Tag Archives: procurement process

Buying The Cheapest – The Biggest Myth About Procurement

Writing off Procurement as the department that finds things for the cheapest price is to write off a complex and important decision-making mechanism that expertly considers several vital factors over “buying cheapest”.


It is saddening how some organisations still think the only idea of Procurement is to buy the cheapest. This leads to numerous erroneous opinions about Procurement function and profession in general. Because of this myth, other departments within organisations try to avoid Procurement department while making strategic decisions. Consequently, in many instances those departments face numerous problems, such as poor service, substandard deliverable, late performance and even disappearing vendors.

It is important to instruct our colleagues and duly inform them about the role and significance of Procurement function in any organisation. It is important to bust Procurement myths.

First, in Procurement profession we do not even use the words “cheap”, “cheaper” or “cheapest”. These are banned words. Because the word “cheap” reflects many attributes, including quality. We say “lower in price” or “lowest-priced” or “less expensive” or “least expensive”.

Second, we never look at the price of goods, works or services, if we are not satisfied with the quality. Even if the price is $0.00. We are simply not interested in seeing the price of a bad quality product.

Third, we do not consider price if delivery schedule and delivery conditions are not what we requested. I.e. if medicines or other vital products are going to be delivered long after they are needed – why do we bother about the price at all?

Forth, most often we give zero attention to price if the company offering products or services is not qualified and reliable. Some exceptions might apply for new technologies, know-hows and monopolies.

Fifth, we do not consider price if a bidder disagrees with terms of the contract we envisage.

Only after all these criteria are met, Procurement starts reviewing, comparing prices.

So, in practice, we might review the prices of only 4 offers out of 20 offers received. The remaining 16 would be filtered out because of the criteria above that come before price.

But, there is “one more thing” (© Steve Jobs). Even comparing the prices at this stage does not mean the contract will be awarded to the lowest-priced offer. Buying organisation might have several other preferences, for example awarding the contract to a greener or more sustainable enterprise, or giving a preference to an SMEs, or local business, or businesses run by women, etc.

In other words, price is just one of those numerous factors Procurement considers.

Additionally, it is vital to acknowledge that while sourcing best value for the organization, Procurement wears two hats:

The first hat is for dealing with the final recipient of the product or service. Procurement needs to listen carefully and understand all the details and peculiarities of the final deliverable. The price of a mistake here is too high. Any concerns or alternative solutions should be properly discussed before going to market.

The second hat is for dealing with vendors. Here procurement needs to obtain the maximum value for the organisation, while keeping the vendors interested and motivated.

Negotiating in two fronts is difficult, but no one said Procurement is easy. Procurement is a complex and important decision-making mechanism that evaluates risks and offers solutions to guarantee the best value for money. It is certainly more than just buying the cheapest.

This article is based on series of lectures by Levon Hovsepyan organised in 2008-2014

This article was originally published on June 9th, 2020. Source: Procurement.org and has been republished here with permission.

RFP Beware – It’s Not Just About Ticking The Boxes

Don’t get caught out by using a template without thinking! The result can give you nightmares!


I was recently asked to describe the worst procurement project that I had been involved in. While not the worst, this story certainly highlights the importance of engaging procurement teams early and not blindly following templates!

The scenario

I was in the role of a buyer supporting an internal customer and I took over a project at evaluation stage. The evaluation team had individually assessed the bid responses and the team had convened to discuss their findings. A weighted attribute model had been selected to help identify what criterion was valued over others.

The template bites back

The ranking of the bidders evaluation scores were revealed and the project lead was shocked. “This isn’t what we expected? These aren’t the best proposals that meet our needs, these are the weaker ones?!”

The problem became obvious. The boilerplate RFP template had been used without tailoring it to the business problem they were trying to solve.  Most critically, the evaluation criteria percentage hadn’t been adjusted at all. Innovation was set to a default of 10% whe,n in fact, it was the most critical factor the project!

What is a weighted attribute evaluation model?

A weighted attribute model is one of the most common evaluation models used in procurement. It helps to identify the proposals that best meet the most important buyer needs. This could be requirements like: methodology, project management, resources or capability and capacity.

A typical weighted attribute model looks like:

Track record10%
Technical skills25%
Project team and key personnel20%
Methodology35%
Price10%

There are many different ways to approach the weighted attribute model. (Top tip, don’t put the percentages too close together otherwise there will be nothing distinguishing one bid from the other!)

Project resuscitation

What would you do if you inherited a project at evaluation stage and the RFP didn’t actually ask the market for the complete picture that you wanted? And worse, that the evaluation criteria didn’t match the most critical elements of the project?

These were my options:

  1. Cancel and start again – this wouldn’t be fair to the bidders who had already put in the time and effort to respond.
  2. Reissue parts of the tender questions – the submission deadline had already passed but we could seek further clarification responses. This would risk our reputation in the market.
  3. Create a second stage and interview each bidder to better understand their proposal and see if they have the capacity and ability to scale up to our desired needs.

We selected option number 3 and ran a second stage process. The presentations enabled us to drill down into each proposal and meet with each company face to face. They were able to better understand the objectives we were seeking and we were able to better understand the solution they were putting forward.

3 lessons that changed the way I approach evaluation

  1. One size doesn’t fit all

A template with a generic model can’t be assumed to meet the needs of every project in every situation. It’s important that the needs are thought about carefully and that the right model is chosen for the project.

