In the second of a two-part look at issues arising out of the tender process we consider what can happen when that process is poorly run. Part 1 of the series can be found at IT tendering: Leveraging the benefits. A typical tender process involves the customer analysing and documenting its requirements in a Request for Proposals (RFP) to which interested suppliers will prepare a response. In larger procurements the process will be more sophisticated, but the basic structure remains the same.

The RFP is fundamentally important. Suppliers will base their offering (and pricing) on the RFP’s content, and it is likely that that content will form part of the contractual assumptions which, if inaccurate, permit the supplier to alter its pricing.

What does this mean?
Given the RFP’s importance, it is critical that it is accurate. Unfortunately, inaccuracies are common, often only coming to light during contractual negotiations after a supplier has been allocated preferred bidder status.

These inaccuracies frequently result in a large increase in management effort, because inaccurate requirements and information have to be reassessed before the consequential changes to the supplier’s proposal are considered.

Occasionally the inaccuracies result in the wrong supplier being awarded the contract. Had the customer’s requirements been defined correctly at the outset, the solution offered by another supplier may have been a better fit.

When inaccuracies are discovered late on in the process it is often the case that too much time and effort has been invested to go back and begin negotiations with another supplier.

What should you do?
To guard against such problems, we often recommend that a ‘verification’ process be undertaken prior to the RFP being circulated to suppliers.

Verification is commonly found in relation to documents used when offering shares in corporate entities. Directors can be held legally accountable for inaccuracies in such documents, so it is important that the content is correct.

The verification process itself involves checking that:
• each item of information is factual and is not misleading in its context
• all expressions of opinion are reasonably based and properly held
• all information necessary to give a true and fair picture is set out, and nothing has been omitted which is necessary to enable an informed assessment to be made

Shoosmiths is experienced in guiding clients through verification of RFPs and ensuring that the tender process – and the deal the customer signs up to – is based on a firm, accurate footing.

 

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