Winning in Procurement: When Price Isn’t Everything

Executive Summary

Too often, procurement is judged by the size of the discount it secures. But in complex domains such as IT services, the “lowest price wins” mentality backfires. What looks like short-term savings often turns into long-term pain: missed deadlines, rework, technical debt, and strained relationships between IT and the business. Drawing on the front-line experience of Rick Ryssel, Advisor to Reiz Tech and corporate clients at Ryssel Advisory, and Inga Kuncaite, Compliance Manager at Reiz Tech, this article examines why ambitious companies, and even public-sector buyers must shift from cost-based to value-based procurement. We argue that the most successful buyers focus on strategic fit, delivery reliability, and partnership alignment, and we provide a practical checklist for evaluating vendors beyond price.

The Trap of Lowest-Price Procurement

Procurement teams are often celebrated for negotiating cost savings. But in technology, those “savings” tend to vanish quickly. A McKinsey–Oxford study of 5,400 IT projects found that large initiatives ran an average of 45% over budget and 7% over schedule, while delivering 56% less value than anticipated. That’s not inefficiency at the margins; it’s systemic underperformance that outweighs any upfront discount.

Procurement conversations often derail not because of the process itself, but because of who drives it. Rick Ryssel has worked on both the demand and supply sides and points to two distinct models.

In the first, functional leaders initiate the dialogue and only later bring procurement in to finalize terms. “In the first model, the functional department initiates discussions and hands them over to procurement for the final negotiation phase,” Ryssel explains. This approach tends to emphasize capabilities and collaboration rather than price. As he observes, “When the functional department initiates the conversation, they expect to find the best partner to deliver the required results. They often focus on technical expertise in the required domain, the ability to ramp up the required team and cultural fit between the organizations. The process starts informally and is often iterative.”

The second model looks very different. When procurement leads from the start, the conversation becomes formal, structured, and cost-centric. As Ryssel puts it, “When procurement initiates the conversation, it is usually very formal and includes an RFQ or RFP. It follows a clearly defined procurement process and often focusses on the lowest cost.”

The contrast reveals why so many IT projects underperform: functional-led processes optimize for expertise and fit, while procurement-led processes often optimize for price – at the expense of long-term outcomes.

The danger that Ryssel highlights is subtle yet critical. Procurement-led models encourage suppliers to win on price, and they often prepare change requests in advance to improve their margin later. That creates incentives for lowballing, change-order traps and delivery shortcuts. In functional-led models, by contrast, the emphasis is on capabilities, fit and outcomes. The difference explains why the statistics look the way they do: price-led procurement inflates the probability of overruns and underdelivery.

The Hidden Costs of Cheap IT Vendors

“Cheap” IT suppliers are rarely cost efficient once the hidden costs are added up. These fall into three broad categories:

1. Delays and rework. Gartner estimates downtime costs companies an average of $5,600 per minute. Even minor delivery slips can erase any upfront savings.

2. Technical debt. McKinsey calculates that 10–20% of IT budgets are consumed servicing technical debt, while studies show developers lose 23–42% of their productivity to poor code quality.

3. Management overhead. Low-cost suppliers often require constant client oversight, absorbing valuable executive and IT staff time.

   
   

The apparent savings from low-cost vendors often collapse under the weight of hidden expenses. Ryssel argues that procurement leaders need to look beyond the supplier’s bid price to the true economics of delivery. “Nowadays, all clients are very cost-sensitive. It usually helps to show that the supplier's price for the project does not represent the project's full cost,” he notes.

One major hidden cost is management overhead. Vendors that require extensive oversight may appear cheaper upfront but actually drain resources internally. As Ryssel explains,“Clients should also consider the costs associated with managing the supplier and the project. Thus, while a self-managed supplier who is easy to work with might have a higher price, this can result in an overall lower project cost, as well as less additional workload and escalation in the client's team.”

Another common trap is the low-bid, high-change-order strategy. Suppliers who win on price often plan to recover profits through scope adjustments. “Many suppliers know that if the client's main criteria is price, they will offer a low price but have prepared change requests to make the project more profitable,” Ryssel observes.

