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Project Procurement

Agile Project Procurement (Comparing Apples to Oranges)

In PowerPoint presentations, every project procurement solution works and every business case rocks but that’s not the case in real life. Bad project procurement planning and choosing the wrong solution are key risks in a project. This has been one of the most time and energy-consuming activities for me, especially in situations with more than 3 companies on services not easily comparable. Project Methodology Main Page

IT Project Procurement

In my field, which is IT, the most complex procurement processes are related to software solutions (hardware related processes are more standardized). Comparing software from different providers, although for the same requirements, is often like comparing apples to oranges. Price is not always an indication of quality. I have seen both scenarios; paying premium dollars and getting bad quality from big names like HP, Oracle and IBM. I have also seen companies bidding with low prices to get the deal, then not being able to fulfill their promise. Big companies can afford good marketing and selling teams, the key skill is driving the perception of quality by building excellence with their polished presentations.

How do you protect the project from price speculation and the marketing window dressing? This is a technique that delivered good results for me on several occasions, making the project procurement process of choosing between apples and oranges less painful. There are 2 prerequisites to this approach. First, you should not be in a hurry. It is good practice to start as early as possible with the planning of the procurement phase. Second, you must have some negotiation leverage with the vendor companies.

Project Procurement Steps

I call this approach the agile project procurement, and it goes like this:

1) The team agrees on the quality criteria and price/quality ratios for selecting the winner. The selection criteria is approved by the steering committee in order to have it written in stone.

2) It is key to start the process fast by sharing a short version of the requirements/procurement-SOW in an RFI with the problem you want to solve and the objectives. Having the list of prospective vendor companies predefined saves time. The companies are asked to propose their solutions based on their past experiences for similar requirements. It is very important to keep this first cycle short in order to use the time later. In this phase, you also request a high level cost estimation.

3) Based on the feedback of the companies, you use the selection criteria and choose 3 companies.

4) All the companies are notified to enter the second round and are asked to build a PoC (proof of concept) or prototype of the proposed solution in 2-4 weeks. Usually companies agree to build the PoC when the process is important to them. If one of the companies does not agree to build the PoC, this might be an indication of trouble and needs to be investigated. Either the company is not very interested in the process, resulting in a low level of commitment, or worse they’re not capable of delivering the required software.

5) After the PoC is delivered, project stakeholders and business users are invited to have a dry run of the software. After their testing, they must provide formal feedback.

6) Based on the gained experience and user feedback, the original RFI is enriched to a RFP and the companies are asked to provide the final pricing.

7) The final selection is done using the original approved selection criteria, which includes the feedback of the users.

Project Procurement Pros and Cons

This project procurement approach is no silver bullet, it has benefits and drawbacks. On the benefits side, it deviates from the classical waterfall planning of procurement by bringing stakeholders’ and users’ feedback into the equation. It reduces risk by braking the power-point tradition and asking the companies to prove their capability to deliver. And it increases the competition, resulting in better price/value positions. This also helps the companies get a better picture of what they are committing too. The benefits are lower risk and better quality.

Some of the drawbacks are that requires more resources compared to the classic procurement phase. The procurement process may cost more and you may lose some of the companies who do not want to invest significant effort during the selection phase.