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Good Purchasing
This page contains guidelines for best practice achievement
throughout the supply chain. The checklist of actions will help
purchasers through the various stages of a successful purchasing
project. Obviously, the value of a potential purchase contract will
determine the depth of involvement of this guidance but it is intended
that all University Buyers will have the document available for
reference and as an aide-memoire in the drive to secure added value
for money.
1.Is the purchase necessary?
Is there scope for sharing equipment held by another department
or outside body?
2. Is there scope for purchasing jointly with another user?
3. Have all methods of acquisition been considered?
Would it be worth hiring? Could the equipment be procured beneficially
by means of a finance or operating lease or hire purchase agreement?
4. Is the specification adequate and non-prescriptive?
Note: Where equipment is specified at or near the leading edge
of technology it is common for the specification to be developed
in conjunction with one or more suppliers. It is important that
the process does not result in a specification which is so detailed
as to eliminate any effective competition. The focus should be on
delivering what the Department or research project needs rather
than specifying what a supplier can supply. One possible approach
is to specify performance (that is the required outcomes) rather
than technical details (how it works). In the latter case there
is the risk that the final product will be technically superb but
does not do what is required. In discussing specifications with
suppliers it is essential that no commitment is entered into prior
to seeking tenders or quotations. Doing so can seriously weaken
the subsequent negotiating position.
5. Has there been a proper market search?
Note: Information on potential suppliers can be obtained from a
wide range of sources, such as existing suppliers, personal contacts,
trade directories, exhibitions, conferences and consultants. The
Official Journal of the European Union may help source a new market
as the adverts are often copied into other magazines and journals
at no cost. Once a wide range of suppliers has been identified,
the purchaser can short-list those suppliers with the best reputations
or specification. However, previously unknown suppliers may bring
new ideas or could give an extra edge to the competition. Sticking
to a small number of suppliers which have been used in the past
may not result in the best value for money. A thorough market search
may also identify opportunities to procure second-hand and ex-demonstration
equipment.
6. Have proper procedures been followed where purchases fall
within the scope of the European Union Supplies Directive?
Note: The United Kingdom Public Sector Contracts Regulations embody
the European Union Supplies Directive into United Kingdom law. The
Government's interpretation is that they apply to all purchases
by higher education institutions, regardless of funding source,
in excess of a specified threshold, currently before VAT. Breaching
them is an offence and leaves the institution liable to challenge
by an aggrieved supplier which would have the effect of halting
the purchase and could prove costly. The Regulations require public
purchasers in most cases to advertise in the Official Journal of
the European Union. They also circumscribe, but do no necessarily
forbid, pre and post tender negotiation and can have a bearing on
the drafting of the specification.
7. Has the Procurement Department been consulted on the conduct
of the procurement?
It is essential that the Procurement Department is involved in
all contracts for the purchase of equipment in excess of £100,000.
8. Has the purchaser considered to use local or national purchasing
agreements, where they exist? Alternatively, is there a good case
for not using these?
Such arrangements have been negotiated using the purchasing power
of the whole institution and taking account of whole-life costs
(see guidance elsewhere on theis web site) and should, for small
purchases at least, be better than anything that can be negotiated
elsewhere. (There are national initiatives which are also working
on developing national agreements). Breaking from the agreements
may impact adversely on the institution's negotiating power when
the agreements are renewed. If purchasers really think they can
improve on the central agreement they can consult the procurement
team to see whether this is really the case and to encourage them
to seek improvements to existing arrangements. Any supplier can
under-cut contract process on a short-term basis as it is its aim
to take business from the contractual supplier, which may have beaten
it in the original tender process. For large purchases it may be
possible to obtain value-added concessions beyond those in the contract,
and the purchasing co-ordinator should be able to advise on this.
