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A view of procurement best practice
 

A view of procurement best practice

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What does good procurement management look like

What does good procurement management look like

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  • Change Control Note <br /> This Change Control Note (CCN #XXX) is between XXX of XXX Co # and XXX <br /> CCN XXX is entered into by the Parties pursuant to a Services Agreement between the Parties dated XXX (the Agreement) and is effective as of the date of the later of the Parties signatures to this CNN# (the Effective Date) <br /> WHEREAS <br /> This CNN # and all non-contractual obligations arising out f or in connection with it are governed by the laws of XXX and The Parties submit to the exclusive jurisdiction of the courts of XXX <br /> CCN #: XXX <br /> Title of Change: XXX <br /> Originator: XXX <br /> Date: XXX <br /> Version: v0.1 <br /> Priority: H/M/L Cost Impact XXX Schedule Impact: XXX <br />

A view of procurement best practice A view of procurement best practice Presentation Transcript

  • A view on procurement best practice Dr Gordon Murray
  • Agenda
  • Agenda Governance
  • Agenda Strategy
  • Agenda The day job
  • What do you mean when you refer to procurement?
  • Procurement Cycle 8. Closure / Review Need 7. Manage Implementation of Contract 6. Award Contract 5. Tender Evaluation 1. Identify problem 2. Develop Business Case 3. Define Procurement Approach 4. Competitive procurement 7
  • Gateway Stages 8. Closure / Review Need 1. Identify Need Challenge Challenge 7. Manage Implementation of Contract 2. Develop Business Case 6. Award Contract 3. Define Procurement Approach Challenge Challenge Challenge Challenge 5. Tender Evaluation 4. Supplier Appraisal 8
  • Structural options
  • Which is best – centralised or decentralised procurement?
  • Centralised The Market Procurement Unit Dept Dept Dept Dept
  • De-centralised The Market Dept Dept Dept Dept
  • Organizational structures within purchasing Advantages and disadvantages of decentralised purchasing Advantages Disadvantages  Direct responsibility of operating companies  Stronger customer orientation towards internal user  Less bureaucratic purchasing procedures/higher operational flexibility  Less friction costs due to coordination  Direct communication with suppliers  Dispersed purchasing power, lack of economies of scale  No uniform way of handling towards suppliers  Scattered supply market research  Limited possibilities for building up specific expertise on purchasing, supply markets and components  Different commercial purchasing conditions among different operating companies
  • Devolved The Market Procurement Unit Dept Dept Dept Dept
  • Procurement Collaboration
  • Procurement Collaboration Why bother?
  • Why collaborate?
  • Collaborative procurement options
  • Consortia The Market PBO Buyer Buyer Buyer Buyer
  • Collaboration strategy Collaboration Cooperation Coordination Conversation (networking) (Derived from Huxham, 1996)
  • Procurement decision-making tools
  • Spend analysis
  • ABC Analysis: 75/20, 15/30, 10/50
  • The implications of ABC Analysis
  • Kraljic’s Procurement Positioning Model Bottleneck Supply Market Complexity/ Risk Routine Impact on profit Strategic Leverage
  • Who does what? Procurement led Potential benefit from central management Coordinated Decentralised Need for business involvement
  • Relative Power
  • Supplier Positioning Model of potential customers Development Core Nuisance Exploit Attractiveness of account Relative value of account
  • eProcurement
  • P2P & Strategic procurement interfaces
  • eProcurement Strategy
  • A potential Procurement Applications Portfolio
  • Category management
  • Marketing view of brand management
  • Approach to Category Management
  • Potential sourcing options            Make/buy/lease Internal/external Standardisation Domestic/overseas Single/multiple sourcing Stockless/JIT Annual Blanket Orders/Systems contracting Partnership/Adversarial Distributors/Manufacturers Vertical integration/Arms length Vendor rationalisation             Consortia/Coordinated purchasing Forward/spot buying Quality/cost Short/long term contracts Earlier supplier involvement Supplier development Supplier councils Supplier certification Reverse marketing Supplier assistance Value analysis/value engineering Utilisation of IT/IS
  • Illustration of sourcing plan content
  • Supplier selection and contract award
  • View supplier selection and contract award as risk management
  • Mandatory and desirable features
  • Supplier selection
  • Award criteria
  • The award approach
  • Contract Management
  • Contract Management When does it start? When does it end? Who’s responsible?
  • The activities of a buyer during a contract period to ensure that all parties to the contract fulfil their contractual obligations Bailey, Farmer, Crocker, Jessop and Jones (2008) p. 419
  • Fundamentals  The contact is the agreement which is to be managed – it must be right  ‘Battle of the Forms’  The contract must be understood by all those managing the contract  A supplier can voluntarily add performance standards to the tender document  It is possible to include supplier improvement plans within a contract  Contract management approach creates the environment for determining whether or not the supplier will want to bid again
  • What could go wrong with a contract? 48
  • Managing risk Risk analysis Risk assessment Risk mitigation 49
  • Risk threat responses Reduction (treat) Removal Transfer Retention Share 50
  • Risk assessment Risk Probability Impact Proximity Mitigation 51
  • Relationship management 52
  • Relationship management Adversarial contracting does not necessitate adversarial relationships Effective relationship management requires  Mutual respect  Mutual trust  Mutual understanding  Creating an open and constructive environment  Contributing to joint management of contract delivery 53
  • Service delivery management 54
  • Performance management Shaped by the original customer definition of need KPIs identified prior to contracting Likely to be directly linked to tender evaluation criteria KPIs should be  Proportionate,  fit for purpose,  easy to support by evidence,  accepted by key stakeholders 55
  • Performance measures Cost and value obtained Performance and customer satisfaction Delivery improvement and added value Delivery capability Benefits realised Relationship strength Responsiveness 56
  • Change happens! Contract variations 57
  • What circumstances could justify a change in the contract? 58
  • What steps are required when a change takes place? 59
  • Managing contract change  Acceptance that change happens  Risk management predicts what might happen and potential responses  Changes require negotiation  Change management control is essential     Due process Principles of transparency, fairness, accountability and stewardship Appropriate record keeping Due authorisation  Accepted changes require scheduling to minimise adverse impact  Changes need to be communicated  Novation and assignment 60
  • CCR and CCN process 61
  • Change Control Form 1. 2. 3. 4. 5. 6. 7. 8. 9. Reason for change: Description (giving full description of any specification): Proposal for implementing the Change: Timetable: Likely impact on the Services, the Service Level and any Charges: The Price (if any) (including itemised breakdown): Further clarification of the Change/Charge/additional information: Signed for and on behalf of XXX Signed for and on behalf of XXX 62
  • Closing the contract 63
  • Contract exit circumstances Client contractual breach or changed circumstances Provider default Frustration of contract End of the contract term 64
  • Contract management review Aims to capture the lessons learnt for improving procurement Should include key stakeholders Complete a post-contract review report  What worked well?  What didn’t work?  What are the lessons for letting this type of contract in the future?  What are the lessons learnt for improving procurement performance? Capture and communicate 65
  • Success factors
  • Thank you for your attention