Good evening Abdullah - I'll contribute an observation on the first one. Perhaps others who have been doing contract management and procurement for longer than me might have a different view, or say it more eloquently, but here goes....

Purchasing is a subset of procurement. It is the giving effect to a lot of the procurement work that you've done earlier (i.e. establishing what you want, identifying suppliers etc).

That said, I think that you can purchase without doing procurement, and in fact, I'd go so far as to say that you can even get the same outcome.

However, only by procurement can you demonstrate that you've got the right outcome. If you only purchase, and don't understand your needs, identify the market and consider the offerings against your needs, you can't demonstrate that you've got the best outcome for the business.

And this is where I think we as a group can demonstrate our worth to the business. We can show with procurement the outcomes that we've avoided (goods not matching requirements, getting better pricing outcomes, repetitional damage etc) by running a fair and robust process ensures that the business is better off.

On many occasions I've seen my team has moved someone from their initial fixed ideas into better outcomes by taking the time to show them what's possible and what good looks like. Do that enough times, and you have more and more allies in the business to encourage others to use your services.

Regards


Darren

Hi, Abdullah,

Check out this article in the IACCM Library, 'Procurement' and 'Purchasing' Are Different:
www.iaccm.com/resources/

Having looked at this topic, there is actually already a lot written on the question of the difference between purchasing and procurement. As they observe, for the typical person they are probably the same, but apparently 'the experts' in procurement know the difference! Though once you start reading, there is plenty of contradiction...

When it comes to Supply Management, it is yet another variant and clear as mud whether it is actually different from Procurement. Supply Chain Management is certainly a more holistic activity of which procurement is part, but that's about all you can really deduce.

The net is, these terms are used with a high degree of variability and tend to mean whatever anyone wants them to mean; the only common factor is that they are all associated with the act of buying!

Tim Cummins

Hi Abdullah

Years ago Procurement and Purchasing were often used interchangeability. These days they have very different meanings. Procurement refers to the end-to-end activities from strategic category management, through to the operational analytics of spend and performance, to the tactical buying and sourcing activities which can happen in-house or in shared services.

As the Procurement function has 'grown up'it has become far more strategic, so although the term Procurement refers to all the activities conducted by the function, it also implies more strategic perspectives. The scope is also overlapping with other related functions like Finance (Accounts Payable as part of the purchase to pay process) and supply chain (Supply Planning, product innovation and supplier performance management). The increasing focus on digital in Procurement is also seeing more collaboration with other functions for example, RPA (Robotic Process Automation) and machine learning, process automation and contract management, and predictive analytics.

Purchasing is clearly the administrative activity of raising a purchase order, managing the goods/service receipt notice and approving to pay. More advanced companies use on-line catalogues to support this along with automated workflow routing and defined delegations of authority. Put simply, Purchasing includes the tactical purchase and approval activities to support buying.

When we speak about supply chain today, we tend to talk about a value chain. Some organizations are now including supply chain and Procurement in one organization given the overlaps, but predominantly they continue to be separate, but related functions.

Supply chain will include demand planning and forecasting, distribution planning, warehousing and logistics, manufacturing (which may also be a separate function), supply planning and often new product development.

Where Procurement gets involved most is in supply planning and supplier performance management, for instance, using contracts to enforce performance, and collaborating with supply chain and marketing for product and service innovation by tracking supply markets and innovations.

Conceptually, the Procurement function has shifted from managing costs to providing value. Using advanced analytics of COGS and SG&A data, digital tools and advanced supplier market research, the function is working far more collaboratively with other functions. As business cadence increases, functions are becoming more linked and lines between which function does what is blurring.

Hope this helps.

The governance and framework for outsourcing service on-boarding and general service contractor on-boarding would be largely applicable here. The key here is that the SOW's, SLA's and KPI's are clear and complete - but that holds true in any services contract. From what I have seen, SIAM principles are highly relevant here.

Governance framework for vendor management should be standard, however, level of engagement to manage a vendor varies depending on type of contract and value of spend.

