Matti Kinnunen
Aug 26, 2010
Posted in category: 2010 Member Articles

Evaluating tenders beyond price

So, you have prepared good RFPs, sent them to the selected vendors and they have replied with well prepared proposals. The next step would be to select the winning bid and start negotiations. But how to select the winning bid? Say you have two proposals, both of which fulfill your requirements. Which one should you choose?
The obvious solution is to select the cheaper one. It would appear that the cheaper one would yield better ROI and NPV than the more expensive one. And so it would, if everything else were equal. But vendors and their proposals  are never equal. Thus, there is a need to look at some other things in the proposals.


Here is what to look at and how to select.


First, look at the vendors. In addition to price and functional coverage of the proposed solution, consider whether the vendors are reliable. Check their finances, for a bankrupt vendor will not be able to support your long term business solution. Then, check whether there are any successful reference installations. If there are none, you are going to pay for the first version and its development, which is not such a good idea unless you can negotiate a matching price and favorable risk sharing principles. Check also, whether vendors’ project model is suitable for you. If they are using agile methods and you have no experience in participating in agile project, you must include your own training costs in the price.


Make sure that the vendors are committed to the project at project team level. Do the promised members of the team have suitable experience and education? Are you given guarantees, that the team members will stay in the project from the beginning to the end? If not, there will be problems and you will be bearing on vendors’ risks.


Second, look at your own organization and its abilities. You must select a vendor that you are able to work with. Most projects are long and require deep and frequent collaboration between the vendor and the customer. Thus, make sure that you can speak same languages and that you will be able to negotiate cultural differences. Check also what the vendors expert from you, the customer. Do you have the necessary IT and project skills? Can you commit the resources the vendor asks for? Does your understanding of your business and its future match that of vendors’?


Third, consider the life span of the solution or system you are buying. How clear vision do the vendors have? Does it match yours? How do their road maps look like? Are they credible? And how well collaboration are you likely to be able to establish with the vendor? Are you able and allowed to communicate with their CxOs?


Finally, consider vendors’ flexibility during the RFP and negotiation process. The negotiations do not have to be smooth or easy, but there must be a feeling and also proof of flexibility. You will need flexibility during the project as well.
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