Agile RFP Process for Value Based Procurement of Innovations

In the ever-changing business landscape, the shift from budget-based to value-based procurement is quintessential for both industrial companies and public sectors, especially in the era of Digital Transformation. Budget-driven procurement decisions often prioritize projects based on available funds rather than their potential value. This approach is limiting when procuring innovative, non-standardized solutions. To address this, organizations should start with a paid pilot to establish a "Proof of Value" before large-scale deployment. Value-based procurement (VBP), coupled with paid pilots, allows organizations to prioritize initiatives based on potential ROI, driving Digital Transformation and growth.

For an interesting read on the topic for Budget based procurement vs value-based procurement refer to the article from Arun - "Why Industrial Companies & Public Sectors Should Shift from Budget-Based to Value-Based Procurement".

In the rapidly evolving industrial landscape, embracing innovation is essential for growth. Traditional procurement methods hinder this progress. To bridge the gap, a value-based procurement approach is crucial. It involves a two-step process: starting with a pilot to establish a "proof of value" and then scaling up. Key elements of an innovation procurement policy include a well-defined business case, evaluation criteria emphasizing uniqueness and expertise, flexible payment terms, and a validation process. This approach has been successfully implemented in partnerships with the government, industry partners, and SMEs, accelerating digital transformation.

Dinesh, in his article "Implementation Framework for Innovation Procurement", emphasizes the importance of innovation procurement as a means to change how companies approach growth and competition, making them agents of change in the industry. Through structured processes, organizations can unlock new opportunities, catalyze growth, and embed innovation at the core of their strategy.

In today's fast-paced business environment, traditional procurement policies and tender bid commercial methods often prove to be inefficient and time-consuming. The Vedanta Group, a leading global natural resources company, has recognized the need for a paradigm shift in its procurement approach. Under the leadership of Forge Innovation and Ventures, Vedanta is embracing a new Agile Request for Proposal (RFP) Payment Scheme, a game-changing initiative that promises to benefit not only Vedanta but also the broader economy.

In this article, we will delve into the intricacies of the Agile RFP Scheme and its potential impact on both microeconomic and macroeconomic levels. We will explore how this innovative approach can be implemented not just within Vedanta but also at the policy level by governments to stimulate exponential economic growth in India. Furthermore, we will highlight the pivotal role played by Forge Innovation and Ventures in introducing and envisioning this transformation at a national scale.

The need for change in the procurement policies

Traditional procurement policies and tender bid commercial methods have long been the norm in the business world. However, they come with their fair share of challenges. Lengthy bidding processes, delayed payments, and complex contractual obligations often hinder the growth and development of startups and innovative ventures. Vedanta Group's recognition of these challenges led to the inception of the Agile RFP Process.

The Agile RFP Process for Value Based Procurement: An Overview

The Agile RFP Process, introduced by Vedanta Group and championed by Forge Innovation and Ventures, is designed to streamline and expedite the procurement process. It aims to foster innovation and collaboration with startups and emerging businesses while ensuring timely and fair compensation. Let's delve into the key components of this scheme:

1. Fixed Payout (Min 30%): Under this scheme, a minimum of 30% of the approved commercial value proposed by the startup is guaranteed as a fixed payout. This fixed amount is determined in alignment with the expectations of the Group.

2. Variable Payout (Max 70%): The remaining portion of up to 70% of the approved commercial value is designated as a variable payout. The terms for this payout depend on the value of the variable amount.Variable Amount > 50%: If the variable amount exceeds 50%, up to 50% of this variable amount is paid after the completion of the First Success Milestone, with the remaining 50% disbursed upon the overall successful completion of the pilot project.Variable Amount < 50%: If the variable amount falls below 50%, the payment is made after the successful completion of the pilot project.

3. Higher Fixed Payout: Higher Fixed Payout provision not only recognizes the value delivered by startups but also incentivizes them to continually excel in their offerings. This mutually beneficial approach fosters strong client-startup relationships, encourages innovation, and ultimately leads to more successful and value-driven procurement projects. It's a win-win scenario where startups are rewarded for their excellence, and clients benefit from the exceptional value provided by these trusted partners.

Benefits on a Microeconomic Scale

The Agile Procurement Scheme offers several compelling benefits on a microeconomic level, both for Vedanta and for the startups involved in the procurement process.

1. Accelerated Innovation: By providing startups with a guaranteed fixed payout, the scheme encourages innovation and entrepreneurial spirit. Startups can focus on delivering value rather than worrying about delayed payments, thus accelerating the pace of innovation.

2. Risk Mitigation: The scheme's Fixed-Variable Payout structure ensures that startups are compensated fairly for their work, reducing financial risks associated with project delays or cancellations.

3. Fair Compensation: Startups receive a fixed payout, even if the project's variable component is uncertain. This guarantees that startups are compensated fairly for their efforts, promoting trust and long-term partnerships.

4. Market Expansion: Successful deployments at Vedanta and other Business Units can open doors for startups to expand their market presence, driving revenue growth beyond the initial project.

5. Resource Availability: By capping the pilot project's value relative to the startup's revenue, the scheme ensures that startups have the necessary resources to execute the project effectively, eliminating resource constraints.

Benefits on a Macroeconomic Scale

While the Agile RFP Process brings undeniable benefits to Vedanta and its startup partners, its impact extends far beyond the confines of individual businesses. Here's how this innovative approach can contribute to the macroeconomic growth of India:

1. Startup Ecosystem Nurturing: The scheme nurtures and supports the growth of startups and emerging businesses. A thriving startup ecosystem contributes to economic growth by creating jobs, fostering innovation, and attracting investment.