I would recommend at minimum to onboard vendor onto these governance framework discipline:

Contract Administration
Service Performance
Financial Management
Risk and Compliance
Transition Management


Regards,
Dave

Dear Alan,
It´s great to hear that organizations like the one you´re working for as Senior Contracting executive are undertaking this type of exercises in order to gather information around best practices in contract, supplier and performance management.
As the unique global organization identifing best practices in this area, at the IACCM we will be happy to assist enabling other members to share what they have been applying in their respective organizations and, furnished with the results and findings of this networking atmosphere, you will be achieving our goals at Philips 66.
Behind 'best practice' is a simple concept: measurable standards. And that means some form of benchmark is required. So, the exercise proposed in your posting, Alan, is a great example. It will be a comparison against peers, organizations at the same level, in order to get standards and then, you will see how you and others do things and what you and they do.
I know that your company has invested in the developement of contracting skills among your CM staff, and most of your colleagues are currently taking the CCM (Contract and Commercial Management) learning program, in its different certification levels (practitioner, advanced practitioner). At this point, it will be extremely important to consider what IACCM states in module 1 ('Best practices in contracting'), so I'd extremely recommend to review that content, at first sight.
Second, in this link you will find the 'IACCM top ten best practices in contracting' (general): www.iaccm.com/resources/;
Among other relevant resouces provided by IACCM corporate membership, as you might be aware, you have the right to get access to ATEs (webinars) via our IACCM library in subjects such as 'best practices selecting the right supplier': www.iaccm.com/resources/;
In addition, refer to 'Supplier relatioship management: best practices'
www.iaccm.com/resources/;
In sum, over the past several years, supplier relationship management (SRM) has become a major focus within the procurement and supply chain community and many companies are analyzing how best to expand SRM efforts and investment. We look forward to hearing from other members.
Kindest regards,
Pablo Cilotta

Dear Alan,

At Seal Software, we can provide you with a technology which locates, understand and extracts data from your contracts. This can help you with supplier and performance management by:
- Extracting information from your contracts, such as the parties to contracts, and their obligations.
- Maximizing revenue opportunities, by identifying unknown business intelligence.

It would be great to discuss how Seal can help you, in more detail. Please feel free to call me on +4420 735 9892.

Kind regards,
Abigail

We are revamping as well this year and I attended a training from State of Flux in Chicago a couple of weeks ago. I found there approach on planning very particle. For me it is very situation on how you manage your supply base hwoever keys are

1) Outlining performance expectations
2) Holding regular reviews
3) awarding business based on performance

Regards

Hi Kim

Apologies, I've only just seen your post on IACCM about Vendor surveys.

There are two types of surveys I recommend you run:
1) Voice of the supplier - take the top 100-200 suppliers, ask a series of questions to understand what attributes of the relationship are important to them (and have them rank them so you can understand how important each attribute is). The ask them how your organisation performs against these attributes (and this next bit is key) - VERSUS your key competitors. This gives you a customer of choice ranking. This type of survey really needs to be run by a third party so the suppliers have the choice of being anonymous.

2) 360 degree survey. This is when you look at one supplier relationship and survey all the key stakeholders from both your organisation and theirs. Typically we split the survey question sets into Trust attributes of the relationship and control attributes. Normally you would use these surveys to help facilitate a joint account planning session with the supplier.

I hope this helps (and sorry if the response was too late). I'm more than happy to discuss in more detail and if you need help in running the Voice of the Supplier, please let me know.

Kind regards

Alan

Really depends on the scope of the survey. If you want to understand the eCommerce capabilities of your suppliers, it is the same scope of survey for all vendors. If you want to understand how the drop in oil price impacts your vendors, it likley is very different between a manufacturer and a labor provider and so you should target it to those vendors that you expect are the targte audience. The key is understanding the audience so that they survey scope is appropriate for those being surveyed. It avoids wasting the suppliers' time, and you also don't pollute your data with responses that don't really apply (i.e. the labor suppliers largely are unimpacted by oil prices, but their responses could dilute the average impact expressed by the manufacturers).

Have you found any of the templates on-line, such as FIDIC or NEC agreement templates?

I did not search NEC agreements but FIDIC does not contain Progressive Lump Sum models up to my knowledge.

Alan

I agree the NEC contract is the best place to look or this contracting model.

If you want to define progressive lump sum agreements I might be able to help further.

Fred Vitale
Fred.m.vitale@accenture.com

Hello,

It will be helpful if you define(Progressive Lump Sum models)

Thank you

I am interested. Lee Graw at Latingraw@aol.com

Facilities execution and construction services are very different catagories and are different depending on the market. Suggest you choose 1 and the applicable industry / location

Thank you. Could you recommend a source pf information and/or literature to analyze it? thanks

I am not sure what you mean by "Facilties execution services". I do have an extensive background in facilities contracting, including architect-engineer services and construction. What can I do to help you? I have separate courses on A&E and Construction contracting.

