Publishing a Budget

Recently I had a client ask: "Is it acceptable to include a clause in an RFQ stating that the proposed fee cannot exceed a certain amount?"

This is otherwise known as the 'to publish or not to publish' question. Many vendors want a budget figure to enable them to quote the appropriate resources. Some contract managers DON'T want the budget released to ensure there is competitive pricing submitted.

On the buying side, I've seen it cause problems in both situations. First, when a budget is released, most of the prices coming back are within dollars of each other, so the buying organization isn't quite sure they got competitive pricing, just people wanting to grab as much of the budget as possible. On the other side, I've had clients with their set budget figure receive proposals twice and three times the budget figure.

Solutions?

Research: First of all, buyers/end users need to do some initial market research to know if their budget is realistic. Some subject matter experts have merely 'guessed' based upon opinions and reading materials. If buying something new or unfamiliar, it's better to post a request for information (if you are unable to ensure a fair/transparent process otherwise). In one situation, the client posted a request for information stating their budget and asked "what can we get for this", and "what would be a standard request for this service" - from this they developed a NEW budget for the bare minimum of what they wanted.

Range: To avoid the bids all coming in at the same price, some have opted to provide a range they expect the pricing to be within. IE they'd prefer to only spend X, but have allowed for Y, so they state they expect pricing to be within the range of X to Y. It doesn't guarantee pricing will be from one end to the other of the range, but it at least keeps them from having to toss the process because everything exceeded their budget cap.

So, the debate continues, to publish or not to publish the budget...