The Pitfall of Competitive Bidding

Niina had transferred to work in the public sector. To IT, to be more exact. The mission of IT was to primarily maintain the systems, keep them up to date, handle the training of new users, and most importantly, to handle implementation projects. The local authority was starting up a project for renovating the hour accounting software and the proper competitive bidding had already started.

The plan looked like this: Contract notice includes testing and reporting in completing the project. It would be one of the requirements for the supplier. They would do it like this, because they have done it always like this before. Typically, in the competitive bidding around local authority they use a process of elimination to bring down the bidders to a few that fit the criteria best. Finally, they choose the cheapest one of those few.

Niina was bothered by this already at the beginning of the project, since in the private sector she had faced projects with tight budgets time after time. It was in common with these projects that they had to compromise in some places. The products always need to be finished on time, so they can hardly ever compromise the coding parts. According to Niina’s personal experience, the projects that strive for a general settlement always divide resources from the testing first.

So, what is in common with projects working on a tight budget is that the testing is the first place to have budget cuts, and the one that gets cut the most.

Because of Niina’s strong demands the local authority decided to take a risk. For the first time they attempted a new approach: Niina’s idea was that they have a competitive bidding without testing and then get the testing from a third party. This solution felt like more expensive one to the authorities, though, since there were now two competitive biddings and the combined cost was probably therefore higher than with one case of bidding. Niina nevertheless demanded that they try this approach once and bury it if it turned out to be more expensive.

As a result, the competitive bidding turned out a combined cost higher than a single competitive bidding would have done. The authorities were grumbling that ‘We shouldn’t have listened to that Niina, this attempt turned out costly!’

As the project went on, there were differences to the old process model. The testing gave reports regularly and clear information of the system’s development. The bug database accumulated three times the information the projects normally collected, and the local authority had a straight access to that data. An objective perspective to the product produced more fruit than before. Yet, an advantage in expenses during the project could not be seen.

According to the contract, after the day the local authority took up the system they had 30 days to notify and report bugs. All bugs discovered and repaired after that date would go to be billed expensively by the hour. During those 30 days of grace period, the professional testers discovered a bunch of bugs and of course, bugs that had not yet been fixed even though they had been discovered during the project. All the central problems could then be fixed during the grace period, and of course, without the added expenses to the local authority!

In addition to the straight repair expenses a new advantage in expenses in the project was discovered later on, when the local authority started to renovate their payroll system. There hadn’t been a functional integration between hour accounting system and payroll system before, but in Niina’s model of competitive bidding the tester had been able to account for the system’s further development requirements. The testing had watched over the local authority’s interests by demanding that the supplied hour accounting system’s interfaces had been open for further development. This way, the local authority dodged huge expenses that would have risen from opening the closed interface. Thanks to the quality-cop.

Niina received thanks for her courage to demand changes. This attempt became a good custom in the local authority, which they had no problem to advertise to the municipal manager of the neighboring municipality.

Having everything bid competitively in one go causes unavoidably prioritization between the work. Next time you have a competitive bidding, think carefully are you willing to compromise testing for the benefit of development.

P.S. TestausOSY’s Oulu group had a mini seminar last week about outsourcing testing, which sparked this blog entry to begin with. A member or not, feel welcome to participate in future events. Follow our event schedule here.

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