This issue is most common during high risk private sector processes or almost any public sector procurements, primarily because in these circumstances there is an imperative to keep the requirement private until the release of an invitation. They are environments where there is a fear of leaking information into the market that could result in either damaging existing relationships or corrupting the integrity of the currently planned procurement process. The often unseen consequence of playing the cards too close to the chest in this way is that your potential suppliers may not have sufficient time to develop enough understanding of the requirements to provide a quality response or they simply don’t have enough time to build the best solution or source the right resources.
One method of overcoming the issue is to leave the response period open for longer, therefore allowing the market sufficient time to find the invitation, digest the requirements and ask questions to further clarify understanding and develop their solution. This can work effectively if you can delay the procurement closing date sufficiently, but often there is no desire within the business for the procurement process to be no longer than absolutely necessary. I saw a meme recently that said something like “we’re over budget, the suppliers aren’t performing and we have to deliver this next week, it’s time to call procurement”. So how can we engage with the market effectively when time is tight or there are concerns around information leakage. The answer is in the various forms of early market engagement.
Early market engagement means making contact with the market, before you are ready to release an offer to prepare the market for the up coming invitation to offer. It is often misunderstood as it comes in many forms and is therefore an illusive concept to describe effectively. Early market engagement ranges from a one way engagement through simply advertising an upcoming requirement at one extreme with a fully interactive workshop and survey processes at the other. The engagement method is tailored to the need, time and budget limitations but the intent is the same all round; 1) understand the market’s capability to respond; 2) let the market know we are about to issue an invitation.
Undertaking an open market tender is the most difficult sourcing methodology in which to achieve early market engagement. This is the process where the opportunity is published to the open market for anyone to respond and as such, it is impossible to carry out a targeted engagement without providing unfair advantage to a segment of the market and potentially defeating the establishment of competitive tension. You can still achieve an early market engagement of this form in this situation, but the challenge here is to identify who and how to engage, without providing advantage to a sub section of the market, and subsequently risk reducing the competitive tension in the process. Ideally you will undertake market engagement well ahead of the issuing of the requirements, this will break the continuity of the selected few and will aid in reducing any unintentional advantage provided. When there is a need to notify a large number of suppliers, the first port of call is the forward notice. This is an advertisement that an opportunity will be released in the near future, with enough detail to attract the attention of the right vendors, triggering them to look out for the opportunity and to start preparing to respond. Most government organisations and many large private sector companies have web-based solutions that enable this functionality. Don’t be afraid to use it, even if you are only giving a week of notice, it is still an extra week made available to potential suppliers to sort out their bid team and to prepare to respond.
If a formal tool is not available for providing forward notice, try being a little creative. One such forward notice technique you may have noticed, but possibly not recognised it as such, is the use of Seek.com by recruiters to issue an Expression of Interest when they get a sniff of a probable peak in demand. They don’t actually have a role or know all the details, but they are notifying the market of a potential opportunity and starting the preparation process for potential job seekers. It may be worth considering an advertisement in print media, maybe leveraging industry journals, association websites or newsletters and with the proliferation of social media, consider if your industry and organisation could exploit this medium for communication.
If the methodology to be used is a limited market engagement, where you have predefined the market and will engage a limited number of vendors, forward notification gets a whole lot easier. In this situation, consider whether you need to wait until you have a fully defined specification and gained approval to release the document before making initial contact. Could a carefully worded notice go out to give the heads up to the suppliers and to establish some preliminary parameters?
Dear Supplier,
PME4U is currently developing a project plan to implement a new ICT system that will include requirements development, solution selection, change management planning and implementation. At this stage, no solutions have been identified.
It is estimated that a highly skilled programme manager with experience in delivering enterprise level ICT systems will be required, and up to 3 project managers.
We currently aim to release the programme manager requirement on the 6th of January and the project manager roles approximately one to two months later.
Bear in mind that there is no commitment to proceed with any of these requirements and that this notice is intended to keep you informed and prepare to respond should we proceed. If you have any further questions regarding this requirement, please direct them in writing to procurement@PME4U…
All questions regarding this notice must be directed through the email address above. Making contact through any other means could result in your organisation being excluded from the process should we proceed to procurement.
To assist the administrative functions, could you please provide the best contact details for issuing a RFQ by close of business this Friday.
Now this is not to say that the door is opened for uncontrolled discussion and this tactic can trigger a flood of inquiries, often targeted at decision makers. A vendor ringing a senior manager for a chat can destroy all opportunity you had for developing competitive tension quicker than a median strip can take out eight Ferraris. So make sure you have all the pieces in place to ensure competitive tension is retained in the process. Let key stakeholders know you are issuing a notice and provide them with a scripted response should any suppliers contact them (and you may want to go all the way to the top, CEO’s and Ministers if the risk is high enough). I recommend a practice of notifying vendors in writing rather than via phone call for two reasons; you can make sure your wording is appropriate before clicking send ensuring only the information you want released is released, many vendors are skilled at getting you to say more than you intend to in a conversation; communicating in writing allows you to ensure all vendors are getting the same information at the same time.
If you are buying from an existing arrangement (a pre-qualified panel or standing offer agreement), consider if there is benefit in opening up a forward planning channel with the suppliers. I worked on a project once where the organisation was rolling out a huge network expansion over a 12 month period. They had engaged a supplier to provide the hardware, but would only place orders a week or two before the equipment was required. The project continuously complained about the poor performance of the supplier and when I visited the supplier, they had a stack of equipment held in stock to improve their agility. Of course half the equipment was the wrong equipment for the current stage of the project. To combat this situation I worked with the project team to establish an environment where they could share the parts of their project plan with the supplier that would not only allow the supplier to prepare the right equipment at the right time, but also allowed them to notify the project of potential savings through smart bulk buying. I won’t go into the details of forward planning demand and sharing with suppliers here, but the gist is a 12 month horizon that is 40% accurate, a 6 month horizon that is 60% accurate and in the forecast for the next month is nearly locked down. Not only will this improve delivery time, it can cut costs as the vendor can plan their sourcing and stock holdings more effectively.
What I am trying to illustrate here is that if you have a captive market in a supply arrangement, then make sure you take every advantage of keeping the supplier, or suppliers, as informed as possible of the demand pipeline so they can optimise their responses and supply to provide greater value to the relationship. Again, this does not mean you bare all and leak information that could help to drive competitive tension. This has to be a targeted release of information designed to benefit both parties. This, incidentally, is also the real power of a pre-qualified panel or standing offer arrangement. It isn’t about driving better pricing by making rubbery promises about potential volume or threats of lock out from future work and it certainly isn’t through strangling the market and innovation with long term commitments to a subset of the market. These arrangements allow you to select a short list of suppliers for a defined period of time to allow you to work closely with them to deliver real value. The suppliers must know that it is only for a limited period and that they are competing every day to get work and stay on the arrangement.
Providing forward notice to the market does increase the risk of corrupting the overall process, but the benefits can be significant. A warned supplier is a prepared supplier, and a prepared supplier will provide a far more valuable proposal. This approach will improve the performance of everything from fast cycle, low value buy through the delivery of multi-million dollar projects. Take a look at the approach you and your organisation are using and see if there is room for improvement.