In talking to various businesses about government tenders recently, one of the most frequent questions they ask is – what value are procuring agencies now ascribing to broader outcomes considerations in the scoring process?
We’ve seen recent project tenders allocating 20% of the total marks, as well as similar in AOG panel tenders. In some instances, broader outcomes have been the decisive factor, as the procuring agency was looking for the proposed solution that best addressed its needs across cultural, economic, social and environmental factors for the local community in which the construction project was to be commissioned.
The next question we then often hear is – so, how is government reconciling that approach with its focus on the lowest price offering?
Most businesses still hold an enduring perception that government entities focus on the lowest price offering. While we know that is no longer the case, particularly in large asset procurements, there has always been a tension in tender processes between price and quality.
What we are now seeing with the introduction of the government’s broader outcomes mandate, is a third layer of tension that market respondents must somehow reconcile when proposing solutions. As can be seen in the diagram below – how can you balance the competing tensions between price, non-price attributes, as well as the new requirement to develop and cost-in specific broader outcomes-based initiatives?
Our point of view is that both the public sector procurers and the respondent suppliers need to shift in their approach as a result of this. There is no doubt that the attainment of broader outcomes in procurement is here to stay – and that when done well, it’s a really positive benefit for local communities and broader society.
Procuring agencies must continue to provide in tenders for a genuine value for money scoring approach – one that accommodates increased costs of wider public value goals. One GM of Procurement we recently spoke to said her organisation is really conscious of how broader outcomes impact pricing proposals. The more suppliers can demonstrate how those immediate, increased costs will positively impact the longer-term value of the project and outcomes on a whole of life basis, the better their chances will be.
Tender evaluation teams (or “TETs”) are often singled out by respondents too. The organisation must ensure that there is alignment between the broader outcomes principles set by procurement and the personal objectives of the members of the TET.
Respondent suppliers need to get more adept at integrating broader outcomes into their proposed solutions. How are you proposing solutions that will have greater impact towards the overall objectives of the procuring entity? How are you quantifying and communicating what both the increased costs, as well as benefits, will be in terms of impact? See the amended diagram below.
This is a challenging environment and it’s fair to say that both the public and private sector participants are still in a developing state - learning as they go. We think those who are more strategic and intentional in this area of broader outcomes will be positioned to do well.
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