PROCUREMENT METHODS

Procurement Methods, Tendering and Competitive Offer for Contractors to Tender

Abstract

Less than one in 10 large Management Information System (MIS) projects succeeds. While the procurement process is not the only factor known to contribute to this high failure rate, it has been consistently identified as a source of difficulty. Knowing that procurement contributes to difficulty, however, is not useful if the reason it does so is not also known. This article analyzes procurement's contribution to failure, and describes the reforms needed to improve opportunities for success. The problem stems from the wide use of tender theory procurement (competitive bidding), and the invalid assumption that a specification can provide the basis for making value-oriented MIS buying decisions. In addition, tender theory procurement interacts with the MIS project environment to create an ethical hazard that makes it almost impossible to succeed. The reforms needed to overcome these problems are substantial. They require that tender theory be set aside and replaced by partnering-oriented procurement methods.

Procurement Methods, Tendering and Competitive Offer for Contractors to Tender

Introduction

In 1992, the United States General Accounting Office (GAO) reviewed Management Information Systems (MIS) projects and concluded: Developing and modernizing government information systems is a difficult and complex process. Again and again, projects have run into serious trouble, despite hard work by dedicated staff. They are developed late, fail to work as planned, and cost millions - even hundreds of millions - more than expected. The results, in missed benefits and misspent money, can be found throughout government (Day, 2005).

Failure is not confined to government. In 1994, the Standish Group presented these alarming statistics: only 16.2 percent of all MIS projects (less than 9 percent of large-company projects) are completed on time and within budget, with all required functions and features. Over 52 percent of projects are over budget, late, and offer fewer features and functions than originally specified. Almost one-third of projects (31.1 percent) are canceled. The cost of this failure is staggering. The Standish Group estimated that $81 billion would be spent in 1995 by American organizations for canceled projects, and that an additional $59 billion would be spent for late projects.

Until recently, MIS project failures attracted little systematic attention. Now, however, attention is turning to the causes of failure and the steps that must be taken to improve opportunities for success. Several reports have indicated that failure cannot be attributed to a single factor, and that improving opportunities for success will require action on several fronts.

Purpose of the Study

* examine the role of procurement as a contributor to the failure of MIS projects

* provide an analysis of how procurement contributes to failure

* describe the procurement reform required to improve opportunities for success

It is not the contention of this article that procurement reform will, by itself, address all the issues that confront MIS projects. It is this author's contention, however, that procurement reform is vital, and unless it occurs, other necessary improvements will have limited impact on the overall success of MIS ...