The Challenge
A Malta public sector agency needed to procure a complex case management system. They had:
- Vague requirements ("We need a modern system")
- Limited procurement expertise in-house
- Vendor proposals ranging from €2M to €12M (for similar scope)
- Political pressure to move fast
- Fear of getting procurement wrong (previous failed procurement cost €1.8M)
Initial approach: Select cheapest vendor and hope for the best.
Risk: Cheapest bid had hidden costs and lock-in clauses that would have cost €8M over 10 years.
Our Approach
We proposed starting with requirements clarity, not vendor selection.
Phase 1: Requirements Definition (Months 1-2)
Activities:
- Facilitated workshops with 35 business users
- Analysed current processes and pain points
- Defined testable requirements (not wishlists)
- Prioritised requirements (must-have vs nice-to-have)
- Developed acceptance criteria
Output: 120 clear, testable requirements replacing original 400 vague "requirements"
Key insight: Original "requirements" were actually vendor feature lists copied from marketing materials.
Phase 2: Procurement Strategy (Month 3)
Market analysis:
- 6 viable vendors identified
- Pricing models understood (license, SaaS, hybrid)
- Contract terms compared across vendors
- Reference sites visited
Strategy decisions:
- Competitive dialogue process (not restricted)
- 2-stage evaluation (capability, then price)
- Outcome-based evaluation criteria
- Exit costs capped in contract
- Data portability mandatory
- Open APIs required
Commercial approach:
- Target: €4M over 5 years (vs initial bids of €6M-€12M)
- Payment linked to delivery milestones
- Performance penalties for poor service
- Price protection mechanisms
Phase 3: Procurement Execution (Months 4-6)
Tender process:
- Clear, unambiguous procurement documents
- Fair evaluation framework
- Structured vendor presentations
- Reference checking
- Commercial negotiation
Red flags we caught:
- Vendor A: Lock-in clauses buried in standard terms
- Vendor B: Exit costs of €800K not disclosed upfront
- Vendor C: Implementation estimates 50% under realistic costs
Commercial negotiation:
- Removed lock-in clauses
- Capped exit costs at €50K
- Negotiated volume discounts
- Secured price protection
- Obtained better SLA terms
The Outcomes
Commercial Success
- ✅ Final contract value: €3.8M over 5 years
- ✅ Savings vs initial lowest bid: €3.2M (45% reduction)
- ✅ Exit costs capped at €50K (vs €800K in vendor terms)
- ✅ Data portability guaranteed
- ✅ Performance-based payment terms
Procurement Quality
- ✅ Fair, defensible process (no vendor challenges)
- ✅ Clear requirements with measurable acceptance criteria
- ✅ Contract terms protecting client interests
- ✅ Realistic implementation timeline
- ✅ Vendor accountability framework
Capability Transfer
- ✅ 4 procurement staff trained in technology procurement
- ✅ Reusable procurement templates created
- ✅ Commercial negotiation skills enhanced
- ✅ Documented procurement process for future use
Risk Avoidance
- ✅ Vendor lock-in clauses removed
- ✅ Hidden costs exposed and eliminated
- ✅ Unrealistic vendor claims challenged
- ✅ Clear exit strategy defined
- ✅ Intellectual property rights protected
Client Perspective
"We were about to sign a contract that looked cheap but would have cost us €8M over 10 years with no way out. Lumina showed us the hidden traps before we signed."
— Chief Operating Officer
"The procurement training was as valuable as the savings. We now understand how to procure technology without getting trapped."
— Head of Procurement
The Hidden Traps We Found
Trap 1: Customization costs
- Vendor quote: "€2M for platform"
- Hidden: Customization charged at €1,200/day (uncapped)
- Estimated total: €4.8M over 3 years
- We capped customization at €400K
Trap 2: Exit costs
- Vendor terms: Data extraction €250K, format conversion €350K, migration support €200K
- Total exit cost: €800K
- We capped total exit at €50K
Trap 3: Annual price increases
- Vendor terms: "Industry standard annual increases"
- Translation: 8-12% per year (compounding)
- We negotiated RPI+2% cap
Trap 4: Support costs
- Year 1: Included
- Year 2+: €180K per year
- We negotiated 5-year support at €90K/year
Total hidden costs identified: €3.2M
What Made It Work
- Requirements first, vendors second - Knew what we needed before talking to vendors
- Commercial expertise - Understood vendor pricing models and contract traps
- Independence - No vendor relationships, no conflicts of interest
- Negotiation discipline - Willing to walk away strengthened our position
- Capability transfer - Client now understands technology procurement
Services Delivered
Long-Term Impact
18 months post-award:
- System implemented successfully
- Within budget (€3.8M vs €3.8M contract)
- On schedule (9 months vs 9 months planned)
- Benefits realization: 85%
- Client satisfaction with vendor: "Good" (vs previous vendor "Poor")
Capability retained:
- Client ran subsequent procurement independently using our templates
- Negotiated better terms than we did (they learned well)
- Zero Lumina involvement needed
Lessons Learned
What we'd do again:
- Requirements workshops prevented scope creep
- Two-stage evaluation (capability, then price) worked well
- Contract negotiation saved £3.2M
- Exit cost capping protected client interests
What we'd do differently:
- More emphasis on benefits measurement earlier
- Vendor relationship could have been more collaborative post-award
- Implementation planning could have been stronger