2. Efficient Resource Allocation: By ensuring that budgets for pilot projects do not exceed 60% of the invoice value, the scheme promotes efficient resource allocation, preventing wastage and financial strain.

3. National Innovation: As startups succeed and expand their operations, India's reputation as an innovation hub grows, attracting global attention and investment.

4. Government Adoption: The success of the Agile RFP Process at Vedanta can serve as a model for government procurement policies. Governments can streamline their procurement processes, support startups, and drive economic growth on a national scale.

5. Exponential Economic Growth: If adopted widely, this payment scheme has the potential to catalyze exponential economic growth by fostering innovation, reducing financial risks, and promoting fair competition among startups.

Government adoption and implementation of Agile Procurement Policies

Implementing the Agile RFP Process, or a similar innovative procurement approach, at the government policy level can indeed contribute significantly to exponential economic growth in India.

Here's how such implementation can be achieved:

1. Policy Framework Development: The government should establish a comprehensive policy framework that outlines the principles and guidelines for implementing Agile RFP Process. This framework should define eligibility criteria, payment structures, and success criteria, drawing from successful private sector models like Vedanta's.

2. Startup Support Ecosystem: To facilitate the success of such schemes, the government should invest in nurturing a robust startup support ecosystem. This includes funding, incubation centers, mentorship programs, and access to resources. These initiatives can help startups develop the capabilities needed to participate in government procurement projects effectively.

3. Training and Capacity Building: Government procurement officials need to be trained in Agile procurement practices. This includes understanding how to assess the value provided by startups, setting success criteria, and structuring payments to incentivize innovation. Capacity-building programs can ensure that government agencies can effectively implement the new policies.

4. Transparency and Accountability: Transparency in procurement processes is essential to prevent corruption and promote fair competition. Implementing blockchain or other technologies for transparent record-keeping and audit trails can help ensure accountability in the Agile RFP Process.

5. Risk Assessment and Mitigation: The government should assess the potential risks associated with adopting this new approach and develop strategies for risk mitigation. This could involve setting aside contingency funds or establishing dispute resolution mechanisms.

6. Public-Private Collaboration: Collaborative efforts between the government and private sector organizations, like Forge Innovation and Ventures, can be instrumental in refining and implementing these policies effectively. Private sector expertise can help the government navigate the complexities of procurement reform.

7. Pilot Programs: The government should initiate pilot programs in various sectors to test the effectiveness of the Agile RFP Process. These pilot projects can provide valuable insights into the real-world challenges and benefits, allowing for adjustments and improvements in the policy framework.

8. Evaluation and Iteration: Continuous evaluation and iteration of the policy framework are crucial. The government should gather feedback from startups, procurement officials, and other stakeholders to identify areas for improvement and refine the policy over time.

9. Awareness Campaigns: To encourage participation and promote the benefits of Agile procurement, the government should run awareness campaigns among startups, businesses, and procurement professionals. These campaigns can highlight success stories and best practices.

10. Incentives for Compliance: The government can provide incentives to agencies and departments that effectively implement the Agile RFP Process, such as budgetary bonuses or recognition for innovation in procurement practices.

11. Legislation and Regulation: If necessary, the government should consider enacting legislation or regulations to formalize the adoption of Agile procurement practices and ensure their consistency and longevity.

By implementing these steps, the government can harness the potential of Agile RFP Process to stimulate innovation, support startups, and drive economic growth at an exponential scale. Such policies not only promote efficiency and transparency in government procurement but also position India as a global leader in fostering innovation and entrepreneurship. Ultimately, a forward-thinking and adaptable approach to procurement can play a pivotal role in India's economic transformation.

The Role of Forge Innovation and Ventures

Forge Innovation and Ventures plays a pivotal role in introducing and promoting the Agile RFP Process within Vedanta Group. Our vision extends beyond Vedanta, as we aim to transform procurement practices at a national scale in India.

1. Introduction of Innovation: Forge Innovation and Ventures introduced an innovative payment scheme that addresses long-standing issues in procurement. Their expertise and vision have led to the development of a model that is both efficient and fair.

2. Advocacy for Change: Forge Innovation and Ventures have actively advocated for the adoption of this scheme, not just within Vedanta but also at the policy level. Their commitment to transforming procurement practices is evident in their ongoing efforts.

3. National Transformation: Forge Innovation and Ventures envision a transformation at the national scale. Their work with Vedanta serves as a blueprint for how similar initiatives can be implemented across the country, spurring economic growth and innovation.

The Agile RFP Process introduced by Forge Innovation and Ventures, represents a paradigm shift in procurement policies. By prioritizing innovation, fair compensation, and risk mitigation, this scheme promises to benefit large companies, startups, and the Indian economy as a whole.

On a microeconomic scale, it accelerates innovation, mitigates risk, and fosters long-term partnerships. On a macroeconomic scale, it nurtures the startup ecosystem, promotes efficient resource allocation, and positions India as a global innovation hub. Forge Innovation and Ventures, as pioneers of this transformation, envision a future where India's procurement practices drive exponential economic growth and innovation, setting a precedent for governments and businesses worldwide. It is now up to other stakeholders to embrace this change and usher in a new era of procurement excellence in India.