Category: Process

Processes like Procurement & Sourcing & Audit

Contract Modifications

As the consequences of COVID-19 continue, it is reasonable to assume that making changes to commercial contracts may become more of a necessity both now and over the next number of months as requirements and demands change due to this global pandemic.

Allowing and regulating contract variations should be a standard feature of all contracts once any proposed variations are planned accordingly

The reasons for the variation should be clearly documented and it is important that any variations are not used to mask poor performance or underlying problems. The variation impact on original timeframes, deliverables and value for money should be assessed thoroughly before undertaking any changes.

There are specific laws that apply to changes in Public Sector Contracts.

Material changes to a contract after it has been awarded give rise to a new contract which needs to be retendered.

The test for material change is-

Does the change introduce conditions, which had they been part of the initial award procedure, would have allowed for the admission of the tenders other than those initially admitted?

Does it extent the scope of the contract considerably?

Has the economic balance of the contract shifted in favor of the contractor in a manner not provided for in terms of the initial contract?

However, there are some steps that public bodies can take legally to make changes mid-contract which are-:

Review Clause Exception:

Provision for a modification included in the original Procurement Documentation/Tender which states in clear and precise terms the conditions under which modification provisions may be used stating the scope and nature of such possible modifications. It is imperative that any such clauses don’t alter the overall nature of the contract

Interoperability Exception

Where there is a requirement for additional works, services or supplies not included in the initial procurement and where a change of contractor cannot  be made for economic or technical reasons and it would cause significant inconvenience or substantial duplication of costs for the contracting authority. Must not exceed 50% of the original contract value and an OJEU notice of the change is required.

De-Minimus:

A modification to the contract is permitted where the value of the modification is below threshold and below 10% of initial contract value for services/supplies (15% for works). The modification must not alter the overall nature of the contract.

Unforeseen Changes:

A modification is necessary due to unforeseeable circumstances e.g. Covid 19. Such modifications should not exceed 50% of the original contract value. Necessary to keep written justification with reference to specific facts outlining the reasons for the modification. Publication of OJEU modification notice is required.

Change of Contractor:

Allowed following corporate restructuring ((e.g. takeover, merger, insolvency) and new operator fulfils qualitative selection criteria.

The specification and administration of change is vital as it needs to be fully documented and agreed between both parties and any additional demands on the incumbent supplier must be carefully controlled.

Change can be difficult however, often necessary.

 

Strategic Relationship Management Advice

By Pat Ryan – Arvo

Your suppliers are your external manufacturing department. They do what you don’t want to do; because it’s technologically impractical, they are better than you, you are concentrating on other things, or it could tie-up your resources.

FACT: You are trusting them with your future

Developing good connections with suppliers—sometimes called Supplier Relationship Management—is critical to business success.

Businesses are increasingly relying on suppliers to help reduce costs, innovate, improve quality and reduce lead time. Good relationships with suppliers can provide a competitive advantage.

First-rate supplier relations require continuous, long-term effort. Not all suppliers should be treated as special suppliers. Some of the suppliers may not be suitable for developing relationships.

  1. Evaluate all suppliers—Make sure they are the best ones for your business and that their products meet your needs. You want suppliers who are aligned with your strategy.
  2. Integrate key suppliers into your business—Learn how they operate, and make sure your systems work seamlessly with theirs in areas such as invoicing and order fulfilment.
  3. Collaborate on quality improvement, problem-solving and product development—Work together to improve capabilities and adopt best practices on both sides.
  4. Measure performance continually—Have structured ongoing discussions with your key suppliers about how to improve.

Ultimately, the idea is to work together as partners so both sides prosper.

BE BRAVE – NOT ALL COMPANIES CAN DEVELOP AND MAINTAIN A SUPPLIER RELATIONSHIP PROGRAMME.

Sometimes companies focus just on the short term and only demand cost reductions from suppliers, rather than thinking strategically. That doesn’t help in the long run.