It occurs to me that a Construction Services group inside the Supply Chain organization might have a functional link to the Facilities Management organization within the company, at least to the extent some of the facilities affected are under the 'corporate services' umbrella. If the construction services are being obtained in support of outbound obligations (to clients), the concerns may be very different. In the latter case, you will need to have a nexus to your customer contracts group.

Carolyn, while we wait for someone else from our community to share with us their "best practices" identified in regards to this point, I wanted to provide this link www.iaccm.com/resources/; where, as you will se, it is covered the matter related to the drafting of enforceable teaming agreements.
Regards
Pablo Cilotta

I have gone through the process of ensuring flow down of terms from prime contracts to subcontracts and understand your feelings. It is laborious. The contracts that I managed had 'mandatory' clauses to be included in the sub-contracts; hence it was somewhat easy to navigate through. We also put in place a simple tracker listing all the clauses and if the sub-contract had complied with the mandatory term flow-down. We referred the matter to the legal team if there was any discrepancy. What I found was that once I completed verification of a sub-contract, other sub-contracts for the same prime contractor was easier to go through.
You could categorise your sub-contract into high (significant),medium and low groups and could vary the mandatory clauses for flow-down as appropriate.

Interesting situation, I may be misunderstanding things here...and correct me if I'm wrong, but typically the point of having a Prime is to "manage" subcontractors and they should negotiate back to back agreements that adequately ensure that as a Prime they can fulfill their obligations...it should also reflect the spirit and intent of the agreement...happy to explore this further.

Hi MC - Agree with you that purpose of the Prime is to "manage" subcontractors... In central Government (not sure if this is required in private sector) sector contracts, it is necessary to ensure that there is a flow-down of the terms to sub-contracts. For example the 'Data Protection' Clause. My response was in this context. The IACCM link given above is a good reference.

My current approach is to have the subcontractor "aware of" the whole contract (coupled to an indemnity if they cause us to be in breach - if I can get it!)

I then add a detailed flow-down of (i) the mandated flowdowns from client - usually things like anti-corruption and audit and (ii) the terms which are essential for us to ensure that the commercial risks are back-to-back - eg. the specific standard of workmanship that the subcontractor must exercise in their design.

Generally speaking this means 5-6 flowdown clauses, for which I either amend terminology by hand or rely on "mutatis mutandis" if I'm short of time.

For 'awareness of the whole' I think the donor clause was from the CECA Blue Book.

Hi Carolyn,

I have also drafted some subcontracts in which I had to ensure that the subcontractor had the same commitment that the prime; as Girija stands, it is very laborious since you need to understand which of the obligations within the prime contract are transferable to the corresponding subco and also you have to modify the wording. I would never attached the entire agreement because of confidentiality concerns and also because usually prime contractors do not wish to share financial details with subcos in order to seek a more profitable negotiation with them.

Bon courage!

Elena

Elena,

You bring up an interesting point. You as the contractor and the owner do not want to share the details of the contract, but want to subs to agree to them. Doesn't that seem unreasonable? I will never agree to something I have not seen. I do get copies where some details are redacted and that is fine, but the text has to be reviewed in order to be agreed to. I would be interested to hear your rebuttal as the contractor in this case when I say I have to see the prime to agree to it.

Kent

Some great discussion point coming through - A recent experience - last month our prime contractor needed to conduct a MRO work package at a location controlled by another party (Subcontractor). As the Prime, they commenced negotiation; however this subcontractor only provided 3 months warranty on their work while our agreement with the prime had a twelve month warranty. The prime formally requested dispensation from the twelve warranty and was rejected due to the following reasons:
1) It is the primes obligation to ensure the test and acceptance of standards and quality of the work
2) The prime included in their financial model, an element of risk which they would absorb based on their contractual obligation.

Part the above negotiation included some issues around IP ownership during the work package being conducted. In this instance we accepted the deviation from the standard IP clauses as we deemed the subcontractor clauses to be reasonable as it didn't affect the operation and future requirements to maintain the vessel.

So while the prime is ultimately responsible for the deliverables, we needed to assess on a case by case situation if any deviations were acceptable...and also had to be careful that we don't set a precedence.

In my experience the Prime Contract is the negotiated version which your company's legal eagles would have negotiated with your client so it would certainly contain more stringent clauses than your company's boiler plates. Usually once the prime contact is negotiated the necessary amendments are made to the the boiler plates to align them with the prime contract. The flow downs are usually attached as "Special conditions" of contract and they take precedence over the 'General Conditions' of contract due to the fact that the GCC are usually amended under SCC and the more stringent approach is adopted. this eliminates any misalignment between the two forms. e.g. 'Limits of Liabilities', 'Indemnification' and 'Insurances' are mostly dictated by Client and the risk must be transferred down to the lower level to protect your company's interest.

