89 Glossary



Bid Is particularly associated with making offers at auctions, but is also commonly used in relation to any offer made, e.g., in response to an enquiry, request for quotation or invitation to tender.
Call-off contract Also referred to as ‘framework agreements’, ‘blanket contracts’ or ‘standing orders’. In this case, you negotiate an agreement with the supplier that remains valid for all procurements made within a certain period.
E-marketplaces Websites where companies and suppliers conduct business-to-business activities.
Enquiry Is the process of asking about something to get information.
Fixed contract Fixed contracts have a number of similarities with call-off contracts. If you have frequent requirements, you can negotiate a contract that remains valid for all your company’s procurements made within a certain period. However, fixed contracts are a more definite form of contract than call-off contracts, as here you will make a commitment to procure a certain volume or value from the supplier over the period of the contract. There may be penalties applied if your firm does not procure the contracted amount. As this type of contract is more attractive to the supplier than a call-off contract, it is likely to offer better conditions.
Joint ventures A separate entity formed by two or more parent organisations and owned by them. A joint venture is similar to a partnership in that it must be created by agreement between parties to share in the losses and profits of the venture. It is unlike a partnership in that the joint venture is for one specific project only, rather than for a continuing business relationship. Where three or more parties are involved in a joint venture, these are often referred to as consortia. Joint ventures for the supply of products or services are formed for reasons similar to those of partnership, for instance, to reduce risk, develop new products, improve operational efficiency, and compete more effectively in a market or to seek access to a new market.
Logistics The transportation and distribution of goods and services.
Open tendering Involves advertising the requirement widely in order to invite all interested suppliers that meet specified criteria to express their interest in tendering. This approach of tendering opens up the maximum level of competition.
Partnership A form of business organisation in which two or more persons undertake some form of business activity together. All the partners share the responsibility of running the business through their shares of the profits. A partnership is characterised by a long-term collaborative form of relationship that is based on high levels of trust. There are a number of reasons why you may wish to pursue such a relationship with a supplier. Key reasons amongst these are the risk reduction and collaboration in product development. Pulling resources from both, your company as well as the supplier, will result in a better solution than that which you could achieve alone.
Piggyback A truck trailer with chassis and wheels on a rail flat car. It is also called ‘container on flatcar’.
Regular trading Can be thought of as repeated spot purchases from one or more suppliers. Each procurement is treated individually under a separate contract. Thus, the price or lead-time for the same requirement may vary with different orders. If regular trading is carried out with only one supplier, this supplier enjoys what might be called ‘preferred supplier’ status.
Restricted tendering Unlike open tendering, restricted tendering is only available to those suppliers specifically invited to bid. There are two ways of deciding who should be invited to a restricted tender. If you know the supply market well, you may simply choose the suppliers that you consider to be the most appropriate. If you do not have a good knowledge of the supply market, you can go through a process of pre-qualifying suppliers. From the pre-qualified suppliers, you can then select those that you consider to be the most suitable to invite. This approach of tendering is most appropriate when your company’s requirement is specialised, and you already know which suppliers in the marketplace are best capable of meeting it. It is also appropriate when the required lead-time and/or value of the procurement does not justify the time and/or expense of an open tender.
Spot purchases Spot contracts are the most frequently found contracts in procurement. They are contracts, which are undertaken individually, that is, one at a time. In spot purchases, you will place the contract with whichever supplier offers the best overall deal at the time of the procurement.
Tender Specifically related to the making of a formal offer in a sealed envelope, and is the term most often used in conjunction with the formal tendering process. However, the terms ‘offer’ and ‘bid’, are also not uncommon in conjunction with tendering processes.
Two-stage tendering In open and restricted tendering, a complete technical specification is included within the invitation to tender package. This contains sufficient information for suppliers to develop bids that can satisfy your company’s requirements. In other circumstances, however, it may be undesirable or impractical to prepare complete technical specifications in advance. This might be the case where it is not feasible for your company to finalise the specifications without first engaging in consultations and negotiations with potential suppliers, due to the complex technical nature of the requirement. Another situation will be when the requirement is subject to rapid technological advances. In such cases, you may wish to use a two-stage tendering procedure, which provides a way of benefiting from the suppliers’ knowledge to optimise the specification before making a final procurement decision.


BLC 304/05 Procurement Management Copyright © 2009 by Wawasan Open University. All Rights Reserved.


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