All of Government Round Two: The “VFM” Factor

Ding Ding.  Round Two of New Zealand’s “All of Government” recruitment tender is about to get underway.  The impressive communication channels between MED and the bidding recruiters have hummed into life once more and further instructions sent out over the past week.

The pertinent points:

• 82 recruitment firms submitted tenders to provide external recruitment services to All of Government.  Following the Recruitment Centre of Excellence evaluation of respondents’ answers and tick-box “robust” measurement of customer satisfaction, this has been whittled down to 59 firms.
• The next stage is a surprisingly sophisticated live, online, Dutch Auction kind of scenario.  For whatever “lots” you have offered to recruit for (from Perm / Contract / Temp in Admin / IT / Corporate) respondents have the opportunity to reduce their price, or percentage, or discount levels, downwards.  The intriguing part is that you will know in real time where you rank in terms of price against the other bidders in your “lot”.  Depending on which of the lots you are bidding within you may be up against 18 – 29 other bidders.
• Eventual award of positions on the panel will be based on a final “value for money” (VFM) score on a lot by lot basis.  It is this VFM score that will determine your success in being awarded a contract to supply to AOG.  To be fair to the MED, this is consistent with Mark Ansell’s claims that this is “not just a cost cutting exercise” as it will mean that respondents who score highly on Quality (measured by capacity to supply services, capability to do so, and customer feedback scores) can get as high, or higher, a VFM score than firms who submit lower bids on the Price category.
• There is a final “sealed bids” stage where bidders can continue to reduce their proposed fees and percentages but will no longer be able to see your ranking against other bidders.

Firstly, I take my hat off to the Government for this adoption of technology, who say that:

“e-negotiation provides the CoE with the opportunity to negotiate price in an efficient and expedient manner whilst giving respondents the opportunity to have visibility of their pricing relative to the market.”

I wonder if they realise just how clever they have been in adopting this method of pricing negotiations with the recruitment industry, though?  We in recruitment are probably one of the most competitive bunch of bores in the entire business community.  We hate to lose.  At anything.  I can remember watching the bidding building up on our Mutsy Stroller push chair recently on TradeMe where at $1 reserve, I had bet my wife it would go above a certain amount and there was no need for a reserve price as that made things boring.  The sense of vindication, and victory, was immense when it went beyond the amount we had originally wanted as a reserve or buy-now price.

I know, I need to get a life, but I can easily picture the scene on 4th and 5th July as senior recruitment figures engage in a battle of Russian roulette with their bidding strategies.  Firms who feel they have sharpened their pencils to as fine a point as possible will be further induced to further lower their pants when they see they are only ranked 25th in the “lot” on price.  MED have actually missed a trick in not revealing the names of the respondents who are ranked higher, as this would undoubtedly ratchet the competitive bidding up several notches more.

In fact, this is probably one of the most interesting exercises you could ever subject the recruitment industry to.  Despite how some may view us, we are a professional services industry, and there are many highly professional players in the sector to balance out those CV-spamming non-call-returning cowboys.  Many of us talk passionately and earnestly about the value we can provide to our clients and the levels of costs hidden in our fees that appear so high to those on the outside looking in.

Well now it’s time to put your money where your mouth is.  How low will you go?  Have you left any breathing room at all or is further discounting going to necessitate changing the entire way you deliver your service, and what kinds of recruiters you will be able to afford to do that.  Do you really value your service so highly, and have so much faith in your “Quality” score, that you will leave your price ranked in the double digits?

Of course, this is the reason MED are not revealing exactly how many respondents will form the final panel, saying only that:

“The Recruitment CoE expects significant further consolidation to take place post e-negotiation.”

To put a number on it now will give comfort to firms sitting around the higher ranked numbers, that they may still be invited through to further negotiations and consolidations, and to leave their bid where it is.  Perhaps we can look to legal services as a guide, where an initial 144 respondents were eventually whittled down into 10-11 panel providers in each of the 6 legal categories.

What we have here is an opportunity now for the Government to actually create a recruitment panel based on qualities and values never before successfully achieved in the other big corporate PSA’s around New Zealand.  If, after this process, we are left with a panel of recruitment firms with scores truly and accurately based on Value rather than Price alone then that is a plus.  But if that score is then communicated to the Participating Agencies who will be looking to engage with external recruitment suppliers, and who then actually use that score to choose which recruitment agency to engage with, and whether to give them a role on an exclusive basis, then this could really be quite revolutionary.

Sadly, though, there are caveats remaining that threaten to ambush this potential PSA utopia.  Imagining a system where your final bid is what you stick with when you are finally awarded a place on the panel is dampened by comments like:

Whilst the Recruitment CoE reserve the right to seek uniform pricing following e-negotiation we also recognise the opportunity in allowing respondents to differentiate their value offering to Eligible Agencies through price.

Furthermore one of the biggest bones of contention amongst providers of legal services to Government in their own recently-awarded AOG contract is the ability of firms in other “lots” who didn’t bid for certain areas of law to be able to offer their services under those other “lots” that they didn’t even originally bid for, just by virtue of their being on another part of the panel.  In the recruitment world this would equate to an IT specialist recruiter awarded a place on the IT Contractors “lot” being able to offer their services for roles coming up under Admin Temps even though they didn’t originally bid for it.  Worryingly, the MED’s default position on this is:

“…where a Participating Agency raises a Recruitment Services Order (or similar request) for areas not tendered by a successful provider, that provider would not be prevented from fulfilling that RSO in lots they did not originally tender for.”

I do take my hat off to MED for conducting a fair and well-communicated tender process so far, and this e-tender stage will expedite further rationalisation on an open and transparent basis.  A panel of providers with different price levels, but also Value For Money scores for hiring managers to take into consideration when appointing a recruitment supplier, sounds like something we would all welcome.  Imagine even having a regularly updated VFM score based upon how successful you are at delivering on roles you take on?

Sadly, though, I fear that even after all this there will just be uniformity of pricing for the ones who are able to go that low.  At that stage it will be a matter of panel providers building relationships with hiring managers and internal recruiters within Participating Government Agencies to make sure they send work their way rather than to other panel providers.  So kind of like back to square one, but for less money.  “Mission Accomplished” Mark Ansell would say.

A watershed moment in our industry beckons, particularly for Wellington recruiters.  How high do you believe your Value For Money score can be?  How much do you believe what you have said to countless clients over the years?  How low are you really willing to go on Price whilst still maintaining that conviction?

We shall see.