The procurement process - Revision history

Tkokotas at 10:23, 7 January 2019

2019-01-07T10:23:47Z

← Older revision		Revision as of 10:23, 7 January 2019
Line 38:		Line 38:
	When a company is about to start a new project, one of the first activities is to estimate the necessary resources. Documents as activity lists and activity attributes give an overview of all the necessary resources. If the company has no similar projects in its portfolio, probably the procurement has no contact with the companies providing products and services that are required in the project. For this reason, the first document that the procurement function issues is a request for information.		When a company is about to start a new project, one of the first activities is to estimate the necessary resources. Documents as activity lists and activity attributes give an overview of all the necessary resources. If the company has no similar projects in its portfolio, probably the procurement has no contact with the companies providing products and services that are required in the project. For this reason, the first document that the procurement function issues is a request for information.
	==Mapping of the market, Request For Information (RFI)==		==Mapping of the market, Request For Information (RFI)==
	[[File:StateOfMaineDataCenter.jpeg\|thumb\|200px\|State of Maine RFI to identify possible contractor for a data center]]		[[File:StateOfMaineDataCenter.jpeg\|thumb\|200px\|Figure 1: State of Maine RFI to identify possible contractor for a data center<ref> https://www.slideshare.net/datacenters/request-for-information-rfi-4493196</ref>]]
	The main purpose of RFI is to gather information about potential suppliers. This is particularly helpful if a single or few contractors are expected to provide a large amount of services and materials in a single project. RFI can be very beneficial in scanning the market for product and services providers for long-term supply agreements.		The main purpose of RFI is to gather information about potential suppliers. This is particularly helpful if a single or few contractors are expected to provide a large amount of services and materials in a single project. RFI can be very beneficial in scanning the market for product and services providers for long-term supply agreements.
	The internal client, the person or business unit requiring the purchase, is responsible to provide the technical specification or to write the request for information itself. The document is received by the procurement function that is appointed to make it available to potential suppliers.		The internal client, the person or business unit requiring the purchase, is responsible to provide the technical specification or to write the request for information itself. The document is received by the procurement function that is appointed to make it available to potential suppliers.
Line 80:		Line 80:
	There exists three main categories of contracts used in supply agreement:		There exists three main categories of contracts used in supply agreement:
	*'''Fixed-Price contracts'''		*'''Fixed-Price contracts'''
	[[File:Contracts.png\|thumb\|400px\|Contracts typologies divided by billing mode and fee definition]]		[[File:Contracts.png\|thumb\|400px\|Figure 2: Contracts typologies divided by billing mode and fee definition<ref>the particular graph is created by the author of the article, First Name Last Name, for the purposes of the APPPM course</ref>]]
	Fixed-Price contracts assign a fixed total price for the provision of products of services. This type of agreement can include financial incentives when some target performance of quality or schedule are achieved. The contract binds the supplier to provide all the items agreed, penalties are applied if the terms are not respected.		Fixed-Price contracts assign a fixed total price for the provision of products of services. This type of agreement can include financial incentives when some target performance of quality or schedule are achieved. The contract binds the supplier to provide all the items agreed, penalties are applied if the terms are not respected.
	*'''Cost-reimbursable contracts'''		*'''Cost-reimbursable contracts'''
Line 118:		Line 118:
	\|}		\|}
	==Purchase Orders==		==Purchase Orders==
	[[File:Purchase-order-example.png\|thumb\|200px\|A purchase order it's a schematic document listing the typology and the number of purchased goods or services]]		[[File:Purchase-order-example.png\|thumb\|200px\|Figure 3: A purchase order it's a schematic document listing the typology and the number of purchased goods or services<ref>https://blog.procurify.com/2013/09/23/all-you-ever-needed-to-know-about-purchase-orders/</ref>]]
	When a company needs to purchase commodities on recurring basis, the term and conditions of the trade are negotiated by the two parts and then stated into a '''framework agreement'''. The agreement will regulate all the future purchases of the items it includes. When this agreement is in place, the buyer can release a purchase orders (PO), a document containing the types and the amounts of purchased goods or services. When the supplier accepts it, the purchase orders become a legally binding document. From that moment, the buying organization will be liable to pay for the supply.		When a company needs to purchase commodities on recurring basis, the term and conditions of the trade are negotiated by the two parts and then stated into a '''framework agreement'''. The agreement will regulate all the future purchases of the items it includes. When this agreement is in place, the buyer can release a purchase orders (PO), a document containing the types and the amounts of purchased goods or services. When the supplier accepts it, the purchase orders become a legally binding document. From that moment, the buying organization will be liable to pay for the supply.
	Once the vendor receives the payment, she/he releases an invoice. This can be used by the buying company for controlling purpose by making it match with the corresponding PO.		Once the vendor receives the payment, she/he releases an invoice. This can be used by the buying company for controlling purpose by making it match with the corresponding PO.
Line 140:		Line 140:
	=References=		=References=
	<references/>		<references/>


	[[Category:Project Management]][[Category:Complexity]][[Category:Actions]][[Category:Resources]]		[[Category:Project Management]][[Category:Complexity]][[Category:Actions]][[Category:Resources]]

Tkokotas at 12:52, 10 November 2018

2018-11-10T12:52:43Z

← Older revision		Revision as of 12:52, 10 November 2018
Line 1:		Line 1:
	Each project needs a certain amount of resources. Usually not all of these are already owned or available within the project organization. Therefore, the company will purchase some of the required sources or services from other firms.		''Developed by Paolo Meneghini''


			Each project needs a certain amount of resources. Usually, not all of these are already owned or available within the project organization. Therefore, the company will purchase some of the required sources or services from other firms.
	In a project, the statement of work describes the needed resources in detail. The project team will examine this document and decide which of the items that can be found or produced internally and which one to purchase.		In a project, the statement of work describes the needed resources in detail. The project team will examine this document and decide which of the items that can be found or produced internally and which one to purchase.
	When all the needed resources are identified, they are communicated to the procurement function. The procurement function ~~search~~ for the best seller for each specific resource or purchase category. For this purpose, buyers and procurement managers start to communicate with potential suppliers, through exchange of procurement documents. Typically, each document reflects a stage of the buying process.		When all the needed resources are identified, they are communicated to the procurement function. The procurement function searches for the best seller for each specific resource or a purchase category. For this purpose, buyers and procurement managers start to communicate with potential suppliers, through the exchange of procurement documents. Typically, each document reflects a stage of the buying process.
	In each stage, the buyer and the vendor require and provide different information. The purpose of the first contact between procurement and vendor is to establish the supply scope and expectations. When the process evolves, the communication includes more details about technical requirements.		In each stage, the buyer and the vendor require and provide different information. The purpose of the first contact between procurement and vendor is to establish the supply scope and expectations. When the process evolves, the communication includes more details about technical requirements.
	These documents are sent to all the potential suppliers by different channels, depending on the size of the purchasing, the selling company and their policies.		These documents are sent to all the potential suppliers by different channels, depending on the size of the purchasing, the selling company, and their policies.
	Contractors and buying organization negotiate the contractual form that regulates the provision. The choice of contract typology, from the buyer organization, has the goal to avoid, mitigate or transfer the risk to the vendor.		Contractors and buying organization negotiate the contractual form that regulates the provision. The choice of contract typology, from the buyer organization, has the goal to avoid, mitigate or transfer the risk to the vendor.
	==Verify need to purchase, Make or Buy==		==Verify need to purchase, Make or Buy==
	The first step of the procurement process is to assess if there is any actual need of purchasing. The company could in fact own internally the necessary resources to fulfill the work. However, these resources should not be available in time and in amount, that is defined by the project schedule. If the project organization doesn't have the resources to complete the work in time, the organization will make a buy decision. In this case, the company can decide if lease or purchase the assets.		The first step of the procurement process is to assess if there is any actual need of purchasing. The company could, in fact, own internally the necessary resources to fulfill the work. However, these resources should not be available in time and in amount, that is defined by the project schedule. If the project organization doesn't have the resources to complete the work in time, the organization will make a buy decision. In this case, the company can decide if lease or purchase the assets.

