The Procurement Paradox: Why the Biggest Commercial Decisions Often Happen Before Procurement Gets Involved

Procurement

22 Sept

What if the biggest procurement decision has already been made before procurement gets involved?

It sounds counterintuitive, but it is a situation that many organisations encounter. A business need is identified, a business case is approved, funding is secured and stakeholders align on the preferred solution. Procurement is then asked to run a competitive procurement process and negotiate the best possible deal.

The challenge is that every decision leading up to the business case approval has already reduced the organisation's room for strategic shifts in alternative directions. The scope is defined, expectations are set and alternative approaches are often ruled out. Procurement teams can still create value, but they must do so within boundaries of what has already been established. The result is a paradox: procurement is expected to optimise an outcome that the organisation has already largely committed itself towards.

The Cost of Commitment

In many organisations, particularly those in the public sector, commitment starts long before a contract is awarded.

It is human nature to begin thinking about solutions when a problem is raised. Few people are comfortable sitting with a problem for long. Instead, discussions quickly move towards what success looks like and how it could be achieved. A potential solution emerges, stakeholders begin to form their views, and momentum starts to build.

By the time approval has been secured:

The problem has been defined
A preferred solution has emerged
Funding has been approved
Delivery timelines have been established
Benefits have been committed into business plans
Stakeholders have aligned around an expected outcome

These are all essential elements of good governance and investment decision-making, however, establishing these without procurement involvement creates a challenge.

As assumptions become embedded and expectations become established, it becomes increasingly difficult to revisit fundamental questions about scope, delivery models or alternative approaches.

This creates a subtle but important distinction: procurement is no longer helping to shape the decision. It is optimising a decision that has already gathered significant organisational momentum and buy-in.

The Business Case Blind Spot

Business cases exist for good reason. They help organisations to justify investment decisions, secure funding and create accountability for outcomes. However, they can also create an unintended consequence: creating organisational commitment before the market has been fully tested.

Psychology offers an interesting explanation for why this occurs. One of the most well-established concepts in behavioural science is the idea of escalation of commitment. Once individuals or organisations have invested significant effort and time in a particular direction of travel, they become more likely to continue pursuing it rather than reconsidering alternative options. This tendency is reinforced when senior stakeholders have publicly endorsed an approach, resources have been committed and delivery plans have begun to form. Changing direction can start to feel like failure, even when new information suggests that an alternative may deliver better outcomes. Loss aversion can make organisations focus more on the perceived loss of previous investment than on the potential gains from considering an alternative approach [1].

These concepts highlight that as commitment grows, strategic flexibility can diminish. Alternative delivery models, different commercial structures or innovative market solutions may receive less attention because revisiting earlier decisions feels increasingly difficult.

This matters because early assumptions are rarely perfect. HM Treasury guidance explicitly recognises a tendency for project appraisers to underestimate costs and timescales and overestimate benefits, known as optimism bias [2]. The National Audit Office has similarly highlighted how over-optimism continues to undermine value for money in public sector projects [3].

Moving Commercial Thinking Upstream

In practical terms, this means that organisations may still run a competition between suppliers, while no longer running a competition between ideas. This makes it harder to test whether the solution remains the best way of achieving the desired outcome.

The answer is not to replace business cases or give procurement ownership of every strategic decision. Instead, organisations should recognise that commercial value is created long before a tender is issued.

Traditionally, procurement is often engaged after a preferred option has been identified. A more strategic approach brings commercial, transformation and procurement expertise further upstream into:

Options appraisal
Business case development
Early market engagement
Commercial model design
Investment decision-making

This shifts the nature of the conversation from "How do we procure this solution?" to "What is the best strategic approach to solving this problem?"

It is about ensuring that organisations retain strategic choice for as long as possible, allowing investment decisions to be informed by market insight, commercial expertise and delivery realities before assumptions become embedded.

Bringing commercial and transformation capability into discussions earlier helps organisations to understand what the market can realistically deliver, how risks should be allocated and whether the best solution is the one originally envisaged.

Procurement's Greatest Value

The important question for organisations to consider is whether procurement is arriving early enough to influence the decisions that matter most.

The strongest commercial outcomes are rarely achieved through contract negotiations alone. They are created through better-informed choices about what to buy, how to buy it and whether the proposed approach represents the best value before significant commitment is created.

The real opportunity is not simply to run a better procurement. It is to make better strategic, commercial and transformation decisions before procurement begins. Furthermore, Procurement's greatest value may not be securing the best deal. It may be helping organisations make better decisions before there is a deal to negotiate.

References