Value over price key to consultancy purchasing decisions

1 November 2012

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1 November 2012 | Anna Reynolds

Companies are experiencing a shift in the way that consultancy services are purchased, with procurement departments playing an increasing role, according to the Management Consultancies Association (MCA).

A report by the MCA surveyed a 50:50 split of 200 UK-based procurement professionals and board directors within large private sector organisations. Out of the sample of procurement professionals, half reported increased involvement in buying management consultancy services and said they played a key role in project delivery.

Alan Leaman, CEO of the MCA, said: “It’s a recent phenomenon that procurement departments have got closer to purchasing professional services. Traditionally, this was the job of the budget controller or director.”

The group was asked to pick the most important factor in the bidding process from seven options: suppliers showing they can deliver; demonstrating value; the creativity of their solution; the detail and quality of the pitch document; the quality of the pitch presentation; the experience of the presenters; and the lowest price.

The results showed that when it comes to the purchasing decision, price was the least important factor; suppliers showing they’re able to deliver and demonstrate value were the most important. “The key message is that value is at the top of buyers’ minds and consultancies believe this should also be the case,” added Leaman.

There were some clear distinctions between the two groups quizzed. Almost 60 per cent of board directors said having a good previous relationship with a supplier was important, compared with only 36 per cent of procurement professionals. Procurement professionals were also less interested in sharing risk with their consultancy supplier through a risk and reward incentive in their contracts.

Furthermore, the study found that consultancy projects delivered a return on investment for clients worth around six times the fees paid, with some projects delivering more than 20 times the value.

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