Tenders are still broken

2021 is still going to present us with challenges. Even though there is light at the end of the tunnel, it still feels like it's a long way off and every business is going to have to watch what they spend and be careful about what they do.

Some businesses will be investing in their marketing, in order to get a return and to kickstart the growth that they need for this year, having pretty much stood still for the last 12 months. But so many will have to keep a real close eye on costs. And so naturally, they turn to tenders.

Because if you've got a tender, where somebody's giving you prices for this widget or that widget, you know that you can rely on those prices, and you've got some guarantees around what costs might be. Or have you?

Is that what tenders really do? The tenders we've responded to over the last decade have got all kinds of grey areas and get out of jail free cards built into them which mean that the prices in them are only ever indicative. This leaves the winning supplier opportunity to quote more accurately once a brief is given. And that’s 99 times out of 100 not the same as the job in the tender.

From our perspective tenders are just a mechanism for suppliers to race to the bottom on cost to get themselves on a framework. They don't provide any guarantee whatsoever that the prices written down in the tender are the price that you'll pay.

Tenders – asking for certainty based on uncertainty

These are not normal times. So the tenders coming out at the moment contain lots of caveats about volumes being unpredictable, or the specification being uncertain.

What they're doing is they're asking for certainty from suppliers, based on uncertain briefs.

Realistically very few businesses have any certainty right now. Volumes might be different. The number of deliveries might be different. Specifications might be different. The creative is being done one way, but actually, you want to print it a different way. And all of that has a bearing on cost.

Businesses like ours don't have any choice. We have to join in the tender merry-go-round. We can't refuse to get into that system.

Even though we think the process is broken and even less fit for purpose in 2021. I don't think there's a tender anywhere containing accurate predictions of what the organisation will want to produce throughout 2021. There are too many variables.

A basket of goods in a tender which ends up being produced to the exact specification in the document doesn’t exist. It's a mythical creature. It's something which people in procurement dream of creating, but in actual fact, it never actually happens.

The numbers in tenders can only ever be indicative, and even more so in the world in which we're operating at the moment where the only certainty is uncertainty.

What is good value?

There’s a crucial element which tenders can’t assess – how does a supplier add value to your organisation?

Cost is one thing, but if you want to work with experts you should also utilise that expertise instead of considering your business relationship entirely transactional.

Last month I wrote about the order of things and how that matters. It’s a simple way of adding value to our clients by using our skills and experience to help them shape a final product which not only achieves their aims, but comes in within budget.

In order to add the most value to our clients we need the time and we need the opportunity to work with them to come up with the right solutions.

Tenders remove a part of a relationship between client and supplier which is really, really important. There is no weighting for how good our relationship is, how a supplier performs at solving problems, or how well they respond to the conversations we have with them.

But is that not what you want from a supplier? Do you not want a trusting relationship where you can present your supplier with a problem, and have them come up with a solution that's within your budget, and that does what it needs to, instead of just referring to a spreadsheet and picking out numbers?

Everything any business does this year is likely to be different to what we did last year. So any tender based on last year's numbers and last year's averages bears no resemblance to the real world that is 2021.

I'd love a conversation with a procurement person who can explain to me the reasons why tenders are set up the way they are. I understand that organisations need to plan budgets. I understand that organisations want to be able to demonstrate they're getting best value. But I don't understand why people still think tenders are the way to do that, more especially now.