The Danger of Bias in the Procurement Process (Video & Podcast)
Any procurement process that is not protected from bias risks a bid protest. To protect the procurement process, officials need to learn about and address common cognitive biases in procurement decision-making. That’s the key take-away message of this episode of the Wise Decision Maker Show, which describes the danger of bias in the procurement process.
Video: “The Danger of Bias in the Procurement Process”
Podcast: “The Danger of Bias in the Procurement Process”
Links Mentioned in Videocast and Podcast
- Here is the article: How to Establish a Bias-Free Procurement Process
- The book Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters is available here
- You are welcome to register for the free Wise Decision Maker Course
Transcript
Hello, everyone, and welcome to another episode of the wise decision-maker show where we help you make the wisest and most profitable decisions. And today we’ll talk about the wisest, most profitable decisions about bias in bid procurement. So that’s what we’ll focus on now. But procurement is procurement and government contracts where you try to get a government contract, so you bid on it, and the successful bidder gets the government contract. Now that is often when the government contract happens to go ri, in some cases, the government contract process happens to go right, then there’ll be a bid protest. So it’s going to be a leak administrative matter or potentially illegal matter where the losing applicants will say, hey, the process of the government officials procurement officials used to select the winning bidder was problematic in some way because they didn’t follow the rules and so on. One of the biggest problems is bias in the bid procurement process. So that’s what we’re going to address: how do you address the problem of bias in the bid procurement protests. So bias, claims of bias in contract awards, government contracts awards are due to a decision process that was flawed in some way, which is a top reason for actually successful procurement bid protest. I mean, many procurement bid products are unsuccessful. But when there is a flawed selection process with a bias involved, that’s a top reason why they’re successful. So it’s really the responsibility of procurement officials to assure that the decision making process is clearly and transparently free from bias. Now, the Government Accountability Office made an Annual Report to Congress in 2016, which found that over 22% of bid protests succeeded during the 2016 fiscal year. So of all the bid protests over a fifth succeeded 22%, mostly due to flood selection decisions. So that is clearly showing that bias was a major factor in actually the success of bid protests. So let’s talk about this. What can be bias in the procurement process, and what can be done to address it? Bias and decision making means using appropriate information or criteria to make decisions, since that results in decisions that are irrational, arbitrarily capricious, the head decisions, basically ones that are not based on facts, logic and reasoning. Now, there are a number of forms of bias. And to dark, there are two main forms of bias. One is deliberate bias, which is pretty judged, you know that it’s deliberate, so prejudged preconceived ideas and choices. That’s deliberate bias. And there is also implicit bias, where there’s a failure to protect against various forms of bias that leads to poor decisions without an intention to do so. But the problem there is that the human mind is inherently biased. And if you don’t protect against bias, you will often get a poor decision. So how to avoid irrational decision making is to learn the specific patterns that cause us to make these bad, irrational, capricious decisions called cognitive biases. So cognitive biases are the specific ways that our mind is mis wired to make bad decisions, dangerous judgment errors. Now, we are hardwired to make some bad choices. We’re hardwired to fall into these cognitive biases, because of a combination of our evolutionary background and the structure of our minds. Our evolutionary background, we’re not evolved for the modern environment, we, let’s say remote work, right? This new Rise of remote work where some people are able to work fully just the small squares and zoom screen. We’re not wired for that. And so there’s a reason that a number of leaders are making some poor decisions about remote work as an example. They said, No, we want to go back to the office because we’re wired to live in small tribes of 50 people to 150 people. But we can change our behavior, we can change the way we think about things. And we can protect against that tendency to be tribal, to live in small tribes, by making sure that we make good choices about how we cultivate relationships deliberately in remote work. And so there are many companies that are successful, working fully remotely or some people working remotely. And that’s one way of overcoming the problems in their minds about tribalism. So we need to learn about these cognitive biases and overcome them. And to do that we need to integrate the practice of D biasing, defeating cognitive biases in procurement So we want to minimize those potential judgment errors. So that’s what we’re going to talk about. Now. What are the biggest problems I see as a common bias in the procurement process, having helped a number of procurement officials get good results in procurement and protect against cognitive biases, and also being on the other side as a legal expert witness, Sue, helping in a lawsuit against procurement officials who had a pretty biased process, I was on both sides of the aisle. And so I see one of the biggest cognitive biases called the confirmation