Do’s and don’ts of supplier relationships

  1. DO—Take a long-term approach to supplier relationships. Commit to shared prosperity and mutual development. Help suppliers boost their technical and problem-solving capabilities.
  2. DO—Understand in detail how your key suppliers work. See how they operate, and learn their culture to ensure mutual trust and strong partnerships.
  3. DO—Periodically evaluate the performance of key suppliers with scorecards, and periodically scan the market for better and/or more cost-effective alternatives. While you want to nurture strong relationships with suppliers, you don’t want to become captive to them.
  4. DON’T—Focus only on short-term goals, such as cost-cutting. Don’t insist on unreasonable payment terms or pressure suppliers to assume the cost and risk of holding the bulk of your inventory.
  5. DON’T—Focus your efforts on all your suppliers. Save your special collaboration for only a handful of key strategic partners. Anything more is unsustainable.

Category Management

Many sophisticated Procurement Functions are implementing Category Management best practices and proven methodologies to migrate “from good to great”. This is usually triggered as the current operating model is focused on the delivery of predominant tactical delivery of value;

While developing a strategic Category Management approach channels procurement resources and services towards improved efficiencies and effectiveness for the betterment of internal and external stakeholders.

With the following major benefits:

Category Management benefits the entire organisation

  • Raises the strategic contribution of procurement to business
  • Improves stakeholder buy-in to results
  • Improves total cost of ownership
  • Reduces risk in the entire supply chain of contracts
  • Uses resources more effectively
  • Fulfils stakeholder needs in terms of availability, quality, and service levels
  • Fosters supplier innovation and capability development

Category Management Approach

The methodology and approach to strategic procurement involves robust research, analysis and planning that results in a procurement strategy that influences and shapes the market to meet your needs.

This approach demonstrates how:

• Research and planning add value to sourcing, implementation and results

• Collaborative cross-disciplinary team work leads to strengthened solutions

• Good governance and project management ensure delivery is on time, on budget and to specification

• Professionalism and ethics support due process, accountability and transparency.

This approach to Category Management is initiated with a baseline review to capture the Vision and Objectives clearly, while undertaking a detailed Stakeholder engagement exercise. The forensic spend analysis then follows against key levers and assessment frameworks. Prior to discovering the competency, maturity and capability within the team plus an expert review of the entire process flow of current procurement activities on-and-off-line. A number of key milestones will be planned throughout the program where gap analyses will provide current challenges and issues, and risks that need to be addressed or be aware of. Practical reports and  recommendations will emerge throughout to focus on the potential benefits to implementing Category Management while guiding the entire project roadmap.

This approach has been successfully implemented in many projects with IDDea and the following key procurement levers used in our Category Management analysis, also enlighten the powerful work of the Procurement Transformation Institute;

  • Culture
  • People
  • Process
  • Knowledge
  • Technology

Talk to us today to discuss how we can support your Category Management journey;

 

5 Steps to Tendering Success

Love me Tender

Many people love Elvis but very few love Tendering!

However Tendering is a skill and process which should be developed in every organisation. Public and private tender opportunities emerge every week to win new business so investing time and resources developing this skill will pay dividends overtime. Whether you are creating or responding to Pre-Qualification Questionnaires (PQQs), Invitation To Tender/Bid (ITT/ITB), RFx etc.), the advice below will improve your Tender outcomes.

This overview initially sets the context by providing 5 High-Level Steps to Tendering Success, before elaborating further with a dozen Tendering Tips for each tender submission;

 

5 Steps to Tendering Success

 

There are 5 key steps to improving Tendering capabilities and success rates but unfortunately most companies primarily focus on Step 4, the Tender Submission;

1. Prepare Tender Library – An easy-to-use robust Tender Library will maximise the Return on Investment from your Tender Activity, while presenting an effective and consistent company message across all tenders

2. Target Opportunities – If you are waiting for the Tender to arrive in your Inbox, you are possibly too late. Effective market research will unearth potential customers, decisions makers, business needs and contract renewal dates, so schedule sales meetings prior to the Tender to convince them of your capability and value proposition. Consider Tender analytics from the likes of TenderScout.com

3. Qualify Opportunities – Create Go/No Go Bid Criteria for your company to use as a decision support tool to tender, or not. Rigorously quality each Tender opportunity to focus solely on winnable opportunities. Tendering is expensive to save time/money by learning to say ‘No’.

