Introduction to Purchasing and Procurement (part-1)

Video Transcript

Slide 1:

0:05: Welcome to the Introduction to Procurement training video from Crescent Purchasing Consortium

Slide 2:

0:20: Crescent Purchasing Consortium or CPC, is owned and run by the Further Education sector with members from all areas of Education. CPC provide their members with specialist advice on best procurement practice including how to ensure value for money.

CPC’s main purpose is to produce EU-compliant frameworks on behalf of members. CPC frameworks cover a wide variety of goods and services.

CPC employ experienced and dedicated procurement professionals who offer support and guidance to members. They also provide value added resources including Crescent Learning and FELP, the Further Education Library of Procurement.

This video is the first in a series of training videos designed to support Procurement in the education sector.

Slide 3:

1:30: The key questions we aim to answer in this video are:

What is Procurement?

What help is out there?

What legislation must you comply with?

How do you manage the risk of buying the wrong thing or paying too much?

How do you achieve value for money for your institution and the taxpayer?

Slide 4:

2:05: We begin with Purchasing and Procurement.

Firstly, what do we mean by Purchasing? Purchasing is the specific activity of committing expenditure. It tends to focus on price rather than overall value. In essence it is about placing the orders, the actual task of buying

Slide 5:

2:30: So what is Procurement? It has a broader scope compared with Purchasing. Procurement is the entire process involved in acquiring goods and services.

Procurement is about identifying your requirements, preparing specifications, assessing risks, managing the tendering process, placing orders, awarding contracts and managing suppliers.

Procurement takes into account the cost over the lifetime of the goods or services, known as whole life costs, and the quality expected to meet user requirements

Slide 6:

3:20: Let’s look at the Procurement Cycle, this begins and ends with identifying the need. Then specify the requirement, basically describing what you need to procure which should always involve input from the end user. Next identify potential suppliers, this might be through a formal tender which we will look at later in this video. Then invite proposals, giving suppliers a reasonable and appropriate timescale to respond. Once this time has passed the proposals are evaluated and assessed, leading to the agreement of prices and contractual terms. The next phase is the award and implementation of the contract, which might include the raising of an official purchase order which can be considered as the purchasing element of the Procurement Cycle. For on-going requirements for goods or services the next stage is to manage the performance of the supplier through contract management, this process continues until the procurement cycle must begin again.

We would recommend accessing Step 2 of the procurement route map available on FELP to find out more about the procurement cycle.

Slide 7:

4:45: You might be asked why procurement is important to your institution? The answer is that following sound procurement practice can ensure or improve the value for money on capital and revenue areas of expenditure.

Moving your institution’s ‘purchasing’ activity to a comprehensive ‘procurement’ activity is an important step in creating value for your institution.

Slide 8:

5:15: It is typical that procurement benefits will be delivered from one or more of six key processes, these are: 1. Through the purchasing process and implementation of the purchasing decision 2. The ongoing management and development of supplier relationships 3. The simplification of internal or supplier interfacing processes, that is how you actually do business with them. 4. Understanding the opportunities in the supply market, are their new products or services available from different suppliers. 5. Creating and controlling a new supply chain 6. Managing risk to your institution.

Slide 9:

6:15: Time and resources are always limited and within your institution’s financial regulations there will be a range of thresholds to help balance the risk in relation to the value of procurements. The ranges shown are examples of possible thresholds, think about how these might compare to your own institution’s and why these are important to follow. You also need to ensure that the European Union procurement thresholds are included within any Financial Regulations or procurement policy, we’ll talk about these a little later. The further education sector average for requiring 3 quotes is £5,000 and around £30,000 for tenders.

We recommend accessing the Template section on FELP and downloading the example procurement strategies, policies and procedures before developing your own. This will help you to gain an insight as to how other institutions balance procedures with value and risk.

Slide 10:

7:23: You will come across the terms quotations and tenders and may wonder what the difference is?

They are almost the same thing but the difference between them is their legal significance.

A quotation is simply a statement setting out the estimated cost for a particular work, goods or service. The supplier providing the quotation is not formally offering to provide them. It is simply an indication of the expected cost which you can accept or reject.

A request for quotation is a competitive process for sending your requirements to suppliers and they are most appropriate for relatively low value requirements, especially if the contract will be awarded on price alone.

A tender at the most general level is a formal offer to supply goods or services or perform works for a stated fixed price. The quotation is part of the tender. In practice, you must accept or reject it.

Tenders are much more detailed than a quotation, usually written for each specific requirement. Sections of the tender will consist of template documents including a standard supplier selection questionnaire and terms and conditions of contract, while other parts will be specific to the requirement such as the detailed specification. Higher value requirements must be tendered under the EU procurement rules as mentioned earlier.

Sample documents for quotations and tenders are available from the Template section of FELP.

Slide 11:

9:16: When conducting a tender drafting the specification for what you want to purchase is one of the key tasks. The specification must give potential suppliers enough information to know what is needed, however, it cannot be too prescriptive or target a particular brand or product. There is no pre-determined length for a specification it may be simply a few words such as a number of boxes of 100 25mm paperclips or run to many pages, containing technical information.

Your specification will also help you to develop both the selection and award criteria used to assess which bidders will participate in the tender exercise and ultimately win the contract.

It is important not to mix up your selection and award criteria when tendering contracts that are subject to the procurement regulations. Selection criteria can be thought of as the stage where you evaluate a bidder’s capability and capacity to undertake the contract. This usually involves an assessment of their experience. Award criteria is when you evaluate their proposals for fulfilling your contract requirements, usually focussing on a combination of quality and cost.

A guide to writing specifications is available on FELP along with information on selection and award criteria and the need to keep these separate.


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Introduction to Procurement - part 2

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The Introduction to Purchasing and Procurement videos are the first in a suite of procurement training videos to be launched throughout 2018. Future videos will include topics such as Effective Procurement Strategies and Procedures, EU Procurement Regulations, Outsourcing Services and Negotiation Skills.

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