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Going faster

Ed Savage
PA Consulting Group
Supply Management
5 March 2009

There are risks and advantages to speeding up tender times. Ed Savage describes five ways to make it work

Lengthy procurement

Processes can be costly for buyers and potential suppliers. Not only do they delay the delivery of goods or services, they can slow down or prevent their benefits. As a result, many buyers are seeking faster procurement processes.

Whether you’re in the private or public sector, if you want to speed up tender times there’s a golden rule and fi ve key things you can do.

The golden rule? Best value is driven by effective competition. So, creating and maintaining it over a suffi cient period to allow value to be achieved must be the top priority for those seeking effective procurement in the shortest time. Also, keeping that competition alive to the point at which an agreement can be signed is imperative.

Following are five things that can speed up the process.

  1. FIX THE SCOPE EARLY

    Before starting any process and particularly one that needs to be completed swiftly you have to make sure the requirement is fully scoped and communicated.

    And here’s how:

    • Consult with bidders early to help shape the requirement and build mutual understanding;

    • Remember to focus on the outcomes required, and leave bidders to sort out how they do it;

    • Ensure that the scope fits your organisation’s business and financial plans, and there is a robust business case underpinning it signed-off by senior management;

    • If scope changes are required, ensure they are carefully considered, sponsored by senior management and communicated to bidders as soon as possible;

    • Engage with bidders to identify early the key risks to the delivery of the scope and build a joint mitigation plan. Transfer as much ‘appropriate’ risk to the bidders as possible, but remember that passing on risk will come at a price.

  2. DEVELOP A PERFORMANCE REGIME

    The long-term success of a major contract will depend on a mix of "hard contractual" and "soft behavioural" factors. It is imperative to defi ne success via a comprehensive performance regime with a simple hierarchy of performance measures and targets, and a mechanism for rewarding good service and deterring underperformance.

    An effective contract will be underpinned by a handful of key performance indicators that all parties can remember, to design their own processes to support it. Establishing what they are at the outset will help a bidder to develop an appropriate solution more quickly.

    Such a performance regime should be supported by the inclusion of financial arrangements. This includes gain-share (sharing the proceeds of reducing cost within the scope of the contract) and revenueshare (splitting revenue from additional activities linked to, but not within the scope of, the original requirement) to promote cost minimisation and innovation.

    This will benefit all parties: the buyer or customer should get, as a minimum, what they asked for (thus leading to certainty of return); and the supplier will be rewarded for performance above a target level and incentivised for introducing new products and services. As such mechanisms are not always familiar to bidders, the relevant contractual terms should be drafted and discussed up front.

    However, no amount of legally binding commitments and performance targets can or will guarantee value. The manner which parties behave will ultimately  determine how a contract is operated and the mutual benefi ts that can be derived. Therefore you should consider the level of collaboration, or partnering, required and seek to develop the desired behaviours, systems and processes early in the procurement programme in order to build the trust required to make it happen.

    The appropriate level of partnering will be infl uenced by many factors. A highly bespoke product or service may point to the need for a partnering relationship, as will a lengthy contract with a high degree of future uncertainty, or the need for high innovation.

  3. EMPOWER THE TEAM

    You won’t be surprised to hear that a rapid procurement programme requires a dedicated and fully supported team, which must be suffi ciently resourced with capable and experienced buyers.

    The governance of the programme must be clearly established with tactical authority delegated to your team; this will maximise the use of the buying, as well as the bidding, organisations’ time and minimise cost.

    The overall customer should endeavour to retain a core team throughout the process and beyond to ensure consistency and clarity in its relationships with bidders. It is also appropriate to insist that bidders commit to the provision of a dedicated and consistent team, if timescales can be identified from the outset.

    Although it is recommended that procurement be dedicated to delivering a  contract, the team should not be isolated. Senior level coaching, support and sponsorship will ensure visibility of the process among key stakeholders as well as providing external oversight. There will be a requirement throughout the process to access functional support (for example, financial, HR, legal), which should be planned for early and provided without delay. This will not only ensure the efficient development of any contract but also that the buying organisation is broadly represented in the decision-making process.

  4. STREAMLINE THE PROCESS AND DEVELOPMENT OF A CONTRACT

    Ensure that the Request for Proposal (RFP) or Invitation to Tender (ITT) is presented in a format that matches the type of product or service desired and fully explains the rules of engagement, the process, the schedule and the evaluation criteria for the procurement.

    As already discussed, where it may be desirable to specify the inputs for a commodity product, an outputbased requirement is more appropriate for a complex and bespoke service.

    Save time by including a draft contract from the outset, clearly identifying the non-negotiables, and those aspects where it is intended that bidders contribute their own ideas.

    Don’t seek information that’s not critical to making a decision on the preferred choice of bidder, or in moving towards a fi nal agreement. Direct bidders to omit sales and marketing material from their responses.

    Provide a clear template for the presentation of the necessary fi nancial information, to simplify its review and comparison. Engage with bidders before proposals are submitted to ensure the needs of all parties can be accommodated. Bidders will have to be able to complete and amend financial sheets quickly, so it is in all parties’ interest to make them user-friendly.

    Consider investing in a secure website to collate, disseminate and work on material efficiently. This will enable you to provide potential suppliers with information and updates that allow them to amend their bids if changes are made. It won’t help either party if a supplier arrives on day one to fi nd the baseline has changed.

  5. MANAGE THE RELATIONSHIP WITH BIDDERS

    Probably the largest risk in a quick procurement is the chance for  misunderstandings. It is important to provide suffi cient information during the period of proposition development to reduce risk of bidders over-pricing/under-pricing or misunderstanding the full extent of the scope and the risk: the earlier ‘core’ information can be provided the better. This activity will also reduce, or eliminate, the need for a formal due diligence period post contract award.

    You also need to ensure negotiations are focused and carefully managed. In planning for this crucial phase, the buyer/ buying organisation should aim to spend twice as much time preparing, briefi ng and reviewing as is spent with each bidder. It is advisable to limit what can be negotiated and communicate it to the bidders early. Hold briefings, review meetings and negotiations away from the customer’s regular place of work to curb distractions and focus effort on procurement activity. Following meetings, ensure that bidders are given a clear guidance on what updates are expected with an onus on them to update schedules with comments and recommendations; it is in the customer’s interest to capture all actions for cross-referencing and tracking of progress.

    You should also develop and maintain a single point of focus with each party, so issues can be resolved quickly with a phone call. Never underestimate the ability of a bidder to misunderstand your intentions, so maintain regular communication.

In conclusion, be bold but be sensible. It is worth trying to speed things up, but  always consider and measure the risk. Be prepared to take more time, if  necessary, to get the right result.

Ed Savage is a managing consultant within PA Consulting Group

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