Procurement

Probity manages a lot of procurement on behalf of clients. We usually refer to these assignments as search and selection. Procurement is an interesting and changing area of business, with large organisations putting together procurement teams and the term ’Chief Procurement Officer’ has come into existence.
Procurement is ultimately about getting best value for money. In the public sector there is an additional dimension to the procurement activity, that is ensuring transparency and that all suppliers get an equal opportunity to participate and bid. Government agencies are required (or encouraged for some) to comply with the ’Rules of Sourcing’. Private sector clients are predominantly focused on getting value for money and are usually less concerned about creating a level playing field for suppliers, other than to encourage commercial tension.
On occasion clients will use a tender process to find out ’what they don’t know’ i.e. what solutions exist in the market, or how particular problems are being solved – innovation.
Probity has undertaken over 100 search and selection exercises in the past ten years, not all of them involve complex Request for Proposals or lengthy tenders. Sometimes we are requested to help with negotiation, sometimes we will assist by identifying the relevant players in the market so that a client can approach them directly rather than spending time using a tender process.
So we thought it would be worthwhile putting together five handy hints for procurement.

  1. Tender processes take time: there are a large number of steps, the process is one of those that are linear and steps cannot be run in parallel so you must:
    a. Work out your requirements
    b. Put the procurement documents together
    c. Send it to suppliers
    d. Get it back
    e. Evaluate it
    f. Agree a shortlist
    g. Validate the shortlisted responses and select a preferred vendor
    h. Negotiate (both commercial and legal)
    i. Sign contracts and buy
    This process takes time – anywhere between two and six months would be typical.
  2. Negotiation will take longer than you expect; lawyers will always look to minimise or eliminate risk for their client. Eventually compromise will need to take effect to achieve a balance of risk between the buyer and supplier – be sure the effort and cost of negotiating is relative to the size of the risk.
  3. Going to market can pay off as it will allow you to understand the market rate and provides commercial tension and thus ensures that you don’t pay more than you should.
  4. Be clear about price vs. functionality. Tender processes tend to favour more expensive higher functionality solutions as the evaluation looks at the functionality and then once the winner of that phase is determined tries to fit that into a price.
  5. Buying major cost items, be they new systems, new assets, or even a new office supply contract, is an opportunity to undertake change and introduce efficiencies as well as pure cost reductions.
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