The Good & Bad of Procurement
How to get what you want.
The How, What and Why of Procurement Success
By Steve Vermey & Dan Henricson for the Illawarra Innovative Industry Network (i3net)
The Good & Bad of Procurement
Poorly run procurement processes often result in delays, additional costs being incurred, damage to the purchaser-supplier relationship and even worse, the wrong solution (equipment/services) being delivered! On the other hand, well-run procurement processes not only delivers the right solution, at the right time and within budget. Whilst the procurement process is started by the client, in order to make it work, it requires both sides to understand the process and work together to deliver a final result.
Over the years, we have seen numerous procurement projects fail to deliver on their promises when both clients and solution providers don’t understand or don’t manage the processes effectively. The result is often significant frustration and confusion throughout the process, which can also impact the quality of the overall solution delivered.
With a number of large-scale projects in various stages of planning or execution throughout the Illawarra, Shoalhaven and Southern NSW region, we thought it was a good time to review the critical steps involved in the procurement process as a reminder of “what good looks like”. By ensuring the procurement process is managed effectively, for both client and provider, there is a greater chance the process will deliver a solution that meets the clients’ needs, but is also delivered on time and on budget.
The Steps to Success
Procurement always starts with the” why”, or the reason that the client is undertaking the procurement. Whilst this sounds simple, it is surprising how many times we see procurement processes fail to address this critical step. The why of the procurement process drives the value that the solution has to deliver and ties it to the key stakeholders.
For private enterprise, the “why” is often driven by a requirement to maintain or improve the productivity of the business or reduce operational cost. For government projects, the why may also include the need to provide services to a community, ensure compliance or safety targets are met, or support the delivery of a government service. By understanding the “why” effectively, tenderers will be able to develop effective solutions that are aligned with the project owners’ intent, as opposed to just filling in the blanks and/or ticking boxes in the tender documents.
There are six key steps purchasers should consider when planning a procurement:
Next is defining the “what”, or the technical specifics of what is going to be procured. The “what” begins with a need, which usually starts when someone in the business says, “I need a…”
The first step in defining the “what” requires the solution owner working with the procurement team to develop a detailed scope for the outputs they need from the solution (can be equipment or services). Procurers must spend sufficient time with the stakeholder(s) of THE NEED to ensure they not only understand what they require, but they have captured the technical details so they can be used in the tender documents.
In some cases, purchasers may require the input of the suppliers to assist in making this clear.
As a service/equipment supplier, during a tender process there are times when the technical specifications will not be clear, or in some cases even understandable! Which is where you could go back to the purchaser to request more information, or ask technical questions regarding the specifications. But remember, your questions (and the answers) are likely to be shared with all tenderers – so avoid giving away your technical solution! Hopefully, with a correctly documented specification, we all be tending on a level playing field.
In some instances, often for larger value tenders, this process may involve a site visit or purchaser presentation. Use this to ask those questions so they don’t have to be issued at a later stage, often when you have already started to develop a solution and may have to re-work your response.
Finally, is the “how” of the process. This is where the procurement team needs to first, understand their own processes and then, make them clear to all of the companies who will be responding. It is absolutely critical that anyone working on the response knows exactly what is required and how it is to be provided!
A typical process is:
Remember to think about the simple things early so you are not caught out at the end of the tender process:
- Do you need to provide an acknowledgement you are responding?
- What is the method the purchaser requires the solution to be provided in i.e. cost breakdown, delivery dates etc?
- How are responses to be submitted i.e. hardcopy, email, via web portal?
- Who is the point of contact for any questions during the process?
- Is there a mandatory site visit?
Getting this process right is vital for both purchasers and suppliers in order to realise success.
For purchasers, the value is receiving services or equipment that are fit for purpose, are delivered on time and within the agreed budget.
For providers, participating in a sound tender process means they are able to accurately scope/price a tender and work with the purchaser during delivery , without incurring additional costs, disrupting the remainder of their business or damaging their reputation.
Most of all, both sides of the procurement equation have to be able to work together throughout the process to solve any unexpected issues and build a relationship, which is supportive of working together in the future.
This article was kindly written by Steve Vermey & Dan Henricson for the Illawarra Innovative Industry Network (i3net)
Steve Vermey & Dan Henricson
Scarp Vantage Consulting helps suppliers unlock their intellectual power throughout a tender process to succeed.
EnterpriseIS works with purchasers to help them define their technical requirements, deliver operationally ready equipment and ensuring their assets deliver the required returns throughout the asset lifecycle.