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A lock-out specification is any requirement that prevents many Suppliers to offer a particular good or service (i.e. locking them out), whilst permitting a selected Supplier(s) to offer a compliant good or service , essentially locking the Buyer in to that particular Supplier.
So let’s say among four suppliers of apples, three Supplies offer red apples and one Supplier offers green apples. The requirement “Apple color: Green” would be considered a lock-out specification favoring only one Supplier.
In the context of procurement, including lock-out specifications can be a strong predictor for the result of tendering procedures, often at the dissatisfaction of locked out Suppliers. And yet - due to the low likelihood of affecting tender requirements after they are officially issued, those Suppliers may stay silent, opting to focus their efforts on more realistic opportunities.
Where do lock-outs come from?
There are many ways for lock-out specifications to end up in tender requirements.
Some end up there by accident - a Buyer, whilst preparing requirements, has unknowingly included it, perhaps believing that the requirement will improve the quality of received goods or services.
In some cases, they are a result of a Supplier convincing a Buyer that the particular requirement is necessary for better contract performance.
In other situations, unfortunately, they are a result of illegal arrangements between Buyer and Supplier agents.
But lock-out specifications as such are not illegal. They are a potent instrument for Buyers to use, an instrument of control in an unpredictable tendering procedure. If the lock-out specification is reasonable and can be substantiated as necessary for contract performance, it can be in the Buyer’s interest to use it.
Dealing with lock-out specifications
The first step to deal with potential lock-out specifications is to understand and spot them. Unfortunately, Suppliers typically don’t label their product data sheet requirements as “Lock-out specifications” (at least publicly - internally they may very well do so for sales training or other purposes). So how can Buyers learn about which requirements are lock-outs?
Your best allies in this case are the Suppliers operating in the same market space.
Suppliers know their industry best, and no one is more motivated to remove unfavorable tender requirements than locked-out Suppliers.
Unfortunately, learning about and removing lock-outs during tendering may be costly and too late.
First, it can prolong or cancel tenders. Second, it can be perceived as an act of incompetence and hurt the Buyer’s reputation. Third, Buyers may face a continuous stream of follow-up requests “If you changed A, you should also change B!”
This is one of many reasons effective pre-tender market research is so important. By engaging many Suppliers at this stage, the Buyer can learn which specifications are generally offered by most Suppliers, and which are offered by a select few.
Even if all Suppliers provide some lock-out specification suggestions, the Buyer can make an informed choice which of these requirements to include, if any, trading tender competition for quality.
So the next time you are told that green apples are best - be sure to ask “Why “ from both red and green apple Suppliers.
See more tips for effective market research in this blog post.
Sorsera platform offers a free tool for performing market research, as well as finding and engaging Suppliers.