Procurement, Strategies, Methods & Procedures

Definition of procurement

Describing activities and processes needed to obtain goods and services. Helps to reduce costs while adding value. Purchasing is a subset of procurement

Internal and external factors affecting procurement process

Internal: Amount of purchased goods & services, structural changes, performance measurement. External: Few but larger suppliers, environmental awareness, technology, competitor activity

Definition of purchasing

Process of ordering and receiving goods & services. Part of procurement process. Refers to tasks involved in ordering goods such as requests and approvals

Procurement vs Purchasing

Procurement involves end-to-end sourcing process, focusing on strategy and value for the long term. Purchasing only involves the buying transaction, focusing on order fulfilment for the short term

Strategic sourcing

Refers to the need to ‘marry-up; procurer and end user within organisation to optimise results and reduce waste

Procurement at different organisation levels

Strategic, tactical/managerial and operational level

Strategic Level

Purchasing research, long-term planning, predicting availability, policy determination

Tactical/Managerial level

Buying method, negotiation, budgeting

Operational level

Records & systems maintenance, invoices clearance, price determination

Procurement strategies

Includes cost reduction, risk management, green purchasing and supplier management

Procurement process

Designed to streamline procurement of goods to achieve efficiency

Procurement process stages

Identify goods, explore & select vendors, submit purchase requisition, create purchase order, receive order, pay for goods & services, record for audit

Responsible procurement

Act of procuring goods in a manner than considers environmental, economical and social impacts

Aims of responsible procurement

Build and expand ethical and sustainable procurement to include environmental, economical and social risk/benefits. Include considerations that are equal/more important than profit and value. Minimise carbon emissions and climate change

Aims of ethical procurement

Maintain confidentiality of information, refrain from activities that impair partiality or lead to conflict of interests, observe contractual obligations

Sustainable procurement

Must consider environmental factors. Event organsier must be aware of product biodegradability, ways to reduce waste and material sustainability

Contractual arrangements

Methods include lump sum, term contract, management contracting, cost reimbursement contracts, design & build, request for proposal

Lump sum (contractual arrangements)

Purchase of specific item to be delivered on specific date at agreed price. Although price fixed, it may change due to variations in order

Term contract (contractual arrangements)

Fixed duration, items listed in schedule of rate where items are priced individually. Not a 1 time purchase.

Management contracting (contractual arrangements)

Hire and pay management contractor to manage work. Work can be subcontracted

Cost reimbursement contracts (contractual arrangements)

Cost plus fixed fee: Client pay EO actual cost + fixed fee (agreed in advance). Fee does not change. Cost plus percentage of cost: Client pay EO actual cost + percentage of costs (agreed in advance). EO earns more if event costs more

Design & build (contractual arrangements)

Client engage one contractor for all design & construction work. Advantages include single point of responsibility and avoid disputes

Request for proposal (contractual arrangements)

Solicit creative solutions from suppliers. Suitable for complex projects where creativity and innovation is required

Government procurement procedures

For small value purchases, quotations and tender

Small value purchase (government procurement procedures)

Estimated value of less than $5k. Used for small purchases which are simple and price known. Sourcing method: verbal/written quotation or off the shelf purchase

Quotation (Government procurement procedures)

Estimated value: less than $90k. At least 2 quotations needed. Open quotation: quotation published openly for anyone to bid. Limited quotation: only selected suppliers can bid. Sourcing method: Invitation to quote issued by suppliers