r. Therefore, the supplier with the lowest price or the best features wins. Right?
Wrong – procurement departments are made up of humans. Humans don’t follow linear patterns of behavior.
Last week, I had the chance to sit down with – we’ll call him “Bill”, a 20-plus year veteran with the utmost professionalism at the Department of Defense. He’s someone I’d trust implicitly to manage more than $20 million of my taxpayer dollars.
Bill, who buys computer hardware, software, and technology services, confirmed what Lee Kuhn at Children’s National Medical Center (see my blog Secrets of a Buyer: Leland Kuhn) asserted; buyers, despite their best effort to develop sophisticated systems to grasp onto the rungs of objectivity, still buy from people they perceive as trustworthy.
Mark: Given the state of the economy, sellers are continually seeking new ways to win business. What advice could you give them?
Bill: A key characteristic I look for in a supplier is a solid understanding of my current and future needs. So I recommend that a seller do their homework, ask me to explain what I think I need, search out solutions and requirements that I may not even be aware of yet, and finally, present those solutions and potential paths to attain them. It’s ok if most of those solutions happen to include the goods or services that the seller might provide, but it should fairly compare their offerings with that of other companies.
Mark: How important is research on the part of the supplier before they meet with you?
Performing this type of homework and providing this type of advice is valuable to me and makes my job easier. Going the extra mile by making this investment gives me a reason to increase my trust level in that seller. Then I’m more willing to invest the time and energy necessary to consider their offerings and initiate a contract action.
Mark: How inclined are you to stay with the status quo and what would it take to get you to switch suppliers or initiate a new contract?
Bill: Unless there is a problem with an existing supplier or a substantial benefit to be gained, the level of effort required to work through the Government contracts process does not justify a change. A superior product or service offered by a trusted seller makes it easier for me to justify the efforts necessary to opening a new competition or initiate a new contract.
Mark: Describe the importance of the relationship with the selling organization and just how important a role trust plays. Can you give an example?
Bill: Trust is critical. Once a supplier fails to deliver as promised, and if adequate corrective actions are not made immediately upon that failure, trust is eroded. If trust is not built back up quickly, there is no longer reason to extend the contract. So when the contract expires, it’s time to look for alternatives.
Recently, a supplier providing services to the Government on a time-and-materials contract was unable to provide the requested expertise in a timely manner. Because of the extremely long turnaround times for some critical requests, the supplier eroded all trust with us – once trust was damaged, a new supplier was not far away.
Mark: In this tight economy, many sales organizations are focusing on reducing their costs, in part to lower their sell prices. What role does price play in your decision making process and how far should sellers go to bring down their price?
Bill: The Government does consider price, but only as part of a broader value model. The model weighs the satisfaction of defined requirements, the risks associated with the supplier’s ability or approach, and finally cost of the product or service. The weight of this cost factor is generally between 10 and 30%.
From a Government evaluation perspective, vendors should remain competitive in the area price but should not reduce operating costs to a level that would significantly increase the risk associated with satisfying the Government’s requirements.
Mark: What other advice can you share with sellers to help us with decision-makers like you on “the other side of the desk”?
Bill: Provide value before and after the sale. Understand my needs. Make my job easier – do an analysis for me, solve one of my problems, or honestly compare your offerings against the competition. Again, make an investment in me – an investment of investigation time, solution exploration, and proposal development gives me one more reason to trust you and trust is critical.