The most damaging effect, however, comes from delivery delays. When business outcomes hinge on new functionality, every missed milestone erodes value. As he warns, “Many projects have business value, such as cost reduction or revenue generation, in the client’s core business. If a low-cost supplier causes a project delay, the benefits will be realized later, negatively impacting the business case. Therefore, it is important for both the client and the supplier to fully understand what they are getting for the price.”

In short, what looks inexpensive at the contract stage often becomes costly in execution. Vendors who optimize for “winning the bid” frequently undermine project economics after signature and the apparent bargain quickly turns into an expensive mistake.

Why Ambitious Companies Focus on Strategic Fit, Value Delivery and Partnership

The organizations that consistently capture value from IT procurement are those that resist the lowest-price trap. Instead, they anchor decisions on three factors:

• Strategic fit. Does the vendor understand the business, the domain, the architecture and the future direction of the client?

• Value delivery. Can the vendor deliver reliably, independently and without rework?

• Partnership alignment. Does the cultural and communication fit reduce friction and enhance collaboration?

  
  

The shift from price to value is not limited to private enterprise. Public-sector buyers, too, have the mandate and the legal framework to look beyond the lowest bid. As Inga Kuncaite points out, “Can public procurement focus on value, not just price? Absolutely. Many assume public procurement is all about the lowest price but regulations in Lithuania and the EU explicitly allow evaluation based on value, including quality, technical merit, sustainability, lifecycle costs and innovation.”

The real barrier is not regulatory but practical. Scoring models that are supposed to measure efficiency often fail to capture hidden costs or long-term benefits. In Kuncaite’s words, “Even when economic efficiency criteria are applied, scoring models often remain simplistic, failing to capture long-term benefits or hidden costs like delays, rework, or technical debt. Limited time, expertise and organizational culture can make detailed, value-based evaluation harder to execute.”

Her experience underscores that compliance alone is not enough. Designing tenders that truly reward value requires deliberate effort. “Smartly designed tenders can legally and strategically prioritize long-term value. Compliance and structured evaluation are the foundation, while careful design and measurable criteria ensure procurement decisions truly deliver the best outcomes.”

In short, public buyers already have the tools to choose value. What determines success is whether procurement leaders use them with rigor, sophistication, and a willingness to move beyond the comfort of lowest-cost metrics.

Handling the “Cheaper, Better, Faster” Paradox

Executives often ask suppliers to deliver projects faster, cheaper and better – simultaneously. The paradox is obvious: something has to give. But, as Ryssel argues, the paradox dissolves if cost is reframed as total cost of outcome.

“It usually helps to show that the supplier’s price for the project does not represent the project’s full cost. Clients should also consider their costs associated with managing the supplier and the project.”

In other words, “better” and “faster” vendors may look more expensive in unit terms but cheaper in "TCO-terms”. The paradox is not solved by choosing two of three – it’s solved by expanding the definition of cost.

Why Alignment Matters More Than Price

Ryssel stresses that many organizations only discover the dangers of cost-driven procurement through painful experience. As he puts it, “Ideally, they are open to discussing the actual cost of the project, as mentioned above. Unfortunately, sometimes the lesson is learned the hard way. Choosing the cheapest supplier and ending up in a nonperforming project that requires a lot of management attention, escalations and rework.”

One case he recalls illustrates this dynamic clearly. A client was transitioning its IT services between two Tier 1 providers – one was rather expensive but discouraged by the transition to the new provider. The other competitively priced but caught in the cost margin trap. “The outgoing provider was in the higher price segment, but perhaps no longer fully motivated. The incoming provider won the contract for various reasons and with a very good price. Both had problems successfully completing a project in a specific area,” Ryssel explains. The consequences were predictable: “The IT department had to put in a lot of effort to manage the suppliers. The business often escalated issues with IT due to delays in implementing functionalities which resulted in additional losses due to inefficiencies in production and, in some cases, delays in deliveries to their customers.”

The turning point came when Reiz Tech stepped in. “Reiz Tech took over the project, handled it very self-managed and delivered it on time and budget. Reiz Tech even managed the interface to the business, i.e., IT's internal customer. As a result, not only was the project ultimately delivered successfully, but the relationship and trust between the business and IT were also restored.”

The lesson is straightforward: both high-cost and low-cost providers failed, not because of their price point, but because of their lack of alignment and accountability. Reiz Tech succeeded by being self-managed, outcome-oriented, and trusted by both IT and the business.

