TM requires vendors to place a RM20k deposit to work with them… but is it justified?

So here’s some unexpected drama. The Association of Accredited Advertising Agents (The 4As) Malaysia, an organization representing over 50 key players in the advertising industry, sent out a press statement last week challenging Telekom Malaysia’s “flawed procurement policy“, where companies have to front up RM25k (of which RM20k is refundable) for a chance to work for TM. At the same time though, TM is also not completely unjustified in asking for it.

In other words, it’s a tender issue in both senses of the word.

Since Cilisos has bid for clients without having to put any money upfront, we thought the RM25k ask would have made us heavily reconsider submitting a tender proposal in the first place. But after looking into it, that’s exactly the point because…

Some companies ask for a tender deposit as a “sign of good faith”

Although “tender” might be a dirty word in Malaysia, it’s meant to – on principle – promote transparency, fairness, and healthy competition. However, it can also run the risk of the lemon problem where the supplier (the hired company) may not be able to perform as well as their tender proposal suggested. Also, a client may run the risk of being drowned in proposals if every company decides to try their luck and tembak a tender submission.

So, it’s not uncommon for a client to require a deposit to show that a supplier is applying secara ikhlas – kinda like putting your money where your mouth is.

In the case of TM and The 4As, TM is currently conducting three separate tenders for the appointment of Panel Agencies for their “Creative Partner,” “Digital Partner” and “Below The Line Partner”. Each tender proposal (or bid) requires the supplier (aka the ad agency) to pay:

• A REFUNDABLE deposit of RM20,000 

• A NON-REFUNDABLE Tender Document Fee of RM5,000

Tackling the Tender Document Fee first, The 4As say that these fees were historically to cover the cost of printing and handling the documents – which is true according to what we were able to find – but in an era before documents were sent digitally. The issue of keeping the high prices of Tender Document Fees in a time where printing and couriering documents should be minimized has also been discussed in other countries as well, and isn’t specific to this TM v 4As drama.

According to The 4As, TM’s response when asked why the two conditions are required replied that they are to…

• ensure that only Agencies of ‘acceptable standards’ will be shortlisted, and
• not waste the time of their evaluation panel”

… which falls in line with our point of secara ikhlas/good faith mentioned earlier.

However, The 4As’ stance is that TM already has an internal screening process in place to shortlist and conduct mandatory screenings for potential agencies, because any agency willing to make both payments won’t necessarily meet TM’s requirements – hence why they’re doing it in the first place. We’re oversimplifying it, but it’s kind of like that chicken and egg situation where you can’t prove how good you are without working for the company, but you need to work for the company to prove how good you are.

The 4As are still appealing to TM to reconsider their requirements

From the outside looking in, it would seem that neither party is right or wrong. Perhaps TM doesn’t want to open floodgates for all their procurement standards and ethics to be challenged in the future but, at the same time, The 4As are also looking out for the good of advertising agencies and the industry as a whole. It kinda looks like both sides will continue playing a game of chicken to see who backs down, which would make it a… chicken tender.

According to the press statement, the 4As didn’t receive any counter-arguments to their reasons when they filed an earlier appeal, other than TM stating that they were “part of TM’s procurement policy”. They’ve since sent a third appeal.

Check out the full press statement here.