9. Procurement Flashcards
Explain the purpose typical content and importance of a Procurement strategy
Hint: Purpose answer, content = 7 points, and importance answer.
O - S - R - C - S- C - B
Purpose = ensure the organisation obtains goods and services it needs at the right time, quality and cost.
Contents:
1.Objectives
2.Scope
3.Risk Management
4. Contracting Approach
5. Supplier selection criteria
6. Contact management
7. Budget and financial considerations
Importance = clear roadmap which obtains the best value for money, minimises risk and manages contract effectively. Procurement strategy also helps to build confidence between stakeholders and enhance transparency and accountability.
Differentiate between the different methods of supplier reimbursement
Hint: 4 points
- FP/LS
- CR
- T+M
- IB
- Fixed price or lump sum - pre-agreed price, often used when risk is low and scope is well defined.
- Cost reimbursement - the supplier is reimbursed for the actual costs incurred in delivering products or services.
- Time and materials - hybrid model that combines both fixed price and cost reimbursement. The supplier is paid for the actual time and materials used, and a pre-agreed rate is applied for labour and materials.
- Incentive-based - links supplier payment to specific performance or quality metrics.
Differentiate between different contractual relationships
Hint: 5 points
FP- T+M - CP - GMP - PB
- Fixed price: contractor assumes risk associated with overruns
- Time and materials:
- Cost Plus:
- Guaranteed maximum price:
- Performance-based:
Explain a supplier selection process
Hint: 7 points
I - D - I -E - N-S-M
- Identify the need
- Develop selection criteria
- Identify potential suppliers
- Evaluate potential suppliers
- Negotiate contract terms
- Select the supplier
- Monitor supplier performance