Ryssel distills this into advice for leaders: “Consider how your company sells its products and services. Unless you're in the commodity business, you're probably not selling based on the lowest price, but rather on the best overall customer benefit. Why would you use different criteria when choosing your IT service partner for an important project.”

Public Procurement: Designing for Value

Public procurement represents 13–15% of EU GDP, making it one of the largest levers governments hold. Yet more than 55% of EU procedures are still awarded on price alone, despite rules permitting quality, sustainability and innovation criteria.

There is no perfect tool for balancing price and quality in procurement decisions. Yet among the available methods, the Weighted Scoring Matrix is the most widely recognized and closest to a workable solution. Inga Kuncaite explains that it is one of the most common practical tools for implementing the “most economically advantageous tender” principle in public procurement, as it translates qualitative requirements into quantifiable, comparable criteria. As she puts it:

“Weighted Scoring Matrices are probably the closest we have. They turn qualitative requirements into structured, weighted criteria, helping balance cost and quality. Strengths: clarity, transparency, comparability. Weaknesses: can become a box-ticking exercise, favoring good bid writers over best solutions. The real game-changer? People and culture. Product owners and evaluators who understand the market and the meaning of quality make the tools truly effective. Methods provide structure, but competence drives results.”

But tools alone are not enough. Kuncaite cautions that many public procurement teams mistake compliance for strategy. “Big misconception in public procurement: Compliance ≠ Strategy,” she warns. Following rules, filling forms, and documenting steps may satisfy auditors, but they do not create value. As she explains, “Compliance ensures transparency and defensibility. But strategy means looking beyond the paperwork – assessing quality, innovation and long-term fit. That requires collaboration: procurement manages the process, while subject-matter experts bring the insights that actually drive value. Even the best scoring matrices won’t capture true strategic quality if procurement and experts work in silos. Compliance is the foundation. Collaboration creates the impact.”

Her point applies far beyond the public sector. Whether in government or enterprise, procurement cannot be truly strategic if it operates in isolation. The combination of structured methods and expert collaboration is what turns procurement from a compliance function into a driver of long-term value.

What Mature Buyers Really Look For

Ryssel observes that the most sophisticated clients converge on the same criteria:

• Technical expertise in the required domain

• Ability to ramp up quickly

• Cultural fit between the organizations

• Supplier reliability and self-management

• Transparent total cost of ownership

• Direct contribution to business outcomes

  
  

Mature buyers know: what you measure is what you get. If you measure only price, you get vendors who optimize for price. If you measure value, you get partners who deliver value.

A Checklist to Evaluate Vendors Beyond Price

Vendor Evaluation Matrix

DIMENSION	KEY QUESTION	WHY IT MATTERS
Total Cost of Ownership	What management effort, rework, or delay costs are hidden?	Prevents “false savings”
Delivery Track Record	Do they consistently deliver on time and budget?	Reduces overrun risk
Technical Quality	What’s their defect rate and technical debt profile?	Avoids productivity drag
Self-Management	How much oversight is required from us?	Frees internal teams
Cultural Fit	Will teams collaborate smoothly and transparently?	Reduces friction
Strategic Alignment	Can they scale and innovate with us?	Ensures future-proofing
Lifecycle Value	Is the solution maintainable and sustainable?	Protects ROI

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What Leaders Should Do Differently

• Lowest price ≠ lowest cost. Hidden costs of overruns, rework and tech debt often dwarf upfront savings.

• Technical debt is a tax. It consumes up to 20% of IT budgets and drains productivity.

• Public buyers can choose value. EU rules allow MEAT criteria; culture and execution lag behind.

• Functional involvement matters. Procurement-only processes bias toward cost, not value.

• Weighted matrices help, but people matter. Expertise and collaboration turn compliance into strategy.

• Choose partners, not suppliers. Cultural fit, autonomy and reliability reduce friction and total cost.

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About Rick Ryssel

Entrepreneurial C-level advisor with a strong background in IT and digitalization. Over 25 years of experience in international management, consulting, IT leadership, and executive roles. Dedicated to creating lasting value for clients.

About Inga Kuncaite

A procurement professional with over 19 years of combined experience in public and private sectors, having worked both as a public buyer and as a supplier. She specializes in public procurement, compliance and contract management, bringing a dual perspective to procurement challenges.