The crucial importance of cost reduction in supply relationship management has been highlighted by the verdict this week by De La Rue not to challenge the decision to grant the new passport production contract to its European rival, Gemalto.
A De La Rue spokesman told the BBC that, after evaluating all options and exhausting all possible avenues, four weeks of focused consideration and legal advice had concluded with the company deciding not to challenge the award decision.
There were, it seems, insufficiently strong grounds to justify the challenge.
The spokesman said: “We remain both surprised and disappointed by the decision of Her Majesty’s Passport Office to award the contract to a competitor. We believe De La Rue submitted the highest quality and technically most secure bid.”
What he omitted to mention, however, was that quality and risk are merely two of the three core components of a supplier and bid evaluation. Cost, or more specifically the need for cost reduction, is the third, and this appears to have been the hurdle De La Rue stumbled upon.
De La Rue’s only hope was to argue that Gemalto’s bid was unrealistically low but, as its lawyers will have explained, this is extraordinarily hard to prove. In pursuing that path, De La Rue may well have had to expose details of its own cost structures, which is most unlikely to have been a comfortable experience.
The Home Office and the Passport Service procurement team is to be congratulated, in fact. Lawyers will have pored over the procurement process and pounced on any weaknesses.
Yet, the proof of the pudding lies in the eating. Gemalto still has to deliver on its bid. There was quite a media storm when the Met Office lost the BBC weather contract. The new supplier, MeteoGroup, has, it turns out, done a good job. But if it had failed, that storm would have turned into a full-scale tornado of outrage.
It is imperative that Gemalto succeed, or face the incendiary blowback if it fails.
Ed founded Odesma in 2014 with the explicit intent of creating a new kind of procurement consultancy founded entirely on cloud principles. Deploying best-of-breed subject matter experts alongside the best on demand technology to deliver rapid and effective change for customers.