Contract Management in Procurement
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At Barkers we typically recommend to our clients that contract management should be integrated into their approach to procurement. In our experience, separate functions rarely collaborate sufficiently to maximise the value from their supplier relationships. Ensuring contract management is conducted with the appropriate levels of authority, the balance of risk and relationship context is key to its effectiveness – and a vital element of the overall contract governance. At Barkers we have decades of experience in setting up and managing contracts, aligning all parties to mutually advantageous goals.
A key checkpoint in any company’s journey is the point at which a supplier’s contract terminates and a new tender process can be initiated. It can be an exciting time, perusing supplier proposals which offer a diverse and innovative array of services, but it’s also a time that demands a high degree of professionalism, care, and guile.
As the tendering journey can be a long and complex one, establishing a clear process at least provides signposts and checkpoints that all stakeholders can recognise and work towards. It is surprisingly common to find companies initiating a tender process and essentially improvising their way through to completion.
This all too easily leads to miscommunications, disorganisation, and – ultimately – an unsatisfactory outcome. Although a tender process should be organic, there needs to be a structure which is constant, accessible, and familiar to all bidders and employees involved in its execution. See an example process below.
A procurement team will typically involve representatives from all departments involved in managing the contract; e.g. HR, quality management, Health & Safety etc.
For high-value tenders, or tenders that involve contracting out for the first time, a larger team (including directors) will usually be required and follow the full tender process. On the other hand, smaller tenders may only require an abridged procurement process overseen by a smaller team.
Having put together a procurement team, the team should then agree what the tender will involve e.g.
- Specification or general requirement
- Supplier requirements and mandatory requirements (e.g. ISO standards)
- Questions for bidders
- Tender rules and/or instructions
- Assessment criteria (how bids will be scored e.g. 60% quality / 40% price)
- Type of contract (e.g. one-off, term or framework)
This should form part of the initial selection process to help select potential suppliers for suitability for the works. It is used to create a list of companies to either be invited to tender or can be made available to anyone (e.g. OJEU tenders).
This qualification stage might only be made available to an approved supplier list, as part of an initial screening interview, or a formal PQQ (questionnaire to assess against minimum requirements). Some tenders incorporate aspects of the PQQ within the tender therefore eliminating this stage.
The invitation to tender (ITT) will be issued to the list of selected potential suppliers. This might involve a set of questions to be answered along with a pricing matrix. Alternatively, it could be less formal – simply asking the bidder to submit a formal proposal and a price.
Public sector and corporates tend to use formal ITTs – especially for higher-value tenders.
It is common and useful for all parties for the tender procurement panel to hold supplier briefing meetings. They are useful to help clarify the tender, answer any questions, and ensure that the most suitable bidders proceed with the tender.
At this stage, the tender panel mark each bid against the agreed assessment matrix. This results in a league table of the highest and lowest bidders’ scores.
The assessment is then used to create a short-list of potential suppliers. The number of bidders in a short-list will depend on the nature of the contract. So, for example, a framework agreement will require a number of suppliers to be awarded a contract, whereas another tender might only have one winning supplier.
Short-listed bidders can then be invited for further assessment by means of a tender short-list presentation or a Q&A session. This might be extended to a visit to supplier’s premises and possibly meeting some of their customers. Again, the tender panel will assess this against their pre-determined assessment criteria.
Whatever the tender procurement process, the tender panel will arrive at its final scores and will use those to select the best performers and award contract(s).
The extent to which there is scope for negotiation will depend on the nature of each individual tender. A large-scale tender may not offer much scope for negotiation whilst other, smaller tenders might. Procurement teams should always keep in mind that it is unlikely that there will be opportunity for any major negotiation – especially not on the overall price.
Once everything in the tender procurement process is finalised, contract(s) can then be awarded.
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