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Procurement Perspectives: How best to monitor contractor performance fairly?

Stephen Bauld
Procurement Perspectives: How best to monitor contractor performance fairly?

I would most likely be one of the biggest proponents of measuring vendor and contractor performance. Having said that, it must be done in a manner that is fair to the owner as well as the suppliers, without any bias by the evaluation person or team.

Too many times in my purchasing career, I have seen unfair assessments done on contractors and vendors because the evaluator had an axe to grind with the specific company being assessed using a performance review.

Monitoring of supplier/contractor performance is the latest rage, both in the public and private sectors. Done properly, it is a great tool to assess how to work with certain suppliers moving forward. Done poorly, it can destroy the reputation of good contractors, and unfairly promote the work of subpar suppliers. It is quite possible that poor performers have a friend inside the organization that are willing to promote poor performing vendors for additional work, and yes that does happen on occasion.

Sadly, most suppliers are not privy to how they are assessed via performance reviews, and only find out after they are cut off from working for that owner and start looking for reasons why they are no longer bidding on projects. To prevent any skullduggery in this process, I would offer a few suggestions to level the playing field for everyone.

As I have stated in past columns, measurement of course, is only the first step. The results obtained must then be properly factored into the procurement decisions. Here again, however, I can see certain risks in excessive reliance on a competitive bidding process that focuses entirely on sticker price.

One-off purchase orders, short-term contracts, and a consistent emphasis on competitive bidding tend to foster an adversarial relationship between supplier and customer. Such a relationship may jeopardize the highest levels of supplier performance. Accordingly, a supplier performance monitoring program is most likely to be of value where there is an enduring (i.e., medium or long-term) supply relationship in place.

In my experience, profit maximizing suppliers will deliver above average performance when such performance influences the chance of contract renewal. In the case of a purchaser who places no or little value on past performance when deciding upon choice of supplier, there is no incentive to invest time or resources in providing top level customer support. In times of product shortage, the indifferent customer is serviced last.

It follows that in order to improve service levels, municipalities as well as private sector companies, must signal to their suppliers and contractors that the quality of service matters. This can only be done by making prior service quality a relevant factor in the award of any contract, public or private.

In broad terms, the process of supplier evaluation can be loosely compared to the annual appraisal process for employees. Again, if your boss is not a fan of your work, the likelihood of you receiving a good performance review that is unbiased is very remote. Much as such appraisal is best when carried out in a fair and systematic manner, with clear direction being given to the employee, the same can be said for ongoing supplier appraisals.

My personal viewpoint on vendor performance reviews is very simple. They should be conducted by a team of possibly three people that work with that supplier on a regular basis. That way if one person has a bias against the company, or a person working for that organization, the other two can bring a voice of reason to the review. This process involving three people stops, or at the very least cuts down on the unreliable single viewpoint of one bias evaluator.

I believe that performance reviews will become a common feature for the future, for vendors that work with specific owners on a regular basis.

 

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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