	==Knowledge source==		==Knowledge source==
Line 137:		Line 140:
	=References=		=References=
	<references/>		<references/>

			[[Category:Project Management]][[Category:Complexity]][[Category:Actions]][[Category:Resources]]

Paolo M: /* Risk and pitfalls */

2017-10-02T18:16:19Z

Risk and pitfalls

← Older revision		Revision as of 18:16, 2 October 2017
Line 120:		Line 120:

	=Risk and pitfalls=		=Risk and pitfalls=
	As many other project management activities, procurement~~'s activities include~~ several risk and pitfalls.These can involve the internal procurement process, poor definition of supply specifications and delivery modes or lack of strategic prospective.		As many other project management activities, procurement includes several risk and pitfalls. These can involve the internal procurement process, poor definition of supply specifications and delivery modes or lack of strategic prospective.
	===Meet requirements for negotiation time===		===Meet requirements for negotiation time===
	Not always the required purchases are available in project planning documents. Many times, internal clients manifest to the procurement the need to acquire external capabilities with little or no advance. In this case, buyers have few bargaining power toward any potential seller as there is no time left for effective negotiation. Therefore, the interested business unit or process owner are responsible to communicate the buying decision to the procurement. Only in this way is possible to achieve buying performance through negotiation.		Not always the required purchases are available in project planning documents. Many times, internal clients manifest to the procurement the need to acquire external capabilities with little or no advance. In this case, buyers have few bargaining power toward any potential seller as there is no time left for effective negotiation. Therefore, the interested business unit or process owner are responsible to communicate the buying decision to the procurement. Only in this way is possible to achieve buying performance through negotiation.
	===Get what is needed===		===Get what is needed===
	In many procurement categories, especially the services one, it is particularly challenging to define what is needed. Contracts ~~always~~ state the duration of service provision but not always are clear about how services are delivered and which services are included. To overcome the possibility of lacking service level, buyers should negotiate with vendors the inclusion of service ~~KPI~~ into the contract. This is usually the case ~~for~~ IT ~~service~~ on Cloud where up time is regarded as an essential metric.		In many procurement categories, especially the services one, it is particularly challenging to define what is needed. Contracts state the duration of service provision but not always are clear about how services are delivered and which services are included. To overcome the possibility of lacking service level, buyers should negotiate with vendors the inclusion of service KPIs into the contract. This is usually the case of IT services based on the Cloud, where up time is regarded as an essential metric.
	The solution is to identify the metrics that characterize the service ~~as ensure they are included~~ and ~~stated~~ in contracts. Financial penalty should be included when a KPI is not meet ~~once~~ or several ~~time~~.		The solution is to identify the metrics that characterize the service and negotiate to include them in contracts. Financial penalty should be included when a KPI is not meet for one or several times.
	===Define pricing policies===		===Define pricing policies===
	Another arising issue of IT service contracts is the vagueness of pricing over time. Many services are offered at favorable initial prices. Companies can be tented to subscribe ~~for the services~~. However, if buyer fails to negotiate a long term pricing ~~profile~~ suppliers will have the chance to increase billing prince extensively<ref> http://www.zdnet.com/article/cloud-computing-pricing-beware-the-bill-shock/</ref>. Service providers can make leverage on the technical lock up and the elevate switching ~~cost~~ to increase their revenue.		Another arising issue of IT service contracts is the vagueness of pricing profile over time. Many services are offered at favorable initial prices. Companies can be tented to subscribe. However, if buyer fails to negotiate long term pricing profiles, suppliers will have the chance to increase billing prince extensively<ref> http://www.zdnet.com/article/cloud-computing-pricing-beware-the-bill-shock/</ref>. Service providers can make leverage on the technical lock up and the elevate switching costs to increase their revenue.
	===Strategic procurement, Supply relationship management===		===Strategic procurement, Supply relationship management===
	Traditional relationship between a company and its suppliers have tactical or operational prospective. Supply relationship management (SRM) is the activity of connecting the interests of the organization and the ~~one~~ of its extended supply chain. Naturally is not possible to establish this kind of relation with all the supplier. It is necessary to categorize suppliers on their strategic importance to the organization. In this way the focus will be directed only toward the most relevant suppliers. ~~Consequently,~~ SRM starts with finding the right stakeholders and aligning strategic objectives. This kind of approach is particularly beneficial for long term supply relationship as it can bring<ref> Deloitte: Supplier Relationship Management (SRM), Redefining the value of strategic supplier collaboration (2015), https://www2.deloitte.com/content/dam/Deloitte/de/Documents/operations/Supplier_Relationship_Management_2015.pdf</ref>		Traditional relationship between a company and its suppliers have tactical or operational prospective. Supply relationship management (SRM) is the activity of connecting the interests of the organization and the ones of its extended supply chain. Naturally is not possible to establish this kind of relation with all the supplier. It is necessary to categorize suppliers on their strategic importance for the organization. In this way, the focus will be directed only toward the most relevant suppliers. SRM starts with finding the right stakeholders and aligning strategic objectives with them. This kind of approach is particularly beneficial for long term supply relationship as it can bring<ref> Deloitte: Supplier Relationship Management (SRM), Redefining the value of strategic supplier collaboration (2015), https://www2.deloitte.com/content/dam/Deloitte/de/Documents/operations/Supplier_Relationship_Management_2015.pdf</ref>
	*Efficiency improvement		*Efficiency improvement
	*Cost reduction		*Cost reduction

