When things go wrong in complex outsourcing, service commissioning or system integration projects, the costs of both escalating the problem for resolution and its remediation, are usually significant. And, looking back over the hundreds of projects we’ve been involved with over the years, it’s heartbreaking to see how many there were that ended in a fatal dispute, resulting in a painful and expensive contract termination when this fate could have been avoided if only the parties had taken some key, but not always obvious steps.
Therefore, this article is dedicated to supplementing your existing knowledge by sharing key lessons we’ve learned about how certain issues can be avoided and hopefully, as a result, lead to you developing the sort of collaborative relationships that result in successfully delivered fit-for-purpose projects, on time and within budget.
The school of hard knocks that is the High Court
We do a lot of work in helping support the process of clients mitigating difficult situations of ‘stand-off’ when these more strategic and complex projects don’t operate as both supplier and client had intended.
In about 400 of the almost 600 complex projects and strategic supplier relationships we have been instructed on over the last couple of decades, by the time we were asked to get involved, the tenderer that had contracted with the bidder had already established that the projects were not working to everyone’s expectations.
This is not just our own experience. Challenges with the procurement and implementation of complex projects are common, according to research from independent organisations such as Standish (in their ‘Chaos’ report), Butler Group, Gartner Group and so forth. Certainly, the Standish research showed that 56% to 87% of complex projects and services do not meet the expectations of the clients or suppliers undertaking them with the majority taking more than double the anticipated end-to-end time and cost.
Some of these projects, unfortunately, also end up in litigation. Often, we are instructed as ‘expert witnesses’ to review the evidence of not only what is not performing well, but based on our deep domain experience, why the project or service in dispute was failing. The High Court wants to know to what degree both the client and the supplier are accountable for which specific aspects of the service or project are not working to expectations. Based on the evidence the court sees and hears, a judgment will be provided on the degree to which of the parties holds accountability for which aspects of the failure of the project and as a result, what damages and legal costs should be awarded and to whom.
The insights provided from the evidence in these cases can be applied to save authorities that issue tenders, millions of pounds during the process of procurement of their project/service and its subsequent implementation process.
The key procurement insights from court rulings: Clarity – of your expectations and requirements – is king
When the public sector tenders for complex projects and services (including Hard FM Outsourcing, Infrastructure (Highways, Bridges, etc.), IT Outsourcing, Business Process Transformation/Optimisation) and in particular, where there is a greater reliance on the domain expertise of the successful bidder to implement the project and/or services in a fit-for-purpose manner, on time and to budget, the clarity of tender documents is crucial for time and cost-efficiency during both the procurement and subsequent implementation process.
When requirements are articulated precisely and comprehensively (this does not mean being prescriptive) and in context, it significantly reduces the need for bidders to seek clarification. And, because of this, they are much more likely to more quickly understand what type of project or service you are tendering for, why the project is important to you and ‘what success looks like’ to you, once the project has been implemented and is providing you with the day-to-day BAU benefits you anticipated.
This streamlined communication not only saves time but also allows for a significantly more efficient evaluation process by your team that takes a fraction of your time in comparison to evaluating ambiguous bidder responses, in response to likewise, ambiguous tender requirements. A tender that is well-written and clear, also attracts a wider pool of bidders, as they can quickly ascertain their ability to meet the requirements and gauge the project’s alignment with their capabilities. Evidence of the successful implementation of hundreds of complex projects clearly shows that the more bidders who are better able to determine what’s required of them during the tender and procurement process, the greater the chances that this will lead to a more capable pool of options for you to choose from.
Avoid additional costs in project delays
Moreover, clear and concise tendering can lead to substantial cost savings. By minimising misunderstandings and aligning expectations from the outset, public sector organisations can avoid the additional costs that often arise from project delays, scope creep, legitimate supplier challenges and re-tendering due to initially unclear requirements and an equally unclear supplier selection process. This results in far more efficient project execution and a greater likelihood of delivering fit-for-purpose projects within budget and against, what are often, challenging timescales.
One ‘acid test’ to help predict whether you are likely to save millions in the tender process
A simple but objective and effective measure of the quality of your tender document is the number of clarification questions you are being asked by a bidder. A low number of such queries from a healthy number of bidders, often indicates that your tender is well-understood and perceived by potential suppliers as feasible and attractive.
In our dispute work, and reviewing evidence of problematic project implementations, we see every time, that where high volumes of clarification questions are issued by a healthy number of bidders during the tender process, it means the expectations, context of the project and requirements are unclear/ambiguous.