  • Clunky RFP processes aren’t always right – especially where innovation is required

Consider what parts of the process must be executed e.g. notice to market, instead of paper based responses – ask the bidders to complete a simple two pager, then hold a dialogue to flush out the rest of the solution.

  • Think carefully about what is important to the success of the project

The commercial team could have determined what was most important to the project. Pairwise analysis is a great tool to help with this!

The traditional RFP model’s days are numbered and will hopefully soon become a thing of the past. It does not suit all processes and yet it’s still frequently used. If the entire process can’t evolve to be more efficient, then we have to change the way we approach evaluation to ensure we’re selecting the best company for the job, rather than the company that can write the best response.

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An Employee Tests Positive For COVID-19: What Now?

If you haven’t dealt with an employee testing positive for COVID-19, you probably will in the very near future. How are you going to manage it?


It’s a complex challenge that calls for quick and decisive action from business managers. The best practice will vary, depending on your workplace.

HR and workplace experts across the world are scrambling to communicate best practice to employers amid the COVID-19 pandemic.

A webinar organised by Hazmasters covered best practices for a various workplace types. The US company works with companies to build a strong safety culture, and has been overwhelmed by demand amid the COVID-19 pandemic.

The webinar revealed that in the US alone, 14.4 million workers face exposure to COVID-19 at least weekly, while 26.7 million face exposure at least once a month.

Sylvia Kolitsopoulos is head of brand strategy and business development for Hazmasters. She explains that symptoms of COVID-19 may appear 14 days after exposure to the virus, making it difficult for workplaces to navigate the risks.

She recommends that workplace health and safety committee should be involved in creating best practice and training programs that work for your business environment. 

“We’re all doing our part to flatten the curve to get through this unprecedented time,” she says.

Kolitsopoulos and her team of Hazmasters colleagues contributed to the webinar, explaining that workplaces need to implement proper workplace hygiene practices.

Crucially, if an employee does test positive for the virus, it’s important to keep a record of this on the employee file and that any potential areas within the organisation that may have been contaminated in your workplace are recorded.

If an employee within your business is exposed, these procedures should be followed:

  • Immediate removal from worksite of individuals testing positive
  • Prompt identification and isolation of potentially infectious individuals
  • Individuals to monitor symptoms for 14 days and contact local health authority if
  • Thorough disinfectant cleaning by a certified company
  • Identify where person has been in the workplace to ensure those areas
  • If you can’t send them home, isolate the contaminated areas so decontaminate team can deep clean the area.
  • Continually check local health authorities for update as advice changes regularly.

Source: Hazmasters webinar

What rights do employees have?

Employees that have contracted COVID-19 will have different rights depending on legislation within each jurisdiction in your own country.

However, in most cases, if an employee is showing flu-like symptoms (whether COVID-19-related or not) while at work, they can be sent home. This is a standard workplace health and safety obligation.

Many employers are wondering if they need to pay impacted staff. The key here is to check the advice from your local authority, which may change as the pandemic continues.

A new report by research firm McKinsey says manufacturing plant leaders can help navigate the transition from initial crisis response to steady the corporate ship with three key steps.

These are:

Protect the workforce: Formalise and standardise operating procedures, processes and tools that help keep staff safe. Build workforce confidence through effective, two-way communication that response to employees’ concerns through flexible adaptation.

Manage the risks to ensure business continuity:  Anticipate potential changes and model the way the plant should react well ahead of the fluctuations to enable rapid, fact-based actions.

Drive productivity at a distance: Continue to effectively manage performance at the plant while physical distancing and remote working policies remain in place.

The report also reveals that absenteeism rates are another important area of focus. Employees are concerned about COVID-19 exposure, which could make them reluctant to come to work, while others may be prevented from attending work due to sickness or due to quarantine rules.

To handle this scenario, some companies are proactively reaching out to employees the day before and the morning of their shifts, and asking if they are planning to come to work, while others are offering hazard pay or soliciting volunteers to be on call for overtime, depending on vacancies, the report explains.

Protect employees

Employers need to take precautions to protect all employees, he explains.

“There are heightened concerns regarding the transmission of COVID-19 in the workplace. If an employee has been absent from work due to flu-like symptoms, it would be reasonable for an employer to make enquiries regarding their ability to safely return to work,” Paterson says.

“These enquiries could include requiring them to obtain a medical clearance indicating that they are not suffering from any disease which may pose a health and safety risk to their work colleagues,” he says.

If an employee has contracted COVID-19, you need to ask who they have been in close contact within the prior two weeks.

Close contact is defined as a person that has been within six feet of the infected employee for a prolonged period of time. You should alert those who have been in close contact as soon as possible.

In terms of confidentiality, the law is clear here. You should tell everyone who has possible exposed at work to the positive employee, within revealing the employee’s identity.

Looking ahead

Moving forward, the lesson here is that workplaces need to have a roadmap in place to respond to pandemics. This includes the potential work from home scenario and specific procedures to ensure the health and safety or employees.

This includes the creation of pandemic kit for employees who have to visit clients, such as hand sanitiser, mask, safety glasses, disposable gloves, sanitising wipes and a garbage bag.

It’s also worth creating a blueprint for the unexpected. While it’s COVID-19 this year, next time it could be an earthquake, recession or something else unforeseen. Global consulting firm Korn Ferry has created this handy guide to implementing a blueprint that works for your business.