9. Has competition been established?
Competition is important. Without it the institution has less purchasing
power. The National Audit Office found few equipments for which
no competition was possible. Competition may secure savings even
where one supplier's equipment is strongly preferred on technical
grounds. Equipment suppliers met by the National Audit Office indicated
that they assumed that they were in a genuinely competitive environment
when asked to tender, and behaved accordingly. The purchaser should
therefore seek to draft a specification which is expressed in generic
terms rather than in terms of what a particular supplier can offer.
It should then evaluate non-price factors such as technical capability,
compatibility, reliability, potential obsolescence and downstream
costs, once the bids are in.
10. Has quality been assessed?
Note: Other known users of the equipment within and outside the
institution may be contacted for their views on quality or to see
the equipment in action. This may also identify opportunities for
sharing.
11. Have all relevant life-cycle costs been identified?
Note: The purchaser should consider specifying what is wanted on
the basis that everything is negotiable. The specification could
include:
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Provision for on-site tests, and pre-negotiation trials if
these are desirable;
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A price which is fixed and firm, irrespective of inflation,
exchange rate fluctuation etc (although it may help in subsequent
negotiations if suppliers are asked to quote on more than one
basis, say at a particular exchange rate, as well as on a fixed
rate basis). It is particularly useful to insist on prices in
sterling to avoid price variations caused by exchange rate changes.
Let the supplier take that risk.
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Free delivery, installation and commissioning;
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Maintenance cover for however long the department needs it
(this is always negotiable downwards);
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The cost of consumables;
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Details of spare parts availability for the life of the equipment
(seven years is a usual minimum) together with contractual notification
before the supplier ceases manufacture of spare parts;
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Handbooks with full maintenance instructions, including circuit
diagrams, etc;
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Training (some suppliers provide this free).
12. Is there an objective appraisal and award methodology?
Note: The complexity of methodology applicable will depend on the
cost of equipment and relative importance of different factors and
therefore the benefits to be derived from spending time on using
it. Account should be taken of the financial factors throughout
the life of the equipment, including expected costs (and any income)
for consumables and energy etc and replacement costs where forecast
replacement dates of equipment being appraised vary. A scoring system
can be devised for non-financial benefits and drawbacks such as:-
13. Have checks been made on the strength and qualifications
of potential supplier(s)?
It should be considered whether; the suppliers have a reliable
trading status (in one case the supplier went bankrupt a few weeks
after a major purchase by an institution); the supplier is technically
capable (previous customers may give references on the basis of
their experience); the supplier has adequate quality controls and
complies with the institution's environmental policy so far as this
is relevant; the supplier can provide satisfactory after-sales service
(they should advise on service arrangements, technical information
and the availability of spares); the supplier will comply with the
institution's terms and conditions of purchase. Much of this routine
work can be obviated by having a credible approved suppliers list.
14. Has an appropriate and thorough negotiation taken place?
The procurement team is always available to assist if required,
this task is made easier if consulted at the specification stage.
The following guidance may be of use:- everything is negotiable,
not only price; the supplier may well ask what the budget is. Do
not tell them. This is none of their business; where another supplier
is offering a better deal, say so without divulging any confidences;
when negotiating with the supplier who offered the lowest price,
the focus should be on other aspects of their tender which are not
so competitive; offer each (selected) supplier an opportunity to
discuss the bid and invite and suggest ways of lowering the price
and/or increasing value; always trade concessions, don't give them
away; consider the inclusion of more deliverables into the deal
as well as attempting to reduce a price. Such as more accessories,
more "free" maintenance, longer warranty periods, free
spares etc.
15. Have there been negotiations over unsuitable conditions
of contract?
The University's standard conditions of purchase should always
be imposed. Do not negotiate on terms of sale - insist that a supplier
addresses the University's conditions. Do not accept conditions
which call for payment in advance of or on delivery rather than
on the outcome of a satisfactory acceptance test or a contractual
event. If advance payments cannot be avoided, the University must
be protected by bank guarantees. Without these documents the University
could make payments without receiving compensation for non delivery.
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