Invitations to Tender: A Flawed System in Need of Change

Digital Insights

Let's have an honest conversation about invitations to tender (ITTs). We've discussed this topic in the Agency Academy, and I believe it's time to address this significant issue in our industry.

If you've been in the digital industry for any length of time, you've likely encountered them. They're a staple of the procurement process, especially in larger organizations and government bodies. But here's the thing: they're not working. Not for agencies, not for clients, and certainly not for the projects themselves or their end users.

As someone who's been on both sides of the fence - writing proposals and evaluating them - I've seen firsthand how this process can fall short. So, let's break down why ITTs are problematic and explore some alternatives that could lead to better outcomes for everyone involved.

The Agency Perspective: A Costly Gamble

For agencies, responding to an ITT is often a significant investment of time and resources. It's not uncommon for teams to spend weeks crafting the perfect response, only to find out they were just there to make up the numbers. This isn't just frustrating; it's economically unsustainable.

The amount of work involved in pitching is substantial. Agencies often have to dedicate significant resources to preparing detailed proposals, which takes time away from billable work and ongoing projects. This investment is made with no guarantee of success, and often with the knowledge that they may have little to no chance of winning the bid.

Moreover, the limited information provided in most ITTs makes accurate pricing nearly impossible. Agencies are forced to make educated guesses about the scope and complexity of the work, often leading to either overpricing (and losing the bid) or underpricing (and losing money on the project). This lack of information and the absence of an opportunity to conduct necessary research puts agencies in a precarious position.

To mitigate these risks, agencies often have to add a buffer to their pricing, which can make them less competitive. Alternatively, they might lowball their estimates to win the bid, potentially setting themselves up for financial strain or a compromised project quality down the line.

The Client's Dilemma: Paying More for Less

Clients might think they're getting a good deal through competitive tendering, but the reality is often quite different. The costs associated with preparing unsuccessful bids don't just disappear - they're factored into the rates of successful projects. This means clients are indirectly paying for all those failed proposals, essentially subsidizing the entire tendering process across the industry.

Furthermore, the ITT process often rewards the best sales pitch rather than the most suitable agency. Clients end up with partners who excel at writing proposals but may not be the best fit for their specific needs. In many cases, agencies tell the client what they want to hear rather than what they need to know, leading to misaligned expectations and potential project failures down the line.

The Project Suffers: Inflexibility and Missed Opportunities

Perhaps the most significant drawback of the ITT process is its impact on the projects themselves. The rigid specifications laid out in most tenders leave little room for agencies to bring their expertise to bear on the project's scope and approach.

This inflexibility continues throughout the project, as the fixed scope makes it challenging to adapt to new insights or changing requirements. It can also lead to tension between the client and agency over what's considered "in scope," potentially damaging the relationship and the project's success.

Moreover, the selection process is often weighed too heavily towards the cheapest price, NOT the best value. This can result in subpar outcomes, as the focus shifts from delivering quality and innovation to merely meeting the minimum requirements at the lowest cost.

The fixed scope also means there's limited opportunity to respond to insights gained during the project, including crucial user testing results. In the fast-paced world of digital, this inflexibility can lead to outdated solutions or missed opportunities for improvement. Without the ability to pivot based on user feedback, projects risk delivering products that don't meet actual user needs, regardless of how well they adhere to the original specifications.

A Better Way Forward

So, what's the solution? While I understand the need for accountability and fairness in procurement processes, especially in public sector organizations, we need to find a middle ground that works better for all parties involved.

Here are a few ideas to consider:

1. Focus on track record and capabilities: Instead of detailed project specifications, evaluate agencies based on their past performance, case studies, and overall capabilities. This approach allows clients to select partners based on their proven expertise rather than their ability to write a compelling proposal.
2. Paid discovery phase: Consider paying a preferred supplier to conduct a brief discovery phase. This allows for a more accurate project scope and budget, benefiting both the client and the agency. For instance, give the preferred supplier a budget you want to work within and pay them a tenth of that to run a review and recommendation phase to define the project and work out what can be delivered within that price.
3. Phased approach: Break larger projects into smaller, more manageable phases. This reduces risk for both parties and allows for more flexibility as the project progresses. Each sub-project can be individually costed and can inform the next, allowing for adaptability and continuous improvement.
4. Value-based selection: Shift the focus from the lowest price to the best value. This might involve considering factors like the agency's expertise, proposed approach, and potential ROI. By doing so, clients can ensure they're getting the best solution for their needs, not just the cheapest option.

Implementing these changes won't be easy, especially in organizations with entrenched procurement processes. The approach of using ITTs makes sense when you're buying a fixed product or service, but it doesn't work well with digital services, which are inherently more fluid and require ongoing collaboration and adaptation.

Ideally, the relationship needs to be more like hiring a contractor based on time and materials. But I accept that this is a big change to ask for, especially in larger organizations and the public sector. The alternatives suggested above can serve as a middle ground, allowing for more flexibility and better outcomes while still maintaining a structured procurement process.

By adopting these approaches, we can create a system that benefits all parties involved:

• Agencies can invest their resources more efficiently, focusing on projects where they can truly add value.
• Clients can make more informed decisions, getting better value for their investment and forming partnerships with agencies that are truly suited to their needs.
• Projects can be more flexible and responsive to changing requirements and new insights, leading to better outcomes and more innovative solutions.

The potential benefits - more successful projects, better client-agency relationships, and more efficient use of resources - make it worth pursuing these changes. It's time for our industry to move beyond the outdated ITT process and embrace a more collaborative, flexible, and value-driven approach to project procurement.

If you're considering hiring an agency and find this approach intriguing, don't hesitate to reach out. I'd be delighted to discuss in more detail how you can implement these ideas.

Until next time,

Paul