The Tendering Trap

What a hopelessly clumsy process tendering is. We now have the allegedly new and reformed NHS 111 service in disarray. NHS Direct have withdrawn from the contract because they have discovered that it is unsustainable. The pressure to put in a cheap bid quickly revealed that they were heading for financial disaster – calls took longer to deal with and remuneration was less than they hoped.

I understand the theory behind tendering.  It is meant as a bulwark against asking your uncle to supply your IT services, a commitment to transparency, to competitive prices, to benchmarking quality and a way of challenging complacency in long-standing suppliers.

Does it actually do this?  I have been on both sides of this fence.  As a commissioner I quickly discovered that tenders create huge amounts of work.  Courtesy demands acknowledging all bids, a rigorous selection process and proper feedback.  It can be challenging to distinguish the bidders’ hype from their actual track record and there is always pressure to get the best possible price and the shortest possible schedule. All of this ties up many tedious hours of staff time for the contract-letter.

From the other side, as a provider you quickly discover that some clients, secure in their regular salaries and reliable pensions, are innocent about what it costs to run an unsubsidized company. They don’t understand the concept of opportunity cost and that time spent on bids is time you could be spending elsewhere. Others assume you to be so overwhelmed by the privilege of working with them that you will work for derisory amounts.  An acquaintance running a company of highly skilled craftsmen narrowly avoided bankruptcy when his firm was ruthlessly squeezed on price by a certain branch of the royal family.

In practice I find that tendering for work can be a tricky process where all is not what it seems. A non-profit organization recently asked me to tender for some work. It sounded interesting and I was well qualified to do it. In due course the invitation came to attend a selection panel. Googling panel members in order to prepare, I was amazed to see a video of a key member of the panel speaking casually at a recent conference informing them that there was already a preferred supplier for this work, who was openly named and one of their books waved aloft, adding that unfortunately the work had to be tendered in order for the organization to be seen to be doing the correct thing.

As a trusting person with little time for conspiracy theories, I decided to give the organization the benefit of the doubt not least because I had already put in many hours on writing the bid. After a poorly conducted interview, dominated by the person who had expressed the strong preference for another supplier, it was little surprise to open an abrupt email informing me that I had not got the work.

This work did indeed go to the favoured firm, people I know and respect who I am sure will do a good job. But the experience leaves a bad taste. As ever, it is difficult to complain without looking arrogant or sulky. And it would be perfectly possible to justify the choice on spuriously ‘objective’ grounds, adding further humiliation for the losers.

Tendering is a rough and ready solution to the problems of procurement. It depends on procurers knowing what they are procuring, when often they don’t have anything like the expertise of the bidders because their lack of in-house expertise is why they are putting the work out to tender in the first place. It depends on buyers having sophisticated selection procedures and skills. It depends on realism about costs on both sides rather than a shared pretence that prices can be driven down and schedules shortened without compromising quality. It relies on people behaving scrupulously. Alas, a lot of the time these basic conditions are unmet in practice. Perversely, as with the 111 service, the successful bid often ends up costing more and delivering poorer quality than it would if the buying had been done in more sensible ways in the first place.