Too often I hear “Procurement thwarts innovation” or worse still, “Procurement kills innovation”.Yet, I believe procurement can lead to, and even drive, greater innovation. It is often necessary for procurement to follow rigorous processes and remain in line with relevant and evolving legislation. The question is, how is this achieved whilst allowing for enough flexibility to accept innovative approaches that will meet an organisation’s needs?
Focus on the strategic, not the tactical!
Most complex projects select their suppliers largely on the basis of compliance with a defined Function and/or Performance Specification (FPS). These FPSs are often comprised of many thousands of requirements which, when combined, appear to be an end solution. While requirement driven approaches to acquisition may work for simple services or Off-The-Shelf products, they are much less applicable when the solution required is new, bespoke, complex or in need of significant modification. Most significant or strategic procurements fall within one or more of these categories.
What if there was a solution which met the goals of the procurement or delivered the required capability but didn’t fit within the confines of the defined requirement? One could ask for variant bids or could offer to evaluate innovative proposals, but how will these be compared with compliant solutions in the defined procurement process? In most cases, no matter how valued these approaches might be, the buyer’s hands are tied to select the solution based solely on those that meet the stated requirements.
Don’t get me wrong, I’m not saying throw away the requirements! Requirements do need to be assured in relation to the project or user’s needs, yet they are not the best basis for supplier selection criteria. Where suppliers are evaluated on their ability to meet requirements, they often feel the need to meet all requirements; score as many points as possible or meet a minimum level. Clearly a focus on evaluating compliance with requirements will have an influence on supplier solutions and whilst this makes it easy to evaluate who can provide a capability this creates a number of problems:
1) The solutions frequently look very alike
2) The winner is too often believed to be the supplier with the cheapest compliant solution
3) It doesn’t look at the ability of the supplier to actually deliver
4) A focus purely on requirements can stifle innovative approaches to meeting the need
There are numerous times when a project team has procured a capability but has failed to investigate some of the support, documentation, intellectual property rights and training elements that enable a capability to be delivered. For one example last year, look at France’s national railway operator SNCF, which now has an additional £50 million in costs after hundreds of new trains were built too wide to fit in over 1300 rail stations. Forgetting to investigate the project in all its nuances ultimately introduces significant risk and is often the cause of projects failing to meet expected results or suppliers failing to deliver on time or on budget.
To reflect this, Commerce Decisions advocates that the procurement process be focussed on the evaluation of key criteria. Criteria are the questions which will be used in the proposal evaluation process – when executed effectively they focus on the purpose of the project (what is the end goal and what benefits and/or indirect improvements are we looking for?) and the factors that will ensure the goals and benefits are realised (where are the risks?). Ultimately we want to explore a supplier’s ability to deliver the solution within a specific timeframe at an acceptable price. The crucial point here is to differentiate between suppliers’ solutions, reduce risk of failure to deliver project outcomes and assure the best value for money.
In order to ensure innovation is sought effectively, the criteria need to be carefully arranged and described such that all stakeholders (buyers and suppliers) can engage with it effectively. By focussing on criteria rather than only on requirements the buyer is able to compare different solutions on a fair and equal basis. This allow suppliers to think out of the box and to come up with innovative solutions or provide tangible cost savings to meet an organisation’s overarching needs.< Back