Concept: Procurement
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- Created by: Annagc
- Created on: 21-03-24 11:24
What is procurement?
Procurement is 'securing the goods and services from external suppliers to satisfy project, programme and portfolio needs.'
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What factors should the procurement strategy consider?
The needs of the project, relevant organisational constraints (ethics policies etc.), how much risk to share with suppliers, the relationship you want with suppliers
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Managing procurement: Make or buy decision
Whether to build it yourself or get someone else to do it for you. Consider costs, quality, intellectual property ownership, resource availability etc.
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Managing procurement: Provider/contractor arrangements
Known as 'market survey' or 'qualified supplier' lists
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Managing procurement: Provider/contractor selection
Identify key criteria to assess potential providers and what your selection process is and how you will prepare sensitive information.
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Managing procurement: Conditions and form of contract
Outline the standard terms and conditions that you'll apply and the terms for agreement on any changes in the standard form of your organisation's contract
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Managing procurement: Types of pricing and methods of reimbursement
Whether you will use a 'fixed price' or 'cost reimbursable plus fee' form of payment
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What does the Official Journal of the European Union state about engaging with suppliers/procurement?
A more transparent and objective procurement process will encourage competition among bidders
Public Procurement Directives are intended to ensure fair and non-discriminatory international competition for contracts greater than defined threshold values
Public Procurement Directives are intended to ensure fair and non-discriminatory international competition for contracts greater than defined threshold values
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Contract conditions: General information
Who the parties are, description and location of the works or services, the legal system that the contracts will use etc.
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Contract conditions: Responsibilities
The provider's responsibilities for design, approvals, assignment or responsibilities, sub-contracting
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Contract conditions: Schedule
Milestones and completion date
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Contract conditions: Quality
Acceptance testing and correction of defects
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Contract conditions: Payment
Certificates, release of payments
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Contract conditions: Alterations
Compensation events, change requests and dealing with unforeseen circumstances
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Contract conditions: Property
Who owns what during the course of the contract, transfer of intellectual property rights and copyright.
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Contract conditions: Risk
Assignment and management of risk e.g. warranties and insurance
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Contract conditions: Disputes
How disputes will be managed e.g. non-performance issues
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What is a contract?
' A contract is an agreement made between two or more parties that creates legally binding obligations between them. The contract sets out those obligations and the actions that can be taken if they are not met.'
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Types of contractual relationships: Comprehensive (turnkey)
A single party is responsible for everything involved in the development and implementation of a specific solution. The single supplier has direct access to all the resources required to undertake the project.
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Types of contractual relationships: Sub-contract
Suppliers may employ several sub-contractors, particularly where the project needs specialised goods and services. Although the 'prime supplier' is responsible for managing the interfaces, the customer should make sure that the outsourced work is of a hig
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Types of contractual relationships: Parallel/Integrated
The customer manages the relationships between the various specialist suppliers. This allows the customer to have more control of performance and/or cost, but it can involve significant management of the interfaces between the two or more integrated suppl
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Types of contractual relationships: Sequential
The sequential use of one or more contractors during a project. This approach is often used when the project is too complex to be covered by a fully defined contract at its outset. There is risk to the customer as it is not possible to quantify the overal
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Types of contractual relationships: Partner/Alliance
The customer and supplier both bring skills and/or resources and work together to deliver the project. They share risk, effort and resources and it might employ some form of pain-share/gain-share agreement.
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Method of supplier reimbursement: Fixed price
The price is fixed at the outset for a defined scope of work.
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Fixed price with economic price adjustments
useful for large, long-term contract as you adjust for economic factors.
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Fixed price with incentive fee
you can adjust the fee if the supplier meets agreed performance metrics
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Method of supplier reimbursement: Cost reimbursable
Cost plus fixed fee means you reimburse supplier for all allowable costs plus a fixed or percentage fee.
Cost plus award means that you reimburse the supplier for all allowable costs but the majority of the fee is only earned based on the satisfaction of
Cost plus award means that you reimburse the supplier for all allowable costs but the majority of the fee is only earned based on the satisfaction of
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Cost plus fixed fee: pro and con
Scope is flexible but there is a chance of cost overruns
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Method of supplier reimbursement: per unit quantity/time and materials
Units are well defined (e.g. area or distance). This may take the form of time and materials contract, especially were services are provided
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Method of supplier reimbursement: Target cost
The customer and the supplier share risk and reward. e.g. the supplier may receive part of the saving if costs are kept below an agreed threshold
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Supplier performance requirement: Retention money
Provides the customer with a limited fund to correct any identified defects in the project deliverables
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Supplier performance requirement: Liquidated damages
A monetary amount that the contractor must pay if they fail to deliver supplied or perform services as specified in the contract or any subsequent modification. Payments are in lieu of demonstrably genuine pre-estimate of the damages related to the failu
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Supplier performance requirement: Variations
Where external change has an impact on the project objectives, you might agree on variations to account for time, budget and performance considerations. Uncontrolled variations can be a major threat to project success and/or the customer-supplier relation
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What is provider selection and management?
'the process of identifying, selecting, appointing and supervising providers through the project, programme or portfolio life cycle.'
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Provider management: Define requirements
Clarify the requirements that the supplier should be providing and research to identify potential providers that have the capability to deliver (easier with a approved supplier list)
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Provider management: Establish criteria
A Pre-Qualification questionnaire (PQQ) can clarify suppliers' capacity, willingness to tender, financial stability and technical expertise. Helps reduce a long list of potential suppliers to a manageable number who are eligible for contract award and who
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Provider management: Solicit and evaluate bids
Ask shortlisted providers to provide a full bid against a set of defined requirements (Invitation to Tender ITT)
Ensure all providers have an equal chance of success, retain records and set a tender deadline
Whilst providers consider whether to make a bi
Ensure all providers have an equal chance of success, retain records and set a tender deadline
Whilst providers consider whether to make a bi
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Provider management: Shortlist
Having assessed tenders, invite a smaller list of contractors to face to face bid clarification discussions, also carry out site visits to speak with other clients of the provider
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Provider management: Select winner
Negotiate and agree on a contract, ensure you have a back up provider
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Other cards in this set
Card 2
Front
What factors should the procurement strategy consider?
Back
The needs of the project, relevant organisational constraints (ethics policies etc.), how much risk to share with suppliers, the relationship you want with suppliers
Card 3
Front
Managing procurement: Make or buy decision
Back

Card 4
Front
Managing procurement: Provider/contractor arrangements
Back

Card 5
Front
Managing procurement: Provider/contractor selection
Back

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