Leveling the intagible playing field of professional services procurement (Beyond Referrals Profile)

“I stated that the worst thing a purchasing person can do when using an RFP to buy professional services is to exclude a project budget. Immediately, a rebuttal was offered, “But if I give them the budget,” stated the attendee, “they are all just going to come in at that budget.” He was right. But he failed to recognize that as a distinct advantage for both the vendor and the purchaser. When everyone’s price is the same, the buyer can compare expertise and value across a consistent price spectrum and purchase the services of the best expert they can afford.”

From the PowerPoint “A Decent Proposal”, Cal Harrison, Beyond Referrals

In many ways my interview with Beyond Referrals President Cal Harrison, was one of the most interesting I have ever had, as the subject of quantifying the intagible attributes associated with the effective acquisition of professional services is a subject upon which my own research on strand commonality has been centered. Specifically, how does one identify and uniformly (re reliably) measure an intagible attribute in which a consistent best outcome or result can be fairly achieved. (Note: funded by the Government of Canada’s Scientific Research and Experimental Development Program, I wrote a white paper in which I outlined the challenges of services procurement and the possible methodologies that can be employed to impirically determine a legitimate and meaningful outcome on a consistent basis that can of course be justified. As an advocate of utilizing an agent-based model my research considered a variety of methodologies including similarity heuristics.)

The fact remains, that Cal Harrison’s firm Beyond Referrals, takes a thoughtful and insightful look at the inherent flaws in the RFx process, and attempts to elevate the exercise from one of perfunctory compliance to that of a tangible and meaningful process.

And while his emphasis is on the procurement of services, it is becoming abundantly clear that traditional RFx methodologies are largely ineffective in all areas of procurement including the purchase of goods.

The RFx Mirage

In an excerpt from one of the many articles I have written over the past year on the challenges of the RFx process, the following observations were by far the most telling. (Note: refer to the Web Resouces section at the conclusion of this post to obtain copies of the corresponding reference material.)

In an effort to gain a more in depth understanding of the reasons behind increasing levels of supplier apathy, particularly in the public sector, I have recently participated (indirectly) in a number of Requests for Proposals etc. (RFx’s) at the Federal, Provincial/State and Municipal levels.

The impetus behind this exercise actually began in 2005 when I spoke at an automotive industry conference for suppliers.

Consisting of more than 200 senior executives, the following is just a sample of the comments I received from the audience:

“I do not think that buyers spend any time at all analyzing RFQ’s . . . once they have sent them out they go directly to the price auction and get on a phone and those who cut the price get the business.”

“We spend too much time working on RFQ’s . . . the RFQ process chews up dollars and time for something that is going to bring us no return.”

“It (RFQ’s) will have a negative effect on my business . . . we should charge the issuers of RFQ’s for responding.”

These of course represent only the tip of the proverbial ice berg. There is a general perception that the RFx process is ultimately little more than an elaborate fact finding mission that is geared toward bolstering and justifying a pre-ordained outcome. Otherwise known as an exercise in decision justification.

At its best, the public sector RFx process can act as a negotiating mechanism to leverage down prices with a preferred supplier. This of course only works if the exercise provides a true reflection of market conditions and prices. Something that is virtually impossible to do without broad supplier engagement. Refer yet again to my post on the dangers of vendor rationalization.

At its worst, the public sector RFx process is considered to be an ineffective legislative requirement which needlessly lengthens the procurement cycle in which a “gravitational leaning” toward a particular vendor already exists. (Note: I will touch on Harrison’s issue with a “relationship-centric” process, which incorporates the expertise of specific individuals within the consulting firm versus properly assessing the expertise of the firm itself.)

While the above example demonstrates that problems do exist, the greatest consequence of current RFx methodology for procuring both goods and services, is tied to the fact that it actually acts a deterrent for many quality vendors. In short, your current RFx practice may actually be keeping the most qualified firms away, while opening the door to the least desireble sources.

But I know the consultant?

In the previous section I made references to “preferred supplier,” as well as “a gravitational leaning toward a particular vendor,” as a way of illustrating the general consensus by the majority suppliers who are highly skeptical of the RFx process. The quote “the battle that is won before it begins,” comes to mind here. (Note: the actual quote by Chinese general Sun Tzu was “that the battle that is won before it begins is something the common man cannot comprehend.”)

The predilection toward a certain vendor is one of a number of interesting topics that is covered in Harrison’s presentation “A Decent Proposal” (refer to the Sponsor Presentations section to access the Beyond Referrals PowerPoint).

“Unfortunately,” according to Harrison, “too many professional service providers still hear that their competitors were selected because the purchasing committee felt more comfortable with the people in the other firm.”

While he is not making the suggestion that the “people factor” is something that should be readily discarded, Harrison does suggest that there are several problems with heavily weighting one’s decision based primarily on the relationship factor in the selection process.

For example, given the mobility of individual expertise, the decision to engage a consulting firm based on existing relationships (nee comfort levels) can leave a company dangerously exposed should said contact leave the firm. This is particularly problematic if the firm that was selected does not, in and of itself, posess the required expertise separate from the aforementioned individual.

Even in those situations in which the primary contact remains in the employ of the winning firm, issues resulting from an uneven or disjointed internal network of expertise can still pose significant problems.

A consulting professional who had attended one of my many conferences indicated that the majority of their firm’s failed or difficult projects was the result of the sometimes wide chasm of expertise between the senior consultants that win the business, and those that are charged with executing the program on the front lines. Think of the importance of the proficient transfer of the baton between runners in a relay race. No matter how fast an individual runner completes their leg of a race, a poor handoff will cost the race for the entire team almost every time.

And this is Harrison’s point . . . erroneously measured or contemplated intangibles in the selection of a services provider are the foundational weak links in the majority of RFx’s, usually leading to unsatisfactory results.

Why Beyond Referrals?

By now, you are probably well-versed in my disclaimer relating to my emphasis on the fact that I am not a voice piece for the sponsor – in this case Beyond Referrals. In assessing the viability of their value proposition for your organization, it will be up to you to determine how they may be of service. In this regard, I will once again direct you to the Sponsor Presentations section of the PI Blog to invistigate the Beyond Referrals perspective in greater detail, and at your own convenience.

This being said, I start out each and every seminar and conference at which I am speaking with the following statement, “to consider the time that we spend together as being useful, it is my objective to challenge and even inspire you to think outside of the framework of that with which you are most familiar, and most comfortable. In essence to empower you to see a particular situation through a new or different lens of understanding.”

The value of the Beyond Referrals presentation (and subsequent value proposition) is that it challenges you to do the very same thing with regard to your current RFx practices.

While Socrates contended that “the unexamined life isn’t worth living,” one might infer those same sentiments by saying that the “unexamined RFx process isn’t worth doing.” While I won’t comment on Socrates’ deeper musings, given the emerging results from extensive research, shining the light of scrutiny on your current RFx process in terms of the procurement of services is definitely a worthy pursuit.

Web Resources:

The Bands of Public Sector Supplier Engagement: https://procureinsights.wordpress.com/2007/12/13/the-bands-of-public-sector-supplier-engagement/

Dangerous Supply Chain Myths (Part 2) Revisited: https://procureinsights.wordpress.com/2008/06/19/dangerous-supply-chain-myths-part-2-revisited/

Use the following link to learn more about our Sponsorship Program; https://procureinsights.wordpress.com/pi-sponsorship-opportunities/

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