Categories: procurement
Last week I looked at four things that go wrong with negotiations with vendors when it comes to buying things for projects. Today I want to look at the procurement lifecycle, as presented by Alex Sandercock of Turnstone at a recent womenintechnology event.
There are five steps in the procurement lifecycle:
- Requirements
- Vendor selection
- Negotiation and contract
- Service delivery and performance monitoring
- Renewal, retendering or exit.
These aren’t all relevant to project managers, so let’s focus on the ones where you could have some input. Today I’ll be looking briefly at requirements and then vendor selection, and next time I’ll cover Step 3: Negotiating and contract.
Requirements
Before you start building something you need to know what it is that you have to deliver, and that means developing a proper requirements specification. One important thing to consider here is are you buying the intellectual property rights to custom-built software or changes to package software. Also consider your requirements for delivery dates. Alex shared a story about a piece of hardware that was specified, configured and delivered, but was unable to get through the door to the data centre where it was to be housed. The team had forgotten to specify the requirement that it must be able to fit through the door.
You may have business analysts who prepare requirements documentation and a development team who prepare technical specifications documents. These all input into the next step, which is choosing which vendor can work with you to deliver the best possible outcome to meet your requirements.
Vendor selection
Once you know what the business requirements are, you can start contacting suppliers to find out if they are able to provide you with suitable services. This stage of the procurement lifecycle could simply involve contacting the company you normally use and asking them if they want to take on the job. This is particularly the case if your company has preferred suppliers for certain things. Other options are:
- Sending out a Request for Information (RFI, also called PQQ: pre-qualification questionnaire). This is used when you don’t know exactly what the solution is, and you want more information on available options to meet your needs. This could go to one or multiple suppliers.
- Sending out a Request for Quotation (RFQ), Request for Proposal (RFP) or an Invitation to Tender (ITT). These all broadly have the same outcome, which is getting the vendor to send you their proposal for meeting your needs, with costs. Again, these could go to one or multiple suppliers.
Before sending out any documentation, be sure to send a confidentiality agreement. The whole tendering process will involve sharing potentially business confidential information about your project, and you want to make sure that the vendors don’t share this with anyone else.
Once you have decided to send out a RFP, phrase it in such a way to make the questions and answers neatly form bits of the contract. This means you won’t be reliant on the vendor’s standard contract, which will include clauses heavily biased in their favour. We’ll look more at contracts next time.
If you can, keep the selection criteria to yourself. In public sector tendering for projects in the UK you have to declare the selection criteria, but as far as possible Alex recommends not sharing these with the vendors if possible. Why give them extra help?
Vendors will ask questions during the tendering process, and to make it fair all the companies involved should get the same information. That means that if one vendor asks a question, all vendors get to hear the same answer. Alex’s recommendation was to pick a date for the receipt of all questions. Then collate the questions and respond to them. Only handle questions in writing. This makes sure that everyone receives exactly the same information – email is a suitable medium for this.
Finally, if you are the person charged with doing this negotiation, make sure that the vendors only speak to you! They might try to call your project sponsor, or someone else on the project team, or someone higher up the organisation. Warn the project team and the relevant stakeholders that you are handling the tendering process and to make sure that they don’t inadvertently give one supplier an unfair advantage by providing additional information.
Next time I’ll be looking at Step 3 in the procurement lifecycle: Negotiating and contract.