Want to keep up with the latest coronavirus and supply chain news? Join our exclusive Supply Chain Crisis: Covid-19 group. We’ve gathered together the world’s foremost experts on all things supply chain, risk, business and people, and we’ll be presenting their insights and daily industry-relevant news in a content series via the group. You’ll also have the support of thousands of your procurement peers, world-wide. We’re stronger together. Join us now.

Out is In: an Outline of the Outlook for the Outsourced

There are ample opportunities for savings in outsourced services implementing the right models for balanced success.


Just over six months ago, I left my role in a well-established procurement advisory firm to take a deep dive into the outsourced services category. My spend management sense told me this category was still untapped by procurement. Now, amidst an unexpected crisis affecting nearly every business in the world, my instincts have been confirmed.

As a baseline, it’s important to understand that indirect service categories tend to get less attention than direct categories or indirect goods, which tend to be more visible. Many indirect services happen in the background, while we’re off at night, despite filling an important need.

To quantify the gaps, we’re running a study on the capabilities and outcomes procurement teams are using in services categories. It’s still open for a few weeks more, so please click here to benchmark yourself in areas like analytics, talent, category management, and value delivered across services categories. I look forward to sharing detailed results with participants as we all try to focus our efforts where we’ll have the most impact.

Outsourcing as a spend category

Specifically, what do we mean by outsourced services? Over the last 30 years, both non-core and core activities have been shifted outside of the organization. While the original goal was cost savings through labour arbitrage in lower cost regions, objectives broadened as provider capabilities developed and companies served increasingly global markets. These days, outsourcing projects are as much about digital transformation as they are about cost cutting.

Many industries rely heavily on outsourcing partners. For example, a typical financial services organisation could spend 5 per cent of its revenue on business services, and more than half of its IT spend could come from services, not software or hardware. That shift means business processes, engineering services, and IT sourcing make up hundreds of millions of dollars of spend for organisations.

As a procurement advisor and consultant for the last 15 years, and a practitioner and services buyer for many years before, I know how tightly procurement has squeezed savings out of every spend category possible. The whole concept of category management is predicated on the idea that savings will flatten over time, and procurement must become a trusted advisor to enable stakeholders in delivering higher forms of value from the supply base. For most categories, price benchmarks are hard to come by, RFPs across multiple suppliers drive pricing down, and relationships can be transactional for all but the most strategic items.

Outsourced services are different. There may only be a couple of suppliers to choose from, and switching costs are high. Service providers are serving as extensions of company operations, sometimes in customer- and employee-facing roles with sensitive information.

At Everest Group, an analyst firm focused on the global services market since 1991, we see untapped opportunities for procurement to better manage outsourced services categories. More suppliers than buyers are accessing the wealth of information on service providers, best practice contract terms, and cost models. The components for strong category planning exist, but procurement teams are just starting to access them. Price and contract benchmarks are readily available, and most projects reveal double-digit opportunities to improve costs. Like many other strategic categories, these are dynamic relationships that benefit from strong category management tactics: quality market intelligence, collaboration with stakeholders, well informed negotiations, supplier partnering, and risk management. There’s so much opportunity for value in these categories as buyers become more educated about the market.

Global services during the COVID-19 pandemic

Of course, we can’t have a conversation about global services in 2020 without talking about the impact COVID-19 is having on the world. My colleagues and I have been busy speaking with service providers and buyers, and crunching the data to help companies emerge from this crisis stronger and better prepared. Check out our COVID-19 resource center for ongoing posts, reports, and even a dynamic tracker to see impact to global service delivery by country.

Optimising costs and modernising value delivery

There’s never been a better time to address cost improvement opportunities in outsourced spend. In our upcoming webinar with Procurious – “5 Cost Levers To Pull Right Now With Your Outsourced Services” – we’ll talk about opportunities to optimise costs and modernise value delivery.

This is not about pushing suppliers to the brink to cut costs while compromising their ability to survive and sustain good services. In fact, as a thought leader focused on driving procurement organizations to create higher value, it pains me a bit to allude to cost savings in the webinar title. As a function, we need to resist the urge to revert to 2008-style high-pressure cost cutting. This is about working with service provider partners to ensure we have the right models in place for balanced success. Our success post-crisis is dependent on having the technology, service levels, and terms in place to operate in a digital world. In fact, service providers prefer to work with educated customers, and, so, prefer small adjustments every few years rather than large corrections when an uninformed customer learns they were wasting money throughout a five-year contract.

During the webinar, we’ll talk in depth about the following improvement levers:

  1. Paying the right price – market rates in services can be quite dynamic; it’s important to understand cost drivers and adjust rates regularly.
  2. Understanding total cost – it’s never just about rates: there are hidden cost drivers everywhere and we need to know where to look.
  3. Deal structure – there are several ways to structure an outsourcing engagement; none are right or wrong for all situations. We’ll talk about what to consider and what to avoid.
  4. Innovation – Innovation and digital transformation is becoming a priority in outsourcing, but we often miss this while focusing on costs.
  5. Financial engineering – there are creative ways to fund productivity. We’ll give a few examples of recent deals that shift the paradigm for buyer and supplier.

Whether you manage a small amount of outsourced spend or multi-million-dollar contracts, or are just curious to learn about a new category, please join us for an interesting and educational conversation.

