For many procurement professionals it can often be difficult, when undertaking an acquisition activity for a solution to a complex business challenge, to establish a market ready specification that facilitates a comprehensive response from
the market.
Without the parties being clear on what is required, by whom, by when and under what terms etc, the risk of a poor contracting outcome is elevated. Supplier uncertainty and ambiguity of requirements often attract the loading of higher risk premiums. Poor value for money is frequently an unintended outcome for both parties.
One tried and trusted method to help manage this type of risk is to build an interactive segment into the procurement process that negates the need for a prescriptive specification. A dialogue process allows the supplier to develop a solution to the high-level business requirement and to clearly articulate and demonstrate how those requirements will be met. If undertaken correctly, the authority can engage in a constructive dialogue with a small number of shortlisted suppliers over a managed period. Utilising a structured two-way exchange of information provides an opportunity for the suppliers to better understand the environmental context and the business need(s) together with any constraints—which may be real and/or perceived. On the flip side, the authority can better understand the range of drivers that impact supply. Following a successful dialogue (and whatever tendering process is deployed), the authority can usually expect a broader set of solutions in return, possibly including options that may not have been apparent from any initial research. Encouraging and enabling the market to innovate has benefits far beyond the immediate procurement activity and can add value to all parties. Likewise, the reduction of supplier assumptions in any response lays the foundations for a better overall value proposition and eventually, contractual risk.
Variants of interactive dialogue procurement processes are widely accepted by both the public and private sectors. Over time the Federal Government’s Commonwealth procurement rules (CPR’s) have been updated to accommodate the principles of interactive tendering and the procurement manuals of many public sector bodies outline the use of such techniques.
When preparing a procurement strategy or playbook for a complex requirement, any consideration of a procurement dialogue process requires careful planning and often the support of the Executive as it is far more costly a process for all parties in terms of resourcing, time and costs than more traditional approaches to market. Care is therefore needed to ensure that the circumstances and the type of dialogue process used are fit for purpose. By way of an example, use of a dialogue process to procure requirements from commodity and/or mature services markets is unlikely to achieve the desired benefits. Whereas the rapid paced technology market, however, is where these types of dialogue activities have been used successfully in the past. Particularly when more innovative solutions from the market are needed.
Should it be determined that a procurement dialogue is the right method, there are many different components therein to consider when building the actual approach. Such things include: when in the procurement process lifecycle is it best to dialogue; whether the dialogue process should be evaluated or not evaluated; and how open and transparent should the organisation leading the dialogue be? Dialogue can also be used to refine supplier proposals in relation to solution/technical designs along with other things like implementation and transition plans. These examples have different merits, strengths and weakness and it is important to assess these with your business approach to risk. Whilst the interaction between parties through the dialogue is often most fruitful when it is frank and transparent, the dialogue process is not a negotiation. If an element of negotiation is required, this could be built into the procurement but once the dialogue component has been completed. Being clear with parties of the intent of the dialogue at the outset of the process is a ‘must do’ activity.
Regardless of the type of dialogue pursued, of critical importance to the process is the need for fairness, transparency and an effective governance overlay. Particular attention must also be paid to such issues as ownership, treatment and use of any intellectual property and confidentiality of proprietary information. To guide all parties involved there is a requirement to fully document the process and share what will happen and when. The development and use an overarching governance framework are critical as these serve to provide all parties with a high degree of confidence that the appropriate safeguards are in place whilst maintaining an effective decision making and audit trail for the authority.
When administering an effective dialogue process, it is important to ensure the maintenance of effective competitive tension—regardless of the number of suppliers involved. This is an essential lever for the authority that will help drive the right behaviours from those involved and contribute to achieving a value for money outcome. These considerations all have a material impact on the overall success of the procurement activity. Last, but certainly not least, it is vital to plan for an appropriate probity regime and to ensure that the right measures are in place and conducted diligently. The overarching probity regime will vary depending on your organisations approach to risk and specialist advice should be sought at the onset of any procurement.
Whilst the use of a dialogue process can result in many risk reductions and contractual benefits, deciding which one is right for you and then undertaking such a process can be a challenge for many organisations, especially where the necessary skills or experience may not be available in-house. We are fortunate however that Australia does have access to sufficient knowledge and resources to make these useful processes a success. The Pulse has previously provided guidance1 on some of the interactive options out there, of which probably the most widely known about is the Competitive Dialogue (CD) process. The CD process originated in Europe around 2004 and has been used for Commonwealth Procurements for the last decade or so. Other CD type variants deployed more recently by a variety of organisations include the Solution and Commercial Dialogue process, Collaborative Dialogue and the Offer Definition and Improvement Activities process. Whilst they all differ in their respective application, all retain an interactive dialogue between parties as a core part of the process. It is the intrinsic role of the dialogue element that has directly contributed to many successful procurement and contracting outcomes.
