Why is there a tendency towards mediocrity in procurements?
For several years now, public procurement for communication projects by state and local authorities has been based on the most economically advantageous offer, which means that the offer is the best in terms of content quality. With all due respect, that's a good thing!
However, there are exceptions, and it is indeed surprising to see that the market continues to be dominated by procurements where the main criterion for selecting the tender is the lowest offered price. To be fair, “Repute” avoids participating in such tenders on purpose, but often the "foot slips" because we get too excited about a topic too quickly, a good idea comes up, the spirit of competition emerges, which at that moment seems to push the choice of the lowest price to the back.
But why is it a mistake to organize procurements at the lowest price?
The first and the most important reason is that such procurements are fundamentally about mediocrity, because the tenderer has no incentive to deliver more than the procuremet documents ask for, and it will deliver required package with the fewest resources it can. Even if the threshold defined in the budget, by meeting all the minimum requirements of the regulation, would theoretically still allow to "put the icing on the cake", i.e. to deliver one more activity to the customer, why do it if competitiveness might lost? The reality is that in the lowest-priced procurement, the client's budget most often is not used at full speed, even though it could have guaranteed a better result.
Dumping is cheering! Unfortunately, all possible means are often used to win the battle for the lowest price, including price dumping. Even if the contracting authority defines in the specifications that an unreasonably low tender is called for an explanation and may be rejected, it is likely that the services offered by the tenderer are below current market prices in the sector. The reality is that, as the project progresses, the contracting authority is at a much higher risk of being disappointed in its cooperation with the contractor. If the partnership is defined by the lowest price principle, the contractor is likely to be very scrupulous about the time it takes and will quickly lose interest in the project. At such times, the client has no way out and has to "drive" the project to results.
Choosing with your eyes closed! Imagine what it would be like to choose the cheapest dish from a menu in a restaurant and enjoy it with your eyes closed? We can't believe that the thought of what that well done steak would taste like, left on the second page of the menu, never once crossed your mind! An exaggerated comparison, of course, but that's what happens when you choose the lowest price offer. At the moment when the lowest tenderer meets all the selection criteria and the substantive tender meets the minimum requirements of the regulation, the substantive offers of the other tenderers remain unread. But what if they contain the right solution (the tastiest steak) and the best result? Knowing these rules of the game, a potential tenderer's creative enthusiasm to compete for the lowest price is crushed. That is why it is not clear why the contracting authorities, when organizing the lowest price procurement, want such a natural selection of bidders, likely to exclude the most powerful and strongest ones?
We understand that you can always "get lucky" - submit an offer that meets the requirements of the regulation of a procurement, has the same price as another competitor and has the same previous project experience! But then the fate of the project application is even more interesting - the lottery becomes the decisive factor for the selection of the offer!
What if there is no alternative but to go for the lowest price? We encourage contracting authorities to define specific results that need to be achieved! In practice, we have seen that the outcome required in the lowest price procurement is often too vague or minimal. For example, a recent specification of this type of procurement required that the only "tangible" result was that the unique audience reached during the campaign should be at least 100 000 inhabitants of Latvia. In this case, the defined criteria was too low. However, it is the defined result that can become the main way to measure the compliance of the lowest bid with the requirements of the regulation and perhaps still lead to the evaluation of another submitted bid.
But remember - you can't get the most effective offer for a communication campaign by paying the lowest price or choosing a partner based on the principle of a lottery. Perhaps this is the case when a state institution is buying pink or yellow sticky notes. A creative and challenging project proposal should be judged on the basis of the applicant's previous experience and the most cost-effective offer!
