Procurement acquisition plans

Wednesday, October 5th, 2011

When we audit procurement decisions (these are not always initiated by procurement specialists), quite frequently there is no formal procurement acquisition plan. We sincerely trust that our readers will find the following helpful, recognising that it is not intended as a full statement of requirements for such a plan.

A statement of need should be recorded. It imposes an early discipline as the objectives and deliverables from the procurement are set out. By definition this must involve stakeholders and regardless of whether it is goods or services that are being purchased the logic remains. If we take the case of consultants being awarded a contract we may ask what are their deliverables? We have seen this defined as a ‘Report’. Clearly this is totally inadequate.

The trading and contractual history of the proposed supplier should be set out. The context of history is important, giving due consideration to such things as contract performance, relationship management and disputes that may have arisen.

There is a serious need for comment on the cost of the procurement. If there is a budget, where did that originate? Is it a guess or is it informed? Have we engaged in a through life cost study? What are the key cost drivers? Who will devise the cost model to include with the RFP/ITT? If a contingency is to be provided how was this determined? – in other words is it a standard 10% overspend allowance?

The planned contractual safeguards should be set out. If we are using standard forms of contract or standard terms and conditions of purchase, are these adequate? The answer is probably not. There are many factors to consider including, acceptance testing, warranty, limit of liability, insurance, key personnel, dispute resolution, termination, step in rights, right of audit and so on. Procurement should take this initiative, basing their approach on a comprehensive risk assessment.

The document should include a thorough risk assessment considering such matters as the supplier’s business continuity plan, dependencies between the parties, technical specification deliverables, programme management, inspection and testing and key personnel.