hero image

Battle of the Bids: Nobody Expects the Spanish Inquisition

image of Peru Consulting Peru Consulting
Peru Consulting 15 Jul 2020 Time to read: 

A global IT services and telecommunications provider was involved in a tender with a large Spanish public sector client. After progressing through the initial stages of the tender process the IT services provider was delighted to discover they had been down-selected to a final shortlist.

The public sector customer then asked short listed suppliers to conduct a Due Diligence exercise to satisfy themselves of the scale and scope of the opportunity as set out in the tender. Each supplier was given the opportunity to validate specific unit quantities involved in the proposed service e.g. counts of IT equipment, licences, end users of the service etc. These volumetrics are typically vital to IT service providers as they confirm pricing based on the scale of the work and effort to manage.

The global IT services provider deployed a Due Diligence team to “count everything that moved (and a few things that didn’t)”, however a misinterpretation of the data provided to them by the customer regarding a vital component of the service related to the scale and scope of the End User Helpdesk resulted in the IT services provider effectively double-counting the volume of Helpdesk enquiries which subsequently drove an incorrect estimation of the resource and therefore cost to deliver the service.

The result of this volumetric mishap? The IT services provider’s pricing was way above that of its competitors, not down to the fact that they were more expensive than their competitors at a base or unit pricing level, but purely as a result of getting the volumetrics wrong. The IT services provider was consequently disqualified from the tender process by the customer.

Lesson Learned: If total cost/price = Unit Cost x Unit Quantity, it doesn’t really matter whether its Cost or Quantity that’s wrong, a mistake in either will spell disaster. Rather than just assuming their Due Diligence findings were correct, the IT services provider would have been well advised to sanity check the unit quantities with the customer prior to making their final pricing submission. As the old saying beloved of carpenters goes “measure twice, cut once”.

Related resources