BUSINESS TIPS: Key ingredients to a successful, best practice procurement process
August 01, 2017
Procurement best practice can bring savings and efficiency to organisations, while also ensuring they avoid the legal risk that presents itself in any procurement process.
So what should you know before getting started? And how should you manage the procurement process before, during and after?
First things first: What is procurement?
Procurement is the act of buying goods and services that enable an organisation to operate. It is increasingly recognised as a separate and distinct discipline with procurement professionals finding themselves recognised as key members of the management, and sometimes, executive team.
The key ingredients to a successful, best practice, procurement process are set out below:
Each procurement begins with the identification of a purchasing need of some kind. For example:
- it may be that there is a new line of business for which procurement is necessary
- a new asset may need to be supplied or built
- an asset may need to be maintained; or
- an existing contract for an ongoing need is coming to an end, leading to the need to re-procure it.
Planning any procurement is key to its success, and an investment of time and money should be made in properly identifying, and then fully specifying the need.
Procurement strategy and process
There are numerous ways to approach the market. Some are required by legal rules or policy (particularly for government) or it may be that a particular strategy is best suited to the need. For example, organisations can procure by direct negotiation, invited / select tender, public tender, or a two stage process involving a public tender for expressions of interest followed by a select detailed tender to shortlisted applicants.
The procurer should ensure that it allows enough time for:
- preparation of the procurement documents;
- the proponents to respond; and
- tender assessment and due diligence on the offers made.
Form of contract
It is essential that the contract form that is used be fit for purpose for the activity being procured. This means that, for example:
- Don’t use a Design and Construction Contract for a Construction only project and vice versa, don’t use a Construct only contract for a project that requires both Design and Construct
- Don’t use a complicated construction contract for a simple supply or supply and install engagement
- Don’t use a complicated construction contract for a maintenance (asset or facilities) requirements
The selection process
The old saying ‘act in haste, repent at leisure’ resonates with anyone that has rushed to make a procurement decision and then stuck with the wrong contractor in a long term engagement, resulting in significant contract and quality failures. Procurers need to invest the right people with the right experience, who can commit time and resources, to assess proposals, check credentials and ultimately make the right decision.
Following the procurement, it is essential that you manage what you have procured by reference to the contract and the requirements.
If you don’t, the hard work and investment that you made in the selection will have been wasted.
This article was written by Scott Alden, Partner Holding Redlich
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