What is the Procurement Cycle?

Public procurement has never had a higher profile. The realisation of the savings that can be achieved from well-run procurement exercises has seen the importance of procurement strategy elevated.

This blog provides a guide to the procurement cycle and discusses some of the key considerations that should be made throughout each stage.

 

Get to know procurement

Gaining an understanding of the rules is a requisite in procurement.

Buyers and suppliers need to understand the structure of the procurement process, the minimum timescales required, the procedures which govern those timescales, the processes that go alongside them, including framework agreements, selection and award criteria, the evaluation process and the standstill process.

Without an understanding of these issues, and many more besides, the risk of error is too high, and failure is a distinct possibility.

The procurement cycle helps buyers to understand the process and breaks the procurement process into 13 sections.

 

What is a procurement cycle?

The procurement cycle is an important part of the procurement process.

The procurement cycle outlines the steps that should be taken by buyers in the course of each procurement exercise.

 

The CIPS Procurement and Supply Cycle

This blog will guide you through the steps of the procurement cycle.

The CIPS Procurement and Supply Cycle is the cyclical process of key steps for procuring goods or services.

The cycle includes 13 stages:

  1. Define Business Needs and Develop Specification
  2. Market Analysis and Make or Buy Decision
  3. Develop the Strategy and Plan
  4. Pre-Procurement Market Testing
  5. Develop Documentation and Detailed Specification
  6. Supplier Selection to Participate in Tender
  7. Issue Tender Documents
  8. Bid and Tender Evaluation and Validation
  9. Contract Award and Implementation
  10. Warehouse, Logistics and Receipt
  11. Contract Performance and Improvement
  12. Supplier Relationship Management
  13. Asset Management

 

Define business needs and develop specification

First and foremost, an organisation must understand and define its procurement needs. This can be done by engaging with stakeholders throughout your organisation, and this research will support the creation of a high-level specification. Engaging with stake holders at this initial stage means that they are more likely to support the change process where stakeholder buy-in is required.

 

Market Analysis and make or buy decision

The second stage of the procurement cycle requires market analysis. Conducting this analysis will help your organisation to assess the market options available.

As part of this research, your organisation should scope out spend, current positioning, and the dynamics of the marketplace. This will help your organisation to identify potential suppliers and the degree of completion.

It will also support decisions around buying and outsourcing versus in-house provision.

 

Strategy and planning

Once you have defined your business needs, you can develop your organisation’s procurement strategy.

Your strategy should consider the potential impact of the external environment. CIPS gives an example of this on their website, noting that:

“Conducting a competitive tender is a good idea if there is competition and you are well positioned to leverage the market.

Developing competition in the marketplace or bringing this in-house may be a better strategy if you are reliant on one sole source of supply”

If you decide to conduct a competitive tender exercise, you will also need to start to consider which tendering route to use. Will the value of the goods/works/services you plan to procure require you to follow a high-value procurement route, publishing in OJEU (until the end of 2020 and in Find a Tender thereafter)? If so, which award procedure is likely to be most appropriate for your procurement?

 

Pre-Procurement

The pre-procurement stage should involve market testing and engagement. A market test will help your organisation to gauge if it is the right time to go into the marketplace. Among the factors to consider at this stage are crop cycles competitor activity, new legislation, and suppliers’ end of financial year.

 

Developing tender documentation

Regardless of the value of the tender, you will need to develop tender documentation, which will inform potential suppliers about the procurement, what you want to purchase, the conditions they will have to meet to be considered and the criteria that you, the buyer, will use at both selection and award stage. This needs to be prepared before you issue the contract notice.

When developing tender documentation, it is vital that it provides suppliers with a detailed breakdown of the volumes of goods or services required, service level agreement and terms and conditions. Your key stakeholders should be part of this stage.

This will form part of a detailed specification, which ensures consistency across the board (e.g. pricing, product quality, operational functionality). Getting the specifications right the first time reduces the risk of having to tender again. This specification will form part of the tender documents for suppliers.

 

Supplier Selection

At this stage, your organisation should be ready to publish a contract notice, either through the OJEU or, if the procurement value is below the OJEU thresholds, through one of the national portals such as Contracts Finder (England) or Public Contracts Scotland. This contract notice should follow the format required by the OJEU award procedure you have selected or by the portal on which you publish. At the very least, it will contain contact details for the buyer, information on how to access the tender documents, a brief description and a deadline date for responses.

If you are conducting a non-OJEU procurement, your contract notice, together with your tender documents, will allow you to ask suppliers a range of questions. If you use the OJEU Restricted Procedure, you will use the Standard Selection Questionnaire or the European Standard Procurement Document (Scotland) to assess supplier capability, offering, financial standing etc. The SQ is then assessed against a pre-agreed set of Selection Criteria, which will enable you to determine if a supplier should be shortlisted and receive an invitation to tender.