4. Tender Submission – Develop the core skills to produce best-in-class tender submissions, with a detailed Tender plan, win strategy, writing and reviewing task-list and submission check-list.

5. Post-Mortem – Tendering is a skill. Improve your strengths and learn from your mistakes overtime to continuously improve this skill and Return on Investment. Ensure to solicit, analyse and act upon all feedback (with further details below).

12 Tendering Tips for each Tender Submission

 

1. For each tender, define the bid strategy to position your bid ahead of the competition, exceeding the buyers’ stated and unstated needs. This bid strategy should summarise the proposal in a few keywords, prior to writing the narrative or incorrectly ‘copying & pasting’ from previous submissions.

2. The proposal needs to be about the Buyer so put their needs at the centre of the Tender document. Explain why your solution is ‘fit for purpose’, with a bespoke response in the buyer’s language. If you do not have a fundamental understanding of the buyer’s detailed requirements your chances of winning are low while avoid using generic/brochure material as the basis for your response.

3. Consider collaboration – be open to forming or joining a consortium to submit a collaborative Tender. Consider strategic partners for complex Tenders and undertake the necessary due diligence.

4. Utilise all available market research to determine the purpose of the tender, the decision-making process (especially award criteria), the incumbents strengths/weaknesses, the strategic ‘fit’ for your organisation etc.

5. A Tender is a project. Use all available company resources, expertise and tools to manage the project effectively with milestones, deliverables, tasks, owners etc.

6. A winning tender response should read like a good book, taking the evaluator on a compelling journey about your business, and how you are creating and delivering real value to your customers. This includes developing a consistent corporate style (grammar, font, colours etc) so as to construct clear and persuasive tenders and proposals.

7. KISS – Keep it short and simple. Use clear, jargon-free language, writing in easy to understand terms (with a list of abbreviations to assist the non-technical readers). Always, assume the tender evaluators know nothing about your company and your solution.

8. Capacity to deliver is the primary risk on the buyer’s mind when awarding new business. Therefore, provide references to practical examples of successfully delivered comparable projects. Do not hold back and ensure you sell your key skills, expertise and experience which delivered past projects, similar to the buyers needs (with any lessons learned?)

9. Define your unique selling propositions and highlight your key differentiators from the competition. Sell the buyer the uniqueness of your solution and the related benefits to the buyer (operational efficiencies with metrics, savings, payback periods etc.)

10. Consider presenting bids in bespoke tender-specific binders, with easily-navigable tabs and graphic design suited to both your branding and the requirements of the buyer. No matter how persuasive the written content, your document will lose impact without colour / design – every tender opportunity is also a sales opportunity! For example, Armand Hammer, former CEO of Occidental Petroleum,  presented his winning bid for oil concessions from Libya in the mid-1960’s, in Arabic, written on a sheepskin parchment, rolled up and tied with ribbons bearing the Libyan national colors of red, green and black. This winning bid generated $200 million for Occidental in the late 1960’s.

11. Proofreading of proposals from start-to-finish is always a worthwhile task, especially experts not involved in the project including professional writers or editors.

12. When undertaking your post-mortem, consider your ‘win strategy’, market research and the effectiveness of your Tendering process. Consider the cost and time budgets, in relation to the value of the Tender. Whatever the outcome, use all available feedback to improve your next Tender.

Any other Tendering tips from the trenches?

While whether you are new to Tendering or have the scars from previous sourcing events, consider Arvo’s unique supports from both sides of the coin, whereby we;

  1. support buyers through every stage of the Strategic Sourcing event.
  2. assist suppliers prepare, identify, qualify and respond professionally to appropriate bid opportunities.
  3. provide training to buyers and suppliers to maximise their success levels at either side of the Tender Document.

 

Contact us today to discuss how we can maximise the return from your next Tender.

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