Paolo M: /* Contract categories */

2017-10-02T18:08:35Z

Contract categories

Paolo M: /* Get the best available provision, Request For Tender (RFT) */

2017-10-02T17:40:46Z

Get the best available provision, Request For Tender (RFT)

← Older revision		Revision as of 17:40, 2 October 2017
Line 68:		Line 68:

	==Get the best available provision, Request For Tender (RFT)==		==Get the best available provision, Request For Tender (RFT)==
	Purchase of extended of large amount of products or services may require a tender. A tender is published ~~the channel~~ determined ~~for the purpose~~ by the company purchasing policy. Larger companies has their own platforms or employee third parts tender ~~platform~~<ref> https://www.ariba.com/</ref>, others publish the tender on public newspapers, trade journals, public registries, or on the internet. The RFT contains well defined ~~specification for~~ the requested ~~item~~. The ~~level of~~ detail of RFT should ~~mirror~~ the one of the RFI's answer. Sometimes the buying organization makes available ad-hoc forms that the bidders must fill and submit to participate in the tender.		Purchase of extended or large amount of products or services may require a tender. A tender is published on channels determined by the company purchasing policy. Larger companies has their own platforms or employee third parts tender platforms<ref> https://www.ariba.com/</ref>, others publish the tender on public newspapers, trade journals, public registries, or on the internet. The RFT contains well defined specifications about the requested provision. The detail degree of RFT should reflect the one of the RFI's answer. Sometimes the buying organization makes available ad-hoc forms that the bidders must fill and submit to participate in the tender.
	If the buyer misses to specify exactly what ~~his~~ organization ~~need~~, the quality of the ~~resulting~~ bids will be affected by the supplier interpretation ~~of the request~~.		If the buyer misses to specify exactly what the organization needs, the quality of the bids will be affected by the supplier's interpretation.
	Tenders are an appropriate ~~tool~~ when requirements of products or services is known with satisfactory advance, compared to their actual ~~use~~ period (defined in the project schedule).		Tenders are appropriate tools when requirements of products or services are known with satisfactory advance, compared to their actual period of usage (defined in the project schedule).

	=Contract categories=		=Contract categories=

Paolo M at 17:33, 2 October 2017

2017-10-02T17:33:21Z

Show changes

Paolo M: /* Risk and pitfalls */

2017-10-02T09:00:05Z

Risk and pitfalls

← Older revision		Revision as of 09:00, 2 October 2017
Line 121:		Line 121:

	=Risk and pitfalls=		=Risk and pitfalls=
	As many other project management activities, procurement's activities include several risk and pitfalls.These can involve the internal procurement process, ~~the~~ definition of supply specifications and delivery modes or lack of strategic prospective.		As many other project management activities, procurement's activities include several risk and pitfalls.These can involve the internal procurement process, poor definition of supply specifications and delivery modes or lack of strategic prospective.
	===Meet ~~requirement~~ for negotiation time===		===Meet requirements for negotiation time===
	Not always the required purchases are available in project planning documents. Many times, internal clients manifest the need to acquire external capabilities with little or no advance ~~to the procurement~~. In this case, buyers have ~~little~~ bargaining power toward any potential seller as there is no time for an effective negotiation. ~~As result~~, ~~should be responsibility of~~ the interested business unit or process owner to communicate the buying decision to the procurement. Only in this way is possible to achieve buying performance through negotiation.		Not always the required purchases are available in project planning documents. Many times, internal clients manifest to the procurement the need to acquire external capabilities with little or no advance. In this case, buyers have few bargaining power toward any potential seller as there is no time left for effective negotiation. Therefore, the interested business unit or process owner are responsible to communicate the buying decision to the procurement. Only in this way is possible to achieve buying performance through negotiation.
	===Get what is needed===		===Get what is needed===
	In many procurement categories, especially the services one, it is particularly challenging to define what is needed. Contracts always state the duration of service provision but not always are clear about how ~~the service is~~ delivered and ~~what~~ services are included. To overcome the possibility of lacking service level, buyers should negotiate with vendors the inclusion of service KPI into the contract. This is usually the case for IT service on Cloud where ~~uptime~~ is an essential metric.		In many procurement categories, especially the services one, it is particularly challenging to define what is needed. Contracts always state the duration of service provision but not always are clear about how services are delivered and which services are included. To overcome the possibility of lacking service level, buyers should negotiate with vendors the inclusion of service KPI into the contract. This is usually the case for IT service on Cloud where up time is regarded as an essential metric.
	The solution is ~~identifying~~ the metrics that characterize the service as ensure they are included and ~~set~~ in contracts.		The solution is to identify the metrics that characterize the service as ensure they are included and stated in contracts. Financial penalty should be included when a KPI is not meet once or several time.
	===Define pricing policies===		===Define pricing policies===
	Another arising issue of IT service ~~contract~~ is the vagueness of pricing over time. Many services are offered at favorable initial prices. Companies can be tented to subscribe for the services. However, if buyer ~~fail~~ to negotiate a long term pricing profile suppliers will have the chance to increase billing prince extensively<ref> http://www.zdnet.com/article/cloud-computing-pricing-beware-the-bill-shock/</ref>. Service providers can make leverage on the technical lock up and the switching cost ~~for~~ increase their revenue.		Another arising issue of IT service contracts is the vagueness of pricing over time. Many services are offered at favorable initial prices. Companies can be tented to subscribe for the services. However, if buyer fails to negotiate a long term pricing profile suppliers will have the chance to increase billing prince extensively<ref> http://www.zdnet.com/article/cloud-computing-pricing-beware-the-bill-shock/</ref>. Service providers can make leverage on the technical lock up and the elevate switching cost to increase their revenue.
	===Supply relationship management===		===Strategic procurement, Supply relationship management===
	Supply relationship management is the activity of connecting the ~~interest~~ of the organization and its extended supply chain. ~~Tradition~~ supplier ~~relationship between a company and its supplier have tactical of operational prospective~~. SRM starts with finding the right stakeholders and ~~align~~ strategic objectives. This kind of approach is particularly beneficial for long term supply relationship as it can bring<ref> Deloitte: Supplier Relationship Management (SRM), Redefining the value of strategic supplier collaboration (2015), https://www2.deloitte.com/content/dam/Deloitte/de/Documents/operations/Supplier_Relationship_Management_2015.pdf</ref>		Traditional relationship between a company and its suppliers have tactical or operational prospective. Supply relationship management (SRM) is the activity of connecting the interests of the organization and the one of its extended supply chain. Naturally is not possible to establish this kind of relation with all the supplier. It is necessary to categorize suppliers on their strategic importance to the organization. In this way the focus will be directed only toward the most relevant suppliers. Consequently, SRM starts with finding the right stakeholders and aligning strategic objectives. This kind of approach is particularly beneficial for long term supply relationship as it can bring<ref> Deloitte: Supplier Relationship Management (SRM), Redefining the value of strategic supplier collaboration (2015), https://www2.deloitte.com/content/dam/Deloitte/de/Documents/operations/Supplier_Relationship_Management_2015.pdf</ref>
	*Efficiency improvement		*Efficiency improvement
	*Cost reduction		*Cost reduction
	*Risk mitigation		*Risk mitigation
	*Increased potential for innovation		*Increased potential for innovation
	Naturally is not possible to establish this kind of relation with all the supplier. It is necessary to categorize suppliers on their strategic importance to the organization. In this way the focus will be directed only toward the most relevant suppliers.