Assistance for services buyers

During the COVID-19 crisis we are offering pro bono assistance to services buyers in the procurement community:

  • Complimentary price checks on up to three standard roles in three different locations – a pulse check to see if your rates are in line or out of line with the market.
  • A service provider risk profile covering four key parameters (finance, governance, operations, reputation) –  find out if there are underlying concerns with your provider beyond the immediate crisis.
  • A conversation with one of our analysts on any global services related topic – ask questions, test your strategy, or get feedback on what others are doing from our senior team.

Our team at Everest Group is excited to be working with Procurious, and we look forward to helping members create value for their organizations.

Amy Fong

Vice President – Strategic Outsourcing and Vendor Management
Everest Group

To find out more about these cost levers, and to access expert advice on how to use them, register for the Everest Group sponsored webinar 5 cost levers to pull right now with your outsourced services, to be broadcast on Thursday May 7th 2020 at 2:30pm GMT. To find out all the information you need, including how to sign up, visit the Procurious website or click here.

Supplier Motivation, A Key Component of Supplier Management

Motivate your suppliers rather than merely manage them


As we have already seen in a former blog, enterprises often fail at maximizing the value of collaborating with smaller companies. Convinced that their sizes and brands will attract suppliers anyway, they entrench themselves behind the gates of rigid procurement processes. They miss the huge opportunity of co-innovating with these businesses, especially startups, by failing to take a differentiated approach. This multi-channel strategy tailored to suppliers’ capabilities is what differentiates best-in-class from a peer group as a report from The Hackett Group reveals.

On the other hand, let us not forget a wise piece of advice from Procurement Management expert, Natacha Trehan, in her keynote last year at Ivalua NOW –  every customer wants to collaborate with the best suppliers, which means that, eventually, the supplier chooses who they want to work with. This translates into a powerful lesson learned for Procurement: motivate your suppliers rather than merely manage them.

This is a method medium-size companies have already integrated in their supplier innovation strategy.

I was lucky to attend an inspirational presentation on the subject by Virginie Favray, Urgo Healthcare’s CPO, at a Procurement roundtable event, before the lockdown. Urgo is a leading international healthcare group which specializes in advanced wound care and self-care. Their €640m turnover qualifies them as a medium-size company, especially if you compare them to pharmaceutical giant Sanofi with its €35b revenue.

Even taking a cautious approach to comparing figures, I cannot help but notice that Urgo’s revenue growth rate is more than double some of its larger peers. Is a strong supplier innovation strategy the key to additional growth points? It certainly contributes and we will dig into Urgo’s methodology.

This methodology was new to most Procurement peers attending due to both its philosophy and the way it translated into concrete actions.

When it comes to the philosophy, Urgo decided to play a different tune compared to its larger peers. They cannot leverage the massive spend volumes that the pharmaceutical giants can. Additionally, if their brand awareness is strong in France, it has limited traction on international markets. That is why, the group fully plays the trust card.

How do you build such an asset and how does it turn into better innovation?

It all starts with building up a transparent relationship. What are they transparent about? They share Urgo’s business strategy, how it drives Procurement objectives and finally how strategic suppliers are valuable stakeholders of it. As I have often highlighted, there is a prerequisite for that to happen: Procurement practitioners must enlarge their focus to embrace the full strategy of their company, which often they do not. At Urgo, they do.

Establishing trust in a relationship is a safe place to start. However, it will not last long if no long-term relationship management is applied. This is something Urgo has perfectly understood. As most Procurement organizations do, they evaluate their suppliers. Nevertheless, they do not satisfy themselves with this one-way view. In fact, they ask suppliers to assess Procurement too. Due to this 360-degree assessment, their relationship trust index reaches high scores. The postulate here is that detecting and solving inevitable business frictions on a regular basis allows a healthier relationship on the long run.

In order to turn this healthy relationship into a thriving partnership, they have developed a supplier award program which recognizes suppliers’ efforts. In the HR realm, expressing gratitude is widely acknowledged as a powerful means to foster motivation. Why would it be different for suppliers? Each year, Urgo acknowledges three suppliers for direct and for indirect spend. They are rewarded with a “best supplier of the year” certificate, some Urgo products and a personal note from the CPO.

Once such a favorable environment has been set up, initiatives aiming at capturing co-innovation with suppliers can be implemented. Urgo employs a wide range of tools to do so.

First, they have a suggestion box concept for suppliers to submit. This is a method that is proving more and more efficient to boost innovation according to procurement consulting group AgileBuyer. On Urgo’s suggestion form, suppliers may recommend new products or improvements to existing ones. They must be as specific as possible about their idea (investment cost, timeline, potential savings…). If the idea generates savings, these are shared between Urgo and the supplier. Buyers receive about a thousand forms per year and commit themselves to responding in a reasonable period of time.

Second, every two years they organize a supplier-buyer speed dating event, focused on indirect spend. As a result of these encounters based on a specific theme, two or three new processes are designed. For example, last year’s topic was about digital marketing. They created a commercial through a crowdsourcing process instead of using traditional communication agencies. Indeed, some preparation is necessary before this innovation event: fifty new suppliers were sourced and only ten were selected for speed dating.

Third, they have an annual two-day innovation workshop which mixes stakeholders from Urgo as well as direct suppliers and even tier 2 and tier 3 suppliers. These workshops focus on specific topics that are prepared ahead to get the most of this workshop. Last year, sixty concepts emerged from the discussions which eventually shortlisted into three projects.

