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The power of saying ‘No’

June 20, 2013

A few years ago, a Global 100 company was re-bidding more than $10bn of its outsourcing contracts. One of the major contenders evaluated the risk allocation and decided to no-bid.

Some time later, I was talking with the head of Procurement at the buying organization. He told me that if one of the other bidders had also declined, it would have led to a massive re-appraisal and would have forced the functions pushing risk allocation (Legal and Finance) to shift their position. Sadly (in his view) no-one else walked away. It took some time for this company to change its ways and build more positive relationships with its suppliers.

I was pleased to read the latest blog from Dalip Raheja of The Mpower Group, in which he describes being on the receiving end of a similarly inappropriate RFP. I have great respect for Dalip – and since most of his work is with Procurement and Supply Management groups, they should be ready to listen to his advice. He cites a case that will be only too familiar to many suppliers, of poorly defined requirements, a mismatch to performance criteria and a flawed procurement process. Dalip also decided to no-bid, but for him there was a happy outcome – he wrote to the company and someone (presumably senior) decided to listen to the reasons and changed the criteria and approach.

Sadly, this is a rare experience – and it will remain rare for so long as suppliers yield to these poorly managed procurements and contracts. Unless there is more frequent push-back, buyers will continue to operate with the myth that their processes and practices are generating savings and value – which in too many cases they clearly are not.

As a final comment, I spoke recently with the CEO of a mid-size software company. They – like Dalip – realized that the buyer was asking the wrong questions and had fundamentally misunderstood market trends and supplier capabilities. They had one of their sales team call the Procurement ‘professional’ who was handling the bid to explain the problem. The concerns were acknowledged – but with no readiness to change the RFP. The supplier asked ‘What is more important – that you follow your process or that you get the right business solution?’ You can probably guess the answer.

  1. Shalas Benson permalink

    I agree with the author that saying “no’ and declining to bid may actually help potential clients push back on internal stakeholders who insist on including unreasonable terms. With limited resources and increases in demand for outsourcing over the past three years, bidders must take care to carefully qualify bid opportunities. If the requirements are poorly defined, the RFP does not provide adequate information to enable pricing without massive assumptions, and the timelines to respond are short, more bidders may decide not to bid.
    If bidders agree to respond to poorly drafted RFPs, they are setting the stage for further problems. By bidding they are telling the uniformed customer that it is acceptable to make unreasonable demands and leave the bidder to figure out all the details. It is setting the stage for an unbalanced relationship that may only be successful if one party is clairvoyant. An unwillingness to openly answer questions in order to solve problems could be part of the customer culture. An informal review of contracts negotiated with customers who assume this approach reveals that those contracts are often very difficult to manage, have cost overruns, and include unreasonable and unachievable requirements. Relationships tend to be strained and frustrating for both parties. Terminations are more likely to occur due to miscommunication and unmet unspoken needs.
    In short, poor RFPs result in poor bids. Poor bids result in poor contracts. Poor contracts result in disputes. Disputes result in .strained relationships. Strained relationships lead to contract terminations. Bidders should choose their clients carefully.

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