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How Peer Reviews Can Help Solve These Two Common Procurement Challenges
Bad experiences with suppliers. We’ve all had ‘em, right?
The answer is a resounding “Yes!” according to a 2019 survey conducted during a session at the NIGP Forum. In fact, 68% of government procurement officials reported having a bad experience with a supplier within the past year.
Whether that poor experience comes from disappointing quality, negative customer service, or failure to deliver on time, negative supplier experiences all stem from the same truth: a discrepancy between expectation and reality.
Here are two common procurement challenges with real-world examples that you can learn from:
Procurement Challenge: Lack of Insight into Subcontractor Performance
As a procurement official, you work hard to secure contracts with the supplier best suited for your project. You worked with internal and external stakeholders to understand the unique needs of the end user; craft the perfect RFP; and review and negotiate contracts with bidders. After all that you are able to award the contract to a supplier you believe will deliver the best results.
In many cases, the chosen supplier then awards portions of the job to subcontractors, especially in large procurements with complex requirements. Subcontractors are particularly common in construction, IT implementation and support, and many service-based procurements. While this practice theoretically creates efficiency and increased specificity, the subcontractors have not been vetted with the same level of scrutiny.
Prime contractors are held responsible by the government agency to deliver the agreed upon product or service. However, the subcontractors they hire report only to the prime, a relationship determined in a commercial agreement. This dynamic puts a premium on the prime’s ability to assure subcontractor quality. Their history of subcontractor management is critical to evaluating a supplier.
Falsified Concrete Data in Washington, DC Area Construction Project
Let’s look at a real example: in 2013, Maryland-based Capital Rail Constructors won a $1.18 billion bid to build the second phase of a 23.1 mile rail extension in nearby Northern Virginia. Over the next seven years three different concrete quality issues arose with three different subcontractors. The issues culminated in 2018 with the discovery of flawed concrete panels inside the station.
The subcontractor responsible, Universal Concrete Products, was found to have intentionally falsified data starting in 2015 to show that the concrete met inspection requirements. Also true: inspectors later found that equipment at Universal Concrete Products’ facility was not properly calibrated, a fact that would explain an improper water-to-cement ratio. Which begs the question – while Capital Rail Constructors did not falsify the data, should they have caught this costly issue earlier?
The details of this story are useful for any agency considering Capital Rail Constructors for a major project that requires subcontractors, which highlights why sharing and accessing candid supplier experiences is an essential component of making informed decisions.
Procurement Challenge: Misleading Marketing and Product Information
As a procurement official, supplier bids are evaluated based on the information available. Product details – where the good is manufactured, the quality of the parts, installation time, etc. – are provided by the supplier. Evaluating supplier references is the check and balance in place to hold suppliers accountable for the promised product or service.
More and more, the practice of suppliers providing references has proven to be a flawed method of supplier accountability. By having the ability to select their own references, suppliers hand-pick their happiest customers.
For this failed system to work the word of suppliers must be accepted at face value. This process makes it possible for suppliers to make marketing promises that they cannot deliver on. Because procurement officials often only hear from cherry-picked references, this deception can continue from one jurisdiction to another.
Early Deterioration of Turf Fields Reveals Decade-long Deception
Here’s another real example: back in 2005, FieldTurf, the nation’s leader in artificial fields, launched a ‘revolutionary’ new style of turf field made out of Duraspine. The fields were touted as the highest level of field technology, incredibly durable, and had an expected life of a decade or more. The fields exploded in popularity. Over the next decade the company would go on to sell over 1,400 fields, mostly to towns, cities, and public school districts around the nation. FieldTurf generated over $500 million in revenue.
The fields were touted as a major cost saver since a field maintenance staff was no longer required. There was no grass to water and cut. No lines to paint. No dirt to rake.
The fields were touted as a major cost saver since a field maintenance staff was no longer required. There was no grass to water and cut. No lines to paint. No dirt to rake.
As early as 2005, and throughout the next decade, customers raised concerns to the company regarding premature deterioration.
In 2016, NJ Atlantic Media conducted a six month investigation of FieldTurf’s Duraspine fields around the nation. The report revealed several key facts:
- FieldTurf executives knew early on that the fields did not possess the quality of durability promised to customers
- After making this realization, FieldTurf did not adjust their pricing, marketing, or sales strategy to reflect the actual expectations of the product.
- FieldTurf customers were not made aware of the levels of deterioration and additional costs associated with maintenance being experienced by other FieldTurf customers around the nation.
FieldTurf has been held accountable in several ways: as a result of the investigation, more than 15 lawsuits have been filed against the artificial field company. And, more than 1 in 5 Duraspine fields have been replaced under warranty, at the cost of FieldTurf.
If procurement officials had access to candid supplier experiences could they have avoided doing business with FieldTurf in the first place?
The Impact of Sharing Candid Supplier Experiences
One common theme on the two examples is that both suppliers' bad performance stories were brought to light for the public to see — one by a lawsuit, one by an in-depth investigation. So, it should be easy to know these horror stories and avoid these suppliers.
But for every poor performance example that is in the paper or on the local news, there are thousands that aren't. And that's why Procurated is so powerful, because we democratize the information needed to make the best possible decision about a supplier based on their past performance, and we make it available to everyone across public procurement.
Published on Oct 14, 2020
