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Categories: procurement
Yes, there is such a thing! Not all project procurement processes have to be a struggle for who comes out top and a hugely competitive bidding event. Here are 3 project processes where there isn’t an element of competition.
1. Use a Preferred Supplier
You probably know this already but you might not have considered it as a non-competitive procurement approach.
If you have a preferred supplier, say, for photocopiers, then you are going to get your next photocopier from them. This goes for recruitment agencies sourcing your next project team members, to the company you have worked with for years who always supplies your widgets.
Where a preferred arrangement exists, company policy may actively prevent you from seeking out competition.
The risk here is that you don’t take the time to look at other vendors. Just because your preferred print supplier was competitive a year ago doesn’t make it competitive today. Business models are changing in plenty of sectors. I usually get all my printing from Moo.com but this month I changed to a local print shop as (strangely) they were more competitively priced for the leaflets I needed. They were even kind enough to ask me to check again, as they said they weren’t normally competitively priced with online printers. But in this case, being able to deal with a real human, having a turnaround in 24 hours and not paying for postage really swung it for me.
Also, don’t assume that your past good experience with a supplier is always going to reflect their future performance. As well as their business model and pricing changing, a key change in support or service personnel could mean that the good relationship you had previously isn’t there any longer.
2. Joint Venture
You might come across this on large projects or at a business venture or product level.
A joint venture is where you are contractually in a partnership-type arrangement with another party to work together to provide a service. There’s an agreement in place that requires you to give the work to a particular company (and they, in turn may give you something).
3. Sole-Source Procurement
I hadn’t heard of this until I read Henrique Mora’s PMP® Exam prep guide where he covers the procurement management processes extensively. It’s a good read if you are preparing for the exam (I read the version that’s current for the 5th Edition).
Sole-source procurement is where the buyer chooses to get a product that is only provided by a single provider. Say, for example, you need a particular kind of roofing tile that is only made by one manufacturer. You’d buy it from them.
You could say this is the same for the vast majority of software too. If you want to buy a particular software tool that you think is right for your business, you can only get it from the vendor. You can’t buy Microsoft Office from Adobe, for example. (This is a poor example because so many large software vendors have a network of resellers where you do have choice about where to get it from. But it holds true for the majority of small/medium sized project management tools like the ones I review.) In healthcare tech many software products are linked to modalities or medical equipment – you have to get the one that ‘matches’.
“The main risks of conducting a sole-source procurement,” Moura writes, “concern the supplier’s economic feasibility and market conditions.”
You can include escrow in your contract if that’s appropriate, or other legal measures as a way of mitigating this if you think it’s worth it.
Benefits of Non-Competitive Procurement
I love the idea of non-competitive procurement.
Not having to sit in endless vendor presentations while the sales people tell you all the features of the product that you know won’t work when you start to get your hands on it.
Not having to prepare detailed business cases and financial models for products that you aren’t recommending, just to prove that you aren’t recommending them for the right reasons.
There are plenty of benefits including being able to get on with the work of your project more quickly because your team isn’t tied up in knots doing procurement activities.
However, there are drawbacks as well, not least because there’s an assumption that you are getting the best/right deal for your business. You might be, but if you have a feeling that actually you aren’t, it is worth talking to your manager or the PMO to see if there is flexibility to ditch the normal arrangements and go out to tender for this particular piece of work.
I’ve written before about treating the company’s money as if it is your own, and if you wouldn’t go ahead with the non-competitive procurement if it was your cash, then you’re right to question your own instincts here too.
Posted on: May 23, 2017 08:00 AM |
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