Wednesday, April 15, 2009

Do PQQs drive up the cost of software?

I recently had the frustrating task of completing a PQQ for a university looking for a replacement CMS (content management system). The PQQ was in two parts: The first was a mini technical specification, along the lines of 'can your system do x, y, z', etc. This in itself was quite a time consuming document to complete.

The second posed as a supplier competence test, and alongside the usual questions about financial probity and accounting history, were very detailed requests for costings and project timescales. For example, it asked for costings for staff training and associated budgets. Essentially, it was asking for what I considered a PID (project initiation document), which is something for a later stage, after a provider has been selected. This part of the PQQ was also very time consuming and the further I progressed, the more annoyed I became at the bureaucracy involved.

Why did this PQQ (& this is not an isolated example but a growing trend I fear) ask for so much information, information that arguably should not be requested at such an early stage? Well, the key reason I fear is fear itself - public sector workers are risk averse. The PQQ has become a back covering exercise conducted along the way to chosing the most expensive provider. After all, no one gets sacked for chosing the biggest, best and most expensive system. There is certainly no reward for saving money - budgets must be spent!

I have the benefit of having been on the other side of the PQQ process, whilst working as a consultant for a local government, so I know something about the mindset at work while drawing up these PQQs. They are written for the precise purpose to absolve the individual/department concerned from any blame for the outcome - afterall, the chosen product/supplier was the best on paper!

There is another, not unrelated dynamic at play too. After completing the PQQ I started to read Avinash Kaushik's, Web Analytics - an hour a day. Here he outlines (p.103) why PQQs (or requests for proposal) drive up the cost of (web analytics) software, largely because everybody has input into the requirements (scope creep), you then add requirements about vendor suitability, set an aggressive response deadline, and then have a committe of 'cross-functional representatives' to select a winner. As the long and expensive process ends, the
"guaranteed result is that you will almost always pick the most expansive, and usually one of the most expensive, (web analytics) solutions."
PQQs therefore are usually expensive and lead to expensive outcomes.

Thus, the PQQ becomes a vicious circle. The more extensive the PQQ becomes, the harder it is for SMEs to compete. So, these PQQs favour the larger companies, with sales teams dedicated to responding to PQQs, so SMEs are discouraged from participating because they don't have the expertise to respond to PQQs. So in turn, the procurement cost goes up - those sales teams need to be paid for.

While the PQQ may help guard against corruption and promote transparency, it also tends to engender complacency and acts to absolve those involved of having to make a real decision, one that is based upon their expertise and knowledge. Finally the PQQ also tends to lead to more expensive outcomes as it favours bigger players in the market place.
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