Consider a company looking to procure external software services. This is a company that manages by objectives and spends time and effort micromanaging costs. In a typical procurement situation, probably a tender for services, their fixation on cost pushes them to select one of the cheaper quotes. This quote happens to be from Big Vendor who Procuring Company lock into a contract to deliver precisely the specification.
Here’s where the fun starts. Big Vendor knows there will be changes to the specification because Big Vendor knows Procuring Company could not have known everything when the specification was written. Big Vendor happily provides a quote that might make a loss because (they can afford to do that and) they know they can charge exorbitant fees for the changes (they expect) to the specification.
What happens next? Big vendor delivers less than Procuring Company specified and argues successfully (on the whole) that the “missing features” (from Procuring Company’s point of view) are enhancements or changes. Ka-ching! In the end Procuring Company pays Big Vendor more than they wanted for less than they expected. Let’s not even go near cancellation penalties imposed by Big Vendor.
Epilogue:
Procuring Company takes precisely the same steps next time. HMG take note!
Partnership and trust will not grow when a business relationship is bound by a contract favoring one party where benefits and risks are not shared equitably.
