17 Nov Procurement Tip: Let the vendor Speak First
This article was written by: Isaac Kashiwagi, Phd
Today’s procurement tip is a general leadership concept. It can be used when you have already pre-identified or awarded the project to one vendor and are now clarifying, negotiating, or planning their final proposal and contract. The tip is to let the vendor speak first when developing the project plan. By doing this simple tip, buyers will be able to identify unqualified vendors, avoid taking on unneeded risk, and empower vendors to be more accountable and proactive planners.
The Mistake of Speaking to Soon
Before the project commences, you, as the client, will have the selected vendor explain in detail what is included in their project proposal—in other words, the vendor will have to share their plan. Ideally, this would be done before you award the project for best results, but it can also be done after. In most cases, clients will already have a general proposal which was the basis of their selection—but a more detailed plan is still needed which includes the exact schedule, assumptions, vendor’s expectations of the client, cost breakout and deliverables.
The mistake most client’s make is that they start this detailed planning stage by either:
- Working with the vendor to finalize that detailed plan together.
- Telling the vendor what they think should be in this plan before the vendor creates and presents their plan to the client.
In both cases, the client has the best intentions. The client’s stakeholders have certain expectations regarding potential risk and known limitations in terms of their schedules, preferences, and workload capacity. It is understandable why clients want to begin relaying this information to the vendor as early as possible. The vendors’ feelings are often similar—many vendors even propose they are unable to make a detailed plan without the client. In either case, the client and vendor do not want to waste their time creating a non-usable plan which doesn’t take into account all the client’s thoughts.
Why the Vendor Should Speak First
We all agree on the outcome, we all want a detailed plan which accounts for everything, but how we get there is critical. When the client speaks before hearing a complete detailed plan from the vendor, a few issues are introduced.
1. The client will never know what the vendor is capable of, and they run the risk of continuing the project with a vendor that has no idea of what to do.
Clients have gotten used to telling vendors everything they need to do—from highly prescriptive requirements to creating their detailed plan together. A big assumption made by clients is that if they write the requirement down in the contract or order the vendor to do something, the vendor will be able to understand and do exactly what the client has in their mind. This is a big assumption which adds risk to the project as both the vendor and client will always have different expectations in their mind. Additionally, vendors do not all have the same capability. Signing a contract or saying yes to a client’s demand does not automatically give that vendor the capability to meet that requirement. By speaking first, the client will not know if the vendor understands their requirement and has the same vision and expectation as they do or if the vendor is just saying “yes” and agreeing.
2. The client is put in a decision-making role which makes the client accountable and at risk for the performance of the project.
The more the client must decide and tell the vendor what to do, the vendor loses their accountability for the project plan. If problems occur due to one of the client’s decisions, the one accountable for that problem is now the client. The client is also now required to propose a “solution” if problems occur. If decisions were made jointly, and there is “risk sharing”, which is a problem because no one will be accountable, leading either to litigation or the client paying for it.
3. The vendor will begin accepting work they did not account for in their initial proposal.
Based on all the information given by the client in their initial requirement, vendors create a realistic price, schedule and deliverables which can meet that requirement. If the client speaks before the vendor has finalized their detailed plan, the vendors are at risk of accepting client demands which they did not account for. Similarly, clients are at risk of vendors accepting to do work they will not realistically be able to do. Life is not magic—something cannot come from nothing. If the vendor accepts demands which they did not cost into their proposal, the cost must come out somewhere, whether that is a decrease in quality or a change order down the road.
It is important to note that some vendors will claim it is unreasonable or impossible to create a complete detailed plan without the client’s input since they do not know things like the client’s schedule and preferences. This line of reasoning is illogical and demonstrates a potential lack in capability. The vendor has already delivered a proposal which includes a specific cost. Time and quality are critical components in determining cost. Without this detailed level of planning an accurate cost would not have been possible.
A Better Way to Finalizing a Project Plan
In the Best Value Approach, clients are advised to first listen and then speak. This means you first let the vendor share their detailed plan before you add any input. This will allow the client to see how the vendor has the requirements and how the vendor plans on meeting those requirements. After hearing the vendor’s complete plan, the client will then be able to add their input, including questions, clarification, and gaps the vendor may not have seen. The benefits of planning this way include:
- You will do less work in planning as the client, but you will still get the outcome of a detailed plan which includes your input. It is also worth noting that the vendor should do less work as well. The vendor, if they are an expert, should be able to complete their plan fairly quickly as it’s only planning and not actually doing any of the work.
- You will reduce your risk in getting a vendor who is not qualified for your project. You will clearly be able to both gauge their capability to execute your project or your risk to project performance based on the vendor’s lack of capability.
- You will have clear lines of accountability as the vendor is now the owner of their plan and the client is responsible only for the assigned pieces the vendor has identified for them.
There are no downsides for the client when they choose to listen before speaking, but it does take discipline and, for most, a change in how they work with vendors. If done properly, it is the more efficient and risk reducing method in creating and receiving a vendor’s detailed plan.
To learn more about the Best Value Approach to procurement and project management here are some additional resources:
- Free membership for latest tips and news: https://pbsrg.com/membership/
- For latest books, events, and licensed partners: https://pbsrg.com/resources/
- Latest BVA journal publications: www.cibw117.org/
- Annual Best Value Conference in January: https://bestvalueconference.ksm-inc.com/
- Latest presentations and videos: https://www.youtube.com/channel/UCxBi26nXLDTqG4ZRV6p0iiQ