100 Processing services procurement

Processing services procurement

Thus far, the discussion has centred primarily on understanding the nature of the service to be acquired. Now, the acquisition process used for services is discussed to highlight several unique dimensions. Two areas of the acquisition process are covered. We will first look at the processing of services requirements and then service contract administration.

Processing the procurement of services upon receipt of requisitions normally involves the following steps:

1.  Determining the appropriate process for procuring the service: This involves consideration of:

a.  The nature and strategic importance of the service as we have discussed earlier in the segmentation of services: A champion buyer can be identified for each strategic service and a buying team established for bottlenecks.

b.  Where procurement of services such as insurance and energy is done by non-procurement personnel in the operating departments, training in procurement techniques should be provided.

2.  Prepare a statement of work: As is true in the procurement of production requirements and capital equipment, the most critical ingredient to a successful procurement of services is the development and documentation of the requirement — the Statement of Work (SOW). Much of the information relating to the content and principles of requirement descriptions writing covered earlier applies equally to SOW. SOW should clearly

a.  The service required

b.  Where, when and to whom the services are to be provided

c.  Under what conditions

d.  Standards or levels of performance required

e.  Period of initial provision and renewal intervals

f.  Roles, if any, to be taken by the buyer and seller such as assistance with coordination, equipment, staff or research

Again, as with production requirements and capital equipment, one of the keys to success is the involvement of qualified procurement personnel at this point in the procurement process. In fact, professional buyers know that most of their service users lack training and experience in the development of service requirements or descriptions. Accordingly, a buyer can provide invaluable assistance during this phase of the procurement. In many instances, professional buyers invite carefully pre-qualified potential suppliers to aid in the development of the SOW. Such early involvement aids all stakeholders in fully understanding the organisation’s needs. At the same time, the potential suppliers gain insight into the nature and level of effort required.

3.  List the SOW as the basis of a request for proposals or quotations: Provide scope for supplier innovation and request potential suppliers to suggest their solution(s) for a given requirement.

4.  Obtain quotation or tenders from potential suppliers: Can be in any approach including reverse auctions depending on the risk impact and potential value of the services to be procured, as discussed earlier with portfolio analysis.

5.  Evaluate quotations or tenders: Evaluation should be by a cross-function team if services procured are of high impact or value.

6. Notification and issuance of contract: Notify the successful and unsuccessful suppliers and issue the contract. The SOW should be either incorporated into the contract or included as an appendix.

Where possible, measurable attributes or actions that are part of the service need to be identified and quantified. In addition, if the service can be broken down into chronological stages, it will be useful to detail progress due dates. These are the milestones and deliverables for a service contract.


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


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