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Useful Techniques to Conduct Procurement
It is quite common these days, to have the work outsourced to a third party vendor. Ask me why? Yes, one of the simple reason is that you won’t find the right talent all the time when you look at your internal staff – in the case of services. However, if your organization intends to buy products, then there is always the concept of make vs buy study which needs to be performed to get the cost effective benefit to the firm.
Procuring the products or services is an art by itself. It takes a lot of analysis, research to finalize a suitable vendor. In this article, we will be discussing some of the proven techniques to successfully conduct procurement.
Generally Accepted Practices to Conduct Procurement
For instance, once your organization decides to outsource a project to an external agency/organization, you will need to assess the vendors who are capable of doing the specific tasks or work within the required scope, budget and duration. Once you select the appropriate vendor, the contract has to be signed to perform the required work. The first step to progress in that process is bidder conference.
Bidder Conference
In the bidder conference, you need to call all the prospective sellers for a meeting to discuss upon the requirements. The sellers should have a clear understanding of the requirements before placing their bids. So, the organizer of the meeting should be fair to everybody by ensuring that all the sellers hear the questions put off by individual vendors and answers given to them by the buyer. The organizer needs to hear their queries and doubts patiently, and provide a clear view on the requirements. Normally the bidder conference is held virtually by online conference calls and meetings.
Once the sellers clear their doubts and understand the requirements, they submit their bid to your organization with their proposals. That is the time when you need to evaluate the various proposals to select the right one.
Evaluate the Proposals
There are certain best practices for selection criteria for evaluating the proposals before coming to a conclusion. A sample criteria checklist is listed below-
Is the seller’s proposal accurately addresses all the specified requirements
Is the proposal’s quote appropriate to the total cost compared to your estimation
Does the seller have the required technical skills or capable of acquiring the skills quickly
Evaluate the risk tolerance capacity, whether the seller is capable of mitigating the risk
Does the seller follows proper management methodology for a successful delivery of the project
Evaluate whether the seller is financially capable to acquire the resources when completing the project on time
Also, check the past performance of the seller and their success rate
Confirm whether the seller has obtained the required intellectual property rights and proprietary rights for the resources required to complete the work
So, you need to apply source selection criteria to choose the right seller. In case, of complex procurement, the proposals go to the selection committee where the experts put their brains to select the appropriate seller and sends to the management for approval.
Let’s discuss some more techniques to evaluate the sellers.
- You can consider an independent body inside or outside your organization for evaluation. They will assess all the proposals and recommend the best possible seller. If the proposals asking significantly higher cost as compared to the estimated cost then it can be believed that the procurement statement of work is not fully comprehensive or the vendors misunderstood the actual scope of the work
- You can also take help from a team of experts from various fields like engineering, design, quality, contracts, legal, finance etc. to conduct the evaluation of submitted proposals
- The past performance of a vendor is also one of the measuring factors behind the selection. Look at the areas where the vendor was not up to the mark, thus pay attention on those areas for successful completion
On the Negotiation Table
Once the seller is selected, call him to the negotiation table to discuss each and every aspect of the work structure, requirements and other terms and conditions.
The discussion will comprise about the responsibilities of the buyer and seller, agreed upon budget and payment schedule, overall
project schedule and quality standards, communication channels and designated authority for any changes, licensing and proprietary rights, any governance laws if applicable and other such applicable term and conditions. Both the parties need to agree on the contract’s terms and condition before signing.
The project manager and the team may be available to provide any clarification on the project’s technicality and other requirements when needed.
What’s next after Negotiation
After negotiation, it’s time for the approval of the final contract to be awarded to the selected seller. A contract is a mutually agreed legal document where one party is the service provider i.e. seller and the other one is the receiver or the buyer of the services, products or something of a value as agreed upon in the contract. So, depending upon your work areas you can go for a fixed price contracts, cost reimbursable contracts or a time and material contracts.
Once all these processes are over, do not forget to update your project management plan including all the three baselines – cost, scope and schedule, communication management plan and procurement management plan. Also update the other project documents such as requirement documents, risk register and stakeholder register as the vendor is now included in your list of stakeholders.
So, while awarding a contract to a vendor, use these tools and techniques which can help you to choose the right one without any discrimination. It is important to select the right seller for a smooth sailing of your project.
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