Unconscious bias in procurement - and how to reduce its impact

29 September 2022 Consultancy.com.au 3 min. read
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Achieving value for money in procurement relies on good decision-making without improper influence. But in practice, procurement teams struggle with unconscious bias. Twoey Jones, a consultant at management consultancy Proximity, explains why and how unconscious bias comes about – and how its impact can be mitigated.

When we think about bias in procurement, we often associate it with conflicts of interest or preferential treatment, usually at the supplier selection stage. This is conscious bias. It occurs when a person is improperly influenced in a direct and known way, such as a decision-maker having a personal interest in a procurement outcome.

Unconscious bias, however, occurs when a person is improperly influenced in an indirect or unknown way. It generally happens unintentionally and without malice, but it can still lead to poor decisions and suboptimal outcomes.

Twoey Jones, Consultants, Proximity

To illustrate the backdrop of unconscious bias, consider two examples:

Anchoring bias
Anchoring bias occurs when we give too much weight to an initial estimate of a particular value. In doing so, we allow this initial estimate (the ‘anchor’) to improperly influence our perception of what a reasonable value might be. This can happen even if the initial estimate was not reasonable at all, and even if we don’t realise that we have accepted the ‘anchor’.

Anchoring bias often impacts negotiations, because the first price put forward becomes a default position from which any deviations must be justified. It can also occur when deciding how many suppliers to approach for a limited tender, or when estimating the value of a procurement. In fact, any decision where an initial estimate is put forward can be prone to anchoring bias, because of the improper influence caused by the initial estimate.

Availability bias
Availability bias occurs when we estimate the frequency of a particular event based on how easily occurrences of it come to mind. In other words, it happens when we are improperly influenced by how easily we can remember something occurring—which may not correlate to how often it actually happens.

In a procurement context, availability bias can cause us to overestimate the likelihood of commercial risks, because we can easily remember a few instances where they eventuated – even if those instances are unrepresentative. This can lead to the implementation of excessive risk controls, such as conservative and onerous contract conditions or excessive warranty terms, which drive up price and decrease value for money.

There are countless more types of unconscious bias. But what can we do to guard against them? How can we stop ourselves from being improperly influenced – especially if we might not even realise it’s happening?

Minimise the impact of unconscious bias

To minimise the impact of unconscious bias on procurement decisions, consider the following simple steps:

  1. Establish decision-making criteria in advance. Just as you wouldn’t start evaluating a tender without evaluation criteria, you can take the same approach to other decisions in your procurement process.
  2. Use reliable data to inform your decisions. Overreliance on personal experiences can cause us to be improperly influenced by events or outcomes that may not be representative of likely scenarios. Rational real-world data is generally much more representative.
  3. Seek external review of your decision-making processes. Focus on how your decisions are being made – ensuring that relevant factors, and only relevant factors, are being considered.
  4. Use standard tools to support consistent decision-making. Templates, checklists, and standard operating procedures all help to focus decision-making on relevant factors.
  5. Document decisions individually before coming together for group decision-making. This prevents people from being improperly influenced by the decisions