The benefits of well-crafted tender documents in the public sector are multifaceted, including time savings in dealing with bidder queries, cost savings across your organisation and improved project outcomes. This approach not only streamlines the tendering process but also enhances the overall efficiency and effectiveness of public sector procurement. Though even more importantly, it also improves the chances of a fit-for-purpose project implementation.
Why millions more than needed are being spent in the tender process
The tenderer’s (your) perspective:
For public sector entities, the tendering process is more than just a procurement exercise – it’s a strategic endeavour that shapes the outcome of key projects and initiatives. This perspective sheds light on the critical factors that you, as the tendering organisation, should check to see the degree to which the strategic and background context of the project is incorporated into your tender documents to facilitate clear, concise and comprehensive communication of your needs and expectations.
The clarity of a well-defined tender will significantly minimise the need for clarifications, attract a diverse pool of highly competent bidders and ensure alignment with the overarching goals of your organisation. Understanding these aspects is instrumental in refining the tendering process, leading to time savings, cost-efficiencies and the successful realisation of project objectives.
Key causes of miscommunication
- Lack of Clear Requirements: Public sector tenders often lack clear context, i.e. what quantified benefits are expected by your organisation once the project or service has been successfully delivered in a fit for purpose manner. This lack of context is often compounded by poorly articulated business outcomes and requirements, leading to ambiguity in what is expected from your supplier.
- Complexity in Requirements: High-value projects tend to have complex requirements that if not clearly articulated and quantified with use cases in context with the business benefits you are expecting are likely to be misunderstood by the supplier.
- Mismatch Between Requirements and Market Offerings: There will occasionally be a disconnect between what the public sector requires and what the market currently offers within the time, budget, expectations and resources you are constrained by.
- Changing Requirements: Your own and your supplier’s understanding of your requirements, particularly if they are unclear to start with, will likely evolve, leading to discrepancies between initial expectations captured in tenders, and what you realise are your final needs as the procurement progresses.
- Limited Understanding of Supplier Capabilities: The less clear your expectations are at the outset, the greater the chance that suppliers will not fully understand what capabilities they will need to provide, leading to unrealistic expectations on both sides.
- Budget Constraints vs Requirements: When business outcomes, expectations and requirements are unclear, balancing budget limitations with the scope and quality of requirements will be challenging.
- Risk Management: An inadequate assessment of risks associated with the requirements (because the requirements are unclear) often leads to significant problems during project delivery and execution.
- Incorporating Innovation: A lack of clarity over expectations means basic service delivery is unlikely to be fit for purpose. And, where the supplier is unable to deliver on even basic services, it is often the client’s view that they will be highly unlikely to have the capability to optimise those services over time by integrating innovative solutions into the service delivery model.
- Sustainability and Social Value Considerations: Incorporating these aspects into ‘meaningful’ requirements is often complex but is increasingly necessary.
- Regulatory Compliance: Ensuring that requirements adhere to all relevant laws and regulations can be difficult, especially in highly regulated sectors, such as the outsourcing of Hard FM (relating to statutory health and safety obligations) or the outsourcing of treasury and pension services.
The bidders’ (supplier’s) perspective:
Suppliers must navigate a sea of complexities when looking to understand the nuances of tender requirements, particularly where suppliers are attempting to ‘second guess’ what the real requirements of a public sector institution’s tender actually are. This will ultimately lead to a significant amount of ‘guesswork’ when it comes to their assessment of how to align their bid proposals with the strategic goals of the client organisations.
A clear insight into a tender’s requirements is crucial for suppliers to craft compelling bid proposals that stand out in the competitive tendering process, thus enhancing their chances of successful collaboration with public sector clients.
Standing in the way of this are a number of issues that could waylay bidders when responding to your tenders. They include:
- Ambiguity in Requirements: If your business outcomes, objectives and requirements are unclear, or are largely unquantified, this makes it extremely difficult for suppliers to, (a) really understand the correct drivers and expectations from the successful delivery of the project, which in turn, means, (b) the suppliers will be less able to propose effective solutions. This is likely to lead to a significant amount of wasted time in your proposal evaluation process and having to deal with numerous unanticipated clarification questions from suppliers.
- Complex and Overly Detailed Requirements: When requirements are articulated poorly, without a clear business context and use cases to support a deeper understanding, this will often mean that what’s communicated is likely to be overly technical and complicated. This in turn may lead to misunderstandings about the real business outcomes expected, once the project and/or service has been successfully delivered and the client is receiving the resulting BAU benefits.
