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Battle of the Bids: The Fight for Hubris Hill

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Peru Consulting 22 Jul 2020 Time to read: 

A multinational IT and management consultancy company were the incumbent supplier for IT Application Development & Maintenance (ADM) services for a global logistics client. They had been providing the ADM service for over 5 years, so when the customer indicated they were going to issue a tender for ADM services for another 5 years (first warning sign… missed), they confidently expected to be the successful bidder for the new contract without doing much work – big mistake.

In their complacency, the IT and management consultancy company produced a weak response to the customers RFP, assuming that the customer would use their knowledge of the service they had delivered over the last 5 years to “join the dots”, however if they had read the customer’s RFP properly, they would have realised by looking at the customer stated requirements, the customer’s view of their performance was somewhat different (second warning sign…missed).

One of the key changes the global logistics clients wanted in the new contract was to transfer some additional scope of work to the future supplier which would result in some client staff being TUPE transferred when the new contract commenced. The client had correctly identified that their retained client team was too large and integration with the supplier had been ineffective in the original contract and was therefore looking to address this going forward.

The supplier completely missed this requirement, despite it being front and centre in the client’s RFP document, and consequently failed to include costs for this (i.e. salaries and overheads of transferring staff) into their tender response which therefore lacked any credibility.

When the client challenged the supplier’s tender response and pricing in respect of the transfer of scope and employees, the supplier’s response was that they wouldn’t agree to the transfer of the staff in any event (third warning sign…missed) as if they had suddenly become arbiters of employment law. In effect the supplier was telling their client they wouldn’t agree to take on the additional scope of work (the TUPE transfer simply being a consequence of this).

As far as the client was concerned the suppliers failure to spot this fundamental requirement and subsequent failure to rectify the issue when it was pointed out to them, left their bid “dead in the water” and the customer didn’t even down select them to the “Best and Final Offer” shortlist, ultimately awarding the work to a rival supplier. As an incumbent you’ve got to be doing something seriously wrong not to make the shortlist on a contract renewal.

Lesson Learned: The biggest enemy of the incumbent supplier is complacency. It may sound counter-intuitive, but incumbent suppliers need to work even harder than the new kids on the block to stay close to their customers to understand the problems they are trying to resolve and the outcomes they desire. In this case, this complacency was compounded by a failure to understand or, when pointed out to them, to accept a fundamental change to the customer’s requirements. If they truly couldn’t meet these new requirements, the supplier would have been well advised to gracefully withdraw from the bidding process once the tender requirements were known, thus saving themselves and their customer valuable time and resources.

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