 

Issue Tender Documents

If you are using a two-stage process such as the OJEU Restricted or Negotiated Procedure, once you have selected the suitable suppliers to be shortlisted to tender, you will then need to send formal documents (e.g. an Invitation to Tender. If you are using a one-stage process such as the OJEU Open Procedure, the SQ or ESPD together with all the other tender documents is issued initially and all suppliers submit a full tender

Along with these documents, a detailed specification, a document with business requirements and clear time scales should be sent.

 

Bid and Tender Evaluation and Validation

It is time for bid evaluation against pre-defined criteria that were part of your tender documentation so that suppliers are aware of the criteria they are trying to meet.

Tender evaluation should be structured, disciplined and transparent.

During this stage it is common for the buying organisation to complete credit checks, site visits, product sampling or trials.

A procurement team should try to fully engage with their suppliers at this stage, while making sure they remain compliant with the procurement regulations at all times. However, this can be difficult and trying to manage all tenders effectively is not an easy task.

Tender management software allows teams to store and share key information with one another throughout the procurement process.

 

Contract Award and Implementation

Once you have selected your preferred supplier – you can then award the contract.

Providing award criteria allows both parties to understand their obligations, which minimises contractual risks.

 

Warehouse, Logistics and Receipt

At this stage warehouse considerations need to be made; this can include:

  • Product coding and classification
  • Space, layout, and racking.
  • Frequency of delivery.

 

Contract Performance and Improvement

Public sector organisations have a responsibility to procure effectively and drive maximum value from every contract that they award.

Any contracts should set out agreed KPIs – which should be monitored with reviews. A contract review should include discussion on how the relationship is working and should resolve any conflicts.

Contract management software can support buyers to track performance and boost improvements.

This kind of software can be used through every aspect of contract management post award, enabling you to monitor supplier performance, undertake value tracking, create contract variations and know when you need to plan to retender – and much more.

Having the right contract management system in place will make your life a lot easier as there are many benefits of this eProcurment strategy including:

  • Evaluation of the supplier’s performance throughout the contract allows for action to be taken to increase the performance and effectiveness of the contract
  • Decisions taken at the proper time, which mitigates potential risks appearing in the future
  • The supplier is cooperative and responsive to the organisation’s needs
  • The delivery of services is satisfactory to both parties
  • There are no contract disputes or surprises

Delta’s Contract Performance tool allows the user to create, manage/monitor and record a tailored performance monitoring plan for each contract and each supplier/contractor.

The user can execute a clear and measurable Contract Performance programme for each active contract using an easy to understand Key Performance Indicator (KPI) builder and an associated plan/reminder/review methodology.

  • Supporting documents can be attached to KPIs.
  • Contract Performance includes full export functionality.

 

Supplier Relationship Management

Supplier relationship management entails strategically managing all interactions with suppliers to maximise the value of those interactions. It means creating closer, more collaborative relationships to realise value.

Supplier relationship management software can discipline your organisation’s processes and help your employees to strategically plan and manage interactions with suppliers.

Delta’s Supplier Management module provides an easy supplier/vendor management service driving supplier to a single central hub where they register, store, and manage their details and to which buyers have instant access. The list building functions provide buyers with the ability to create and manage lists of suppliers.

  • Create an unlimited number of category/supplier lists
  • Ability to store and manage framework lists
  • Ability to set list open and close dates and times in line with deadlines
  • Real-time data view: supplier profiles within the lists are automatically updated if a supplier makes an update
  • Removes the requirement for time-consuming maintenance of supplier information and paper storage

 

Asset Management

Assessments should be carried out to determine if requirements have changed.  Organisations should also think about what can be improved and incorporated next time.

This is where we reach the end of the cycle – which takes us back to the start!

 

Key considerations

When making decisions throughout the cycle, CIPS advises that the following should be considered:

  • Procurement Systems & Technology
  • Stakeholder engagement
  • Sustainability/ CSR / Ethics/ Security
  • Risk Assessment / Mitigation
  • Continuous improvement
  • People & skills
  • Innovation

We explore some of these key considerations in detail below.

Procurement Systems & Technology

The requirement for all communication around public sector procurement to be electronic as of October 2018 means that eProcurement software and tender management systems are becoming increasingly interwoven in commercial eProcurement solutions.

eProcurement has come a long way since it started in the 1980s. The invention of Electronic Data interchange (EDI) allowed files and documents to be shared between the public and private sector, which was revolutionary at the time.

