The Disappointment Gap

By Denis Henry (Published Procurement Professional Magazine, CIPS Australia, Issue 24)

A recurring theme for many procurement staff is the erosion over time of the actual performance of their service contracts. Why is it that, despite the increasing use of robust tools and templates and the increasing proficiency of procurement staff, purchasers continue to feel dissatisfied with their contracts?

Over time; price creep, scope pullback, service level failures, lack of innovation and increasing levels of distrust increasingly characterise their customers’ experiences. We have coined the term; the Disappointment Gap, for this phenomenon.

The Disappointment Gap

In undertaking a tender, clients commit considerable resources to ensuring;

  • their exact service needs are well specified, often representing significant intellectual property
  • the necessary information is provided to tenderers
  • they have an excellent understanding of what constitutes the ideal service provider
  • all relevant risks are managed.

Typically, sourcing departments and their customers have a future vision of continuous improvement over the course of the contract. This vision is often given effect by innovation-related KPIs and/or formal gainshare arrangements. These expectations are built into contracts in the knowledge that the market’s capability will continue to improve through such things as technology and productivity improvements.

When RFT documents are released to the market, the evaluation teams’ expectations of the market’s ability to both respond insightfully and then deliver the contract, are high. Tender responses are developed by business developers whose role it is to win contracts, not deliver them. Many evaluators report their disappointment with the gap between the expectations set in the RFT and the responses received.

Further disappointment is frequently reported after contract commencement, as the client contract managers come to realise the promised performance of the service provider is not reflected in the actual delivery. Their experience can be further exacerbated by failure of both parties to achieve mutually beneficial contract management relationships.

The difference between the idealised future vision and the eroded actual performance is the Disappointment Gap.

The three keys to procurement driven cost reduction and performance improvement

A game changing guide for modern (next generation) procurement professionals.

Being able to influence the business on how to use all available procurement levers, not just aggregation and tendering, is critical to drive the next wave of procurement savings and benefits for your business.

Great in theory but how can we as a profession effect significant change to such a well-entrenched and established way of working?

Perhaps the first and most important step is to think differently and not be afraid to question conventional thought.

In this guide we introduce to you three game changing ways of viewing and approaching existing business problems, namely:

  1. Getting performance from suppliers is the same as getting performance from staff
  2. Tenders no longer generate savings – you have to pull all four spend levers
  3. Procurement must become a trusted internal advisory team

This is not just theory, from our research of more than 250 Australian organisations we know that turning the ship around to better source and manage suppliers leads to an increase in performance of 29 percent!

Download your copy where we turn the world of procurement on its head, challenge the status quo and share our insights for dramatic supplier performance improvement.