• Australian Red Cross Blood Service
Here are a couple that I just quickly came up with:
1. Can you recall the last time that you engaged with our team. Was it;
a) In the past 7 days
b) In the past 4 weeks
c) In the past 3-6 months
d) More than 12 months ago
c) Who is this?
2. When you engaged with our team, did you know the name of the person you were contacting?
a) No, I had to look someone up using either the contract, website, intranet, LinkedIn
b) Vaguely, I have spoken to a few different people in the course of business
c) Yes, I have regular communications with a consistent point of contact
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.
Check out this article in the IACCM Library, 'Procurement' and 'Purchasing' Are Different:
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!
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.
Whilst it's the way that a lot more suppliers seem to be going, if you think about this in with your procurement hat on - and that is what's going to happen at the end of 3-5 years - it's tough to see you doing anything but just rolling this over (and over and over again) as someone else has all of your data on their server.
At the risk of being awfully contentious, my own experience is that in a lot of circumstances, there's little consideration of whole of life costs - especially with that thinking about what's to happen in 3-5 years. Right now, many of these purchases done right now are flying under the radar of procurement teams because they're below procurement limits or just being called operational expenditure within business delegated authorities.
That said, one of the benefits that I've also seen is that upgrades happen automatically on the server of the host without the business having to create teams to do this, especially where there was a major upgrade - which were previously a big financial impact on many businesses.
Hope that this is useful.
Bahrain National Gas Co. (B.S.C)
In both cases, you can issue Purchase Orders/Letter of Awards and get the acceptance of the same form Contractors to make them agreements enforceable by law. As long as Contractors are accepting with agreed terms & conditions, I don't think there is a need to sign a Contract by both parties. Purchase Orders/Letter of Awards can be considered legally binding commercial documents in the court of law.
I have seen some of the tenders wherein it is mentioned that the Accepted PO/Letter of Award shall constitute a formation of Contract. Hence, there is no need to enter into a separate Contract Agreement as per tender issuing authority. Although I have seen some Contractors insisting for signing of Contracts for large value Contracts as they believe that Contracts would only be admissible in the court of law in case of any future disputes due to its nomenclature of 'Contracts'.
As a matter of practice, some buyers go for signing of Contracts for large value supply/works/service contracts and go for Purchase Orders for Small value supply/works/service contracts.
As per my opinion, there can't be any thumb rule for this issue. However, it is always better to take a legal opinion to avoid any future disputes.
I suppose this depends on what you mean by a Contract Agreement. If you have a Master Services Agreement in place that contains agreed legal terms and conditions, signed off by both parties, then the RFP process could proceed. However, depending on the types of good or service being sought, i.e a major construction project, then the terms and conditions within the Master Services Agreement may not be appropriate, its always best to consult a legal professional before you issue the RFP to ensure all legal provisions are either sufficient or addressed.
• AJA Global Consultancy Services, LLC
Pallab, I may be missing something from your description of the issue; or what you describe as "execute a Contract Agreement (signed by both parties)..." could be the reason of my confusion.
It is not clear to me if your organization represents the buyer or purchaser side (who is the party making pressure to move ahead). But anyway, the practice you are describing seems to me as the typical recipe for potential claims. As Gary says in his reply: seek in-house legal advice.
Sorry I can not be of much help.
• Bahrain National Gas Co. (B.S.C)
What I mean by the Contract Agreement is the Form of Agreement which is generally the first covering pages of any standard Contact wherein it is stated..
This Agreement is entered into on the xth day of ... by and between ......
followed by the list of documents that together constitute the Contract and showing the precedence of documents in the event of conflict between the documents.
A blank Form of Agreement is provided as a format along with the tender documents which is finally filled up and signed by us and the successful tenderer. The format when filled up and signed, we call it the 'Contract Agreement'. This document is used for tenders (for services, construction works, etc.) having reasonably high estimates where full tender package is used to invite bids.
On the other hand, for small supply orders ( spare parts, plant consumables, etc.) a system generated RFP document is used to invite bids and eventually a system generated PO is issued referring to RFP document and supplier's quotation.
Now let me rephrase my question as - is there any thumb rule ( example- bid estimate) that could be followed as a criterion to determine
• when a full fledged tender document to be used to invite bids and finally a Form of Agreement is signed off to conclude a Contract, and
• when a simple RFP document to be used to invite bids and and just a system generated Purchase Order is issued to the winning bidder, and no Contract Agreement is executed.
• Omaha Public Power District
I think blockchain will have a major impact in the future of and will transform the legal industry. And I try to stay informed ('try' is the magic word) -- check out this link as well: www.legaler.com/
Blockchain approaches are really bleeding edge at this point, and only for the very best informed. We recently did a workshop at MIT on AI, Blockchains and the Future of Law. Happy to make introductions if you are seriously considering this. But in the meantime- suggest you might look at the work we are doing with the IACCM on contract standards that are compatible with a blockchain approach - or not. github.com/IACCM and a "Wise Contracts" paper with Helena Haapio - papers.ssrn.com/sol3/papers.cfm.
Also - the AccordProject.org is very active in this field and in the IACCM.
Hi Andrew, aeternity is a blockchain implementation with some limited contracting features. Basically the ecosystems support smart contracts on their blockchain but with many limitations in terms of compliance. Our approach is a bit different, we offer an end to end contract management system in the blockchain supporting eprocurement and supply chains. Have a look here www.trakti.com and let me know if you want to know more. PS we are production ready ;-)
Public Works Advisory, NSW Department...