	=References=		=References=
	<references/>		<references/>

Paolo M: /* Contract categories */

2017-10-02T08:48:05Z

Contract categories

Paolo M: /* Contract categories */

2017-10-02T08:30:19Z

Contract categories

Paolo M: /* Identifying the supplier */

2017-10-02T08:01:50Z

Identifying the supplier

← Older revision		Revision as of 18:08, 2 October 2017
Line 73:		Line 73:

	=Contract categories=		=Contract categories=
	Once the buyer (or the project team in absence of a procurement function) has identified the most appropriate vendor, the two parts sign an agreement. Skilled procurement professionals are able to negotiate the best contractual form for their organization. Each contract type ~~spares~~ differently the responsibilities of the two parts. Also the remuneration criteria for the contractor differs between agreement categories.		Once the buyer (or the project team in absence of a procurement function) has identified the most appropriate vendor, the two parts sign an agreement. Skilled procurement professionals are able to negotiate the best contractual form for their organization. Each contract type divides differently the responsibilities of the two parts. Also the remuneration criteria for the contractor differs between agreement categories.
	Companies have different policies about who will sign the contract on the company’s behalf. Some policies ~~defines~~ a maximum contractual value that each buyer can sign ~~for~~.		Companies have different policies about who will sign the contract on the company’s behalf. Some policies define a maximum contractual value that each buyer can sign up.
	There exists three main categories of contracts used in supply agreement:		There exists three main categories of contracts used in supply agreement:
	*'''Fixed-Price contracts'''		*'''Fixed-Price contracts'''
Line 80:		Line 80:
	Fixed-Price contracts assign a fixed total price for the provision of products of services. This type of agreement can include financial incentives when some target performance of quality or schedule are achieved. The contract binds the supplier to provide all the items agreed, penalties are applied if the terms are not respected.		Fixed-Price contracts assign a fixed total price for the provision of products of services. This type of agreement can include financial incentives when some target performance of quality or schedule are achieved. The contract binds the supplier to provide all the items agreed, penalties are applied if the terms are not respected.
	*'''Cost-reimbursable contracts'''		*'''Cost-reimbursable contracts'''
	In cost-reimbursable contracts the client refunds the seller for the cost sustained over the project. In addition, the customer will provide the supplier with a fee, representing the vendor’s profit. The contract may include clause for financial reward in case of outstanding expenditure or time performance.		In cost-reimbursable contracts the client refunds the seller for the cost sustained over the project. In addition, the customer will provide the supplier with a fee, representing the vendor’s profit. The contract may include clause for financial reward in case of an outstanding expenditure or time performance.
	*'''Time and material contracts'''		*'''Time and material contracts'''
	Time and material contracts are used when ~~it’s know~~ the typology of, material or staff that must be outsourced, but is not ~~know~~ the amount, needed or the time horizon of the provision. They are particularly,useful to employ external staff for a defined period.		Time and material contracts are used when the organization knows the typology of material or staff that must be outsourced, but is not known the amount needed or the time horizon of the provision. They are particularly useful to employ external staff for a defined period.

