We have been researching procurement expenditure on a wide range of “one-off” procurements. These typically challenge the knowledge and skills of procurement specialists simply because on “one-offs” there is little or no experience against which to benchmark. Imagine you were asked to tender the removal of large quantities of scrap where the contractor would sell the scrap metal in international markets. This would warrant due diligence being conducted on the key personnel and the contractor. More should have been done in the real life example. Within 6 months the contractor was in default of the contract. It is also relevant to note that the insurance requirement was for ‘valid insurance’ but it neither stated the risks to be covered or the coverage limits. There were 3 bidders all of whom failed to meet the Financial Viability criterion at which point the process should have been stopped but it wasn’t. Not a happy experience!
Continuing in a similar vein, imagine you were asked to procure a helicopter and the early discussions included consideration of a helicopter that would fly under IFR – Instrument Flight Rules as opposed to VFR – Visual Flight Rules (the latter is a much more constrained operational capability. The auditor observes “no transcripts exist of the various discussions.” We always stress the importance of an immaculate audit trail. The estimated final cost of the helicopter is a 37% increase on the project cost. This percentage will probably not surprise our readers but “one-off” purchases have an unfortunate habit of exceeding budgets. In the helicopter purchase the budget figure substantially missed, finder’s fee; consultant costs; Inspection & License fee; management fee; air freight, insurance and import fees, other costs and contingencies. The helicopter was purchased from a sole source, no competitive bids were held. Not a happy experience!
Brian Farrington Limited have risk metrics specifically designed for “one-off” purchases. Interested? Please contact us for further information
Wednesday, April 4th, 2012 at 7:49 am
My view is that the ‘check-box’ approach to Pre-qualification questionnaires is ideal from the perspective that the potential bidder is informed of all pre-requisites that would apply prior to contract award.
It is generally a simple check list could save the bidder alot of time and effort by avoiding submitting a tender when they may lack some genuine, mandatory, regulatory requirement (such as being a registered company).
It acts as a simple ‘Stop here and save your time and effort if you do not fulfil this fundemental contractual requirement’
There is no requirement at the PQQ stage for a council to validate the information! They just need to ensure that requirement stated in the PQQ is genuine.
I think a ‘check-box’ approach is the best approach to PQQs.