You know the IBM ad:

“Nobody has been fired for choosing IBM”.

Well… in procurement there are ads like that.

“We didn’t just go for the cheapest.”

Lovely.

Everyone nods.

Someone writes “quality” in the minutes.

Your career feels protected.

Unfortunately, the project hasn’t read the minutes.

Take Scotland’s Parliament building at Holyrood.

In January 1999, three final candidates were competing to become construction manager.

Bovis came out comfortably ahead at interview.

82 points out of 100.

The next highest scored 65.

Its bid wasn’t the lowest.

But the selection panel stressed the importance of choosing a company the client and design team felt comfortable with.

Comfortable.

Yes… No joke.

Comfortable.

A expensive way for public servants to live La Vida Loca…

Ah… and paid by you, taxpayer.

Now, an important detail.

This was a construction management appointment.

The bid covered managing the works.

It wasn’t a fixed price to deliver the whole Parliament building.

And the more expensive appointment did not make the project’s problems disappear.

By 2004, Audit Scotland identified £86 million in additional construction costs from prolongation, disruption and delay.

Contracts had been awarded with uncertainty over scope and design.

The client was then poorly placed to resist claims.

The auditors also concluded that the same building quality could have been achieved for less with better execution of the design and construction process.

As I said… So much for buying peace of mind.

Of course, this doesn’t prove the cheaper candidate would have delivered a better result.

We don’t have a spare Scotland to run the experiment.

But it does expose a very expensive assumption:

A higher price is not a warranty against problems.

Now bring that lesson into your next PPP procurement.

You spend months selecting the shortlist.

Advisers.

Lawyers.

Technical reviews.

Enough workshops to qualify as a small religious movement.

You end up with three credible consortia.

Then one submits a lower price.

Suddenly, everyone becomes suspicious.

“Have they missed something?”

“Will they recover it through claims?”

“Shouldn’t we choose the safer team?”

Good questions.

Ask them.

Then ask the other bidders exactly the same questions.

Because an expensive bidder can also misunderstand the scope.

Exclude a risk.

Offer an impossible programme.

Or arrive with a claims team that could invoice you for the oxygen consumed during negotiations.

Paying more only buys additional value if you establish what that value is… and secure it in the contract.

Everyone forgets the last part, by the way…

Otherwise, you’ve paid a premium for a better interview.

That’s why I created:

​The ROOM — The ONLY Way of Doing a Proper Procurement Process​

For the people who have to recommend the winner.

Approve the award.

And explain the consequences when the lovely evaluation report meets the actual project.

Because “we didn’t choose the cheapest” might get you through the approval meeting.

It’s a rather weak opening sentence at the inquiry.

​The ROOM — The ONLY Way of Doing a Proper Procurement Process​

PD 1: If you liked this email, don't keep it in secret and forward it to a friend. They will thank you enormously one day.

PD 2: If somebody has sent you this email and you want to receive emails like this yourself, visit vicentevalencia.com

PD 3: If you want unsubscribe, click the link below.