The high price of free procurement software
When it comes to ‘free’ upgrades, ‘free’ vacations, or a ‘free’ gift of $5M from an international monarch, we recognize that if something seems too good to be true, it usually is.
However, in the case of free procurement software, many procurement professionals are accepting a ‘free’ platform at face value, without the critical lens they apply to other buying decisions. These platforms, in which vendors shoulder the cost of the software, may technically be free for buyers, but they come with high costs — to the competitiveness of your projects, the openness of your process, and the ability of your platform to keep pace with innovation. Last week’s announcement from the Government of Ontario on the elimination of fees for vendors to access contracts is a strong signal that the vendor-supported model, and its negative implications for procurement teams, is on the way out.
The elimination of vendor fees is part of the province’s mandate to make it easier for businesses to submit bids for government contracts, achieving what Minister of Government and Consumer Services Tracy McCharles calls “a modern procurement process that can work for every business.” This points to the first key problem with vendor-supported platforms: they make it more difficult for vendors to access opportunities.
Vendor-supported procurement platforms pass the cost of the software onto vendors, via fees to view documents, register for notifications, or submit to opportunities. These fees further disincentivize a process that can already be arduous and resource-intensive for vendors — especially small and medium-sized businesses without dedicated staff to prepare bids.
The inevitable result of making participation in your contracts both more expensive and more difficult? A smaller vendor pool, and reduced competition. When you consider that each additional supplier bidding on a given project results in a 5 – 20% greater pricing spread, the potential business cost of limiting competition quickly eclipses the price you might have paid for software in the first place.
Vendor fees also present barriers to open access to information, a concern which is becoming more and more central for public procurement teams in light of recent trade agreements, such as CFTA and CETA. Hiding project details behind a paywall is not consistent with the spirit of open access and a transparent process towards which so many teams are dedicated. Instead, procurement teams should be able to rely on software that prioritizes and facilitates transparency at every step.
Procurement teams also deserve a platform that is built to suit their unique needs and evolves with the pace of technology advancement to provide more value. This is another area where vendor-supported models do not deliver. After all, procurement teams are not represented in the revenue structure of these companies, and as a result, there is a natural disconnect between the primary users of the platform, and those who are funding it. Procurement teams need a platform that is built for them, with their needs and feedback at the centre of each decision. In the long run, a platform designed first and foremost to serve procurement’s needs delivers time and cost-savings that far exceed the investment in the software.
Procurement professionals are experts at considering the whole picture when making a buying decision. But when it comes to software for their own team, many procurement leaders are allowing price to significantly outweigh the qualitative factors, an approach they’ve been discouraging for years.
Vendor-supported platforms look good on paper. But when examined with a critical lens, it is clear that they come with very real costs, to procurement teams and also to taxpayers.
The good news is that procurement leaders around the world are recognizing this and adjusting their approach to procurement software decisions. The Government of Ontario’s announcement is emblematic of a broader movement away from the vendor-supported model towards software platforms that promote transparency, open competition, and innovation — the same values which public procurement teams are dedicated to upholding every single day.
Further reading: eBook | Vendor Fees & Sourcing Software in the Public Sector