bias, where there’s a tendency by procurement officials to look for information that confirms their pre-existing beliefs. For example, they have certain information about procurement applicants, and they have pre existing beliefs about them. And they look for information that confirms their beliefs while actively ignoring information that doesn’t confirm their pre-existing beliefs. So that results in poor decisions. There are objective and irrational, arbitrary and capricious procurement processes, which are going to often get you sued as a part of a bid process, which is really something that procurement officials don’t want. I know from working with procurement officials, I mean, nobody wants to get sued, right. So second, cognitive biases, belief bias, where we evaluate arguments for applicants based on pre-existing beliefs about their quality, for example, personal likes or dislikes of a procurement official about a certain applicant, rather than the facts that are present in the application. So that’s a big problem, belief bias. Another one is called the anchoring bias. The anchoring bias really relied too heavily on that initial information about a topic. And that results in playing favorites in the bidding process based on first impressions, pre existing information. So you don’t want to simply rely on the pre existing information. And that’s a problem because we tend to be too anchored to it. So we need to address the anchoring bias in order to make good decisions. Next is that availability bias, that’s about what information is available in your memory. So we look for information that’s most easily available in our memory, rather than what’s truly important. So when we think about, oh, what’s important, what’s available in my memory about this applicant, or this aspect of the situation of the application, what this criteria, so we might focus on one criteria, when we really shouldn’t be focused on all criteria, because the criteria is most prevalent in our memory, because there was a problem with a certain aspect of the criteria, for example. And so we want to accurately evaluate the application, we want to look at all criteria. And so we want to focus on what’s truly important. Next one is the halo and horns effect. The halo effect has to do with the fact that we treat an option more favorably when we like one certain characteristic of that option. So if we like one way that an applicant, we like something about an applicant, then we will tend to weigh all other characteristics of the applicant better than the applicant actually deserves. The opposite is the horns effect. So the halo effect is like somebody has a little halo on their head. And the horns effect is that somebody has little horns in their head, which would treat an applicant less favorably if we dislike certain characteristics of that applicant. And that characteristic, by the way, might have nothing to do with the bid proposal. Maybe the person who came to propose the bid was somehow off in their appearance, or they reminded you they had the same name as you know, the husband or wife with whom you had a divorce five years ago. And you can stop thinking about that person, your former spouse when the bidder was presenting their presentation, and so your negative impression, it’s not all the fault of the bidder. But that is the kind of problem we’re talking about. So that poses a particular danger to non ball lined procurements, when the applicants know the identity of the procure of the so the procurement officials know the identity of the bidders. And they can have a former impression of the better. For example, you can think like, oh, that company is a huge company that’s going to be bidding. Therefore, they’re going to be inherently good just because they’re large. And that will undermine the ability of small businesses to compete. And of course, the government. Definitely overall one small business to be able to compete. But if you just go by brand name, and now that you’re familiar with a brand, and you’re not familiar with another brand, that you will tend to favor the brand that you’re familiar with, even though perhaps the brand that you’re unfamiliar with the small business might do an even better job at lower costs. Now, I also want to talk about group research. Those are more individual based biases and We’ll talk about two group decision making biases. One is called groupthink, which causes the people to accept the code causing the group to coalesce around the viewpoint of the most powerful person in the group. So it’s driven by desire for consensus, peer pressure, and so on. And so despite potential reservations, the evaluators will conform or coalesce around the most influential group member, because they want harmony. And this, of course, causes biased decision makers decision making, because the point of a group is that you want this harmony, meaning you want different perspectives, and you want people to voice their different perspectives. So you need to really fight groupthink. Another problem is called authority bias where certain people in the group of evaluators might have authority. So and if you perceive those people as having more authority, then there’s a tendency to give your opinion to favor their opinions more highly, for example, more experienced evaluators, higher level executives, the facilitator of a consensus meeting, even though they might not have better information about this topic, maybe they’re a high level executive, and they have information, they have power, but a lower level evaluator might have much better information about the topic of the bidding proposal proposals, but they’re not going to be listened to, because they don’t have because of authority bias, because they’re perceived as having