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Procurement today must move beyond price and focus on long-term value, resilience and sustainability. Clean India Journal spoke to Dr. Sayantan Sinha, KVP, Vice-President (Facilities Management & Group Procurement), JMD Group, on why the traditional ‘lowest bidder’ (L1) mindset is losing relevance.
The cheapest (L1) option often becomes the most expensive because the real costs don’t appear on the proposal — they show up later in downtime, operational risks, compliance failures and management stress. In facilities procurement, budget protection is important, but value and price are not the same. A strong procurement partner brings disciplined planning and execution, regulatory compliance, safety standards and communication clarity, helping organisations protect costs
across predictive, proactive and reactive stages.
Optimisation, Not Cost Cutting
Cost optimisation should always be read alongside value creation. It validates expertise in strategic sourcing, supplier negotiations, spend analytics and Total Cost of Ownership (TCO) reduction. These capabilities enable organisations to drive sustainable savings, mitigate supply chain risks and optimise vendor portfolios.
The “lowest bid” is a dying concept in modern procurement. Cheap pricing is a liability, not a Key Performance Indicator (KPI), because it often masks hidden risks and compromises quality, making the lowest upfront option far more expensive over the lifecycle of a project.
Why Cheap Can Become a Liability
A significantly lower-priced bid often signals an unsustainable business model or unfair competitive practices.
• Lowballing and scope creep: Vendors may intentionally bid low to secure the contract, knowing they can recover costs later through aggressive change orders, revised scopes and additional claims.
• Skimping on quality: To protect margins, vendors may substitute specified materials with inferior alternatives, compromise labour compliance or rush turnaround times, adversely affecting quality
and productivity.
• Hidden conversion and opportunity costs: Critical project components are frequently omitted from low bids. The apparent savings eventually shift to the operational floor through higher maintenance, rework and continuous vendor management. Opportunity costs are often ignored while focusing only on immediate expenditure.
Lowest Price is not a KPI
True KPIs are navigational tools that measure operational efficiency, business outcomes and alignment with organisational goals. “Lowest Price” is merely a transactional number.
Procurement should instead focus on metrics such as Return on Investment (ROI), Total Cost of Ownership (TCO) and Lifecycle Cost, which provide a more comprehensive picture of long-term value.
An excessive focus on price encourages a race to the bottom, pushing vendors to cut costs rather than innovate. It also overlooks critical risk factors such as financial stability, supplier reliability, compliance history and past performance.
Measuring Procurement Through Value
Procurement functions should balance price with measurable value. Some important indicators include:
• ROI and commercial value, including Customer Lifetime Value (CLV) and ROI improvements.
• Customer sentiment and loyalty, measured through Net Promoter Score (NPS) and Customer Retention Rate (CRR).
• Usage and value realisation, including Feature Adoption Rate and Value Realisation Time.
• Business growth, tracked through Net Revenue Retention (NRR) and Average Contract Value (ACV) growth.
These KPIs reflect sustainable business performance rather than short-term procurement savings.
Moving Towards Best Value Procurement
Mature organisations are increasingly shifting from rigid L1 policies to Best Value Procurement (BVP), where supplier selection is based on multiple performance parameters rather than price alone.
Technical competence, capability and historical performance become critical differentiators. Evidence across construction and facilities management shows that BVP reduces cost overruns, improves client satisfaction and minimises project delays.
Equally important is evaluating Total Cost of Ownership by considering acquisition costs, operating expenses, facilities management, insurance, maintenance and end-of-life decommissioning, instead of only the purchase price.
Excessive focus on price encourages a race to the bottom, pushing vendors to cut costs rather than innovate”— Dr. Sayantan Sinha, KVP
Digitalisation, Resilience and Human Capability
Early integration of facilities management with project management, supported by Critical Path Method (CPM), enables better design decisions, lower lifecycle costs and shorter project durations.
Digitalisation has transformed procurement from a reactive administrative function into a strategic business enabler through process automation, advanced spend analytics, predictive risk management and stronger supplier collaboration.
At the same time, procurement must remain human-centric. Continuous upskilling, knowledge sharing and professional collaboration complement technology and artificial intelligence, while stronger supplier partnerships and diversified sourcing improve resilience across the Product Life Cycle (PLC).
Procurement for a Sustainable Future
Future-ready procurement must align with net zero roadmaps by valuing carbon efficiency, scope 3 emission reductions and ESG goals alongside commercial performance. It should prioritise circular procurement practices and low-carbon materials while establishing clear sustainability expectations for suppliers.
Recognised standards such as GRIHA, LEED, ISO certifications and compliance with the Energy Conservation Building Code (ECBC) are increasingly becoming benchmarks for supplier evaluation and responsible procurement.
Ultimately, procurement success should not be measured by who quoted the lowest price, but by who delivers the greatest long-term value. The future belongs to organisations that optimise cost through quality, resilience, sustainability and enduring partnerships — not simply by selecting the cheapest bid.