Finally, buyers also spend time on their strategic suppliers’ premises. This is not to discuss day to day operations or business or pain points but rather serve as a vehicle to discuss long term strategy, find synergies in situ and foster innovation ideas.

Obviously, this is not an approach you can replicate with every supplier you work with. This is why, Urgo applies a supplier attractivity matrix which identifies the partnerships they really want to nurture. Only strategic suppliers are part of this matrix. A supplier becomes strategic when it ranks high in a wide range of criteria: margin level, market share, supply chain criticality, procurement annual review score, ethics and innovation rating. Suppliers are then positioned against a second axis: the maturity of the relationship with Urgo. Combining these two filters brings to focus the suppliers that are core to the business and which innovation proposals can truly be beneficial.

All these are smart and actionable ideas which can easily be replicated into any large enterprise. Let’s get started!

Design Thinking Applied To Procurement

Don’t reinvent the wheel, apply design thinking tools to help you plan your next procurement.


Agile processes and design thinking are not fads, they are here to stay. During a three day design sprint that I participated in recently. I was bombarded with many different models designed to stimulate creativity. The result was a continual stripping down of our ideas until they were polished and on target.

Using these tools to break down our assumptions and continually test and probe ourselves for new answers was both exhausting and inspiring. Tools to aid design thinking don’t have to be high tech, new or complex to be effective. They are simple and freely available, so why aren’t we utlising them more in procurement?

Design thinking in action

Here are some of the design thinking exercises that I have used recently in my work:

  • Lightning Demos: before a workshop set the attendees homework to discover relevant tools or examples of either how your problem has been dealt with elsewhere, and/or things you’ve interacted with in your daily life that you find easy to use e.g. pay wave credit card for ease of transacting, a website you’ve used, etc.
  • ‘How Might We…’: takes challenges and poses them as questions.
  • User Journey Maps: These help to build empathy and understanding. Start with how your user first encounters your business / product and map out their experience end to end.
  • Crazy Eights: You fold your A4 piece of paper into eight sections and set the timer for eight minutes. Try and think of any solution possible, no matter how out there.
  • Game theory: Using cards to stimulate combinations of thinking differently e.g. event cards, theme cards, product idea cards. Draw one each from the pile and see what ideas it generates.
  • The Five Whys: the idea is to keep interrogating the cause of the problem to ensure any solution has dug to the actual root cause. In the example below often the response would end at fixing the leak.
  • Personas: Another empathy building tool. Build up a detailed persona of the core or target user and use them when designing ideas.
  • SCAMPER: The acronym represents seven techniques for idea generation: Substitute, Combine, Adapt, Modify, Put to another use, Eliminate and Reverse
  • Dot voting: With an overwhelming amount of post it notes and ideas, each person gets two dot stickers to place on the post it note that they feel is the most important and contributes to addressing the problem statement.
  • Decision matrix: Because everyone loves a four box diagram in procurement. This Is a great way to clear on priorities, especially if there are a lot of dot stickers!

Want to find out more? Google has made their design sprint kit free, its open source and available for anyone to use. You can find further information about each design thinking tool cited above by visiting their website.

How can you apply these to your procurement project?

Many internal customers come with pre-formed solutions and ideas of how to solve the problem or opportunity they wish to approach the market about. The design thinking exercises are quick ways to ensure that the right solution is being reached for. If the customer is not willing to participate, you can do these by yourself.Test for new ways to solve the issue and test that the problem or opportunity has been correctly identified in the first place.

Ditch the 400 page strategy

The Lean Canvas is where we can start to bring all the creative thinking together on one page. It should be clear, concise and make a convincing case for change. There are many free examples online. The lean canvas can be used to replace the traditional procurement plan document for low risk procurements. It can also cut down a category management paper to it’s essence, making the perfect executive summary for others to digest at a glance.

This sounds bonkers

Are people really doing this? Yes! My current workplace is central government agency and we are using the lean canvas approach in the place of traditional procurement plans.The co-design process can replace tenders effectively. The theory of change model is the perfect framework to accelerate an idea and unlock its true impact.

Get inspired and start thinking outside of the procurement box!

This article is solely the work of the author. Any views expressed in it are those of the author and do not necessarily represent or reflect official policy of the New Zealand government or of any government agency.

Tenders are the Worst Form of Procurement

Tenders may be the traditional form of procurement, but it’s time they were consigned to the dustbin of the past.

This article was originally published on LinkedIn by Austin Harrison.

“Procurement by tender is the worst form of procurement, except for all the others”

Winston Churchill, British politician, army officer, and writer, 1874-1965

Actually, Winston Churchill never said that, but if he’d been a Bid Manager I reckon he totally would have.

Procurement by tender is, by and large, a solution to a whole lot of problems that ought not to exist. Nepotism, backhanding, bribery and intimidation – those old-school gangster favourites – are obnoxious and illegal and commercially inadvisable, and picking with a pin is a terrible way to get an optimal result. I fully accept that tendering is as about as fair and sensible a method of procurement as I’ve come across.

Then again, if aliens landed and were introduced to the concept of tendering, they might wonder why we’ve created an entire sub-industry devoted to a single method of acquisition that doesn’t always get the right result for the purchaser and doesn’t always guarantee a sale for the best vendor.

