Scenario 3: Working both sides of the deal

What is the situation?

A Crown Research Institute (CRI) needs a new IT system. It recognises that it does not have the expertise to write a detailed and technical specification for the system that it can use for the tender.

The CRI hires a specialist consultancy firm to develop the requirements and write the specification and tender documentation on its behalf.

Subsequently, a software supplier asks the consultancy firm to become part of a joint venture to bid for the contract to implement the new system.

Why is this a conflict?

Initially, the interests of the CRI and the consultancy firm were not in conflict. The CRI wanted good quality tender documentation that it could go to the market with.

The consultancy firm’s interest was in doing the work, getting paid, and building a track record that would help make it a successful and sustainable business.

However, an actual, potential, or perceived conflict arises when the consultancy firm joins a bidding consortium. Its interest is now in winning the contract, but the CRI’s interest is in choosing the best supplier.

Why is the consultancy firm’s work for the CRI a problem?

The consultancy firm’s work writing the requirements, specification, and tender documentation for the CRI is a problem for several reasons:

  • The consultancy firm could have or could be perceived to have skewed the specification towards its or its preferred delivery partner’s area of expertise.
  • Having worked closely with the CRI, the consultancy firm could have inside information that is not available to others or that is not clear from the tender documentation. This could include the CRI’s plans and what it thinks is important to the project’s success.
  • Having worked closely with the CRI, the consultancy firm may have established good relationships that could lead to conscious or unconscious bias among the CRI staff.
  • The consultancy firm cannot bid for the contract and support the CRI at the same time. Because the CRI lacks in-house expertise, it needs to find another source of specialist support to manage the procurement, but it has fewer and less effective options for finding it.

Management plans that do not mitigate the conflict

The CRI identified some management plans to deal with this scenario. However, the plans do not address the inherent conflict for the consultancy firm.

Proposed management plan Why it does not work
The consultancy firm separates staff supporting the CRI from those supporting the software company with its bid. It is difficult to get assurance that these kinds of separation are operating in practice.
Competing suppliers are likely to be sceptical, so the perception risk is not mitigated.
The consultancy firm signs a non-disclosure agreement for any confidential information it has access to during its work with the CRI. It would be practically difficult to ensure that no information is disclosed.
A non-disclosure agreement also cannot cover information already in the heads of the consultant’s staff. It would be near impossible for them to ignore or not be influenced by this information, even if subconsciously.

What might be a better plan?

Key to managing the potential conflict is ensuring that everyone who tenders has a fair and equal chance of succeeding. This could mean providing the market with as much information as possible to reduce any advantage that the consultancy firm has gained from early or inside access to information.

Another option could be to have informed the consultancy firm that it could not bid for the resulting implementation when appointing it to assist with writing up the requirements, specification, and tender document.

The viability of this option depends, in part, on whether you are embarking on a competitive or collaborative procurement approach. For example, it may be appropriate to engage with providers to co-design a new service delivery model.

However, it is unlikely to be appropriate for a consultant to write the specifications for a commercial project such as a new IT system or a capital build, then compete with other private sector firms to deliver the project.

Either way, it is important to be clear with the market at the start of the process.