OPINION: The problem with open tenders

Darren Woolley
By Darren Woolley | 7 December 2012

I was recently in a meeting with a marketer and their procurement team discussing a forthcoming agency review. When we got to discussing the process, I was asked by the head of marketing what process would be best. Before I could answer the procurement team had said they would have to go to market with an open tender as that was company policy.

Open Tender: def: A Tender that allows a wide range of Suppliers to Bid without restriction.
Closed Tender: def: A Tender where the number of Suppliers invited to Bid, is limited to a small, select number that are deemed to be able to meet the Tender requirements.

The problem is that while the Open Tender is a legitimate selection process, in the marketing and advertising category, like most professional services categories, it is often flawed, delivering less than optimal results for a number of reasons.

1. Attracting less than qualified suppliers
Advertising is a broad and diverse market category that is easy for suppliers to enter but more difficult to succeed. Therefore you invariably have a pyramid structure of potential vendors. Open tenders, even those with detailed criteria, attract participation from the broad range of suppliers.

While this is often the case used to argue for open tenders, it is next to impossible to have potential responders self-qualify with many believing they are suitable against even the most detailed criteria.

Even in closed tenders we have totally unsuitable agencies, because of either size or geographic location or core competency, contact us trying to convince us that they have been overlooked. Such as the three person agency in region NSW convinced they were ideal for the account of one of the big four banks saying they could ‘scale up’ to suit.

2. Highly successful suppliers boycotting the process
The open nature of the tender sees the process as seen as highly competitive and quite random. Even with a rigorous selection process, going to the open market makes participation seen by many as a high risk for reward, because of the usually quite subjective evaluation. This is especially true for the highly credentialed and highly successful suppliers.

We have seen several open tenders where the more desirable agencies are choosing to not participate in the process because they do not feel their expertise is recognised or considered in the open tender process and the risk of rejection and the subsequent poor perception is too much of a risk.

3. Wasteful time and resources required
Going to open tender can generate a lot of interest, but if it is not the right type of interest you can be wading through a huge number of tender documents. We have seen many marketers and even procurement have difficulty reading five or six tender documents. So imagine the time required to read through 100 or 200 documents? The problem is that if you skip through them you may just be overlooking the best solution purely because you are bored.

The argument often raised is that the tender is highly detailed to make sure you are able to explore each response in detail. But this is a double edge sword. On one side more detail means more reading and more waste in time and effort. On the other more effort for high risk for reward means it can alienate the best candidates.

4. Not achieving a sustainable outcome
If you are procuring a commodity item then an open tender is a legitimate approach because the tender simply needs to prove they can deliver the item in quantity and quality and the cost. But marketing and advertising services are specialist skills that are co-created between the agencies and the organisation. It is more a relationship than simply a supplier agreement.

Therefore knowing who you want is an important initial step to success. Going to the market place and inviting all those interested is not as clearly defined as approaching those suppliers that you have determined already fit your criteria and commencing the process from there. And you get a much higher level of engagement from a better but smaller pool of possible agencies because who can resist a personal invitation?

Darren Woolley
Marketing Management Consultants

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