Cheers

Asif

Hi
Australia is about to introduce new legislation about unfair contract terms with SMEs. This is going to make it harder for Primes to push terms down for fear of being void. Hopefully this will start new discussions about getting rid of clauses which are unfair!

1. Always remember that if you miss a Clause, it's not the end of the
world, because, as Contractor, you will always be responsible for the
delivery of your contract, regardless of who you choose as your
subcontractor.
2. Check your subcontract template. If your subcontract template and your
Contract and Procurement Principles match, then the Prime Contract
negotiated between you and the Client is much easier to flow down.
3. Semantics. Don't get caught up in the details of the Clause having to be
an exact copy of what you have in your Prime Contract. If it says the
same thing, then it doesn't matter if you use different words or the
words are in a different order.
4. Remember that you are a buffer between you and your subcontractor. As a
company, you do not want the Client getting into your business.
5. The top 8 flow downs (no particular order):
a. Warranty duration
b. Exclusion Clauses
c. Indemnities including pollution
d. Confidentiality
e. Insurance
f. Intellectual Property
g. Benefit Clauses such as paid suspension
h. Days, remember to allow for internal processing as well as Client
processing

There will always be exceptions but number 3 is where most people fail, including the Client.

Don't use the back to back Method unless there are high risks, high value and/or Client appointed Subcontractors and if you plan on using this Method, take that subcontractor's qualifications with you from day one. In addition you need to develop a standard template for Form of Agreement and Exhibits because it isn't possible to just blindly throw your contract at a subcontractor, they are a Third party, and it just doesn't work without some modifications to the Prime Contract.

Hi Carolyn. Depending on cooperation levels of your prospective subcontractor / subconsultant, you can 'seal the deal' with an RFP document and a Letter of Acceptance. If you give me your email address, I can send you a template document I created for implementing back-to-back subcontracts to a prime FIDIC contract.

Hi Keith, this is a very interesting question and I am glad you are undertaking the exercise.

I haven't come across a dynamic tool that would support the sort of pre-analysis you suggest, although it may be that you could adapt one of the systems used by marketing to undertake customer segmentation. Another approach could be to build relevant questions into whatever requirement definition tools you use, cuasing the business to consider the points you make regarding issues such as innovation, likelihood of change etc

In working with another IACCM member, we have developed a model that looks at three core levels of relationship and then overlays the extent to which there is potential uncertainty which would impact the nature of the relationship / terms required. I'll be pleased to discuss with you and share ideas..

Hi Keith. I'm also unaware of the existence of such tools.

My suggestion (assuming you haven't done so already) is to align your organisational objectives with the business cases, service specifications that were developed during the tender process, justifications for contract variations, etc. Once this has been done, identify the commonalities across the service spectrum and then compare against the performance of each contractual arrangement including the extent to which the service is being successfully delivered and then how this may relate to the business activities of the individual business unit. No mean task!

Understanding contract management within broader organisational strategy and commonality that exists between contracts is likely to yield insights into what you're trying to achieve e.g. innovation, appropriately skilled staff, etc. And by taking such an approach, it may increase the likelihood that decision-makers outside of your own business unit who may also benefit from this work will support your efforts more readily.

You may also find as a result of using this type of analysis, the requirement for knowing whether the relationship is growing, etc becomes less relevant as an end in itself - assuming of course that the appropriate aspects of organisational strategy are being delivered as intended through its contractual arrangements and that risk appetite for further value / profit-seeking under each or multiple contract(s) is not being exceeded, and is being properly managed.

Product replacement or discontinuation is obviously quite usual - but that doesn't alter warranty obligations. The manufacturer should have stocked sufficient to meet likely needs. Without knowing the value. It is hard to know whether it is worth pursuing them; right now it sounds like they are ignoring you in the hope you just give up.

Hi Tim,

Thanks for your viewpoint and I couldn't agree more with you on this.

However, they have actually discontinued the product and their revised e-catalogue confirms this. I am sure they understand that a Purchase Order from us would just add on to their revenue in multiples at best, to risk such ignorance. Of the 28 product categories they have supplied, the issue affects only 1 of the 28.

The query deals around with
(a) non availability of spare parts of the product and
(b) non availability of the product itself.