	The table shows a synthetic overview of the types of contract present in the three categories:		The table shows a synthetic overview of the types of contract present in the three categories:
Line 92:		Line 92:
	\| rowspan="3" style="text-align: center; font-weight: bold;" \| Fixed-Price contracts		\| rowspan="3" style="text-align: center; font-weight: bold;" \| Fixed-Price contracts
	\| style="text-align: center;" \| Firm Fixed Price Contracts (FFP)		\| style="text-align: center;" \| Firm Fixed Price Contracts (FFP)
	\| The price for the ~~good~~ is set by the vendor, and once the contract is signed, it cannot be changed. The only ~~cases~~ in which the price can vary is when the scope of the project is revised or when the client requires different ~~specification~~ from the ~~one~~ stated in the contract.		\| The price for the goods is set by the vendor, and once the contract is signed, it cannot be changed. The only case in which the price can vary is when the scope of the project is revised or when the client requires different specifications from the ones stated in the contract.
	\|-		\|-
	\| style="text-align: center;" \| Fixed Price Incentive Fee Contracts (FPIF)		\| style="text-align: center;" \| Fixed Price Incentive Fee Contracts (FPIF)
	\| FPIF contracts ~~allows~~ a degree of flexibility on the cost of the item. This flexibility is linked to the supplier performance ~~in delivering the item~~. Performance targets are ~~settled~~ by the vendor, and they relate to time, schedule and technical performances. The cost of the supply is billed when the work is finished. In this way, the client recognizes the supplier financial incentives in case of outstanding performances. However, the cost cannot exceed a price ceiling previously set. The supplier must cover all the costs surpassing that threshold. Vendors are also legally liable for the completion of the work.		\| FPIF contracts allow a degree of flexibility on the cost of the item. This flexibility is linked to the supplier performance. Performance targets are set by the vendor, and they relate to time, schedule and technical performances. The cost of the supply is billed when the work is finished. In this way, the client recognizes the supplier financial incentives in case of outstanding performances. However, the cost cannot exceed a price ceiling previously set. The supplier must cover all the costs surpassing that threshold. Vendors are also legally liable for the completion of the work.
	\|-		\|-
	\| style="text-align: center;" \| Fixed Price with Economic Price Adjustment Contracts (FP-EPA)		\| style="text-align: center;" \| Fixed Price with Economic Price Adjustment Contracts (FP-EPA)
	\| FP-EPA contracts are designed for long term supply agreements. These,contracts are usually valid for many years. For this reason, the fixed price is adjusted on the base of precise indicators. Indicators involve variation of the price of commodities and financial index monitoring inflation changes. These adjustments ~~defends~~ both buyer and vendor from adverse scenario variation.		\| FP-EPA contracts are designed for long term supply agreements. These,contracts are usually valid for many years. For this reason, the fixed price is adjusted on the base of precise indicators. Indicators involve variation of the price of commodities and financial index monitoring inflation changes. These adjustments protect both buyer and vendor from adverse scenario variation.
	\|-		\|-
	\| rowspan="3" style="text-align: center; font-weight: bold;" \| Cost-reimbursable contracts		\| rowspan="3" style="text-align: center; font-weight: bold;" \| Cost-reimbursable contracts
	\| style="text-align: center;" \| Cost Plus Fixed Fee Contracts (CPFF)		\| style="text-align: center;" \| Cost Plus Fixed Fee Contracts (CPFF)
	\| The vendor is reimbursed for all costs sustained in the provision.,Additionally, he receives a fee computed as percentage of initial estimated project cost. The fee ~~does not~~ depend by the seller performance and can be revised in case of scope changes.		\| The vendor is reimbursed for all costs sustained in the provision. Additionally, he receives a fee computed as percentage of initial estimated project cost. The fee doesn't depend by the seller performance and can be revised in case of scope changes.
	\|-		\|-
	\| style="text-align: center;" \| Cost Plus Incentive Fee Contracts (CPIF)		\| style="text-align: center;" \| Cost Plus Incentive Fee Contracts (CPIF)
	\| In CPIF the seller is reimbursed of all allowable costs sustained for completing the work. Furthermore, he receives a fee depending on fulfillment of performance objectives ~~set~~ in the contract. Cost lower than or exceeding the budget are shared by vendor and buyer, according to formulas defined in negotiation phase.		\| In CPIF the seller is reimbursed of all allowable costs sustained for completing the work. Furthermore, he receives a fee depending on fulfillment of performance objectives stated in the contract. Cost that is lower than the budget (or exceeding the budget) are shared by vendor and buyer, according to formulas defined in negotiation phase.
	\|-		\|-
	\| style="text-align: center;" \| Cost Plus Award Fee Contracts (CPAF)		\| style="text-align: center;" \| Cost Plus Award Fee Contracts (CPAF)
	\| The ~~vendors~~ is reimbursed of sustained cost. The fee is based solely on performance's achievement stated in the contract. The fee is defined by,the buyer on his perception of the seller performance. Fee definition is not subject to appeals.		\| The vendor is reimbursed for sustained cost. The fee is based solely on performance achievement stated in the contract. The fee is defined by the buyer on her/his perception of the seller performance. Fee definition is not subject to appeals.
	This type of contract can be signed by contractors that ~~wants~~ to gain a,good reputation with the customer as tie the profit to the quality of,the work delivered.		This type of contract can be signed by contractors that want to gain a good reputation with the customer as tie the profit to the quality of the work delivered.
	\|-		\|-
	\| colspan="2" style="text-align: center; font-weight: bold;" \| Time & Materials		\| colspan="2" style="text-align: center; font-weight: bold;" \| Time & Materials
	\| The contract defines the unit price for ~~the~~ specific ~~item~~, for example daily wage of an expert or a unit of material, but it ~~does not~~ state the amount. The volume of the supply is defined over time by the clients need. Therefore, the cost of the contract is billed to the buying organization on ongoing basis, depending by its usage of the resources.		\| The contract defines the unit price for specific items, for example daily wage of an expert or a unit of material, but it doesn't state the amount. The volume of the supply is defined over time by the clients need. Therefore, the cost of the contract is billed to the buying organization on ongoing basis, depending by its usage of the resources.
	\|}		\|}
	==Purchase Orders==		==Purchase Orders==
	[[File:Purchase-order-example.png\|thumb\|200px\|A purchase order it's a schematic document listing the typology and the number of purchased goods or services]]		[[File:Purchase-order-example.png\|thumb\|200px\|A purchase order it's a schematic document listing the typology and the number of purchased goods or services]]
	When a company ~~need~~ to purchase commodities on recurring basis, the term and conditions of the trade are negotiated by the two parts and then stated into a '''framework agreement'''. ~~In this way,~~ all the future purchases of the ~~item listed in the agreement will be regulated by~~ it. When this agreement is in place, the buyer can release a purchase orders (PO), a document containing the types and the ~~amount~~ of purchased goods or services. When the supplier accepts it, the purchase orders become a legally binding document. ~~For~~ that moment, the buying organization will be liable to pay for the supply.		When a company needs to purchase commodities on recurring basis, the term and conditions of the trade are negotiated by the two parts and then stated into a '''framework agreement'''. The agreement will regulate all the future purchases of the items it includes. When this agreement is in place, the buyer can release a purchase orders (PO), a document containing the types and the amounts of purchased goods or services. When the supplier accepts it, the purchase orders become a legally binding document. From that moment, the buying organization will be liable to pay for the supply.
	Once the vendor receives the payment, he releases an invoice. This can be used by the buying company for controlling purpose by making it match with the corresponding PO.		Once the vendor receives the payment, she/he releases an invoice. This can be used by the buying company for controlling purpose by making it match with the corresponding PO.

