Most companies that buy goods and services employ some kind of procurement system. The logic is simple - to ensure that the organization gets good value for its dollar. But for many organizations, something has gone off the rails. Processes that were intended to allow for dispassionate acquisition are now crushingly bureaucratic reality shows. Rules are invented to frustrate the respondents. And the system is gamed, more often than not by the very people who insist that procurement processes are vital to the company's well-being.
Earlier this year, I reviewed an RFP outline of the rules of engagement for the process. One paragraph noted that respondents who do 'X' will be disqualified from further consideration. A later paragraph said that respondents who did NOT do 'X' would also be disqualified. This discrepancy was raised by vendors during the Q and A. The issuing organization's answer? Do your best to figure out what is the correct way to respond. It's a testament to the imbalance of power in the procurement world that some organizations actually responded.
So how can you tell when your procurement system is polluted? Check for some of these behaviours:
- Have suppliers ever been involved in writing evaluation criteria for your RFPs? Try asking a car salesman to help you determine what you need in a car. I guarantee you the criteria will revolve around their differentiator.
- Do responding rules promote a level playing field (e.g., open Q and A sessions)? Or do they create hurdles that may help you filter, but not really evaluate, respondents (e.g., disqualifying submissions that deviate from a prescribed format)?
- Do you cancel RFPs routinely? Of course, by wasting your vendors resources you raise the prices you pay.
- Are procurement rules routinely circumvented? Do senior managers follow them? Do employees chop up their acquisitions to keep them under certain thresholds in order to avoid justification processes associated with larger procurements? Mix with bullet 1 and you've got the Ontario Premier's nightmare.
- When creating an RFP, do you try to ensure that the distribution of risk is fair between the supplier and the buyer? Or do you try to get as much as you can without having any of your own skin in the game? What would you do on the receiving end of this kind of tactic?
- Do you rely on cost-minimization strategies to select vendors? These days, this antiquated view of value propositions is routine in public institutions like hospitals and often coupled with bullet 5. Trying to minimize both cost and risk may seem like a noble strategy, but it is incredibly naïve.
Your procurement system can do much to support an 'arms-length' dispassionate approach to buying? Or it can just 'stiff-arm' potential partners that could provide real value to your business? And if that's what happening, who is it really hurting in the end?
