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High Risk Procurement

May 24, 2013

Stephen Ashcroft posted on Supply Management on the topic of ‘high risk’ procurements.

According to the media, most procurements these days are ‘high risk’. Stephen captured a number of key points, setting out some common weaknesses in many procurements. For example, he starts by highlighting the need for good quality specifications. Our research at IACCM shows that the main cause of disputes is due to poor specifications or scoping. This will only be avoided if Procurement acts as a facilitator of discussions between users and the business, rather than as a barrier. It must also ensure proper documentation of whatever is agreed and recognise that requirements are likely to change – so facilitate that within the contract.

Next he focuses on selection. What are the important characteristics you want from your supplier? If you select on price alone, you will have a relationship that reflects this principle. Don’t expect quality, value, flexibility, innovation because nothing you said or did suggested those were important – and the price does not allow them. If they were important, you should have established different selection criteria.

And as for contracts, another of his areas for focus, a high proportion of the templates used by Procurement have little relationship to the bid or the desired outcome. Many Procurement groups really do not understand contracts or their role. They accept templates provided by Legal that are based on risk allocations, not on outcomes. Far too many Procurement groups consider the contract to be an administrative requirement, rather than a critical tool in performance definition and management. So it is hardly surprising when results are disappointing.

But never mind. Lost savings this time round can be claimed all over again with the next Procurement!

One Comment
  1. Hi,

    Yes, poor scoping n incomplete tech specs added with poor contracts plays major risks in procurement. Vendor selection is a big process before quick buying section.

    I managed 480 purchases , I came across many but the contract drafting saved.

    Jay

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