Tenders – A Hugely Expensive Lack of Control

As someone who supports sales for a living, the issue I have, if one accepts I’m not a gangster, is that tendering is hugely expensive, and doesn’t quite work like it says on the tin. Purchasing, even of large, complex and multi-component tangibles, as well as intangible stuff like ideas and values, works a bit better for both parties if it’s treated more like old-fashioned shopping.

The buyer needs to try it on, to prod and poke and feel the width, and the vendor needs to suggest politely that while tangerine sequins are a bit last season, this one here is timeless and elegant and 20 per cent off.

A glaring anomaly, for me at least, is that as soon as an invitation to tender is issued, both sides lose a significant element of control. From the sales side, there might have been months or years of locating, learning about, and leading a prospect towards a solution that meets and exceeds needs that have been properly and professionally identified.

An RFx is issued, and suddenly any such headway can be diminished or completely negated. For the purchaser, they give up the tactile, lived experience of shopping and replace it with acquisition by form-filling at arms-length.

And if we’re being brutally honest, both the form and the response can be poorly designed and quite a long way from what is wanted or what is actually delivered.

Re-channelling some of the blood, toil, tears and sweat

While the tendering thing fills up my time quite satisfactorily, I’d prefer to expend a little more effort on winning business, and a little less on just joining in. Tenders are unlikely ever to disappear (and nor should they), but that doesn’t stop me from exploring any alternative approaches.

I’m lucky that the field I work in is flexible to some extent in respect of the sales process. It’s been possible for my team, in collaboration with others, to provision my sales colleagues with written collateral that is designed to preempt, or at least influence (in a non-gangster way) procurement by tender. I believe we’ve had some success with the following:

A Buyers’ Guide to Tenders

More of an infomercial than an advert, this encourages a prospect to ask questions of prospective suppliers. They are, of course, the kind of questions that my company would enjoy answering, and our logo and testimonials are prominent, but for those prospects who are in the early stages of procurement, I believe it’s actually a really useful item

The Case for a New [insert your offering here]

A more substantial justification for change, and how to go about it (define why you’re shopping, don’t let the wrong people make the decision, focus on advantages rather than risk, examine the risk of not changing, etc.). Includes plenty of stories of successful procurement (of my company’s products, but then those are the only stories to which we have access…)

How to write a Request for Proposal

If we have to go down the RFP path, it’s great to receive something that we can respond to properly. You may be surprised, but this isn’t a shameless spruiking for my company’s products. Rather it highlights sensible things to ask, and how best to encourage an honest and comprehensive response (e.g.; a spreadsheet with 500 or 1,000 closed questions might actually deliver less information than 50 broad questions that can be completed as the respondent sees fit, kind of thing) 

A Host of One-Pagers

A host of documents, from one-pagers upwards, that serve to address questions from prospects that repeatedly crop up during the sales process. For my line of work, these include collections of case studies focused on a particular market sector (who else like me has your products?), outlines of change management and ongoing support services, descriptions and examples of opportunities for return on investment, explanations of solution architecture and overarching compliance, etc., etc.

While it seems that these documents have had some impact, it’s difficult to measure precisely how much. Certainly, we’ve received RFPs based on our suggestions, but often we’re not sure if a particular document reassured or persuaded a particular prospect sufficiently for a them to sign the contract.

That said, I take the view that my job is to support the salesfolk, and if they consider this sort of thing helpful, that, for me, is a decent result.

Do you do anything to anticipate or guide procurement by tenders, and move forward into broad, sunlit uplands? What are your experiences here? Always keen to learn more….

Guide to Writing a Supply Management Plan

Though it may seem like a daunting task initially, writing a solid supply management plan for your organisation will really set you up for success.

From Startup Stock Photos on Pexels

This is the second part in a series. Read the first on ‘Writing a Brief for the Procurement of Goods and Services’ here.

Supply management is one of the key components of a successful business regardless of its niche or service portfolio. Once you find a suitable supplier or B2B partner with the items or services you need to remain operational at peak capacity, you will want to ensure that a supply management plan is in effect.

However, drafting such a document takes effort and panache for small details due to legalities and mutual obligations that will require careful listing and formatting. According to Finances Online, 57 per cent of companies believe that adequate supply management gives them a competitive edge that enables further business development. 62 per cent report limited visibility in terms of being informed about their supply chain status at any given moment.

This creates an incentive for companies to create a supply management plan which can easily be retrofitted for different applications and allow them to stay informed about their inventory at all times. Let’s take a look at how you can benefit from supply management plan writing and the steps necessary for its successful drafting and approval by all parties included.

Basics and Benefits of Supply Management Plans

It’s worth noting what supply management planning is all about before we jump into writing guidelines and plan outlining. Supply Management Planning is a forward-thinking process that involves coordination aimed at optimising the delivery of goods or services from a supplier to a customer.

Its main focus is to balance the supply and demand through inventory planning, production scheduling, and delivery organisation. Writing a supply management plan for your business’ needs will allow you to streamline product delivery and quicken the general turnaround time of your contracts due to the standardisation of written documentation.

