NZ’s new Procurement Academy shares the top 10 secrets of better buyingNovember 2011
Education Review asks New Zealand’s new Procurement Academy to share its top procurement tips.
ost organisations spend more on buying ‘stuff’ than they do on staff. It’s fair to say that most people involved in purchasing this ‘stuff’ – products and services – probably wouldn’t think of themselves as actually being engaged in something called “procurement”; even less would probably ponder, “What would a procurement expert do in this situation?”
Yet, applying even basic procurement principles to how an organisation goes about buying products and services will typically help free up funds for spending on more important front-line activities.
Procurement, once described as just a “routine clerical process operated by unglamorous individuals”, is emerging as the proverbial budget ‘super-sizer’ – helping organisations gain better value for money from existing budgets, while improving supplier service levels and reducing carbon footprints.
So, when did procurement suddenly become important? Although the pyramids, Napoleon and the discovery of New Zealand clearly all relied on procurement, it wasn’t until 1933 that Harvard published the first textbook on the topic. While World War Two and its aftermath certainly matured the profession, it wasn’t until the ‘80s and ‘90s that we saw procurement evolve into the key corporate centre function it is today.
And of course, more recently, the global financial crisis has driven governments and organisations to look to procurement for solutions – procurers are in hot demand globally. At a local level, New Zealand has such an undersupply of qualified professionals, these skills are listed on the skilled migrant shortlist.
One of the largest concentrations of procurement experts is currently employed in the Ministry of Economic Development’s (MED) Government Procurement Reform programme. Responsible, among other things, for the introduction of a range of multi-million dollar all-of-government contracts covering such things as computers through to electricity supply and even legal services, the MED team is the go-to place for expertise in this area.
OK. So, having no knowledge whatsoever of what good procurement practice looks like, I asked MED’s Government Procurement Solutions team to give me their ‘in a nutshell’ version.
There are basically three parts to procurement:
- Planning it – which is largely about understanding your real business needs, as opposed to what you think you want, and understanding the supply market and how to approach the market to best deliver your needs.
- Going to market – which in simple terms is about asking suppliers “can you meet my needs?” And then considering what that would look like, then doing the deal – which can range from a basic purchase through to a formal contract for products and services.
- Supplier management – ensuring that the resulting contract and relationship are effective in meeting your ongoing needs
Given all this, I then asked the team to share their top 10 secrets for successful procurement? Here’s what they provided:
- Understand where you spend your money and what’s important – what are the things you spend the most on or which you rely on the most? Put greater planning focus on these. Some of the worst purchasing decisions are made in haste, often when a critical or high-demand resource runs out or reaches the end of its usable life.
- Take the time to understand the real business needs – history is riddled with examples of purchased products and services that either didn’t meet the needs or excessively over-met them. What’s a ‘need’ versus a ‘want’? For example: I need transport… I want a BMW!
- Ask the question – do we need to buy it? Is there another way of meeting your need that provides better added value. Take, for example, a school van – are you actually better to hire or lease one, or even share a van with neighbouring schools?
- Take advantage of the buying power of the government sector – check out what’s available via the all-of-government contracts. You’ll find you can access some commonly used products and services cheaper through one of these.
- Get to know the market – remember that sales people want to sell you things! Do some research: who are the best suppliers and what are the best products? If it’s technology, what’s old, new or emerging – and does the price reflect this? And if you are an early adopter, is there a risk that you are paying too much or investing in a product that won’t survive the initial ‘market battle’?
- When going to market, play by the rules and don’t take shortcuts, unless it’s a real emergency – get familiar with the policies and rules governing your procurement; you’re spending tax dollars.
- Don’t get compromised – ensure there are no real or perceived conflicts of interest, by way of how you deal with suppliers, or what you receive from them (e.g. tickets to the rugby).
- “Lift the bonnet and check everything over.” Always look beyond the glossy brochures and promises. Take the time to check out both the product and the supplier before you sign up.
- Understand the full costs of ownership. In addition to the purchase price, always consider the other costs that will be incurred during the life of the product – consumables, training, insurance, maintenance, servicing, etc. Unscrupulous suppliers will sell you something cheap and then exploit you on things like consumables and maintenance.
- Decide what type of supplier relationships you need? If the product or service is critical to your organisation, invest time in building a relationship. This reduces the chance of issues becoming major problems.
Sounds like a lot to look at? Sure, if you’re stocking up on a few reams of photocopy paper, but not if you’re investing in such things as new technology or school buildings that you’ll be spending six figures on over one or more years.
Bottom line: better procurement translates into buying more for less, or buying better for the same. As they say, “Marry in haste, repent at leisure.”
...applying even basic procurement principles to how an organisation goes about buying products and services will typically help free up funds for spending on more important front-line activities.
For more information, visit www.procurement.govt.nz