Nowadays, technology has enabled the public sector to purchase more efficiently using bespoke software. Buyers use Tender Management or eTendering systems that have filing mechanisms which allow buyers and suppliers to review and revise the bid documentation, along with any questions and answers that have been submitted in relation to the bid.

Using electronic communication removes unnecessary manual processes and helps buying organisations to speed up response times and set clearer lines of communication with their suppliers.

Additionally, moving to an eProcurement solution means that your organisation will have a lighter environmental impact as there is no requirement for printing and posting. As well as being more sustainable, your organisation will cut budget spend, making eTendering software an excellent investment.

Delta eSourcing customers have access to cutting-edge technology that can transform the efficacy of any buyer’s strategy. Every stage of the procurement process, from initial contract notice to evaluation to contract management can be conducted electronically and is fully auditable.

Stakeholder engagement

Throughout the procurement process, engagement between buyers and suppliers is crucial. By engaging with the marketplace before a procurement exercise the buyer can learn more about the latest products and services available.

There are many benefits of early engagement for buyers, including:

  • Networking and building relationships with suppliers
  • Suppliers can influence objectives and requirements of a contract before the official notice is published, which reduces the risk of retendering.
  • Suppliers can educate the buyer on your product/services, the current landscape, and trends in the market

GDPR

On 25 May 2018, the EU implemented a new data privacy and security law across Europe, the General Data Protection Regulation (GDPR).

The GDPR consists of hundreds of pages of new requirement, causing leading organisations around the world to reassess their data protection strategy.

Many would argue that GDPR is the toughest data privacy and security law in the world. Though it was drafted and passed by the European Union, it imposes obligations on organisations anywhere, so long as they target or collect data related to citizens in the EU.

According to IT Governance:

“The EU GDPR will no longer apply directly in the UK at the end of the transition period (31 December 2020). However, UK organisations must still comply with its requirements after this point.

First, the DPA 2018 enacts the EU GDPR’s requirements in UK law. Second, the UK government has issued a statutory instrument – the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019 – which amends the DPA 2018 and merges it with the requirements of the EU GDPR to form a data protection regime that will work in a UK context after Brexit.

This new regime will be known as ‘the UK GDPR’.

 

Cyber Security

New regulations such as GDPR, as well as high-profile media coverage on the impact of cyber incidents, have raised the expectations of partners, stakeholders, customers and the wider public. Quite simply, organisations – and board members especially – must get to grips with cyber security.

The public sector holds large quantities of sensitive data, and it is important that all public sector bodies possess the knowledge and ability to defend themselves against cyber threats, which means investing in greater security both for their own organisation and the supply chain.

The UK government is improving cyber security in its supply chain. Since 1 October 2014, all suppliers have needed to be compliant with the Cyber Essentials controls if bidding for government contracts which involve handling of sensitive and personal information and provision of certain technical products and services.

 

Ethical sourcing

Procurement is changing and buyers are no longer able to award contracts on cost without taking the wider impact of the procurement into consideration.

Given that procurement exercises can involve complex relationships between many different organisations, there is potential for many unethical practices to become involved somewhere in supply chain. These can range from illegal activities such as modern-day slavery and corruption, to broader issues such as disregard for the consequences of climate change

Ethical sourcing can support buyers to avoid these pitfalls as it focuses on conducting sourcing activities at the highest possible standards of responsible, sustainable, environmental, and socially aware business practice.

Social value

Social value may mean a commitment to environmental issues in procurement, for example ensuring sustainable or low-carbon practices are prioritised. But social value can also encompass elements that are ‘closer to home’ for businesses.

Companies treating their employees well is a type of ‘social value’. Paying the living wage to all workers, for example, contributes both to employee wellbeing and the local economy.

Malcolm Harrison, CEO at the Chartered Institute of Procurement & Supply, has previously emphasised that it is a misconception to think that social value is only important in local government procurement. Social value has become increasingly important for central government, national governments around the world, and the private sector too.

 

Procurement strategy with Delta eSourcing

Delta provides a central, secure, online solution that simplifies and automates many of the time-consuming processes involved in creating and issuing calls for competition and managing tender responses.

Delta’s rich functionality covers all aspects of the eTendering process from commissioning, notice creation, pre-qualification and issuing of invitations to tenders to evaluation of responses and award of contract and even contract management.

Having this comprehensive solution allows you to significantly reduce both the processing cost of procurement and the timescales for tenders above the OJEU procurement thresholds.

Delta eSourcing offers a range of procurement software and is committed to helping public sector organisations make efficiency savings to improve their procurement processes. Our procurement services offer you the flexibility to create a bespoke procurement package for your organisation.

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