Tender for omnichannel results in omnilessons
By Pim Schouten
The headline grabbers and Twitter users have been busy again in recent weeks. "IT project already 85% more expensive before start" sums it up well, and even the judge finds it 'difficult to understand' why the municipality opts for a bid that is so much more expensive.
An explanation of the tender
So, what was the case (in summary): the Municipality of Amsterdam had initiated a tender for an omnichannel information system. Within this tender, one of the eligibility requirements was to provide a similar reference. Quotes from suppliers that met the eligibility requirements were evaluated. The score was determined with 70% based on quality and 30% on price.
Four parties submitted bids for this omnichannel information system tender. In the ranking, supplier Pegamento came second, and Deloitte came third. The submission of the number one was declared invalid, putting Pegamento in the lead. Why was Pegamento ahead of Deloitte? Price undoubtedly played a role. The Municipality of Amsterdam estimated the cost at 14 million euros, Pegamento offered 12, and ultimately, Deloitte was awarded the contract for 26 million euros.
Various media outlets have criticized this course of events. But why exactly? It intuitively feels wrong that the contract is awarded to Deloitte, considering they asked for a price so far above the estimate.
Pegamento then loses the summary proceedings against the Municipality of Amsterdam. But this case has multiple losers.
Firstly, Pegamento. They lost the summary proceedings because they made a mistake in their bid: their reference assignment did not meet the municipality's requirements. According to the tendering guide, the municipality had to set aside Pegamento's bid. Following tendering rules, the municipality had little other choice.
Then Deloitte; it's quite bold when your offer price is so far above the municipality's estimate, while other suppliers seemed capable of meeting that amount. Does this lead to a repair of Deloitte's reputation?
The municipality is a loser because, although they acted lawfully, they need to explain to the outside world why the costs for the omnichannel system are so high. Of course, the citizens of Amsterdam are also losers here, as the money cannot be allocated to other purposes.
Omnilessons from this tender
As a tender specialist, I see several lessons learned in this case:
- The reference as an eligibility requirement serves as independent substantiation of the suitability of a supplier. As a supplier, be careful in substantiating your quality and unequivocally indicate why your reference meets the requirements. If in doubt: aim for a better reference (assuming Pegamento has one).
- If, as a municipality, you include a 'target amount', make clear what this term means. In the current case, the target amount has no value, because a supplier that is 85% more expensive can win the tender.
- If you have a maximum budget as a municipality or at least don't want to end up much more expensive than the target amount, ensure that quotes that are significantly more expensive receive significantly fewer points or can be set aside.
- Think carefully about the quality/price ratio and create scenario analyses. The 70/30 ratio of the municipality is common, but what happens in 'extreme' situations, such as with a very expensive bidder, few quotes, a cheap but qualitatively subpar quote, etc.? Ensure that you can also award the contract to the supplier with the best price-quality ratio in those situations. If necessary, include an emergency brake to avoid truly unwanted situations.
With thanks to Frank van Vonderen for reviewing this blog.
Want to know more?
Do you want to know how Highberg can assist you with your tendering processes? Take a quick look at our sourcing and vendor selection services. Or get in touch with our tendering specialist Pim Schouten.