When Previous Price Is Maybe The Tender Clincher

Writing recently about the huge UK Lottery supplier switch, (click here, with an earlier less savoury example also recalled here), I was reminded about another recent public sector contract award controversy.

Back in 2018, the latest ten-year arrangement to produce UK passports came up for grabs. The incumbent, De La Rue, considered renewal theirs.

I have affection for this company. Having helped them with a solution sales issue back in 2009. Although at the time I found one of their new recruits contrary to the verge of toxic, their management team (ex-military, as it happened) were a delight, my kind of people and genuine in seeking success for their customers.

They majored on security. An edge highlighted back then by the calamitous (allegedly corrupt) procurement by the S African Home Affairs which replaced them as supplier. Only for catastrophic impacts to follow on that country's visa requirements overseas for its tyrannised citizens.

The UK government sought to conduct a tender process by the book; a “rigorous, fair and open competition”.

They highlighted top-level criteria of ''quality, security and price".

Note too, how this triangle can be used with our prospects to tease out their slant on the classic 'quality, service, price'. (Acknowledging that you can only ever have two of these three alone.)

With the red herring of nationalist pride dismissed due to the UK-based manufacturing plants of both bidders, the winner was the challenger; “in a fair procurement process, we had to look at quality, security and price, and [the challenger’s bid] was the contract that provided the best value on all counts”.

The subsequent press coverage headlined the price difference.

Despite (or perhaps because of) the incumbent dropping their price by almost £100m compared to their overall previous decade-long deal, the alternative still crept in under that themselves.

The above assertion that on all three counts the challenger was the more attractive 'value for money on all counts' bidder does make you think a little.

As a buyer, do you think to yourself, 'have I been ripped off before here'? And if so, then does that turn you away from the incumbent that's possibly overcharged in the past?

Another factor here could well have been that the challenger - French-Dutch owned Gemalto - are also old hands in this game.

They handled the UK driving licence printing since 2012. Which seems a success they could leverage. So also an existing supplier elsewhere, with a track record to happily mobilise.

The "standstill" period - the ten days cooling off time allowing for any loser dissent to formalise before signing ceremony - got extended to a fortnight in this case. Yet legal proceedings did not materialise.

As one wailing politician said in The Commons at the time, "the cheapest is not necessarily the best". So was this ever about price?

The seasoned sellers suggest that for a buyer to consider switching on price, the discount offered must be at the eye-watering level of around 20pc. Switching costs just one element that can eat into perceived price shavings.

In this case, can you suspect operational concerns built upon a slight price-tag difference? Which does make you wonder whether, as the old adage goes, the tender matched one offering from (before) the start. And it wasn't the incumbent. So why did they bid..?

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