The 6 simple principles behind effective procurement

How do Buyers – and Suppliers – ensure the same direction of travel, (goal congruence appears to be the mot de jour) in tendering for contracts? The thought of mirroring best practice behaviour would appear to be a beneficial area to explore.   Stick with me, this applies to both public and private sector.

An Example:  As part of a research programme I was delving into the archives (what a hi-life for me!) reviewing a UK-Government audit report that stated that:

‘Competitive procurement is used patchily by local authorities’

and backed up this worrying over-arching statement – as is the wont of auditors – with some compelling numbers:

• 70 per cent of authorities having difficulties with competitive procurement
• 17 per cent of authorities in the top performing category – they have both the capacity and commitment to use procurement effectively
• 80 per cent of procurement strategies are incomplete
• there is a strong relationship between positive attitudes to competitive procurement and service improvement judgements

The Auditors and inspectors cite six main reasons for ineffective procurement.

These are challenges that must be overcome if authorities are to meet the duty of best value – and that authorities with the necessary skills and commitment can, and do, overcome, namely:

• legal complexity
• risk aversion
• perceived supply market weaknesses
• lack of client-side capacity
• narrow approach, and
• organisational culture

A systematic approach to competitive procurement can overcome these barriers. The steps in this approach are…

• laying the foundations – using a strategic approach, having clear procedures, involving the right people and accessing the right skills
• design – this stage is fundamental to service improvement. It involves strategic challenge, understanding the market, scoping the contract and the make or buy decision
• bidding and contracting – this is the implementation stage when good project management and communication are essential
• continuous improvement – once the service is established it is important to maintain the momentum of improvement using rewards and motivation for the provider and a strong client-side function

So, what are the 6 simple principles behind effective procurement?

Buyers should ask themselves whether they have:

1. strategic thinkers who are able to see the potential improvement in a service area;
2. a project manager with the skills, drive and commitment to convert that strategic vision into a practical scheme;
3. financial expertise to establish the business case and to understand the costs of each of the components within the proposed scheme;
4. legal support to deal with the details of the contract documentation;
5. skilled negotiators who are competent to bring the scheme to a satisfactory conclusion; and
6. contract managers to check that once the scheme is operational, it delivers services as intended.

Buyers- and Suppliers – are asked to reflect on the resources they have in place to deal with the emboldened roles and activities.

About Brian Farrington Ltd…

Brian Farrington is one of the world’s longest established procurement and supply chain consultancy and executive training specialists. 33 of the current FTSE100 have retained our services, as well as leading organisations in the UK, North America, southern Africa and Asia. Established in 1978, we have proven expertise and experience in procurement, risk and negotiation.

Our solutions and services are formed through consultancy, training & development and coaching – all underpinned by proprietary technology. Our four core areas of procurement capability are:

• Strategic review and commercial governance
• Performance delivery and transition
• Major project support including contract negotiations
• Learning & development in support of organisational aims.

If you’d like to know more about how we do this then please drop me a note or let’s have a chat on 01744 20698

Regards

Steve