	=Risk and pitfalls=		=Risk and pitfalls=

← Older revision		Revision as of 08:48, 2 October 2017
Line 96:		Line 96:
	\|-		\|-
	\| style="text-align: center;" \| Fixed Price Incentive Fee Contracts (FPIF)		\| style="text-align: center;" \| Fixed Price Incentive Fee Contracts (FPIF)
	\| FPIF contracts allows a degree of flexibility on the cost of the item. This flexibility is linked to the supplier performance in delivering the item. Performance ~~target~~ are settled by the vendor, and they relate to time, schedule and technical ~~performance~~. The cost of the supply is billed when the work is finished. In this way, the client recognizes the supplier financial incentives in case of outstanding performances. However, the cost cannot exceed a price ceiling. The supplier must cover all the costs surpassing that threshold. Vendors are also legally liable for the completion of the work.		\| FPIF contracts allows a degree of flexibility on the cost of the item. This flexibility is linked to the supplier performance in delivering the item. Performance targets are settled by the vendor, and they relate to time, schedule and technical performances. The cost of the supply is billed when the work is finished. In this way, the client recognizes the supplier financial incentives in case of outstanding performances. However, the cost cannot exceed a price ceiling previously set. The supplier must cover all the costs surpassing that threshold. Vendors are also legally liable for the completion of the work.
	\|-		\|-
	\| style="text-align: center;" \| Fixed Price with Economic Price Adjustment Contracts (FP-EPA)		\| style="text-align: center;" \| Fixed Price with Economic Price Adjustment Contracts (FP-EPA)
	\| FP-EPA contracts are designed for long term supply ~~agreement~~.,These,contracts are usually valid for many years. For this reason, the fixed,price is adjusted on the base of precise indicators. Indicators involve,variation on the price of commodities and financial index ~~aimed to,identify~~ inflation changes. These adjustments defends both buyer and,vendor from adverse scenario ~~change~~.		\| FP-EPA contracts are designed for long term supply agreements. These,contracts are usually valid for many years. For this reason, the fixed price is adjusted on the base of precise indicators. Indicators involve variation of the price of commodities and financial index monitoring inflation changes. These adjustments defends both buyer and vendor from adverse scenario variation.
	\|-		\|-
	\| rowspan="3" style="text-align: center; font-weight: bold;" \| Cost-reimbursable contracts		\| rowspan="3" style="text-align: center; font-weight: bold;" \| Cost-reimbursable contracts
	\| style="text-align: center;" \| Cost Plus Fixed Fee Contracts (CPFF)		\| style="text-align: center;" \| Cost Plus Fixed Fee Contracts (CPFF)
	\| The vendor is reimbursed for all ~~the cost~~ sustained in the provision.,Additionally, he receives a fee computed as percentage of initial,estimated project cost. The fee does not depend by the seller,performance ~~but is~~ revised in case of scope changes.		\| The vendor is reimbursed for all costs sustained in the provision.,Additionally, he receives a fee computed as percentage of initial estimated project cost. The fee does not depend by the seller performance and can be revised in case of scope changes.
	\|-		\|-
	\| style="text-align: center;" \| Cost Plus Incentive Fee Contracts (CPIF)		\| style="text-align: center;" \| Cost Plus Incentive Fee Contracts (CPIF)
	\| In CPIF the seller is reimbursed of all allowable costs sustained for,completing the work. Furthermore, he receives a fee ~~that can vary,~~depending ~~by the achievement~~ of performance objectives set in the,contract. Cost ~~higher~~ or ~~lower cost compared to~~ the budget are shared by,vendor and buyer according to formulas defined in negotiation phase.		\| In CPIF the seller is reimbursed of all allowable costs sustained for completing the work. Furthermore, he receives a fee depending on fulfillment of performance objectives set in the contract. Cost lower than or exceeding the budget are shared by vendor and buyer, according to formulas defined in negotiation phase.
	\|-		\|-
	\| style="text-align: center;" \| Cost Plus Award Fee Contracts (CPAF)		\| style="text-align: center;" \| Cost Plus Award Fee Contracts (CPAF)
	\| The vendors is reimbursed of sustained cost. The fee is based solely on,performance achievement stated in the contract. The fee is defined by,the buyer on his perception of the seller performance. Fee definition is,not subject to appeals.		\| The vendors is reimbursed of sustained cost. The fee is based solely on performance's achievement stated in the contract. The fee is defined by,the buyer on his perception of the seller performance. Fee definition is not subject to appeals.
	This type of contract can be signed by contractors that wants to gain a,good reputation with the customer as tie the profit to the quality of,the work delivered.		This type of contract can be signed by contractors that wants to gain a,good reputation with the customer as tie the profit to the quality of,the work delivered.
	\|-		\|-
	\| colspan="2" style="text-align: center; font-weight: bold;" \| Time & Materials		\| colspan="2" style="text-align: center; font-weight: bold;" \| Time & Materials
	\| The contract,defines the unit price for the specific item, for example daily wage of,an expert or a unit of material, but it does not state the amount.,Therefore, the cost of the contract is billed to the buying organization,on ongoing basis, depending by its usage of the resources ~~stated in the,contract~~.		\| The contract defines the unit price for the specific item, for example daily wage of an expert or a unit of material, but it does not state the amount. The volume of the supply is defined over time by the clients need. Therefore, the cost of the contract is billed to the buying organization on ongoing basis, depending by its usage of the resources.
	\|}		\|}
	==Purchase Orders==		==Purchase Orders==
	[[File:Purchase-order-example.png\|thumb\|200px\|A purchase order it's a schematic document listing the typology and the number of purchased goods or services]]		[[File:Purchase-order-example.png\|thumb\|200px\|A purchase order it's a schematic document listing the typology and the number of purchased goods or services]]
	When a company need to purchase commodities on recurring basis, the term and conditions of the trade are negotiated by the two ~~part~~ and then stated into a '''framework agreement'''. In this way, all the future ~~purchase~~ of the item listed in the agreement will be regulated by it. When this agreement is in place, the buyer can release a purchase orders (PO), a document containing the types and the amount of purchased goods or services. When the supplier accepts it, the purchase orders ~~becomes~~ a legally binding document. For that moment the buying organization will be liable to pay for the supply.		When a company need to purchase commodities on recurring basis, the term and conditions of the trade are negotiated by the two parts and then stated into a '''framework agreement'''. In this way, all the future purchases of the item listed in the agreement will be regulated by it. When this agreement is in place, the buyer can release a purchase orders (PO), a document containing the types and the amount of purchased goods or services. When the supplier accepts it, the purchase orders become a legally binding document. For that moment, the buying organization will be liable to pay for the supply.
	Once the vendor receives the payment, he releases an invoice. This can be used by the buying company for controlling purpose by making it match with the corresponding PO.		Once the vendor receives the payment, he releases an invoice. This can be used by the buying company for controlling purpose by making it match with the corresponding PO.

← Older revision		Revision as of 08:30, 2 October 2017
Line 74:		Line 74:

	=Contract categories=		=Contract categories=
	Once the buyer, or the project team in absence of a procurement function, has identified the most appropriate vendor the two parts sign an agreement. Skilled procurement ~~professional~~ are able to negotiate the best contractual form for their organization. Each contract type spares differently the responsibilities of the two parts. Also the remuneration criteria differs ~~from~~ agreement ~~category~~.		Once the buyer (or the project team in absence of a procurement function) has identified the most appropriate vendor, the two parts sign an agreement. Skilled procurement professionals are able to negotiate the best contractual form for their organization. Each contract type spares differently the responsibilities of the two parts. Also the remuneration criteria for the contractor differs between agreement categories.
	Companies have different policies about who will sign the contract on the company’s behalf. Some policies defines a maximum contractual value that each buyer can sign for.		Companies have different policies about who will sign the contract on the company’s behalf. Some policies defines a maximum contractual value that each buyer can sign for.
	There exists three main categories ~~or contract~~ used ~~for~~ supply agreement:		There exists three main categories of contracts used in supply agreement:
	*'''Fixed-Price contracts'''		*'''Fixed-Price contracts'''
	[[File:Contracts.png\|thumb\|400px\|Contracts typologies divided by billing mode and fee definition]]		[[File:Contracts.png\|thumb\|400px\|Contracts typologies divided by billing mode and fee definition]]
	Fixed-Price contracts assign a fixed total price for the provision of ~~product~~ of services. This type of agreement can include financial incentives when some target performance of quality or schedule are achieved. The ~~contracts is binding for~~ the supplier to provide all the items agreed, penalties are applied if the terms are not respected.		Fixed-Price contracts assign a fixed total price for the provision of products of services. This type of agreement can include financial incentives when some target performance of quality or schedule are achieved. The contract binds the supplier to provide all the items agreed, penalties are applied if the terms are not respected.
	*'''Cost-reimbursable contracts'''		*'''Cost-reimbursable contracts'''
	In cost-reimbursable contracts the ~~clients refund~~ the seller for the cost sustained over the project. In addition, the customer will provide the supplier with a fee, representing the vendor’s profit. The contract may include clause for financial reward in case of outstanding expenditure or time performance.		In cost-reimbursable contracts the client refunds the seller for the cost sustained over the project. In addition, the customer will provide the supplier with a fee, representing the vendor’s profit. The contract may include clause for financial reward in case of outstanding expenditure or time performance.
	*'''Time and material contracts'''		*'''Time and material contracts'''
	Time and material contracts are used when it’s know the typology of,material or staff that must be outsourced, but is not know the amount,needed or the time horizon of the provision. They are particularly,useful to employ external staff for a defined period.		Time and material contracts are used when it’s know the typology of, material or staff that must be outsourced, but is not know the amount, needed or the time horizon of the provision. They are particularly,useful to employ external staff for a defined period.