Relying on writing tools such as Grammarly (a dedicated proofreading tool), Studicus (a professional outsourcing platform), Evernote (a cloud-based text editing service), as well as Grab My Essay (a document writing platform) will help you get the documents shipped to clients and contractors with impeccable speed and quality. While these documents are not special and show up quite frequently in companies that rely on shipping or ordering of goods and services, their standardisation will bring about several benefits to your business, including the following:

  • Better stakeholder cooperation and networking
  • Improved supply management efficiency
  • Lowered risk of delays and bottlenecks
  • Increased profit margin and ROI

Supply Management Plan Writing Guidelines

Supply Management Plan Overview

The first thing worth noting is that a supply management plan isn’t bound by length or complexity – it all depends on your contract’s requirements. Supply management plans are typically assigned for a fixed duration of time, be it several weeks or years in advance, thus allowing two parties to manage the supply line between them. In that regard, the first page of your plan should focus on an introductory segment that will outline the supply management document in its entirety.

Elements such as the name of your recipient (company name, representative name, address, etc.) as well as products or services outline (product category, number of items, estimated value, etc.) should find their way into the plan overview. This will allow the reader to quickly scan the document and become acquainted with your requirements without going through several pages of the supply management plan.

Supply Procurement Policies Outline

Every organisation, be it focused on physical goods or cloud-based services, features certain procurement policies. It is pivotal for your business’ reputation and longevity of your contracts to outline any special requests or policies you have in advance for the sake of transparency.

In this segment, it’s good to include information pertaining to your storage capacities, safety regulations and procurement facilities you have access to. This will ensure that your recipient is aware of the environment in which their goods will be stored and to better prepare their shipments in case of special climate or infrastructure requirements on your part.

Detail the Quality Assurance Systems

No matter how good your relation with a certain supplier may be, you should still rely on objective QA systems when it comes to supply risk management. The plan you write and send out as a procurement document should include a breakdown of your QA systems, as well as any regulations it covers based on health and safety hazard standards.

This is especially important when shipping medical equipment, chemical compounds and other hazardous materials that can cause severe human danger if mismanaged or stored inadequately. Most importantly, outline your specific guidelines in case of procurement contamination or product failure on the shipment’s arrival into your facilities to cover all grounds.

List International/State Laws

Chances are that you will sometimes work with international suppliers and companies that don’t share your governmental or legal jurisdiction. When that happens, you should ensure that international and state laws pertaining to your industry are listed on the supply management plan with follow up links or documents.

If you work with suppliers which don’t speak your language, you can refer to platforms such as Is Accurate, which is a translation review website, in order to ensure that your writing is understandable due to its importance. It’s also good practice to requisition legal documents and shipping approvals from the supplier for your own border and customs checks and their timely processing.

Outline your Supply Selection

You should follow up on your initial product or service procurement outline from the opening segment of the supply management plan with a detailed breakdown of your requisition. One of the easiest ways to do so is to create a simple table with clearly outlined product categories, product names, procurement numbers, as well as any special requests you may have, such as limited-time-only procurements.

This will allow your supplier to process the order quickly and to clearly understand which items you will require for the duration of your contract. Make sure to include a quick contact information line in this section to allow for follow-ups in case of unclear requirements or a lack of products on your supplier’s side.

Detail the Distribution Timeline

Lastly, supply management plans should come with a detailed breakdown of the distribution timeline pertaining to the previously outlined order. Do you require the items to be shipped to numerous different retail fronts across the country – if so, in what order and quantity? Will you handle a part or the entirety of the shipping procedure and only require the supplier to prepare your items for pickup?

Do you require any safety or manpower assistance with handling the supply going forward or do you have sufficient capacities to do both? These items should be added to the distribution section alongside a rudimentary contract timeline that will allow the supplier to quickly scan through their obligations toward your business.

Not as Daunting as it Seems

Writing a supply management plan for your company may seem like a daunting task at first. However, it is a pivotal step toward creating a reliable and professional supply management network.

Find ways to implement the above-discussed supply management plan guidelines in your own business practice and contractual obligations. Their inclusion in your supply documentation will help your business’ ongoing growth and stability on the market going forward.

The Time Paradox of Contract Management

When you’re busy it’s easy to let things slide and ignore contract management in the procurement process. But the idea that you’re saving yourself time by doing so is a paradox we would be well-served dismissing.

By andrey_l /Shutterstock

You’ve taken your time meticulously following the procurement process from inception of the idea through to contract award. You’ve spent all the time you needed getting your ESPD right and crafting some good contract documents to get the necessary competition and achieve best value. Your contract award reports have been signed off and you’ve even managed to fit in time for a lessons learned document.

But you’ve got another tender sitting waiting to be evaluated. And another that needs sign off from the stakeholders before you can publish. Not to mention that phone call you’ve just taken or email you’ve read assigning you a new project or asking for your input.

So you think to yourself, “It’s ok, I’ll arrange the mobilisation meeting and then the Operations side of the business can take it from there. After all, it’s an easy contract – it’ll take care of itself…”.

Stop. No really, stop. Why, after putting all the hard yards in to begin with, would you then choose to step back at such a critical juncture? Are you sure that without your input, all those savings and benefits you agreed with the supplier will be delivered? And can you prove you are getting what you asked for?

Out of Sight, Out of Mind

Let’s take a step back from this and stop blaming ourselves as individuals. Time is not on procurement’s side (as I have said in the past) and there’s not always time to perform all the necessary tasks as part of the procurement process. When push comes to shove and there are tenders to be published, one of the first things to get dropped, alongside training and development, is frequently contract management.

Why? That’s a hard one to answer. In many public sector organisations, the issue comes down to an unholy trinity of reasons.

