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It’s NOT All About Price

9/9/2008

2 Comments

 
Posted by BJ
For the proposal I’m working on at the moment, a very large public sector deal, the evaluation process is clearly defined. Within this process, price is the last consideration, not, as some people continue to believe, the first.The process steps for the evaluation of responses for this deal are as follows:
  1. The proposal will initially be reviewed for compliance with the instructions contained in this Request for Proposals (RFP).
  2. The proposal will then be reviewed and evaluated for technical merit. During this review oral presentations and discussions may be held. The purpose of such discussions will be to assure a full understanding of the State’s requirements and the Offeror’s ability to perform.
  3. Offerors will be given the opportunity to correct deficient proposals, respond to written questions or provide written clarifications. Technical proposals will be ranked at the end of this process.
  4. Finally, the financial section of each proposal will be opened and evaluated separately from the technical evaluation. After a review of the financial proposals additional and further discussions may be requested and held.
At least for this deal, it is definitely not “All about Price”.

2 Comments
Andy Moorhouse
3/26/2016 03:20:33 am

Hi BJ,

Good luck with the proposal. In my opinion, it is rarely about price – but procurement has done an excellent job of conditioning the supply base into thinking this way.

Indeed, we recently did some research into the award criteria for reverse e-auctions – the most price focused of all sourcing tools. We found that less than 16% of all events were structured to guarantee the contract to the cheapest bidder.
Thus, in most cases, procurement states: “We reserve the right to award the contract to any bidder – irrespective of their bidding position in the auction.”

Digging even deeper, in our sample of Fortune 500 selling organisations, 92% of the times an incumbent secured the contract they were not the cheapest bidder – the most common bidding position was third place!

Will you be at the UK APMP conference to discuss further?

Best regards,

Andy.

Reply
Barbara Esmedina
3/26/2016 03:20:43 am

Excellent post (and comment). I learned many years ago on defense contracts to never try to win contracts by under-bidding your competitors. Price is rarely the determining factor in a government proposal. The last two companies I worked for and the current one are almost always the more expensive solution, but we focus on value and deal with fee negotiations after we present our case. No one has ever chosen a competitor over us based solely on price.

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