Are you responsible for procurement? Then you definitely had a certain moral pressure on the choice of minimum prices. But is it always wise to prefer the cost to all other factors?
From the very beginning, the price criterion monopolized the decision-making space for determining the winner. Its priority is noted in the law itself, where it is said that the price must either completely prevail or have a weight of at least 70% at the time of the final decision.

Maybe this is the great homespun truth?

Indeed, choosing the cheapest proposition may seem like a sensible action, especially in the current economic environment. In addition, the tender scheme was designed to minimize costs and find optimal solutions.
However, many people forget that the "optimal" solution is not equal to the "cheapest" one. It goes without saying that the price is not always directly correlated with quality. Of course, a good product cannot be suspiciously cheap, as the supplier must at least cover the costs of its manufacture. But many manufacturers adhere to their personal vision of determining the price of their products and most often it is simply unreasonably overstated without reference to quality.

Complex procurements

It becomes especially interesting when procurement implies the performance of some complex services, research or work. Here, the price will tell you very little about what performers are going to give you. It is important to consider other criteria:

payment terms;
deadlines;
guarantees.

The current legislation does not provide for the concept of complex procurements, so customers themselves determine this degree, based on the scale and specificity of the purchased goods or services. The nuances of such procurements are not exhausted by the need to apply non-price criteria. Concentration on the financial component makes it difficult for all participants to consider the research aspects of procurement, which could open ways for new proposals and means to solve the set tasks.

Time to save and time to spend

The old adage “you get what you pay for,” of course, is not always true. However, the company, entrusting the purchasing department with buying something, wants to have unquestionable guarantees that they will receive exactly what they are paying for. Is it possible to somehow escape from this vicious circle? Why not give it a try.

Set the required quality level in advance

We’ve all come across tender deals and have often seen suppliers arrange a real battle to reduce bids. This is not because they underestimate themselves, but for well-defined reasons. However, if you really need professional contractors, subcontractors and materials, then it is better to use the principle of reasonable investments. Moreover, it makes sense to initially define the required level of quality of work and exhaustively describe it in order to immediately exclude suppliers who are unable to provide services of this level.
Of course, if the work is not difficult, and the contracting team is experienced and skilled, the cost can easily become a decisive factor. If the project is more combined (a tighter schedule, restrictions on the job, complex construction or specific standards), then the cheapest tender will be riskier and is unlikely to pay off in the long term.
Analyzing the procurement activities for several years, we can conclude that the participants who reduced the average price by more than 25% fall under the category of dubious, and cooperation with them can be risky. Thus, it makes sense to focus on those who offer a price 10-15% below the average one.

The low cost

Choosing the lowest-cost tender most likely results in:

delays in the performance of the ordered works;
the presence of non-professional subcontractors;
the cheapest and low-grade materials;
redundancy in the number of performers;
additional costs due to overloading performers, delays and problem solving;
cost overruns resulting in complaints and disputes;
possible financial and reputational damage to the company.

Look for collaborative value in higher bids

To select the best performer, it is wise to formulate tender questions that will generate answers that affect the collaborative value since they will lead to real savings while maintaining quality. In addition, during the evaluation of bids, look for answers that demonstrate the bidder’s commitment to a reasonable balance of price and quality.
A quality approach should bring savings, keep the project within the budget and ensure its timely completion, while a lower price can be much more expensive.