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Honestly have you ever really had a great deal from anything, that was absolutely dirt cheap?
I was chatting about this very thing just last week and the colleague I was chatting with, agreed with me. That was that most things (too) cheap, either have a problem or we will end up paying much more in the long run. That’s generally because we have to patch it up with something better, or the original outfit goes pop, or the original outfit use change control or just sales charisma in some cases, to recover the true cost.
Cost savings often do result in vast amounts of frustration, lost staff time and lost opportunities to crack a lot of that inspirational transformation, we all crave these days. You might be reading this with ‘transformation’ in your job title, or your remit might well include ‘organisational transformation’. It’s a fair ask, everyone wants improvements. We are all stretched, budgets are shrinking and it’s a given, we need to do more with less.
Too few organisations are still not questioning why some things are so cheap. Part of the trick is having some benchmarks, to know your outliers, then to question them.
One recent example I had was a full HMS procurement, where one supplier was half the price of the others. My client operations director thought that wonderful, she was less happy when I said, “to me its ringing alarm bells”. To the experienced, its easy to determine why, although many organisations avoid external help, so can be blind to much of the obvious. I kind of get that, because on occasion I have been described as ‘expensive’, although in contrast, more clients have told me that I “saved them more than they spent with me as a critical friend”. I like that. That’s what I think I am here for.
Have you ever had a project where you have agonised over when procuring, around that cost/quality scoring ratio? If we need great transformation opportunities I generally advise clients to favour quality/functionality over cost. On more than one occasion, I have been asked,”what if we end up with a preferred supplier, £200k more expensive than the others?”. Bear in mind occasionally we are severly limited and in those situations, we need to clearly cut our coat to our cloth.
My answer has always been that if we want the transformation ambition, we probably will be displacing some job roles, as efficiencies are applied, but adding additional value to staff performance. IE freeing up staff to do more for residents, adding more value with tech or with better tech freeing staff up. In that context, £200k might free up ten staff in year one. That’s also a saving in years 2,3,4 – 10 etc. Considered in that context, how could cheapest that could struggle with delivering the transformation, ever be best?
Clearly in an OJEU procurement, to assist everyone, ratios are defined and communicated up front, for the benefit of all. Now many people know quite well I have worked for 14 years on the dark (supplier) side, which makes me very sensitive to supplier as well as my clients needs. In my procurements, I have always refused to move the goal posts part way in the process. Firstly its wrong and unfair, also it violates the rules. On a few occasions, I have said to clients, ‘No you cannot do it’.
The last instance of ‘Done Cheap’ I have encountered, from both sides of the fence, is the tactic of reducing margins down to the absolute minimum. Often if finance are driving outcomes, this looks like a great deal from the client viewpoint. The supplier being totally strapped down however, has nothing in their ‘bank of goodwill’ for flexibility. Every deviation from contract or specification, will inevitably result in formal change control and additional cost and hassle. I do tend to advise some rowing back from that, as we will need some goodwill on both sides in the project, both supplier and client needing a shared bank of goodwill, to travel forward effectively to success.
I am sure many reading this will recognise a number of these insights. The takeaway is that you should not get tied up too much by the bottom line. Its about getting the right value at an acceptable level of risk, that the price will provide. Risk is probably worth a blogpost all on its own. Maybe later in lockdown, I will revisit that old chestnut son.
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AC/DC - Dirty Deeds Done Dirt Cheap.
(c) Tony Smith, Acutance Consulting www.acutanceconsulting.co.uk 07854-655009
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