Survey shows communication high priority when firms award contracts

(This article originally ran in The Colorado Springs Business Journal, Colorado Springs, CO, another Dolan Media publication).

Price is not the No. 1 priority when U.S. firms are awarding $1 million or more in contracts for outside services. Price is not even among the top 10 most important reasons that companies choose a supplier or provider.

In a survey of 700 worldwide executives, with 30 U.S. executives responding, price ranked the lowest among bid considerations, according to Rogen International, a business consulting firm that helped Australia land the Sydney Olympics.

The annual Rogen survey, over the past 10 years, has found that communication and persuasive elements of both oral and written presentations have more impact than the attributes of the solution. And the findings are related to a cross section of businesses that include finance and banking, Internet technology, manufacturing, pharmaceuticals, advertising and media.

Bob Wiesner is the managing director of Rogen's U.S. operations, which is based in New York City. Wiesner said Rogen focuses its expertise on high-stakes communications, new business presentations, specific event consulting, initial public offerings, and training and presentations for senior managers and top-of-the-ladder business leaders. Rogen works with large corporations, small businesses and startups. Wiesner has been with the company for 10 years.

What I take away from this survey, he said, is that client references and price are less important than what executives would like to believe.

He said a client reference means the bidding company did a good job for that particular client, but it's not apples to apples in another contract situation. It's the solution that worked for one guy, Wiesner said.

However, a company's reputation, which is No. 4 on the list of reasons U.S. firms award contracts (73 percent of executives agreed), is imperative to the project's success or the quality of materials needed.

A reputation built over time on the basis of the number of projects and solutions that tells the buyer or decision-maker that the seller or provider can do what he says is more influential, Wiesner said. It's a sense of belief.

Sixty-seven percent of the executives said it's important (No. 9) that bidding companies demonstrate how the client and provider would work together in a contract situation.

It's no surprise regarding relationship building, but it's about the purpose the relationship serves, he said. The relationship is important if it's going to bring results, but I won't give it to you because you are my friend, and actually friendship might be too much of a risk. The relationship aspect has to be about the ability to craft a solution.

The third priority that 80 percent of the executives listed is the bidder's ability to listen to the client's goals and needs. Although Wiesner said problems develop when costs have escalated and time tables are not met, he said the No. 1 reason why contractors fail to satisfy the company is not listening to what is needed.

Wiesner, who said he has worked with some of the largest advertising agencies in the country, said that without question, the No. 1 reason that contracts fail is that the agency stopped listening. If a provider hasn't understood the problem or needs, a downward spiral begins.

The sixth reason that 70 percent of the executives gave for choosing contractors is their overall understanding of the client's business.

There is a tendency to believe that you need to have industry experience or someone on board who has experience in the industry, like tourism or telecommunications, where you are trying to provide services, he said. However, knowing the ins and outs of the company's internal business is not as important as people think. Just because you've spent your entire career providing services or solutions for let's say pharmaceuticals, it doesn't mean you can't go after the telecom industry.

What the client wants is the expertise in the solution you are offering, whether it's setting up a network or bringing in more customers.

Wiesner said a bidder doesn't have to be an expert in aviation to set up a marketing plan or an advertising campaign. Find a way to present your capabilities so they are relevant to every industry, and it will broaden your horizons, he said.

The No. 1 factor in awarding contracts is the overall quality of the supplier and provider - 90 percent of the respondents concurred. In the No. 2 spot (important to 80 percent of the executives surveyed) was the bidder's ability to demonstrate enthusiasm and commitment. Seventy percent said initiative was important (No. 5), 70 percent listed demonstrated confidence, and 67 percent recorded demonstrated creativity in presenting solutions as the sixth and seventh reasons for winning the bid. The last reason listed was showing evidence of capabilities (67 percent), such as case studies.

Wiesner said that even if a company wins a bid based on the best price, adding value to the relationship means delivering more than price. Otherwise, he said a company will constantly be in a rebidding situation with pressures to keep prices down or lower them.

Wiesner said government contracts are more likely to go for price first. The U.S. Air Force spent $36.5 billion in fiscal year 2004 on research and development, tests and evaluations, and procurement contracts. Although cognizant of taxpayer dollars, price wasn't the uppermost reason contracts were awarded.

Michael Maglio is the chief of the Contracting Policy and Implementation Division of the U.S. Air Force. Maglio said the Air Force contracts or buys services based on a continuum of complexity and risk. With services that are commercial in nature - for which there are many sellers and buyers, such as waste disposal - price is a more important factor, he said. When the continuum extends to the most complex system or takes on a technical aspect, the Air Force determines its contractors based on four areas.

Maglio said mission capability, or how well the company can meet the requirements for the project or mission, is the first consideration.

Second, past performances are scrutinized and thoroughly researched. We find out as much as we can that's relative to the things we are buying and then make a judgment on how they have done work in the past, he said.

Third, the Air Force looks at risk factors. If someone says, 'I can sell you something that flies to the moon in a half-hour,' that means risk, he said, so we assess that risk. And he said high risk doesn't mean the company won't get the contract.

Last, the Air Force looks at price.

Maglio said the Air Force integrates and balances the four areas, looking for the best value. It may or may not be the lowest bidder.

He said the Air Force also is socially and economically responsible to set aside opportunities for small businesses, which includes disadvantaged businesses. We want to make sure small businesses get a piece of the pie, he said. To make certain that small businesses are aware of projects, the Air Force advertises its procurement opportunities more than $25,000 on the Internet at http:/ /www.FedBizOpps.gov.

Referencing the Rogen survey, Maglio agreed that contractors don't have to fully understand how the military works to apply or win a contract. It depends on what the Air Force is acquiring, he said. If the contractor has to continuously work with the Air Force, there is an advantage to knowing how the Air Force is structured. However, experience with other federal agencies or large entities could suffice.

What about creative solutions? Maglio said dealing with Air Force contractors is fairly prescribed.

He said: Sometimes you are seeking out-of-the-box solutions, and you might get additional credit for the creative solution. But Maglio said in the end, the first priority is that the company has an understanding of what needs to be done.

What about creative presentations in relation to military projects? Maglio said the more complex the requirement, the more documentation is needed, which may include an oral presentation. However, someone who wholly articulates in their presentation isn't going to knock our socks off, he said. We have a fiduciary responsibility to the taxpayer, which is as important as making sure we are getting the most for the taxpayer dollar.

Corporations, too, want to get the most bang for their buck. Judy Cara, community relations manager for Intel Corp., cited Intel's Web site information regarding its commitment to equal access for service providers.

Intel lists four objectives that determine the company that is best suited for its needs: seeking suppliers through sound business principals to maximize results and ensure higher quality at a lower total cost; identify qualified, world-class suppliers who can respond to fast changes in design and manufacturing strategies; build relationships with other companies to help identify potential world- class suppliers; and investing in supplier education, outreach and developing business relationships.

Wiesner said organizations that want to win contracts must interact with prospective clients early and often by building rapport, demonstrating quality and making the prospect comfortable that the solution or services will be delivered.

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