidders. The result was a winning contractor who needed significant, and unexpected support to deliver against their commitment – adding cost, time and unnecessary risk to the project. Unhappy with this approach, the same Authority subsequently sought our advice and adopted our robust methodology to successfully regain control of the project, mitigating all previous risks.

This illustrates the importance of transparency and sharing sufficient information with bidders, ensuring they understand what’s important to you as well as providing evidence of every decision you make along the way. Publishing your scoring method and the detail will give bidders greater insight into what a successful bid looks like, helping you get better quality bids and ultimately better outcomes. And equally important is the maintenance of a full audit trail of how and why the winning tender was selected. Without this evidence how will you be able to successfully defend a challenge and justify your decisions?

In times of increased uncertainty, the probability of facing negative press, wasted budget and legal challenge becomes even greater. Wouldn’t it be good if you knew, before going to market, that you’d be in a position of confidence and defensibility with your procurement evaluation design?

By engaging your market early and adhering to industry best practice, you can support your suppliers in successfully responding to your tender. Better market engagement means better quality bids and ultimately better value for money outcomes.

In our latest guide, 6 steps to better procurement outcomes, we draw on our extensive experience in shaping and refining best practice for some of the most complex public sector procurements. We share top tips and expert insight from across the Commerce Decisions team, all designed to help you deliver better procurement outcomes. Download the 6 steps guide here or contact us to find out more.

References

The source for our statistic is from:

https://www.mckinsey.com/industries/public-and-social-sector/our-insights/how-smarter-purchasing-can-improve-public-sector-performance