Vendor Selection - Cost Containment

Continuing our discussion on Vendor Selection, the next topic I’d like to discuss is cost.

Let’s be frank…… You don’t always get what you pay for. Clients can be just as easily swayed into believing that they are being the most cost effective going with the lowest bid while on the flip side can also believe they are getting the best of the best if they pay on the high end. As I write this entry, I can think of recent examples of both situations where firms were trying to “get in the door”. Of course the most common method is to low ball the initial bid and identify “scope creep” during the project to facilitate a higher revenue generating project for the firm. What interesting is that no one benefits in any of this. The firm wins in the short term (sometimes) but most often loses in building a long term partnership with their client and potential future revenue. The client of course loses as what they have to pay is now more than originally budgeted. Why go through that?

Clients need to look toward their consulting firms to help support their goals and long term objectives. Working together to properly scope and estimate a project provides that foundation for a long term relationship. When working with a vendor, it will soon become apparent who the “trusted advisors” are as they will be more flexible in identifying the critical needs and associated costs to support your firms’ goals. If a firm comes in substantially less than competing firms with the same information, cause for concern should be raised. As well, if your firms estimate and your consulting firms estimate are dramatically different, the two parties should be open and honest in identifying the deltas. There may be misunderstandings on one or both sides which could easily justify the deltas.

At the end of the day, can costs be used as a determining factor? Sure. Should it be in the top three? No. Just to be clear, I’m not trying to wipe cost concerns off the radar, I’m just clarifying that the success or failure of your project is not going to be determined by how much you paid, it will be determined by the Experience, Roles and alignment of personalities and teams amongst the project team. That’s not to say you should always go with the most expensive. There is no direct relationship between experience and cost here. Identify the cost, but more importantly identify and understand the consultants associated with that cost. As over used as it seems, the “Team” is still the most important factor in supporting your projects success.

Let me know your thoughts!

Stay Tuned…. More to come!

TAG: Costs, RFI, RFP, Vendor Selection