That is the title of a presentation that I gave at an APMP event in 2008. What has changed since then? In my opinion, not a lot!
Buyers say they are looking for value, compliance, and innovation but generally seem to award contracts to the lowest priced bidder. So bidders are forced to promise more for less. This creates a Catch-22 type paradox of lowest price versus best value – where overpromising in bids becomes normal practice, resulting in increased risk of failure to deliver.
This is not an easy paradox to overcome. Addressing it at the time of submission is probably too late. Buyers are genuine in their requests for things like innovation, quality, and compliance. But it is difficult not to choose on price when all bidders seem to be offering the same capabilities.
Equally, when submitting a bid you are offering your best solution which is almost certainly not the cheapest; it is so tempting to think reducing your price will make your offer more attractive. But cutting the price at the last-minute makes it likely you are offering 100% of your solution for a smaller percentage of the price.
Then the worst thing happens – you win with your reduced price and are obliged to deliver what you offered. Your delivery team must try to recover your margins whilst delivering the innovative, compliant, and high-quality solution specified in the contract. That causes them to be less client-focused than normal, with the outcome being long-term damage to buyer-supplier relationships.
So, how do we resolve this paradox? By engaging early with key stakeholders in the buyer organisation, well before their tender requirements and evaluation criteria are finalised. We can help them see supplier selection should be based on value, not just price. Where possible, we encourage them to quantify the value of the service and capability we propose. If they share that information with us, we can quote their numbers back to them. Referencing their own figures lends credibility; people trust the numbers they’ve helped define.
Take action: Talk to prospective clients as early as you can about the value to them of what you offer. Try to influence the evaluation criteria to be more about value than price. Offer a solution they value, at the right price, and deliver!
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