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Sunday, August 05, 2007

THE RIGHT THING: THE CONTRACT GOES TO THE LOUDEST BIDDER

After the bids for a recent project came in from vendors, my reader's nonprofit organization awarded the job to the lowest bidder. They weren't obligated to go with the lowest bidder, but they had liked the low-bidding vendor's work in the past and figured that to award him the contract was a smart business move.

They began to rethink that decision after another of their regular vendors, whose bid on the project had been roughly twice as much, pitched a fit. He threatened to contact key stakeholders, tell them that the organization's leadership was withholding business from him and urge them to withdraw their support from the organization. After a moment of polite incredulity, she says, the organization's leaders decided "to just give him the business to avoid the ugliness."

They plan to call him on his behavior once the job has been done, but my reader isn't satisfied.

"Giving him the job prevents the fallout he threatens, which is important to the integrity of my organization," she says. "But it also shows him that such tactics work and leaves my organization open to future abuse.

"From an ethical perspective," she writes, "what would have been the best way to respond to him?"

The issue here isn't the organization's response to the bullying vendor, but rather their treatment of the low bidder. Having told him that he had gotten the job, the organization had an obligation to him to follow through on that promise. If the leaders were going to knuckle under to the bully -- as they had before, my reader acknowledges -- the time to do that was while considering the bids, not after the award had been made. Giving in to a bully is not strictly unethical, but breaking one's word unquestionably is.

Not that giving in to the bully was smart, ethics or no ethics. In their book Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them (Harvard Business School Press, 2004), authors Max Bazerman and Michael Watkins write that a common bias against taking action stems from deluding ourselves into believing that a serious problem is not severe enough to merit action, allowing us to maintain the status quo.

By failing to address the problem of the bully's behavior now, the organization does indeed leave itself open to worse in the future, and not only from him: If he knows that he can get away with it, what's to keep him from telling others that they too can bully the organization for higher prices and more jobs?The right thing for my reader's organization to have done, once the job had been awarded to the low bidder, was to have lived with that decision. They were right to tell the other vendor that he was welcome to bid on future jobs. To go any further was unfair to the low bidder and didn't do their own organization any favors in the long run.

Once the threats came, however, they had a new question to ask themselves: Is this the kind of vendor we really want to do business with?

"Our stakeholders generally trust us and know this vendor's reputation," my reader writes.

If that's the case, I don't see any problem here. The stakeholders would likely have appreciated the integrity it would have taken to wish the bullying vendor farewell. At the very least they'll appreciate it now, when the leaders tell him that he's no longer welcome to bid on future jobs.

2 comments:

Anonymous said...

One of the problems with this type of unethical behavior is that, from a strictly pragmatic point of view, it is self defeating.

As electrical contractors, we bid regularly on a variety of projects. We plan our bids carefully, and often explain that we will rarely be the lowest bidder, as we refuse to compromise quality work in order to get a job. We will, on occasion, decide that a job is one that we don't want. In that case, we will bid high enough that, if we do win the bid, we are being amply paid for the factors that make the job undesirable.

I cannot imagine trying to bully anyone into accepting a bid -- particularly after that job has been contracted to another bidder.

The company that came in with the lowest bid may have been giving a charitable discount to an organization they respected. If they do not sue for breach of contract, it will be only their support of the organization's goals preventing them from doing so. If one of our customers treated us with such disregard, we would certainly refuse to bid on any future work for them.

This organization may well be stuck with the bullies for all future work. Will other contractors ever trust this organization to honor their contracts in the future?

M.Lawrence said...

This company's decision to give in to the bully is truly mind-boggling - not to mention very bad business. On every level - from giving in to a tantrum-throwing child's demand for candy to pacifist countries trying to make deals with Hitler - nothing but bad rewards such cowardice. The previous poster nailed the business specifics of the situation, but the underlying principle occurs over and over in every strata of life. You get more of what you tolerate.