Open vs select tender vs single source. Once off contract or supply arrangement? These are the options that are often analysed to determine the preferred procurement strategy before going to tender. However, there are many more options to consider to really drive value in the procurement process.

Are prescriptive requirements better or will an outcomes-based focus lead to better value for money? Is a written response sufficient to assess suppliers’ capability or do you want to see them implement some of your requirements or solve a problem before making a selection? Will the contractual arrangement be complicated, and could this be worked through as part of the evaluation process?

One industry where contemporary procurement strategies can add value is in the Information Technology category. Organisations have traditionally bought IT by issuing huge tenders containing hundreds of prescriptive requirements that industry need to respond to by providing a written submission to prove their ability.

This results in suppliers mostly being selected based on how well they can respond to a tender. That approach works well when you know what you are buying, and the market has an existing, proven product to offer.

For example:

"I need x number of servers, they need to fit in this space and meet these environmental sustainability criteria".

However, there is a growing trend to move away from these prescriptive tenders for more challenging problems and to rely on industry to provide solutions to problems.
Instead of issuing a tender for servers, they might approach the market with their problem; that they are running out of computing storage space. The supply market then responds with what they think the best solution is. In this scenario they could come back with physical servers to add to the customer's data center, offering infrastructure as a service in a cloud environment or implementing hyperconverged infrastructure, which would allow greater capacity and easier expansion.

The challenge then becomes how do you compare those different options and choose which one offers the best value for money?

In order to use outcomes-based requirements the organisation needs to be able to:

1. Clearly articulate the challenge that the organisation is trying to solve.

2. Include any constraints/non negotiables, (in the example above this may be that the organisation has no appetite for their data to be sent offshore).

3. Consider the benefits (and dis-benefits) of each option and the impacts.

4. Build robust cost models to be able to calculate the total cost of ownership for each different delivery model, not just the purchase price (i.e. will one option significantly increase your internal costs?

To shape a contemporary procurement strategy you need to determine:

1. What are you trying to achieve?

2. What do your stakeholders want to see?

3. What do you need to know to know that you’ve selected the right supplier?

Shift the analysis from open vs closed to prescriptive vs outcomes based. Competitive dialogue vs design competition vs innovation workshop.

Published by Terri Aitken, Director at Block 5 Consulting