Procurement for small companies (private, not public)

Negotiations
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The procurement process can be complex and it can be good to keep a check-list available. This blog is about private business.

The complexity is dependent on several aspects. E.g. the product / service complexity, the level of control needed (e.g. if expensive, this will increase) and how often you procure something similar.

 

Requirement Definition
1) Define the need and goals – What is the problem if nothing would be procured. Separate what is needed from the ‘wants’.

It’s good to realize that it is often impossible to list all requirements. E.g. if we buy a car, we don’t specify the requirement that the steer-wheel needs to be on a certain height. But if the goal of the solution matches the need, a lot of requirements are ‘automatically’ covered well.

2) Solution outline – If there might be more ways it’s better to not describe this. But if there is just 1 option, describe it.

Check the market for options and innovations. E.g. by entering your option in a search engine (e.g. Google) and than “vs”. Alternatives might be suggested by the search engine. Options which will drop-off, will trigger you to define requirements

3) Requirements, terms, conditions
Think about the complete life-cycle. Is ‘maintenance’ relevant and to be included?

4) Where possible and useful, break the complete need into parts / stages. This way it’s easier to get started, and it helps in vendor-management.

 

Tendering
1) Select vendors. Find them by searching, and check their key-skills and performance (e.g. on independent evaluation sites, such as Trustpilot)

2) Involve vendors, for as far as it has no downsides. Provide them with the goals, solution outline, requirements and high-level timelines.

3) Ask the vendors  for a quotation or proposal, proposing their product or service. Trigger them to be innovative and make suggestions. They are experts in this area.

 

Evaluation & Selection of the product / service
If there more reasonable options, an evaluation and selection has to be performed.
A first comparison can be done based on “needs” only (not including “wants”).
It’s good to verify if the offering is intended for the purpose, see “Requirement Definition”

 

Contracting
This stage can involve collecting more information. Writing the contract may involve legal. What if….

Understand your negotiating position, to understand who needs to accept (e.g. terms), and compromise where that is needed. To avoid sad-backs here, some important parts of the contract may have already shared in earlier stages.
If possible have a pricing-model which encourages the vendor to be in time and save effort. Both parties will benefit from having the same interest.
Consider payment depending on deliverables/stages, and relate to cash-position.

 

Contract Management
Ensure that deliverables and payments are in time. Keep regular in contact about the status and contractual obligations.
In instances where a special circumstance arises, the contract may need to be modified.

Good contract management will give you what you expected to get and. A good relationship will give you partnering.

 

Hope this helps you. Feel free to comment below.

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