	The table shows a synthetic overview of the types of contract ~~we find~~ in the three categories:		The table shows a synthetic overview of the types of contract present in the three categories:
	{\| class="wikitable"		{\| class="wikitable"
	! Type		! Type
Line 93:		Line 93:
	\| rowspan="3" style="text-align: center; font-weight: bold;" \| Fixed-Price contracts		\| rowspan="3" style="text-align: center; font-weight: bold;" \| Fixed-Price contracts
	\| style="text-align: center;" \| Firm Fixed Price Contracts (FFP)		\| style="text-align: center;" \| Firm Fixed Price Contracts (FFP)
	\| The price for the good is set by the vendor, and once the contract is,signed, it cannot be changed. The only ~~case~~ in which the price can~~,change~~ is if the scope of the project ~~change~~ or if the ~~buyer,organization request~~ different specification ~~respect~~ the one stated in,the contract.		\| The price for the good is set by the vendor, and once the contract is signed, it cannot be changed. The only cases in which the price can vary is when the scope of the project is revised or when the client requires different specification from the one stated in the contract.
	\|-		\|-
	\| style="text-align: center;" \| Fixed Price Incentive Fee Contracts (FPIF)		\| style="text-align: center;" \| Fixed Price Incentive Fee Contracts (FPIF)
	\| FPIF contracts allows a degree of flexibility on the cost of the item.,This flexibility is linked to the supplier performance in delivering the,item. Performance target are settled the vendor, and they relate to,time, schedule or technical performance. The cost of the supply is,billed when the work is finished, ~~considered~~ the ~~factors mentioned,before~~. However, the cost cannot exceed a price ceiling. The supplier,must ~~pay~~ all the costs surpassing that threshold. Vendors are also,legally liable for the completion of the work.		\| FPIF contracts allows a degree of flexibility on the cost of the item. This flexibility is linked to the supplier performance in delivering the item. Performance target are settled by the vendor, and they relate to time, schedule and technical performance. The cost of the supply is billed when the work is finished. In this way, the client recognizes the supplier financial incentives in case of outstanding performances. However, the cost cannot exceed a price ceiling. The supplier must cover all the costs surpassing that threshold. Vendors are also legally liable for the completion of the work.
	\|-		\|-
	\| style="text-align: center;" \| Fixed Price with Economic Price Adjustment Contracts (FP-EPA)		\| style="text-align: center;" \| Fixed Price with Economic Price Adjustment Contracts (FP-EPA)

← Older revision		Revision as of 08:01, 2 October 2017
Line 33:		Line 33:

	=Identifying the supplier=		=Identifying the supplier=
	When a company is about ~~starting~~ a new project one of the first ~~activity~~ is estimate the resources ~~needed for it~~. Documents as activity list and activity attributes give an overview of all the necessary resources. If the company has no similar ~~project~~ in his portfolio is likely that the procurement has no contact with the companies providing product and services required by the project. For this reason, the first document that the procurement function issues is a request for information.		When a company is about to start a new project, one of the first activities is to estimate the needed resources. Documents as activity list and activity attributes give an overview of all the necessary resources. If the company has no similar projects in his portfolio,it is likely that the procurement has no contact with the companies providing product and services required by the project. For this reason, the first document that the procurement function issues is a request for information.
	==Mapping of the market, Request For Information (RFI)==		==Mapping of the market, Request For Information (RFI)==
	[[File:StateOfMaineDataCenter.jpeg\|thumb\|200px\|State of Maine RFI to identify possible contractor for a data center]]		[[File:StateOfMaineDataCenter.jpeg\|thumb\|200px\|State of Maine RFI to identify possible contractor for a data center]]
	The main purpose of RFI is to gather information. This is particularly helpful if a single or few ~~suppliers~~ are expected to provide a large amount of services and materials ~~for~~ a single project. RFI can be very beneficial in scanning the market for product and services providers for long-term supply agreements.		The main purpose of RFI is to gather information about potential suppliers. This is particularly helpful if a single or few contractors are expected to provide a large amount of services and materials in a single project. RFI can be very beneficial in scanning the market for product and services providers for long-term supply agreements.
	The Internal client, the person or business unit requiring the purchase, is responsible to provide the technical specification or to write the Request for Information itself. The document is received by the procurement function that is appointed to make it available to potential suppliers.		The Internal client, the person or business unit requiring the purchase, is responsible to provide the technical specification or to write the Request for Information itself. The document is received by the procurement function that is appointed to make it available to potential suppliers.

	The document is published, or sent to a broad base of potential supplier, on channels defined by the buying company policy. For many suppliers replying to RFI is a chance to promote their product and services. Consequently, companies may includes special incentives and discount prices in their quotations<ref> http://www.method123.com/template--rfi.php#!prettyPhoto </ref>. By responding to a request for information a business is showing its interest in meeting the needs of the company that sent out the request.		The document is published, or sent to a broad base of potential supplier, on the channels defined by the buying company policy. For many suppliers replying to RFI is a chance to promote their product and services. Consequently, companies may includes special incentives and discount prices in their quotations<ref> http://www.method123.com/template--rfi.php#!prettyPhoto </ref>. By responding to a request for information a business is showing its interest in meeting the needs of the company that sent out the request.
	Procurement may use RFIs to list the products and services ~~and~~ require a first quotation. The pricing obtained at this stage ~~are~~ used to assess the different ~~company~~ price level. This information can be used later in the negotiation phase and should not be considered for buying decision. The quotation provided at RFI level will not necessary reflect the final ones, as suppliers will redefine it as they get more information. Through analysis of RFI: responses, strategic options, lower cost alternatives, and cost reduction opportunities may be identified.		Procurement may use RFIs to list the products and services to require a first quotation. The pricing obtained at this stage is used to assess the different companies price level. This information can be used later in the negotiation phase and should not be considered for buying decision. The quotation provided at RFI level will not necessary reflect the final ones, as suppliers will redefine it as they get more information. Through analysis of RFI: responses, strategic options, lower cost alternatives, and cost reduction opportunities may be identified.
	The different vendors that reply to the request are inserted in a database. This is used for future supplier negotiations on the quality and ~~the~~ price of the supply.		The different vendors that reply to the request are inserted in a database. This is used for future supplier negotiations on the quality and price of the supply.