less authority and therefore having less status and less prestige. So this is something that may cause biased outcomes. Now, a big problem is that I see a lot of procurement officials having essentially a deliberate indifference toward a bias in evaluation. So there was a bid protest case that I’ll share about, it’s a Medicaid management contract award for us in a state worth over 20 billion. So it’s a long term contract for insurance companies to manage Medicaid in a state overall worth over $20 billion. So Q which one, so that word experts, consultants hired to facilitate the procurement evaluation, who lacked any awareness of training in cognitive biases. They’re not familiar with any of the common cognitive biases that I described. And they admitted that the consulting firm that they work with has no policy to identify bias. That’s ridiculous. I mean, it’s completely absurd that this is what happens. But that’s what happens on a $20 billion bid, who for a major Medicaid procurement case, this was $20 billion. And the firm that was hired was a facilitated major consulting firm. And they really had no policy to identify by not training their consultants to identify bias, even though the consulting firm had several millions of dollar contracts on this, because this took place over a year and they had some a number of staff members working. So this is a problem. So preventing bias should be the end goal of procurement evaluation. And in the Medicaid case there was an evaluator who served as the State Medical Director who testified that removing bias is another thing that’s important, and that the contract award process was designed to be as objective as possible. And the real estate employee who headed the procurement process, procurement manager, testified that the entire procurement process was designed to prevent bias. But clearly, we saw that that’s not what happened. So what they did was that evaluators were asked to sign a document saying they weren’t biased. So you know, Pinky swears right, and that is biased, to avoid outside communication during the period of affiliation. But they didn’t have education about cognitive biases. So this couldn’t really protect them against them. The overall process was seriously vulnerable to biases. So the lessons that you should learn from that lawsuit against that the Medicaid management contract award, the 20 billion contract award and where bias was the center of the case is a lack of concern with addressing bias seriously cost the Department of Medicaid, the bias and the procurement process could have been really avoided relatively easily at a much much lower cost than the Medicaid department paid in the lawsuit. With education about cognitive biases, and expert based interventions, you can get education and you can get an expert to evaluate the actual procurement process to make sure that it’s protected against biases, it’s going to cost you way less than the resulting bid protests and lawsuits and so on. I hope you’ve benefited from learning about the danger of bias in the build procurement process. And please make sure to subscribe to the wise decision maker show. Wherever you check us out on YouTube, iTunes, wherever, make sure to leave a review. We’d love to hear what you think and recommend us to your family and friends, which is a great way for them to discover the show. They’ll be grateful to you. All right, everyone. I look forward to seeing you in the next episode of the wise decision maker show in the meantime the wisest most profitable decisions to you my friends.
Transcribed by https://otter.ai
Bio: Dr. Gleb Tsipursky helps leaders use hybrid work to improve retention and productivity while cutting costs. He serves as the CEO of the boutique future-of-work consultancy Disaster Avoidance Experts, which helps organizations adopt a hybrid-first culture, instead of incrementally improving on the traditional office-centric culture. A best-selling author of 7 books, he is especially well-known for his global best-sellers Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters (Career Press, 2019) and The Blindspots Between Us: How to Overcome Unconscious Cognitive Bias and Build Better Relationships (New Harbinger, 2020). His newest book is Leading Hybrid and Remote Teams: A Manual on Benchmarking to Best Practices for Competitive Advantage (Intentional Insights, 2021). His writing was translated into Chinese, Korean, German, Russian, Polish, Spanish, French, and other languages. His cutting-edge thought leadership was featured in over 650 articles and 550 interviews in prominent venues. They include Harvard Business Review, Fortune, Inc. Magazine, Business Insider, Fast Company, Forbes, and elsewhere. His expertise comes from over 20 years of consulting, coaching, and speaking and training for mid-size and large organizations ranging from Aflac to Xerox. It also comes from his research background as a behavioral scientist. After spending 8 years getting a PhD and lecturing at the University of North Carolina at Chapel Hill, he served for 7 years as a professor at the Ohio State University’s Decision Sciences Collaborative and History Department. A proud Ukrainian American, Dr. Gleb lives in Columbus, Ohio (Go Bucks!). In his free time, he makes sure to spend abundant quality time with his wife to avoid his personal life turning into a disaster. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, follow him on LinkedIn @dr-gleb-tsipursky, Twitter @gleb_tsipursky, Instagram @dr_gleb_tsipursky, Facebook @DrGlebTsipursky, Medium @dr_gleb_tsipursky, YouTube, and RSS, and get a free copy of the Assessment on Dangerous Judgment Errors in the Workplace by signing up for the free Wise Decision Maker Course at https://disasteravoidanceexperts.com/newsletter/.