IT and business procurements should be fairly empirical exercises, free as far as possible from subjective and personal judgements. However, given our innate human fallibilities, that’s rarely the case. Given the importance of IT procurement to housing providers’ operations, we thought it would be enlightening to consider some of the most common procurement fallacies.
• Sunk costs – These are costs that you’ve already paid and can’t get back, with the fallacy resulting in IT or business projects being continued only because of the previously-spent (sunk) costs, in spite of the intended benefits no longer likely to be achieved. To use an everyday example, imagine you’ve bought (non-refundable) tickets to a film but after watching it for ten minutes you decide that you really aren’t enjoying the film; do you stay until the very end because you’ve paid for the tickets, or leave and use the remaining time to do something more enjoyable?
• Confirmation bias – We each have a tendency to focus on things that reinforce our existing beliefs and ignore evidence or arguments that undermine those beliefs. In the context of procurement, we might believe, for example, that ‘well-known IT supplier’ simply must be better than one we’ve heard less about; we would then frame our post-hoc procurement arguments accordingly, in spite of what might be in the respective suppliers’ tender responses.
• False dilemma – This is the misleading idea that the procurement will be sub-optimal, regardless of the decision-making process. For example, when selecting a potential IT supplier, you might think or be told, “If we go with the lowest price bid, the service will probably be terrible; and if we decide to pick the best service offer, we will pay through the nose.” The goal of each procurement exercise should be to find the best overall value for the proposed price (i.e. the optimal TCO); the value is a fair price that we are willing to pay for the best quality product or service.
• Hasty generalisation – This fallacy is based on applying a small, unrepresentative sample or opinion to a much larger situation. For instance, when deciding which companies to include in the request for tender, someone might say, “We’ve tried to get quotes from this company once before, but their prices were too high, and the quality is questionable; they should therefore be excluded.” This is flawed reasoning (and unethical); no suppliers should be excluded from getting your business just because they didn’t win previous bids.