	==Aligning buyer and supplier expectation, Request For Proposal (RFP)==		==Aligning buyer and supplier expectation, Request For Proposal (RFP)==
	The main outcome of the RFI is a first overview of ~~the~~ potential suppliers. At this point, the procurement communicates its willingness to consider a partnership and the availability of funds. This is done through a request for proposal. The ~~document stated~~ the bidding process and contract terms, and provides guidance on ~~how the bid should be formatted~~ and ~~presented~~.		The main outcome of the RFI is a first overview of potential suppliers. At this point, the procurement communicates its willingness to consider a partnership and states the availability of funds. This is done through a request for proposal. The RFP states the bidding process and contract terms, and provides guidance on bidding form and process.
	The request describes the solution ~~need by~~ the company and the criteria on which each proposal is graded. Requests for proposals can include a statement of work describing tasks to be performed by the winning bidder and a timeline for providing ~~finished~~ work.		The request describes the solution that the company requires and the criteria on which each proposal is graded. Requests for proposals can include a statement of work describing the tasks to be performed by the winning bidder and a timeline for providing work or material.
	An effective RFP ~~can~~ also ~~contain~~ information about ~~the characteristic required from~~ the supplier, as ~~these~~ should be compatible with the buying organization objectives. A request for proposal for a specific ~~program~~ may require the company to review the bids to not only examine their feasibility but also the health of the bidding company and the ability of the bidder to actually do what is proposed<ref>http://www.investopedia.com/terms/r/request-for-proposal.asp</ref>.		An effective RFP also contains information about the supplier profile, as this should be compatible with the buying organization objectives. A request for proposal for a specific project may require the company to review the bids to not only examine their feasibility but also the health of the bidding company and the ability of the bidder to actually do what is proposed<ref>http://www.investopedia.com/terms/r/request-for-proposal.asp</ref>.
	The structure and format of the response is to the discretion of the suppliers. The originality supplier shows in building their proposals may be used to distinguish one from another.		The structure and format of the response is to the discretion of the suppliers. The originality supplier shows in building their proposals may be used to distinguish one from another.

	==Benchmarking and selection, Request For Quotation (RFQ)==		==Benchmarking and selection, Request For Quotation (RFQ)==
	Once ~~the~~ range of suppliers ~~for the desired item~~ is available, buyers aim to collect more precise information to make a comparison between the different offers. To make this possible a ~~new document, called~~ Request for Quotation ~~is sent~~ to all the suppliers that displayed interest ~~for the~~ RFI, or that are already present in the database.		Once a range of suppliers is available, buyers aim to collect more precise information to make a comparison between the different offers. To make this possible procurement sends a Request for Quotation to all the suppliers that displayed interest in RFI's answer, or to those that are already present in the database.
	It is ~~desirable for the~~ procurement ~~to set different~~ parameters and ~~define the~~ relevant specifications. Consequently the RFQ ~~will~~ contain a detailed list or description of all relevant parameters of the intended purchase. ~~In this way, all~~ the potential suppliers ~~will have to reply~~ following a defined ~~framenwork~~ including information such as<ref> https://www.negotiations.com/articles/procurement-terms/</ref>:		Better supply quality is most likely achieved when procurement sets specific parameters and defines relevant specifications. Consequently, the RFQ should contain a detailed list or description of all relevant parameters for the intended purchase. All the potential suppliers replies by following a defined framework including information such as<ref> https://www.negotiations.com/articles/procurement-terms/</ref>:
	<div style="column-count:2;-moz-column-count:2;-webkit-column-count:2">		<div style="column-count:2;-moz-column-count:2;-webkit-column-count:2">
	*Personnel skills, training level or competencies		*Personnel skills, training level or competencies
Line 64:		Line 64:
	*Draft contract		*Draft contract
	</div>		</div>
	If this is done correctly it will be easier to compare the goodness of the different firms ~~with the same scale~~.		If this is done correctly, it will be easier to compare the goodness of the quotation of the different firms.
	The offers replying an RFQ is received in many case in the form of a sealed bid, in one or more submission rounds.		The offers replying an RFQ is received in many case in the form of a sealed bid, in one or more submission rounds. All the answer to the RFQ are evaluated by the same criteria. Essentially, key parameters will represent hard constrains. For instance, external IT contractors hired from a consultancy firm will be required to have specific competences and know particular programming language. All the offers that does not respect these constrain will not be considered. If the item purchased is a commodity, price per item or per unit of service can be the main evaluation criteria, otherwise it will be considered the trade off between the quotation and the other parameters.
	All the answer to the RFQ are evaluated by the same criteria. Essentially, key parameters will represent hard constrains. For instance, external IT contractors hired from a consultancy firm will be required to have specific competences and know particular programming language. All the offers that does not respect these constrain will not be considered. If the item purchased is a commodity, price per item or per unit of service ~~will result~~ the main evaluation criteria, otherwise it will be considered the ~~tradeoff~~ between the quotation and the other parameters.		The procurement department makes the final supplier decision following a comparison and analysis of the RFQ responses for negotiation benchmarking advantage.
	~~Procurement~~ department makes the final supplier decision following a comparison and analysis of the RFQ responses for negotiation benchmarking advantage.

	==Get the best available provision, Request For Tender (RFT)==		==Get the best available provision, Request For Tender (RFT)==
	Purchase of extended of large amount of ~~product~~ or services may require a tender. A tender is published the channel determined for the purpose. Larger companies has their own platforms or employee third parts tender platform<ref> https://www.ariba.com/</ref>. The RFT ~~should contained~~ well defined specification for the requested item. The level of detail of RFT should mirror the one of the RFI. Sometimes the buying organization makes available ad-hoc forms that the bidders must fill and submit to participate in the tender. If the buyer misses to specify exactly what his organization need, the quality of the resulting bids will be affected by the supplier interpretation of the request.		Purchase of extended of large amount of products or services may require a tender. A tender is published the channel determined for the purpose by the company purchasing policy. Larger companies has their own platforms or employee third parts tender platform<ref> https://www.ariba.com/</ref>, others publish the tender on public newspapers, trade journals, public registries, or on the internet. The RFT contains well defined specification for the requested item. The level of detail of RFT should mirror the one of the RFI's answer. Sometimes the buying organization makes available ad-hoc forms that the bidders must fill and submit to participate in the tender.
	Tenders are an appropriate tool when ~~the requirement to acquire a specific product~~ or services is known with satisfactory advance compared to their actual ~~employment time,~~ defined in the project schedule.		If the buyer misses to specify exactly what his organization need, the quality of the resulting bids will be affected by the supplier interpretation of the request.
			Tenders are an appropriate tool when requirements of products or services is known with satisfactory advance, compared to their actual use period (defined in the project schedule).

	=Contract categories=		=Contract categories=