Who should use a lottery to select suppliers? It could be you

26 January 2012
Last week, bemused colleagues asked me to comment about the reported use in the Czech Republic of lotteries for awarding contracts. The apparent unfairness of this was attracting their interest partly because at first sight it seems incompatible with the use of our evaluation software. This reminded me of some work we have done over the last few years with a client who at one point was seriously considering the use of ‘lotteries’ or ‘queues’ in UK public sector procurement. In the work we did for them it became clear that they may have some – perhaps overlooked – advantages. First, it’s worth pointing out there’s a big difference between use of lotteries or queues in the selection of bidders and in the award of contracts. When awarding contracts there are no sensible alternatives to applying objective criteria to determine the most economically advantageous tender; a lottery isn’t going to help with this. Selection of bidders though, is a different matter.
 
All public sector procurements using the restricted process will have to write some selection criteria, and since in many sectors (e.g. construction) the reality of the situation is there is a large number of companies able to take on the work with minimal (and certainly acceptable) risk of delivery. We often apply increasingly obscure and demanding criteria in order to whittle them down to six to eight bidders to issue an ITT. These “enhanced” criteria normally have the adverse affect of selecting only the largest, most established players and locking out all SME competitors. This manifests itself by discouraging all but the biggest players from bidding in the first place, with the SMEs all citing “bureaucratic procurement” as their reason for not competing. One way around this is to relax the selection criteria back down to a set that are reasonable for the job in hand (i.e. reduce risk to a reasonable level) and then to simply choose at random or use a queue-system to select your bidders. The advantage of this lottery or queue is that it means the competition is opened to all players who can provide an acceptable level of capability and everyone gets a chance – allowing SMEs to compete against the big boys. Obviously this only works on jobs where the SMEs can provide an acceptable capability. On larger and more complex jobs the selection criteria will rightly reflect the need to select only the most established and capable suppliers. Interestingly, when we were working with our client we interviewed quite a few bidders - particularly in the construction industry - and the feedback we got was that they also see advantages in the queue or lottery selection method. From their point of view, they get opportunities to bid without having to fill in a huge PQQ that asks all sorts of “daft questions” that favour the big players. They also know that so long as they pass a pragmatic selection hurdle eventually they will get their turn at submitting a tender. So, maybe a lottery isn’t as mad as it first seems – maybe the Czechs are ahead of the game? ☛ Peter Marshall is professional services director at QinetiQ Commerce Decisions
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