We all know that to build a house we need to make sure we have the right foundations. The same is true for the start of a sourcing exercise.
The foundation is the specification you go to the market with in your RFx. It is doubly important if you are doing a full-blown public tender exercise as any mistakes can cost time, resources and also potentially damage your company’s reputation.
One of the most common mistakes I see is companies going out to tender with poor and insufficient specifications, or specifications that are clearly biased to (in most instances) the incumbent supplier.
A sales manager of a multinational company recently explained to me on a recent tender he competed for, the specification was lifted directly from a supplier’s technical spec. So similar, that when he typed the text into Google, the first web page listed was that of the incumbent supplier’s technical specification page. This is now going through expensive legal channels.
A fellow procurement professional recently told me how she was given a specification for fasteners that simply listed a number of sizes of nuts and bolts - no materials, standards or specifications. A less experienced purchaser may well have gone out to the market and either been inundated with hundreds of questions from suppliers, or potentially sign a contract with a company that offered the best price, but with sub-standard products.
There are a number of reasons why those responsible for specifications fail to give a full and detailed set of requirements that would pass a probity test for non-bias to any specific company - laziness, lack of product or market knowledge, lack of time or resources and, of course, genuine bias. But if the process is to get the best result, time needs to be spent getting the foundations correct.
It is the procurement professional’s role to not only spot these poor specifications, but also to push back to the specifying officer the RFx process cannot take place until the specification is correct. I know a company that conducted a tender process with a poor specification and ended up locked in a contract with a supplier and product that did not meet the business need. Who got the blame? Procurement. Time is now spent going back to market as the company that won the contract cannot meet these corrected specifications.
The rise of category management within organisations is certainly helping the purchaser to spot poor specifications and guide the specification officers in the right direction. Stakeholder relationship management will also really help close the gaps between those pushing bare minimum specs through and wiping their hands of the situation to accepting a more collaborative and outcome driven sourcing process.
☛ James Williams is a partner at Optimus Business Solutions