HQP follows a transparent, unbiased and coherent procurement process when we are looking for new suppliers. We use the methodology from the Chartered Institute of Purchase & Supply to ensure we take a holistic approach
We follow the latest industry recommendations and choose suppliers that are the right fit for the requirements of our members, beyond the basic criteria of upfront cost savings. In this article we would like to share a brief overview of our procurement process and why these are good steps to follow when choosing the right supplier partners for your organisation.
Typically, a procurement cycle (below) breaks down the process into key steps.
Step 1 = Identification of need
The first stage in the procurement process. Where the organisation identifies that there is a requirement for a new or different product or service to support operational effectiveness.
Step 2 = Defining the specification
The next step is to develop a suitable specification. It’s important that the specification adequately describes the need and is one that prospective suppliers can understand.
Careful planning in the first two stages is important to match stakeholder expectations. It’s useful to involve the end-users in the procurement process. This improves the likelihood of smoother implementation and achieving what your end user requires.
Step 3 = Supplier Identification
Also known as sourcing, this is the process of identifying suppliers that are best able to supply the goods or services the organisation requires.
Step 4 = Pre-Qualification – Selecting the most promising suppliers
When selecting the most promising suppliers and inviting them to quote, it’s useful to run some checks and balances. The companies should all be financially stable, capable of providing the right quality of product/service, at the right time and in a way that represents good value. Only suppliers that you judge competent should be progressed to provide quotations.
A Pre-Qualification Questionnaire (PQQ) could be used at this stage to appraise potential suppliers’ business credibility prior to engaging in a Request for Proposal. As well as identifying credible high-performing suppliers a PQQ could help you eliminate some unsuitable suppliers early in the process, avoiding the cost of having to assess inappropriate suppliers at the next stage.
Key points to take into consideration:
- Financial performance
- Experience within the sector
Step 5 = Requests for Proposal (RFP)
When you have selected several competent suppliers the next step is to raise a Request for Proposal (RFP). This document can be designed so that prospective suppliers answer a range of pertinent questions. For example, covering their service capability, commercial and contractual offering, implementation plan, account management and customer service approach as well as providing case studies and references. Their answers can then be used to form the basis of your bid evaluation
All suppliers should be sent the same document to ensure fairness. Trying to look beyond an attractive basic price and considering the total cost of ownership can help in achieving a better overall solution for the organisation – cheapest solutions may be enticing upfront but beyond the façade are often loaded with extra add on costs – installation, transaction costs, training costs and indirect costs associated with managing service issues.
Step 6 = Receiving and evaluating bids
Prior to RFPs being issued, consider how you will approach the evaluation of bids once they are returned. Part of this process should cover what your criteria is for selection.
Try to take an objective view of your existing incumbent supplier. Complacency can surround any long-term relationships from both sides which can result in creeping excessive pricing and a fall in service levels over time. You may also be missing out on new market innovations and developments.
A Weighted Framework Award Criteria KPI could be used to assess each completed RFP with percentage weights dependent on your priorities should be factored in. When the completed RFPs are received, they should be evaluated against your selected criteria.
As an example, HQP considers the following categories for proposals
- Business Credibility – Assessed at PQQ stage
- Commercial Approach
- Service Capability
- Governance and Account Management
- Case Studies and Client References
Involving department specialists and end-users can help give a different and more complete perspective of the proposal received. The ‘two heads are better than one’ principle can often mitigate the risk of missing key considerations.
Step 7 = Negotiation
Prior to starting the process, agree on your goals for the negotiation, one emphasis could be to achieve value rather than basic cost savings. In addition, there may be aspects of the supplier’s RFP that can be improved upon. Costs may be reduced and quality improved by careful negotiation. Further negotiation may take place after the quotation process, with what appears to you as the ‘best’ supplier to finalise details such as Service Level targets for the Service Level Agreement, before awarding the contract.
Step 8 = Contract award
Once the supplier is selected and a decision is made to award the framework contract, suppliers involved in the process should be notified of the decision and constructive feedback provided.
Contract Award to a new supplier and away from an incumbent supplier can often be an uncomfortable and difficult decision. Consider the cost of not making the decision or not deciding to change. Staying with an incumbent supplier can be detrimental to your organisation and inhibit continuous improvement.
It can be considered best practice to contact non-successful suppliers with a polite response communicating they have been unsuccessful. Respond transparently with any requests as to why this was so. Integrating a Weighted Framework Award Criteria KPI can help ensure you are able to justify your decision based on clear, unbiased criteria. Providing honest feedback has the twofold benefit of stopping the supplier contacting to seek an update and gives them valuable feedback so they could modify their offering to you in the future, should you wish to consider them again.
Step 9 = Implementation
Carefully plan and co-ordinate how the new framework contract will be communicated. Structured implemented is helpful to ensure all stakeholders are aware of the framework and can derive the greatest benefit from it.
Step 10 = Performance Review and Contract management
Once the contract has been awarded to the supplier, it’s worth managing your suppliers’ performance levels on a regular ongoing basis. Their performance should be reviewed against any target KPIs you set out in your Service Level Agreement.
Investing in the time to conduct a structured, professional procurement process will benefit your organisation. However, if you don’t have the capacity to complete this activity it can be worthwhile engaging the services of a procurement organisation, such as HQP.
HQP conduct contract negotiations and agree supplier frameworks for products and services that are of direct benefit to the care sector.