Notesale: Turn your study into money

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The Process of Obtaining & Selecting Offers
 Prepare the invitation to offer
...

 Receive and evaluate the offers
...

 Accept offers and award the contract
...
1-1

Prepare the invitation to suppliers
Get all the information that you need
...



...
2-1

Action Point

6
...
2-2

The documents to include with the
invitation:
A covering letter
The scope & specifications of the contract
Additional information on the contract &
instructions to suppliers (for more complex
and/or important purchases)

Payment terms & conditions of contract
Documents & information to be provided by
the supplier with its offer
ITC

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...
)
Delivery
Installation
Commissioning
Operation
Stocks to be held
Maintenance
Technical support services
Repair services
Provision of management information / reporting
Disposal

ITC

M6:U6:6
...
2-5

The scope & specifications of the contract
What can be included in a purchase specification
Service /
Responsiveness

 Required service levels
 Requirement for a “customer manager”
 Requirement for technical support in installation
and commissioning of complex equipment
 Training requirements
...
2-6

The scope & specifications of the contract
What can be included in a purchase specification
Background  General information on the company and what it is
trying to achieve
and Scope
 What the supplier is to be responsible for
 The supplier’s responsibility for obtaining import/export
licenses, payment customs duties, customs clearance
...


Legislation

 Any legislation with which the purchased product or
service must comply

Policies

 Any organisational and functional policies with which
the supplier must comply
any
p
m
Co olicy
P

ITC

M6:U6:6
...
2 + 0
...
45(L/L )}

 Definitions
 Background information (reason
& context for the purchase)

 Basis for pricing, e
...
:

0

0

0

Where:
P = the revised price to be paid at the future time of
purchase of the item
P0 = the item’s current price
M&L= the relevant materials and labour cost indices
at the future time of purchase of the item
M0&L0= the current materials and labour cost indices

 Fixed price (against required
supplier’s cost: fixed costs – 20%; materials – 35%;
performance)
labour – 45%
 Price with variation (or revision)
formula based on changes in costs of inputs
 Cost plus fee (fixed fee, or based on performance)
 Schedules of rates against milestones
 Leasing

4


 Acceptable deviations from specifications (& options that
suppliers are allowed to offer)

 How offers will be evaluated (e
...
lowest price, lowest total
cost of ownership, proven supplier’s capabilities, etc
...
g
...
)

M6:U6:6
...
2-2

Basis for pricing

Give examples of contracts that you have placed
...
2-9

Payment terms and other conditions of
contract
Payment terms
Method of payment and its costs, e
...
open
account, letter of credit, confirmed irrevocable
L/C, etc
...
g
...
e
...
2-10

Documentation & information to be provided
by the supplier with the offer
Offer presentation form & schedules
 Prepare it in advance to make your evaluation easier
 It can be an electronic spreadsheet
 Include all of the data needed for your evaluation

Information on the supplier company
 Financial reports
 Corporate policies (e
...
environmental, social)
 Organisation charts
 Certificates (insurance, quality & environmental management
systems, compliance with legislation…)

 Any subcontractors to be employed for the contract
 Statements of prior experience & client references
ITC

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Initial advertisement
2
...



...
3-1

Reach the widest possible
audience using:
 Local, national & international newspapers
& trade journals

INTERNET

W
W
W NET

B2

B

E-Commerce

 Dissemination services and magazines publishing trade
opportunities
 Electronic bulletin boards
 Direct contacts using your company’s mailing lists &
research (by post, fax or e-mail)
 Your company’s website
 Internet portal sites
 B-2-B commerce platforms (auctioning websites)
 Suppliers’ own websites (direct ordering)
ITC

M6:U6:6
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3-1

Inviting offers over the Internet
Access the Internet sites referred to in the Coursebook and write
down below what you think of the usefulness of each site to you:
1
...


3
...


ITC

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Ensure that the offers are comparable
 Review deviations & options
 Convert these into costs for comparison purposes

Tabulate the offers
 Use a special evaluation form which provides for options
allowed to suppliers
?
 The form should be compatible with the offer
presentation form given to suppliers
 Use an electronic spreadsheet for calculations

Obtain any additional information needed

 If the information provided is insufficient or unclear

ITC

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...
4-1

Tabulation form for offers
Take an important purchase that you have made recently, and look at
the tabulation form
...
Did it coincide perfectly with your appraisal criteria? What was
missing?
2
...
g
...
What else could have been improved in the form?

ITC

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 Check conversion rates for different currencies
 Identify the cost implications of payment conditions
 See if there are any additional “hidden” costs (e
...

administrative)

Deal with abnormally low bids - what are the
supplier’s possible reasons?
 It has not understood the requirement
 It is unscrupulous and will later “cut corners”
 It intends to make its real profit
in later deliveries
 It wishes to enter a new market
or reduce its stocks

ITC

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...
g
...
)

Evaluating lease vs
...
4-5

Action Point

6
...
If no
such request was ever made, why not?

ITC

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5-1

7

Accept an offer & award the contract
How to do this?
•
•
•
•

Verbally (only low value items) - see company policy
Purchase order (with standard conditions)
Specially drafted contract
Signing in accordance with company policy:
Company Policy: Approvals required for the
commitment of expenditure
Order or contract value

Approval

$0 - $4,999

Junior buyer

$5,000 - $14,999

Buyer

$15,000 - $39,999

Senior buyer

$40,000 - $79,999

Manager, Purchasing and Supply

$80,000 - $149,999

Operations Director

$150,000 or over

ITC

Managing Director

• Ensure that the supplier has the legal right to contract, &
that you use the company’s full legal name
M6:U6:6
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7-1

Guidelines for debriefing
...
7-2

Action Point

6
...
7-3

Keeping a record of the process


Copy of invitation to offer



Supplier pre-qualification documents



All documents (and amendments) made available to suppliers along with
the invitation to offer



Records of any communications with suppliers



The offers received from suppliers (incl
...
reasons for awarding the
contract and rejecting other offers)



The purchase order or supply contract



Any correspondence or records regarding the performance of purchase
order/contract

ITC

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8-1

Record keeping
What types of information do you include in your records
of the process of obtaining, evaluating and selecting
offers?

What other types of information could you keep to
improve management control and auditing?

ITC

M6:U6:6
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9-1

Streamlining the process of obtaining offers
Reduce the cost:
 Eliminate redundant administrative operations
 Ensure that the invitation is clear & concise
 Use purchase cards for micro-purchases, but check
against supplier overpricing
 Use frame contracts to obtain discounts
 Invite few suppliers for low value purchases

ITC

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 For improving communications and reducing costs
 For example: enquiry / request for quote - offer /
quotation - order - acknowledgement of order

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Standardise the documentation:

- -- -- -- -- -- -- -- -- -- ---- -- ---- -- -- -- -

M6:U6:6
...
9-1

Streamlining the process
Make a list of the things that you think you could do to streamline the
processing of obtaining and selecting offers
...
9-3



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