  1. A lack of resources in procurement departments, be that head count, budget, or similar;
  2. A lack of time, which has been covered extensively in the past; and
  3. A high churn of tenders, meaning that getting the contract signed has become the priority.

Unfortunately, the reality is that the public sector is falling victim to the paradox of contract management. It might be felt that there isn’t sufficient time to manage contracts effectively, but without a procurement focus, how are organisations going to realise savings offered by and agreed with suppliers.

In some cases, from personal experience, procurement isn’t even charged with the on-going contract management. In many organisations, both in the public and the private sectors, once procurement has put the contract in place, it’s passed to contract managers or end users for its duration.

Not Rising to the Challenge

Look for the importance of contract management and you don’t have to go far to see why and where it drives success. In the past 12 months there have been stark examples of where contract management has fallen down to disastrous and altogether spectacular effect.

The collapse of Carillion and the endless budget overruns of HS2 are just two examples. A bit further in the past, the National Programme for IT for the NHS, which cost £6 billion more than it should have and has, to date, only delivered a third of the predicted benefits, is another.

However, on the flip side of that there are examples of where good contract management has made a tangible (and quantifiable) difference in public sector projects. The new Queensferry Crossing over the Firth of Forth actually came in £100 million cheaper than initial estimates suggested, with credit being given to the overall management of the project.

The NHS Wales Informatics Service project has set up digital systems to aid patients with prescriptions and staff with communication, aimed at creating greater efficiencies across the strained health sector.

And if you’re unsure about procurement’s involvement in these projects, both have been nominated as regional winners for national awards at the GO Awards, which recognises best practice in public sector procurement across the UK.

Getting Mavericks Out of the Danger Zone

Let me start this section by contradicting much of what I have written before. Procurement needs to actively take on contract management, irrespective of the time commitment. And not only this, but it needs to be a priority on the same level as market analysis and tendering. As has been shown with the example above, good contract management can deliver savings and value, but it also extends beyond this too.

Improved compliance, standardising processes and procedures, spend and performance analysis and spend visibility are all key benefits. On top of this, it can help reduce maverick spend (a procurement favourite!) by taking away a route to using a non-contract supplier, or non-contract items.

And, as a final benefit, it’ll help you save time when it comes to retendering, extending or renewing contracts for existing services, as you’ll know far enough in advance to do the full procurement process properly. Not so much spend (money) to save (money), but more spend (time) to save (time). And maybe we can clear up a couple of paradoxes on the way!

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

Removing Obstacles to Competitiveness with CLM

Do you view CLM as an automated filing cabinet? You’re completely missing the point!

When you think about why a company would invest in a contract lifecycle management (CLM) solution, the first things that come to mind might include improved governance and agreement administration. But is that it? If the ROI of CLM is limited to better dotted I’s and more neatly crossed T’s, the effort to select and implement a solution hardly seems worth it.

Companies that view CLM as an automated filing cabinet are completely missing the point. They may even be at risk of having a constrained strategic vision for the future and for the place they want to hold in the market.

In order to create and defend a competitive advantage, a company must lean forward with every process, through every employee, and via every system they implement. There is no reason to do anything if it does not breakdown silos, overcome barriers and make them more competitive in some way, and contract management is no exception. CLM must eliminate obstacles to competitiveness and be as strategic as the company’s approaches to market segmentation and lead generation.

Competitiveness Requires Constant, Active Refinement

Even though the world is moving faster than ever before, contracts are still put in place for multiple years at a time. The chances of conditions being the same in the second or third year of a multi-year contract as they were during the bidding process are slim to none. As a result, companies – led by their procurement function – should expect to modify the contracts that govern supplier relationships. This is especially true for an actively engaged team that wants to drive maximum value through their contracts. CLM not only makes it easier to amend an agreement, it tracks the changes – even if there are hundreds of them – and makes clear which set of terms and conditions is the most current.

Are You Getting What You Contracted For?

There are two ways of looking at supplier obligation management. The first involves whether or not the company receives the goods, services, delivery, and outcomes outlined in the contract each time they make a purchase against the contract. The other is a bit more complex, and it forces procurement to look at demand management in a nonconventional way. Just like a world class athlete, a competitive organization has to be supplied with the appropriate fuel. If procurement estimated a certain level of demand by a predetermined point in the contract and actual purchases are falling short, there is a very good chance that other performance benchmarks will be missed as well. CLM can ensure that consumption is proceeding as planned, and if it isn’t, the system can alert procurement. Procurement’s insight becomes a leading indicator of potential performance – one that the executive team won’t want to be without.

Sleep with One Eye Open

In order to secure or defend a competitive advantage, procurement may be supporting decisions to take risks rather than just monitoring external risk from afar. If a company is going to engage in strategic risk taking, they must be able to constantly audit and review reports to ensure that performance benchmarks are achieved and compliance is maintained. This becomes even more important if procurement is taking advantage of appropriate opportunities to refine and amend the contract.

It is unrealistic to expect anyone working in a fast-paced environment to remember the latest terms and conditions; instead, CLM should bear the weight (and proactively report on) key contract data.

Results matter above all else in a competitive enterprise. Leading companies are harnessing the capabilities of CLM to navigate (and eliminate) uncertainty and enable maximum performance at all times. If your company is looking to become more competitive, you’ll need to be prepared to do the same – an increase in performance that is not possible without leveraging the full capabilities of your supply base through contract management.

This article was originally written for Determine By Kelly Barner.