Dan Diehl, Paul O’Malley & Lou Ronsivalli.
Cost and Quality in Procurement16 October 2018 / by GRITIT Ltd (author) / Leatherhead
“If you buy cheap, you buy twice”: It’s a home truth that’s often borne out in everyday life, but while taking a faulty bargain kettle back to the shop can prove an inconvenience, cutting corners in procuring long term service contracts can have a significant and lasting impact on a business. Even so, tales of poor service and squabbles over what’s in and out of scope in years two and three of service delivery are all too common and it’s invariably true that such issues often arise from a poor procurement process.
As competitive pressures ratchet up the need to do more with less, businesses will always seek new ways to make budgets stretch further, yet buying services also has to provide businesses with the flexibility to respond to new challenges. In outdoor FM services, the extremes of hot and cold weather over the past year is a case in point.
Last winter was one of the UK’s coldest and harshest years, creating huge demand for professional Winter Gritting and Snow Clearance services to keep sites safe and open for business. This was followed by a long, hot, dry summer that provided new challenges in planning and delivering effective Grounds Maintenance as the grass dried out and the hedges grew more rapidly.
So, with the natural environment doing its bit to further tax the resources and budget allocated to outdoor FM services, how do you still stay within budget? More importantly, how can one build the necessary responsiveness into the procurement process to ensure you buy services that are truly fit for purpose, sufficiently flexible and that don’t create unnecessary risk downstream?
Here are some essential tips to help balance these demands and succeed in procurement:
- You’ve got to be 100 per cent clear on what you need. Understand what “good” looks like: Buying a service is not the same as buying a product, and your specification needs to be as explicit as possible about your requirements, expectations and measurement. A vague specification will inevitably lead to inconsistent pricing from potential service partners due to varying interpretations of service requirements; this naturally favours suppliers who choose to assume that the minimum level applies and price accordingly.
- Give some real thought to what’s important to you and make sure your procurement process is designed to consider those things. It’s amazing how often the pre-amble in tender documents talks about what’s important to an organisation but there is no reference to these elements in the tender questions. If sustainability is a key driver, you need to evaluate the credentials of your potential service providers in the tender process.
- Asking tender questions that tell you what you need to know whilst meeting the obligation to do an “apples for apples” comparison is a bit of a dark art. For high value complex requirements, it may be worth engaging a specialist procurement consultant; this will help to ensure that your process delivers the best possible outcome in terms of both quality and price.
- Finally, and most importantly of all, think really carefully about the evaluation weightings between cost and quality. If the weightings are skewed toward cost you will inevitably risk falling into the procurement equivalent of “buying cheap, buying twice” trap. Even at 60% cost/40% quality the lowest price will always win, which may be appealing in the here and now, but you need to consider if the cheapest price will be sustainable over the life of the contract. If you really want a quality solution, you need to give it a higher rating and use the specification to make your requirements fit the budget.
We are now entering the main buying season for Grounds Maintenance services and this is the time to start pulling your tender together. This is also the best opportunity to really think about what you need from your Grounds Maintenance service and how this will work within your budget. As well as talking to your key stakeholders and understanding their requirements, why not also consult with the potential supply chain, before you are in the confines of the tender process, to get a feel for the art of the possible from the experts. This will enable you to accurately articulate your requirements in the tender process and facilitate an evaluation of cost against comparable service levels.
Taking this step will allow you to shape a process that can still reveal the providers that are able to deliver the service at a lower cost – or even the lowest cost, but it will also ensure that you can understand how that pricing is being achieved. After all, there’s nothing inherently bad about buying cheap, and if a lower cost is the result of better productivity and efficiency then this is truly the ideal outcome for all parties. That’s what good procurement looks like.
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