- Feasibility of Requirements: In line with the above, the supplier may likely interpret the requirements as being unachievable within your given resourcing, timing and budgetary constraints, when in fact, the only thing blocking a supplier’s path to a very different feasibility assessment, is a lack of clarity in the requirements.
- Alignment with Supplier’s Capabilities: A poor understanding of the requirements by the supplier means there is likely to be misalignment between the project’s ‘perceived’ requirements and both your own and your supplier’s interpretation of how their core competencies align correctly to the project deliverables.
- Requirement Changes During the Tendering Process: A lack of clear expectations often leads to unanticipated changes in requirements during the tender process and ultimately, during the implementation of the project. This leads to confusion and increased costs.
- Understanding the Client’s Real Needs: Poor project background context, ambiguous business outcomes and unclear requirements will lead to difficulties in suppliers interpreting your underlying needs.
- Cost Implications of Requirements: High-value projects often come with stringent requirements that can escalate costs. Any lack of clarity over project requirements and expectations is likely to significantly increase those already escalated costs and implementation time frames.
- Technological Constraints: Poorly articulated requirements often mean misunderstandings by both supplier and client over technology or solutions to support the business outcomes you anticipate.
- Risk Sharing: Suppliers are often reluctant to engage in detailed tender dialogue when they sense the requirements, or the team that created them, may not be clear enough about what’s needed to offer a full understanding of what is expected from the successful delivery of the project. In turn, suppliers will either drop out of the tender process or deliberately impose a significant ‘risk premium’ on the project delivery costs (often referred to by suppliers/bidders, rather cruelly, as a ‘moron premium’), because a lack of clarity over expectations indicates to suppliers that misunderstandings are likely to arise during the implementation process, that will more than likely, resulting in disputes over project requirements, change control/variation and ultimately, payments for work undertaken.
- Adherence to Regulatory and Compliance Standards: Requirements that demand strict compliance can be challenging, especially for smaller suppliers.
How to save millions in your next tender opportunity; what an optimised and truly cost-effective fit-for-purpose requirements assessment looks like for a complex project
To increase the likelihood of a clear articulation of all necessary requirements to prospective suppliers in a public sector tender and to ensure you receive the appropriately quantified benefits you expect once the project has been successfully delivered, we have put together an evidenced-based list of the ten key insights from both evidence we see in disputes, advice from court rulings and just really great practice we have been fortunate enough to be involved in with some amazing client organisations, to save millions in both tendering and project delivery costs. They are:
- Explicit Requirements Description: Clearly and concisely define what business outcomes and business objectives the project/service needs to achieve, avoiding ambiguities and vague statements, but without being ‘prescriptive’. Ensure the requirements are coherent and have a lot of background context (i.e. what will change in your organisation once the project has been successfully delivered). Additionally, though a basic point, it’s fundamentally important to ensure consistency throughout, and the accuracy of all spelling and grammar in your tender documentation, as errors here can undermine the professional tone and seriousness of your tender, not to mention, cost you significantly more.
- Use case example of inconsistency. One small, simple example of the dangers of inconsistency, is a public sector tender we recently reviewed for assurance purposes. The public authority client insisted, at the beginning of its tender document, that the successful bidder had to provide all consulting services ‘on-site’ and all-day rate and/or fixed costs for the consulting service had to include travelling/subsistence expenses. Quite straightforward, you might think until you read further into the requirements where it states consulting can be delivered on-site, but that ‘remote working’ would be preferred where appropriate, to reduce the cost of travelling expenses to be borne by the contracting authority…?
- Why does this really matter? If there is a hybrid of on-site/off-site working available, as opposed to an insistence of ‘always on-site’, this can significantly reduce the ‘expenses-inclusive’ day rate costs, which in turn, reduces the overall tender cost. An added bonus of this is that opening the door to physically diverse workers who would otherwise be excluded if off-site working was not allowed could provide a rich new vein of expertise the supplier could utilise and the client could tap into.
- Avoid Design Details in Requirements: Focus on the ‘what’ rather than the ‘future-how’, ensuring that the requirements do not suggest specific future design features or implementation methods. This keeps the focus on the end business goals rather than the means of achieving them. It is important to include use cases and/or operational process maps directly linked to both your existing way of working and any new requirements you have articulated so that bidders can see what you do now and your perception of the operational areas you want to improve. It is important to make clear to bidders, that this information is not designed to provide them with a blueprint for their solution, but instead to simply open up dialogue about how you currently work – both within their own team and with yours – and about how their proposed service or solution may deliver improvements, greater benefits and improved effectiveness by enhancing how you currently work, with newer, more effective, operating processes.
