When publishing an invitation to tender for an IT solution or service, there are several approaches to formalising and defining your requirements, each with different levels of prescription and flexibility.
The choice of approach has a major impact on the whole process.
The approach you choose will depend on the needs of your organisation, the nature of the solution or service you are looking for and whether you want to engage in a more collaborative or more rigid procurement process.
Broadly speaking, it is possible to define 4 main categories of models.
Detailed specification model
This approach involves specifying all the requirements, criteria and penalties in minute detail. It leaves little room for interpretation or customisation by bidders.
Main features:
Detailed specifications : You provide a complete list of technical, functional and non-functional requirements.
Fixed Service Level Agreements (SLAs) : Specific service level agreements are defined, particularly with regard to uptime, response times, return to operational condition times, maintenance windows, etc.
Defined penalties : Clearly defined penalties for non-compliance or breach of the service level agreement.
Assessment criteria : Well-defined criteria for evaluating proposals, such as cost, technical suitability, supplier experience, etc. The scoring system and evaluation matrices are directly aligned with the formalised criteria.
Benefits :
Control : You retain full control over what is offered, which reduces the risk of receiving solutions that don't meet your needs.
Clarity : As the needs and context of the acquisition are very precisely defined, you can be sure of getting a precise response to every point identified
Easier comparisons : The proposals are easier to compare because they are based on the same requirements.
Analysis and evaluation of factual responses : particularly in the context of a public procurement contract, the final evaluation is easier to understand given the presence of a large number of formalised criteria.
Disadvantages :
Potentially less innovation: Tenderers may be limited by your requirements and not propose innovative solutions or alternatives.
Higher administrative burden: The definition of detailed specifications and the management of the procurement procedure require more effort at the outset.
Potential sharp reduction in the number of bidders: The impossibility for some bidders to meet certain mandatory criteria may lead them not to submit a proposal and to restrict the possible choices (too much).
Difficulties in defining certain criteria or penalties (and by extension in making them acceptable and reasonable) due to a lack of knowledge of the underside of the market and the margins charged
Performance-based model
In this approach, you define the desired outcomes or performance standards, but you allow bidders to propose how they will achieve these outcomes.
Main features:
Results-based: The call for tenders specifies levels of performance and desired results rather than specific solutions or methods.
Flexible SLAs: SLAs are based on performance results, with bidders able to propose their own methods for achieving or exceeding them.
Open to innovation: Tenderers can propose innovative solutions that meet your performance criteria.
Advantages :
Encourages innovation: Tenderers have the opportunity to propose new or alternative approaches that may offer better value or performance.
Results-oriented: Focuses on results rather than process, which may be more in line with the company's objectives.
Capitalising on the experience of potential suppliers: Suppliers are in a better position to share their knowledge and operating methods for similar needs.
Disadvantages :
More complex evaluation: The evaluation of different approaches and solutions may be more complex and require a more nuanced evaluation process.
Risk of non-compliance: The proposed solutions may not fully meet your expectations if they are not clearly formulated.
Incompatibility of certain proposals on operational or technical aspects not previously (or partially) identified.
Hybrid model
This approach combines elements of both the prescriptive and performance-based models, allowing you to define certain key requirements while leaving other aspects open to interpretation by the bidder.
Main features:
Mixed specifications: Some requirements are fixed, while others are left open for bidders to propose their own solutions.
Flexible assessment: assessment criteria can include both compliance with mandatory requirements and innovative approaches to achieving the desired results.
Negotiable SLAs: SLAs can be defined for critical aspects, but bidders can propose different levels or penalties for less critical aspects.
Advantages :
Balance between control and flexibility: Allows you to maintain control over critical aspects while encouraging innovation in other areas.
Possibility of better solutions: You can have the best of both worlds, ensuring that essential requirements are met while benefiting from suppliers' creativity.
Disadvantages :
Complex tender design: It can be difficult to write a tender that strikes the right balance.
Risk of misalignment: If the invitation to tender is unclear, it can be difficult to align bidders' proposals with your strategic objectives.
Supplier-centric model
This is the most flexible approach, where bidders are allowed to propose their own models, including how they will meet requirements, define service level agreements and manage penalties.
Main features:
General requirements: The invitation to tender may simply describe high-level business objectives or challenges, leaving it to the suppliers to find technical solutions.
Supplier-defined SLAs: Suppliers offer SLAs and penalties based on their own capabilities and standards.
Open evaluation: The evaluation process is highly subjective and focuses on the overall suitability, innovation and value of each proposal.
Advantages :
Maximum innovation: Suppliers have the freedom to propose cutting-edge or unconventional solutions.
Potential for strong partnerships: Can lead to solutions that are highly tailored to your needs, fostering strong relationships with suppliers.
Disadvantages :
High risk: there is a risk of receiving proposals that do not correspond to your needs, requiring more effort in terms of evaluation and negotiation.
Difficult to compare: Proposals can be very different, making direct comparisons difficult.
Choosing the right model
The choice of model to be used must be based on several factors:
Complexity of the IT solution or service: More complex solutions may benefit from performance-based or hybrid models, while simple purchases may be better served by a prescriptive model.
Market maturity: In a mature market with well-defined solutions, a prescriptive model may be appropriate. In a rapidly evolving market, a performance-based or supplier-centric model may yield better results.
Organisational capacity: Consider the capacity of your team to evaluate and manage the procurement process. More flexible models require stronger evaluation and negotiation processes.
Conclusion
Each model offers a different balance of control, flexibility and risk. A careful assessment of your organisation's needs, market conditions and supply capabilities will guide you towards the best approach for your tender.
In its support mandates, Cogency generally favours models 2 (Performance) and 3 (Hybrid) as soon as a potential for value creation linked to the choice of solution and/or supplier is identified, or when a problem is deemed sufficiently complex to benefit from different or even innovative solutions.
The detailed prescriptive model remains relevant in highly targeted acquisition processes, with a restricted scope.
Conversely, we recommend the supplier-centred model in RFI phases, as it enables a relevant and rapid review of the market, without strong restrictions on the players who can meet the needs.
Cogency can help you define the most appropriate model for your needs and situation, and implement it in a procurement process.
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