Best value or lowest price or both?
As I read through bid protest decisions, I often see agencies make the case that they picked a winner because it represented the best value for the agency. It’s just a coincidence that the winner also had the lowest price.
I also see the losing bidder arguing that the agency really made a decision based on lowest price and should have declared the contract as a lowest price, technically acceptable competition. It may have changed how the company approached the procurement.
Generally, the Government Accountability Office sides with the agency and declares that the agency acted reasonably in picking the lowest priced bid. The agency couldn’t justify spending the extra money for the higher bidder’s solution.
It seems to me that companies face a couple choices.
You can go all in on a technically superior solution that will justify a higher price.
Or you focus solely on your costs, deliver an acceptable solution at a price lower than anyone else.
Of course, I’ve cast those two choices in extreme terms. The reality is somewhere in between. Just because you have a great technical solution doesn’t mean you don’t have to pay attention to your costs.
Ditto for the companies that pursue a price-focused strategy. Lowest price might be the top priority, but that doesn’t mean that you can’t invest in new technologies.
The right balance between those two extremes needs to be struck. That’s the challenge that these GAO decisions highlight for me.
Establishing your differentiation – and a differentiation the customer is willing to pay for – remains one of the biggest challenges companies face in today’s market.
Finding that differentiation means understanding your customer, their mission and their needs as well as being able to identify the right solutions that support the customer. The goal is not finding something that wows them, but something that makes their live better; something they can’t live without and can only get from you.
You also need to understand what your customer values. Do they want something new and innovative, or do they just want a refresh of their current state and to keep moving forward?
The answer to that question should greatly inform your strategy. It might mean you change your bid or it might mean you walk away.
So, at the end of the day is it best value or lowest price? One answer is: It depends. The other answer is: Both. It is up to you to decide which is right for you.
Posted by Nick Wakeman on Jul 22, 2016 at 10:09 AM