- Highlight Noteworthy Benefits: Clearly articulate the operational benefits of the project you expect to achieve, explaining how these improvements will enhance your organisation’s operations. Make sure you emphasise to bidders that their responses should unambiguously articulate how they intend to help you achieve these benefits, often through enhancing your current operational processes and/or supplemental solution provision, so they can capture your attention.
- Impact Beyond Scope: Bidders should be encouraged to describe the broader impact of their solution, such as the social, environmental or community benefits that will be created. This will show the added value they are offering beyond simply meeting the contract requirements. Try to clearly articulate key elements of this broader impact to bidders so they understand, for example, in what specific aspects you want your local community to benefit, which are the most important to you to have delivered, and by when.
- Evidence-based Assertions: A bidder should always support their claims with evidence such as independent statistics and case studies. You should be specific in your tender to communicate what better clarity or certainty you hope to have as a result of seeing a bidder’s case studies or statistics. This strengthens the credibility of their proposal and makes it possible to more objectively and fairly assess it. Note that it is important to make clear in your tender documentation that the final scores in all assessments will be subject to your being able to independently validate any case studies provided. If you (or they) are unable to independently validate case studies, then any scores attributed will need to be negated as the ‘evidence’ would not be objectively valid.
- Gateway Criteria: By definition during the RFI or SQ (used to be ‘PQQ’ – Pre-Qualification Questionnaire, but is now ‘SQ’ – Selection Questionnaire), include gateway criteria to ensure bidders have essential qualifications like appropriate insurance levels, good financial health and clean legal records.
- Clarification Process: Have a clear process for clarifying ambiguities in bids, through written questionnaires or clarification meetings. This helps ensure that all responses are evaluated fairly and accurately.
- Evaluation Criteria Transparency: Be clear about the evaluation criteria. This includes both selection criteria (aligned to your business outcomes) and a focus on the bidder’s track record, qualifications and award criteria, related specifically to the contract at hand.
- Early market feedback/testing. Put all of the above into a first-stage requirements document and test it with the supplier marketplace prior to any formal procurement process being undertaken. The feedback you receive will let you know how clear your requirements document already is, where practical improvements should be implemented, and the likelihood of the project and/or services being successfully delivered in a fit for purpose manner, within the budget, time and resource constraints you are operating to.This early feedback from suppliers will give you an opportunity to discuss it with your internal stakeholders to help set their expectations, prior to any formal procurement process being undertaken. You can then update your requirements where appropriate before embarking on any formal procurement/tendering process in the knowledge that the process is likely to run much faster, with fewer clarifications being asked for by your suppliers/bidders as a result.
- A much smoother and faster, formal procurement process. Having completed all of the above, the formal process you adopt for your tendering process will not only operate more simply, but the project has a far higher likelihood of being fit for purpose, and delivered on time and on budget.
Feedback and Improvements for Unsuccessful Bidders
One of the most effective ways to build future relationships and significantly cut the cost of future tendering, is to provide honest, objective and clear feedback to bidders that were unsuccessful. You don’t need to go overboard, but it’s really important to have a clear process to approach unsuccessful bidder feedback and to explain this feedback process in your tender documentation. It demonstrates to bidders that you value them and their time too.
Outlining the unsuccessful bidder feedback process in your tender also reflects a great level of professionalism. This is not always evident within public sector tendering and usually means that, for future tender opportunities, better bidders will beat a path to your door to work with you, and are more likely to provide better pricing, a better mobilisation, delivery and implementation team and to work in a genuinely collaborative manner with you to drive maximum value through your relationship with them.
Conclusion: Don’t forget your bidder’s ‘Expert Responsibilities’ and their ‘Duty to Warn’
Drafting really clear business outcomes into your requirements for an early market engagement process to be followed by a formal tender process is critical. It minimises misunderstandings and sets stakeholder expectations as to what they are likely to achieve, what they are unlikely to achieve and what the consequential impact on the project would be if they are unable to achieve those outcomes.
But you also need to be aware of the bidder’s ‘Expert Responsibilities’ and its ‘Duty to Warn’. Incorporating these into your tender documentation by contracting for the bidder’s advice, separately from the solution or services they provide, ensures the key foundations for a collaborative relationship throughout the lifetime of the project.
Again, operating this in the right way has the capacity to save you millions through both your tender and project implementation process, while maximising value between you and your suppliers.
