A properly managed I.T supplier selection project can save both purchasers and potential suppliers time and money.
The easiest way to run an I.T supplier selection project is to base it on a settled Tender Management Process.
Yet Tender Management Processes get a bad press. For example, suppliers often believe that they are loaded against them and stacked in favour of an incumbent (assuming there is one).
Purchasers on the other hand, especially SME’s with limited time and resources, believe that formal Tender Management Processes are too bureaucratic to set-up and apply consistently.
I can understand why such views are common, but I think there is a danger they become self-fulfilling prophecies. It need not be like this.
A well designed Tender Management Process should be light to execute and provide a framework for a fair and transparent supplier selection process.
In this post, I will outline a Tender Management Process, explain why supplier selection should be run as a project and highlight some key roles in the supplier selection project.
Ten Step Tender Management Process
Whenever I run a Tender Management Process on behalf of Yorkshire SME’s, most often to help them select new I.T systems and services, it usually looks something like this, where I:
Step 1: Carry out some research and produce a short Business Case about why my client is going to market. A short business case should provide clarification and justification about why the purchaser is going to market.
Step 2: Get the Business Case agreed and signed-off by key client stakeholders.
Step 3: Write up a Request for Information (RFI) to be sent to suppliers.
Step 4: Identify potential suppliers and send them the RFI.
Step 5: Work with the Procurement Project Team (see below) to evaluate all supplier responses to the RFI; we do this using identical criteria applied to each supplier response and scoring responses objectively.
Step 6: Assist the Procurement Project Team when deciding upon a short-list of suppliers from respondents to the RFI.
Step 7: Spearhead the drive for further information from shortlisted suppliers. This is done by a combination of software demonstrations and structured Q&A’s (either by telephone, in-person meetings or electronic communications). Sometimes I will prepare a Request for Proposal (RFP) document, but not always as often RFP’s simply replicate well thought out RFI’s.
Step 8: Work with the Procurement Project Team to help them select the preferred supplier. As with the short-list selection process, we work to a list of predefined selection criteria and make every attempt to consider things objectively. Obviously total cost weighs heavily on everyone’s mind, but this is never the sole criterion.
Step 9: Work with the Project Sponsor (see below), assisting with commercial and legal negotiations with preferred supplier (I am a non-practising solicitor, so although I do not offer any formal legal advice, I very familiar with contract terms, especially regards the supply of IT services and solutions).
Step 10: Help ensure formal contractual agreement is reached between my client and the successful supplier.
Supplier Selection Project
Implementing new software and related services are widely considered as ‘projects’ which need to be managed properly.
It is less common to approach the supplier selection process as a project, but this is what it is – a supplier selection project.
The key aspect of running a procurement project, as with projects of all kinds, is effective communication with all key stakeholders: senior management and the procurement project team at the purchasing organisation, all potential suppliers and, if there is one, the current incumbent supplier.
The guiding principles behind all my stakeholder communications are honesty, transparency, timeliness and respect for commercial confidentiality. The latter point is a particularly important one; at some point during the supplier selection process someone is, out of necessity, going to have to divulge information which is commercially sensitive.
All my formal supplier selection documentation contains confidentiality clauses, sometimes supplemented by more comprehensive non-disclosure and confidentiality agreements. In practice I have found the most effective thing to do is build up trust as quickly as possible with all stakeholders. Once trust has been established then information, including commercially sensitive information, flows more freely.
Another important aspect of running supplier selection as a project is the timetable. I will set-out a timetable of events early on, ensuring the client procurement team agree to it. I do my utmost to keep to the timetable, as this promotes transparency and helps everyone focus on what needs to be done next.
Procurement Project Team
The procurement project team is usually made up of representatives of each functional area of the business likely to be affected by the procurement. Frequently nowadays, this means every functional area of the purchaser’s business! This is most obviously so when considering new Enterprise Resource Planning (ERP) systems, which are designed to touch upon every aspect of business operations.
Other systems can also have a much wider impact than might be first supposed. For example, selecting a new customer ordering portal is going to affect the marketing, sales, finance, operational delivery and IT departments.
Things can get a little complicated when companies outsource some key functions within any of these departments. In SME’s this is most often seen with IT services, where companies outsource some or perhaps all their IT maintenance and support. One effect of outsourcing is to increase the number and range of stakeholders in the procurement team.
I give a lot of thought about how best to communicate clearly with the wider project team throughout the procurement process. Teams in different organisations are, quite naturally, different. This reflects different organisational culture which often manifests itself in the mode and means of effective communications. In short, I adapt and vary communication techniques bearing in mind the stakeholder community and project team(s) I am working with.
The team needs to provide feedback about all the potential suppliers and team members can only do this if they fully understand the nature of all supplier responses. With this in mind I also often act as a ‘translator’ between potential suppliers and the procurement team. The most important aspect of my ‘translator’ role is being able to ask pertinent questions of suppliers (perhaps relating to their technology or support services as set out in their contractual documentation) and then explain the answers back to the procurement team using language and concepts they can understand.
As with all kinds of other projects, procurement projects should have a project sponsor. Many people do not appreciate this, probably because they are unclear about the role of project sponsor.
A project sponsor is someone who has commercial responsibility for successful project delivery. The primary task of the project sponsor is to make sure the project has sufficient resources and that, once completed, the project delivers commercial benefits to the organisation.
At most SME’s I have encountered the person who best fits this role is someone with the role of commercial director or something similar. Hence, I tend to work closely with commercial directors in SME’s.
Significant I.T. projects are never just about the technology – in fact making sure the technology runs properly is relatively easy. Making sure that new or upgraded technology causes as little disruption as possible to the business and, most importantly, helps achieves business objectives are much more difficult aims to achieve.
The best project sponsors are people who have a high degree of visibility and authority in the purchasing organisation and they themselves are fully engaged in the project. They do not need to micro-manage (and nor should they attempt to) but they should be prepared to champion the project, help everyone focus on project aims and be prepared to pour oil on troubled waters should the need arise.
The ten step Tender Management Process outlined above may look like overkill to some readers, but I can assure you it isn’t. I have found that busy senior managers at Yorkshire SME’s welcome a structured procurement process, especially as I take responsibility for doing the ground work, managing the process effectively, keeping communications flowing and acting as translator between prospective suppliers and the purchaser.
A structured supplier selection process, properly managed as a procurement project, helps decision makers focus on issues which are important to them. As a result confidence grows that, by the end of the project, they have indeed selected the right supplier, products and services for their business.