Organisations undertake procurement processes and set up new contracts all the time. But less frequently, an organisation has to undertake a big, strategic piece of sourcing – the type that is multi-year, runs into £100+ million, is service-led, and has a strategic impact on the company’s ability to deliver to its customers. The approach taken to these procurements has to be very different, and it needs to be right first time. So, in our experience, what is needed to deliver successfully?
A huge investment is normally associated with large scale procurement projects. The procurement process for large, strategic sourcing necessarily takes a long time from start to finish. Often it involves the input of a big group of stakeholders within the organisation, sometimes redeployed to work solely on the procurement. Business as usual roles tend to be filled by other staff members and the help of external expertise is often required. Organisations therefore need to ensure the process is successful in order to maximise the return on investment.
Running a complex procurement exercise can be made more challenging by the fact that the supplier-buyer relationship is often an adversarial one - each side rightly wanting to get the maximum out of the agreement. A procurement team, will need the bidder to provide the answers, demonstrate innovation in their solution, and ultimately do the heavy lifting where required. This often requires more of a collaborative approach, which may be counter intuitive for a procurement team historically incentivised to focus solely on cost savings.
What key things should an organisation do to complete a successful procurement?
Where the scope is complicated, or the service required is multi-layered, a different approach is sometimes required. In these instances, the procurement team must be willing to give guidance, support, and in some cases the answers. This is critical in order to receive a bidder response that meets or exceeds their needs. It should be recognised from the beginning that they may not know all the answers. The journey should be viewed as a ‘learning’ process, just as much as a ‘telling’ process.
In our experience, one of the key activities that organisations running complex procurements should do, is encourage regular, open and honest two-way engagement. This applies both to internal stakeholders, who will need to be onboard in building the strategy and tender, and all other external parties. No matter how clear your communication and requirements are, it is highly likely that bidders will require further clarification. There is often huge complexity in running supplier days and managing multiple responses and questions – especially where suppliers are bidding in consortiums. The overall aims and objectives need to be understood, but beyond this, bidders need the opportunity to clarify their understanding and test their solutions – some of which may be new and innovative. Ensuring there are dedicated face-to-face sessions with each bidder, allowing time to ask questions, and an extended period of Q&A engagement, typically works best to maximise the chances of bidders building effective solutions.
Clear and Accurate Data
Secondly, buying organisations have to ensure adequate data is shared with bidders. This will allow them to provide accurate and feasible responses, reduces the amount of time having to re-work solutions, and ensures costs are based on accurate assumptions. In our experience, complex procurements often require huge amounts of data that takes time to gather, analyse and share. Therefore, rather than waiting until the response period is in progress, we advise that organisations should build in time to gather the data that will be needed proactively, and kick start this process at an early stage before the external procurement commences. It also often helps to provide supporting data and information from the offset, to help bidders quantify their solutions early on. This is critical to ensure bidders are building the right solutions that are properly costed.
Clarity on Strategic Aims
Finally, being clear on strategic aims and outcomes is a key prerequisite. Organisations need to ask themselves why they are undertaking the process and what they hope to measurably achieve. The answers to these questions will dictate the wider approach to the RFP and should also be communicated to those bidding. For example, the negotiation strategy will be very much informed by the strategic outcome – and dictate whether the focus throughout the assessment, scoring and negotiation is on cost, quality or innovation. Too often organisations are unclear on the initial objectives, and this can create conflict between the procurement team (who are focused on cost) and the business (who may will likely require service uplifts).
Open and honest engagement, providing data, and having clear strategic objectives, must be managed in a way that gives bidders a level playing field and does not favour incumbent suppliers.
In order to ensure fairness, organisations should broadcast all questions and answers to each bidder – irrespective of who asked – and make sure that face-to-face time is equal across all parties.
The benefits of taking this approach are significant. It enables bidders to provide a proposal that best meets the requirements, allowing them to exceed expectations once the baseline requirements are met. Ultimately, it removes the risk of poor understanding from bidders, which will increase the number of competitive bids you receive. This will allow you to push hard on price later on in the process (if that is your aim) and get the best end solution – both from a cost and service perspective.
Alex is an experienced commercial, marketing and change specialist with a strong track record in driving projects to improve value and revenue.
Alex Goodman Manager
Sam is an experienced senior consultant, having undertaken a number of roles that have allowed her to specialise in project and change management.
Sam Smith Senior Consultant
David has 13 years’ consulting experience delivering complex transformations across foods, other consumer businesses and pharmaceuticals.