The folly of the tendering process

This is a follow-up to my recent post about The challenge of selling brainspace, and the general unwillingness for people to pay for the intangibles of ideas, insights, designs planning and perspective.

Here is a very real example, familiar to many of us who have written or responded to a tender (or Request for Proposal/Pitch RFP to Invitation to Quote ITQ)*.

A typical IT project tender is a request for proposal/quotation to design and build some sort of system which is a mixture of hardware, software, systems integration and process integration. Even a straightforward web application (like online sales fulfilment) crosses all these areas. Such systems are by this nature complex, with long term and potentially deep implications for the client.

Surprisingly, the typical borderline-unreasonable requests in such a tender seem to actively work against getting the most appropriate and cost-effective outcome for the client:

  • Designs required up front – whether this is strategic or systemic. How can anyone worth their mettle design anything with the sketchy information typical in such proposals? And having not met the client, nor understood the real needs thereof? What will be the end quality or appropriateness of such a design?
  • Fixed quote required – with minimal information, no scope, and no design, there is no way a real quote can be generated. So the client typically ends up with a grossly-padded out figure.
  • Short timelines – the crowning glory is often a ridiculously short timeline. Imagine being asked to design Amazon.com in two weeks, with minimum information, and without any guarantees of being paid. What is the quality of work that can be expected?
  • How often does the project scope change radically after commencement? And at what cost to morale and the bottom line?

As a good friend of mine (you know who you are) would say: “this is so totally f*cked.” This has to be a form of deliberate self-sabotage on the part of the client. There is an incredible waste of resources and effort in this process for all. Just what are the possible psychological factors at work here?

There could be any number of reasons why this is the case:

  • The people writing the tenders have an inadequate understanding of the complexities and implications of their projects.
  • They are unable or unwilling to see and involve the larger picture.
    They already have a respondent in mind and the tendering process is really only to satisfy policy or legal requirements.
  • They are shopping for the cheapest respondent, even though (especially when?) they make a point of saying this is not the case.
  • They just want a simplistic solution with a simplistic price so as to make a simplistic decision. Longer term implications can wait, or they can be fixed if and when they arise.
    They are fishing for free ideas from as many sources as possible.

The end result for the client?

  • Wasting time going through scopes that are quite different in scope, and in price.
  • Forced into working with budgets that may be higher than necessary.
  • The numerous assumptions made in the various scopes can unwittingly seed the project with new distractions, questions and variables.
  • Forced to make numerous and costly course corrections along the way.
  • Forced to fix problems, or be lumbered with limitations, that could have been prevent up-front.

The most practical and reasonable win-win situation here is clearly to start off by paying someone to do some serious stakeholder needs analysis, run brainstorming sessions., and write proper functional specifications before the project goes out to tender. Even for smaller web projects, this step saves a huge amount of grief and money in the long run.

Once the client has a clear scope in place, tender respondents will have a better chance of quoting appropriately for the actual work required, instead of stabbing in the dark. The client will then get a more consistently comparable set of responses.

This process I have described presumably applies to non-IT projects as well (construction, manufacturing, service outsourcing etc), but I have no first hand exposure to these. Please share your experience below.

* I have played a part in a range of permutations of respondents: a consortium of small businesses, a consortium of medium and large businesses, a single small business and a single medium sized-business. Clients have been government bodies, institutions, sporting and arts bodies; in Australia, Singapore and Europe. The success rate has been variable and inconsistent.

9 comments

  1. Neil said:

    The things you say about IT tendering are often true. I have seen supposedly smart organisations repeatedly make stupid expensive IT procurements that fail to meet their needs.

    Engineering projects have similar processes. But engineering deals with tangibles and is a more mature discipline. If a client wants a road they don’t wander around interviewing drivers and vehicle manufacturers doing needs analyses and trying to understand roads. They do a concept design and tender for full design. Construction contracts are then accurately based on design details. There are always unforeseen variations and some scope changes but these are carefully managed.

    Civil and mechanical engineers would be terrified at the thought of calling tenders without specifying what you want. In IT not only does the client often not know what they want but we don’t help by using proprietary software and components for which we have no details and over which we have no control. An engineer building a bridge (by law) needs to fully understand the details and functions of all its components.

  2. Benedict said:

    This is so true. I wish I had written this myself, it is that true.

    I get the impression that the “marketing” person who calls for the quotes doesn’t really know anything about their needs. Whenever I dared ask, I got met with such venom that “just provide your best quote” was obviously an insult to everything good in life.

    Tendering has also seemed to me to be a way of building walls to protect mediocrity.

    Thanks for this article

    :-)

  3. Zern said:

    You are welcome Benedict.

    “Just provide your best quote” just about sums up what is flawed with this process.

    All they seem to want is a set of simple numbers, attached to a simple solution, and one that is based on minimal understanding.

    “Hey, we don’t understand anything ourselves, nor do we want to put any work in. Just give us an easy and cheap fix…”

    Am I being too cynical?

