Finding the real Added Value in procurement

The general definition of ‘added value’ in procurement tenders and contracts is often obscured by cultural shifts in business and local government. All it really refers to are the non-cash benefits that come as part of the procurement process. What those are, how they're determined and whether they’re acceptable is open to debate.
 

Selling services

At Dukes, pitching for a tender can sometimes turn into an exercise in sales, where added value represents an opportunity to up-sell or to advertise unique selling points. It’s important that potential clients see every advantage we can bring, but I believe that added value should really be about how we connect with our clients' goals, values and operational priorities. To achieve that, we need to understand where each added value item really fits.

In cases where the added value is training or preferential access to resources, for example, this doesn’t factor in beyond business negotiations. When it comes to delivering additional services at reduced rates or at no cost, you need to be sure you’re including them as part of an overall service package that really meets your client’s philosophy and needs, rather than simply throwing something extra to sweeten the deal.
 

Avoiding tick-box tenders

From the client side, the parallel risk is one of adopting a tick box approach, and I've seen it surface occasionally in organisations and local authorities. Particularly where it's felt that seeking added value from a contract necessarily makes it more worthwhile.

The flip side, of course, is neglecting added value entirely. In a time of austerity, it’s right to focus on cost-saving and efficiencies when it comes to procurement. However, neglecting the opportunity to reduce risks and exploit opportunities can be as costly as a bad deal.

I recently found a positive example in RBS’s procurment function, which has moved from traditional category management to a business-aligned model. Now sourcing, contract management and team leaders are all connected and know what’s happening, what needs changing, and are empowered to drive innovation.
 

Getting what you pay for

In the long-term, I believe a more unified approach like this also ensures added value is actually delivered. Ideally, any contract should make clear whether the offering is reviewed once the contract starts and, if so, how it’s done. This not only clarifies the position of both sides, but encourages them to drive one another to achieve their goals.

If the added value isn’t provided as promised, both parties need clear avenues to be able to address the problem. This is particularly true for local authorities, where the stakes are high and contracts difficult to walk away from. So a shared vision, supported by clear contractual terms and a collaborative approach becomes even more important.