In this exclusive article for PASA, Tony O’Connor, managing director at business travel advisory Butler Caroye, explores the tendering process, explaining why you should question the idea of a non-existent or simplified process.
Every now and then, there’s a push by someone to do away with the tendering process in the travel category, or to at least simplify it down to bare bones and a couple of open questions.
After discussing the merits of this, I’ll offer my thoughts on why you should question the idea.
The main benefit, of course, is the saving in time and money.
Reductions to time spent managing smaller, less critical supply categories allow scarce procurement resources to be directed where they’re most needed, but the judicious use of resources is something that you are, no doubt, already doing.
The other benefit put forward is that eliminating a thorough process gives you space to concentrate on other better assessment techniques.
However, most of the suggested better techniques are just sensible things that you’d do anyway. They complement a thorough process and they don’t replace the outcomes of careful questioning.
According to recent advice from one supplier asking us to “rethink” the process, the alternative way includes looking at value rather than price, talking to the right people, conducting a needs analysis, weighting the scores and giving yourself enough time.
These are just necessary parts of a tender, not things that replace it.
Suggesting that you should not tender, so that you can perform the parts of a tender, is illogical and ingenuous.
I think that we should look at the source of any advice to not bother with the details.
If it comes from a supplier, then it’s very possibly just a way of evading proper scrutiny – and that’s suspicious.
This is particularly the case where the supply arrangement involves a lot of detail, and where some of that detail, if unchecked, can allow the supplier to turbo-charge their profits.
Here’s an example:
I specialise in travel procurement, where the most detailed and important tender is that for the corporate travel agency, the travel management company or TMC.
The details of the TMC arrangement are the main determinants of travel cost, safety, service and carbon.
Let’s say you run a three-question TMC tender. What are the risks? Where to start? Here goes…
You haven’t checked on how the TMC pays its booking consultants.
If they’re paid large profit-based bonuses as some are, you’ve walked straight into the major overcharging den. But you didn’t check.
You haven’t done anything to prevent hidden mark-ups to airfares and hotel rates, a not-uncommon practice that could cost you dearly.
You haven’t even checked the basic capabilities of the online booking tool. They really differ and matter.
Who owns your data? Where does it go? How do you apply a duty-of-care for your travellers?
The TMC gets 70% of its revenue as sales commissions from airlines and hotels. How do you battle the bias? And so on, down a lengthy list.
Another slightly perplexing source of the relaxed approach is procurement consultants. I’m not sure why they’d push the idea of doing away with good process. Perhaps they don’t have one.
Those that promote a simple search for “cultural fit” are possibly pushing a differentiating methodology.
However, in my 25 years of tendering, I’ve seen that a basic cultural clash shadows other things.
One side seeks value and the other side seeks profit.
Certainly there can be great outcomes from well nurtured compatibility, alignment and collaboration but disregarding the basic difference across the table from the outset is costly and unnecessary.
Running a selection that gives real assessment credence to carefully created sales presentations and marketing documents; applying light assessment according to the supplier’s own agenda, is obviously never a best approach.
But if the spend is small, the details are few and the moving parts are transparent and simple, then the risk might be acceptable on balance. Otherwise, no.
If you are buying cardiopulmonary bypass machines, you need to ask some granular questions.
If the supply chain is opaque and complicated, you need to properly explore and understand it.
If the supply chain is dominated by margin-making intermediaries, you need to be wary.
If you’re spending five million dollars, even a minor 10% “slippage” is $500,000.
I think you need to tender.
Catch Tony’s ‘Conquering The Travel Category’ free one-hour webinar in partnership with PASA, live on 6th December from 12.00pm AEDT.