  4. Benedict said:

    No, not at all.

    The question is, how does the ‘quoting’ business overcome this?

    :-)

  5. Zern said:

    Is it purely up to the ‘quoting’ business?

    Surely, just like in any relationship, it is up to both parties to come together and set the tone of the engagement. Will it be one based on respect? Or exploitation?

    Failing this sort of idealised “proper” change, in the short term the ‘quoting’ company can perhaps look at alternatives like: avoid the anonymous tendering process and instead rely on building direct relationships via networking etc.

    If an anonymous tender is the only way, perhaps the short term solution may be: quote cheap up front to get the job (by making anorexic simplistic assumptions about unknown requirements), only to then increase the quote as the real requirements are identified after commencement. No-change terms notwithstanding.

    Nonetheless, this still feels inauthentic and wrong somehow. A relationship that starts with this sort of manoeuvring and second-guess does not bode well.

    Any thoughts on your end?

  6. Benedict said:

    When I tried to develop relationships to get to the real needs to create a real solution (often cheaper then the other tenders) then I was invariably met with hostility and suggestions that ‘I should just know’.

    I always saw this as three issues; 1) ignorance of what was required in the project, 2) a hope to outwit the quoting companies into the ‘best price’ and 3) an avoidance of personal responsibility – if the other guy designed/approved it, when it fails it can’t be my fault.

    Going in low and then revising is, as you say, playing the same nasty game.

    I was blindly hoping there was a way to bypass the stupidity of the system. The more I think on it the more I think Ayn Rand had it right by having all her great minds go on strike in “Atlas Shrugged”.

    The only way of change I see is to refuse to play with any company or individual who tries to do business based on inequality (“at the point of a gun”). Imagine if all the best companies simply refused to deal with bad customers. Of course in the real world there is always a competitor who will swoop in but maybe the competitor is not the best mind or best solution.

    Over time the hope is that companies will start to get sick of mediocre results and start to consider fully involving good consultants early on.

    :-)

  7. Bruiser said:

    The tendering process in my industry is a crock. My issue is that the person continuously and consistently getting screwed is the poor customer who needs to have the work done. The situation in the electronic industry is that we are a very small part of a construction or office fit out and we generally dumped in with the electrical scope, responsible to the electricians; I cannot think why, maybe because we both use cable. First things first. The customer requires good advice on what is best to protect their business premises from break and enter and steal. Business continuity is not only reserved for the IT space and all important delivery of 5 x 9′s in terms of Network SLA. Business continuity is also around people arriving at work the next business day and the computers and servers are still in the spot that they were at the close of the last business day. In addition, who wants to hear that they are not allowed to touch anything until the Police fingerprinting team have been to the premises, put a cash value on the time and loss of business. So the customer needs to receive good advice which for they pay good money to a consultant. The problem is that in our industry the consultants are nearly always all electrical engineers and don’t understand or keep up to date with developments or change and so the gap in ambition and capability of the consultant is sometimes too wide and the advice is anything but good. In the absence of a real stakeholder needs analysis they get what the consultant thinks is appropriate. Imagine putting access control and alarms on doors with nothing to detect intrusion through gyprock walls into the office area. A gyprock wall is after all just chalk wrapped on two sides in a thick paper then painted. My size 12 makes short work of gyprock walls and I’m in – undetected. In responding to a tender I have found that the specifications are sometimes nonsense or a bad cut and paste from another project. When there is conflict between the plans and the specifications I often have to use the drawings as my only guide on what to quote. If there is equipment left out which I identify is necessary to comply with safety regulations I leave it out and will make a fully marked up variation later, if I get the gig. So the job goes to the cheapest bidder as decided by the electrician. The variations naturally follow. I am responsible to the electrician who reports to the builder who in turn is responsible to the Project Manager then up to the Architect. My variation price goes through 4 sets of hands before the customer ultimately gets reamed. Each set of hands puts 20% handling charge on it. So a $1000 variation is $2073 by the time it gets to the poor customer. The poor bugger who needs good advice and pays good money for that advice does not get it. Who wins out of the tender process? That would be the consultant…good money for poor or mediocre advice and no responsibility. The tender process needs a serious rethink, or the customers need to get savvy and wise up. For me – I won’t be responding to tenders – WOFTAM.

  8. beam dog said:

    how will you source new clientel woftam? What aother means are there of meeting new customers and building strong buisness relatioships?

  9. Zern said:

    Meeting new customers and building strong relationships are two different things.

    Meeting new customers involves attracting them in the first place. And then establishing the first lines of communications. Setting the foundations of new relationships.

    Only when some level of mutual trust and interest has been established can the relationship building part start. Some relationships never make it pass the initial meeting stage.

    Tendering for work is on the only means to finding customers. Just like going through a recruitment agency is not the only way to find a job.

    The problem is not so much as in the concept of tendering for work as in how people use the tendering process, their expectations, and the mindset it fosters.

Leave a Comment