Money is never burnt, it just changes hands

Unserious quotes and conclusions cost companies serious money – for nothing.

Money is never burnt, it just changes hands

November 13, 2015 / Tobias Riege / Editorial

“Our discussion may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation.”

— Source: http://investor.oracle.com/files/events/2010/safe-harbor-080331.pdf

While investors expect and demand serious information regarding financial forecasts according to e.g. the SEC (U.S. Securities and Exchange Commission), customers regularly expect or demand highly speculative estimates based on requirement specifications that are often – unconsciously – incomplete or overstuffed with contingency features which will never be used.

Quotes on this basis cannot be precise or reliable, let alone serious. But many companies regard a true and fair answer to this kind of requirement as unsatisfactory or indicative of a potential vendor’s inflexibility. The opposite is true. A serious supplier will never submit speculative offers based on promises he knows in advance he cannot deliver on. This applies to the three critical scores – cost calculation, timeline targets and desired quality and volume of solutions.

It is a simple breakdown of eventualities. If a serious vendor includes these eventualities in his quotes – clearly stating that final cost will be based on real, measurable effort – he finds his offer regularly disqualified as over-priced and himself as a loser of tenders. While winners, having undercut competitors quotes, score the deal and subsequently introduce post calculations far exceeding original  estimates.

Practice has proven that timeline targets – due to unpredictable incidents – tend to be difficult to achieve, there is an obstinately recurring demand to deliver in the shortest period of time, meanwhile, the length of time between first quote and final decision frequently exceeds by a considerable margin the time allowed to reach go-live date.

Accomplishment of satisfactory quality and quantity of solutions is a result of flexible but serious cost estimation and realistic timeline computation. To achieve the desired results, this triad must be harmonized.

One would expect decision-makers to seek optimum results in exchange for reasonably fair pricing (also in the eye of the supplier), but the reality is rather different. Shallow promises go hand in hand with highly speculative and un-serious quotes. These are – time and again – accepted to finally end up in endless or abandoned projects and financial disasters.

One gets the impression decisions are based on beginnings, not ends. A promising start seems to be more important than a successful completion of a project. These unhappy ends or – even worse – never ending stories earn a lot of public attention when projects of national or global importance become the focus of investigative media, but in reality they take place every day compromising the future strategies of countless institutions and companies. Not infrequently, money is spent for nothing, for solutions that won’t work, for projects unfinished. While customers seriously suffer from wasted money with no results, there is always someone who will rub his hands and make a profit. Money is never burnt, it just changes hands.

The solution to the problem is as easily said as done, simply don’t trust in promises and undercutting competitions, but look for transparent disclosure and serious calculation based on realistic quotes. A tender should never be just about money. It is also meant to separate the wheat from the chaff by either by qualitative selection procedures or contractually guaranteed commitments whereby it should be noted that sometimes no commitment is a hard and fast and more serious alternative. With these simple rules in mind, customers will be better  off, and so will their company, their targets – and their hard earned money.

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