Guest Blog- Fallacies in Procurement Reasoning

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As a Procurement professional, I want to believe that I’m a reasonable and sensible person when dealing with potential and incumbent suppliers. However, after reading the list of Common Fallacies in Reasoning I questioned if I ever experienced or observed some of the fallacies in reasoning during my procurement practices.  Surprisingly, I realized very quickly that I did witness many of the listed mistakes during either a supplier selection or a contract negotiation process.

The most common fallacy in Procurement, in my opinion, is a SLIPPERY SLOPE.  This error in reasoning is also known as a “snowball” or a “domino effect” and it assumes that if you make one move, it will inevitably lead to other similar motions that you will be unable to stop.  For example, “If we allow even one supplier to renegotiate our standard contract terms, then all suppliers will want to renegotiate their contracts.” However, that is not always the case.   We all know that standard terms and conditions provide a template from which to make adjustments, and if we didn’t allow suppliers to make changes, we would have no suppliers.  If we have terms that are NOT negotiable, we should let suppliers know that upfront.  Also, we should always start with our terms and not the suppliers.   

The next very frequently used fallacy during the purchasing process is a FALSE DILEMMA.  It deals with the notion that no matter what the outcome will be, it will be negative.   For example, when selecting a potential service provider, you may hear this reasoning – “If we go with the lowest price bid, the service quality will probably be terrible; and if we decide to pick the best service offer, we will pay through the nose.”  The goal of each sourcing project should be to find the best overall VALUE for the proposed price, also known as Total Cost of Ownership  (TCO).   The value is a fair price that we are willing to pay for the best quality product or service.

HASTY GENERALIZATION is another potential fallacy in Procurement.  It is based on a small unrepresentative sample that is applied to a much bigger situation.  For instance, when deciding which companies to include in the request for quote (RFQ) list, some team members could state, “We’ve tried to get quotes from this company once before, but their prices were too high, and the quality is questionable.  Therefore, they should be excluded from all future bids.”  If you hear this reasoning, please reject it.  No suppliers should be excluded from getting your business just because they didn’t win prior bids.  Also, provide constructive feedback to those suppliers and assist them in doing a better job during future bids.

The worst fallacy in Procurement reasoning is INCONSISTENCY.  It typically deals with a contradicting statement and must be discouraged from ever being used.  This particular saying always made me cringe – “Sure, we will go through the competitive bidding process and give all suppliers an equal chance to win our business, but in my mind I already made a choice about the winner.”  This type of faulty reasoning is not only contradicting but also unethical.  We must treat all incumbent and prospective suppliers with respect and consideration for their time.  In this situation, try to persuade all team members that maintaining a level playing field  is beneficial to the organization, and the outcome could potentially surprise a decision maker.

See more examples of Common Fallacies in Reasoning by clicking the link and think about how often you encounter these fallacies in either your business or personal life situations.

(http://commfaculty.fullerton.edu/rgass/fallacy3211.htm)

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Irina Shulman

Irina Shulman

Irina Shulman has over 20 years of experience in leading cross-functional teams and managing complex projects for Fortune 500 companies. She has demonstrated substantial process improvements and cost saving results while sourcing products and services for retail, home improvement, repair services, and licensed business.
Irina Shulman

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