Complex procurement: Start early, talk more, think like a supplier

Imagine a situation:

You have finally managed to move away from an incumbent supplier who has delivered the same service for over 15 years. The re-procurement, which was a complex transaction, has been exceptionally challenging and costly with the incumbent using many delaying tactics to continually extend their contract and exit period. The first few months of service from the incoming supplier have been difficult with the incoming supplier being very vocal about the lack of exit support from the incumbent. As a result, your day-to-day business has been significantly disrupted.

You then find your credibility has suddenly dropped with the business – your ‘customers’ – because of the exit issues (new suppliers blaming old suppliers for the issues including increased costs). The CEO has made it clear to your commercial director that it is imperative that you are not in the same situation in five years’ time when the contract is up for re-procurement. Sound familiar? So how will you do things differently when it’s time to run re-procurement?

The example above – all very common according to our clients – tells you something: the process to start the re-procurement of a service must start as soon as the ink on the contract is dry.

Here, we outline three top tips based on our client roundtable discussions where a community of commercial/programme leaders have been getting together twice a year to share, in a private setting, their personal challenges/successes of levelling the playing field and related complex commercial issues. Adopting these tips will help shift the dominance of incumbent suppliers, minimise their inherent advantage, and support levelling the playing field to create a fair and equitable environment for the re-procurement. This will drive greater value for money and ensure that re-procurements are not a commercial black hole – and as stress-free as possible.

Re-shape your re-procurement

Avoid like-for-like replacement.

Copying as-is increases incumbent advantage and typically doesn’t support driving value. Over the period of a contract, the organisation’s needs must have moved on to reflect current demand. Consequently, this is a great opportunity to start re-building those relationships with the organisation by spending time with them, understanding what they need, and the limitations of the existing contract. Building this knowledge on an ongoing basis gives you working in-depth insights to shape the requirements for re-procurement.

Introduce new ways of working.

Build your network to learn from others. Keeping abreast of best practice – and the latest examples – will ensure a re-tender includes new ambitions, such as adoption of AI technology, gaining productivity efficiencies, a new commercial model, or agile delivery approach delivering increased value for money.

Engage the market early.

Communicate regularly throughout the contract term to test new ideas, driving engagement of new suppliers to shape your thinking. And become knowledgeable in the ‘art of the possible’. Understanding what the market has to offer will enable you to be ambitious and identify innovative solutions and emerging technologies that will excite the business, at the same time as providing competitors to the incumbent with the opportunity to get more involved and stimulate competition. Our clients suggest that you have to start engaging as early as two years before re-procurement given the complexity and scale.

Don’t be afraid to talk exit – you need to be well prepared.

Let’s face it, it’s not in an incumbent supplier’s interest to be talking exit. Make them do it. Ensure that your contract has robust exit obligations, including commitments for an annual submission of an Exit plan, detailed Exit registers, Transfer of Undertakings (Protection of Employment) (TUPE) regulations, TUPE data (including sub-contractor data) and performing an annual exit test. Hold the incumbent supplier to account by ensuring that you receive the Exit plan, registers and annual TUPE submission, making sure that you review the information and get the incumbent to address any shortcomings.

Perform exit testing on an annual basis by running a scenario-based exercise gaining full sight of documentation and knowledge transfer plans, and understanding how separation would take place. Communicate that you are not averse to taking legal action if obligations are not fulfilled because, as our clients will testify, some incumbents may ‘play to the wire’.

Think like an incumbent supplier – what would you do to exploit your competitive advantage?

Approximately two years prior to exit, run ‘war games’ to get into the incumbent’s mindset. It’s a great way to spend a day and build your team’s alignment and expertise, and really helps to enable you to be pro-active. Invite people that have worked for a supplier to give you in-depth insight. Identify the incumbent supplier’s likely reactions and develop counter-measures before engaging the incumbent early to pre-empt actions. As an example, our clients frequently see incumbents re-allocate key staff on to other opportunities just ahead of when a procurement starts, so that incoming suppliers have no one who can help them. Mitigate this situation by asking the incumbent supplier to ring-fence key staff two years ahead of the contract end. Of course, it always helps if you have obligations laid out in the contract.

Conduct a lessons-learned exercise now

You and/or your colleagues will have seen behaviours of incumbent/exiting suppliers – all the tricks they have played to skew things in their favour. Now is the time to carry out a lessons-learned exercise to capture all of those tricks, and to come up with mitigations that can be included: in contract management over the course of the contract, in the re-procurement exercise that is to come, and in the contractual terms of the new contract in five years’ time.

During the re-procurement process you will likely get a full list of bidder dependencies on the incumbent – identified by the participating bidders. By having the re-procurement process at the forefront of your mind throughout the contract term and implementing these top tips you will have everything you need from the incumbent – information, knowledge transfer plans, separation approach, TUPE data, and documentation to significantly reduce, if not eliminate entirely, exit issues and incoming suppliers blaming incumbent suppliers for disruption.