The QBS Story
What Is QBS?
QBS is a procurement process that has proven that buyers get better outcomes and greater value by excluding price as an initial evaluation criterion when hiring a professional services firm for projects in accounting, architecture, engineering, consulting, IT, research, communications, design, law, etc. With QBS, firms are selected based upon their qualifications to do a project, instead of their low bid.
Here’s why including price as even a small part of the evaluation process gets buyers and taxpayers low value and higher costs….
What is QBS?
When price is even a small part of the evaluation process vendors know that if they aren’t one of the lowest prices – regardless of how qualified they may be – they will not win the project.
This forces all vendors to interpret the project in it’s least viable form and to provide stripped down pricing for the least viable project knowing that the real cost of the project is likely higher and will be achieved using change-orders after they have won the project – a situation that creates project cost overruns and turns buyers and vendors into adversaries instead of partners.
This does not mean that vendors are being deceptive – it is simply a consequence of having price as a part of the evaluation. It forces vendors to comply by writing stripped down, low priced proposals which lead to inaccurate project costs and compromised projects. Ever wonder why a new building awarded for construction at $100 million becomes $150 or $200 million by the time it is finished? Likely one of the most significant contributing factors, was that it was awarded using a process that included price as one of the evaluation criteria. Don’t blame the builders and designers. Blame the procurement process.
By removing price, the QBS process means vendors focus on demonstrating why they are the most qualified firm to do a project knowing that if they are selected based on their expertise, they will then be able to discuss and negotiate a REAL price and scope, instead of blindly providing an UNVIABLE low-bid.
- It is important to remember that the buyer is free to cease negotiations with the most qualified vendor and move onto discussions with the second most qualified firm if they cannot agree to a price and scope with the first. This protects against overcharging that many fear will happen if price is not part of the initial selection of the firm.
What is NOT QBS?
“Best Value” as a generic procurement term is usually just another phrase for “low-bid RFP” and is not QBS
Any RFP that includes price as part of the evaluation process is not QBS – even if qualifications are part of the evaluation process (no matter how low price is weighted)
Any procurement methodology that evaluates price as part of the selection process is not QBS
While low-bid processes are appropriate for commodity goods, they are inappropriate, ineffective, and far too costly for use when procuring professional services that are custom, complex and costly.
YOUR HR DEPARTMENT HAS BEEN USING QBS FOR DECADES.
SO WHY ISN’T YOUR PROCUREMENT DEPARTMENT?
When your organization hires new staff the process usually looks something like:
- Define the expertise that is required
- Define a salary range
Advertise for candidates
- Assess the resumes (a two or three-page summary of expertise)
- Interview the top three
- Make an offer to the most qualified candidate
- If you can’t come to terms with the most qualified candidate then terminate the negotiations and make an offer to the second most qualified candidate
Let’s assume your new hire makes $100,000 a year and you expect them to stay for about 10 years. You just made a $1,000,000 hiring decision and you never asked any of the candidates to provide you their lowest price.
If we can do that with staff why can’t we do that with contract professionals? QBS aims to change that.
Benefits of QBS
Hiring professionals based on qualifications instead of low price benefits all Canadians.
Benefits to Buyers of Professional Services:
- Easier identification of the most qualified vendors
- Collaborative instead of adversarial vendor relationships
- More accurate project estimates meaning fewer project cost overruns
- Lower procurement costs
- More innovative project results
- Reduced life-cycle cost of projects
Benefits to Vendors of Professional Services:
- Reduced sales costs
- Collaborative instead of adversarial client relationships
- Opportunities for innovation and life-cycle planning