Question 2

Explanation

CIPS Procurement Cycle is a model that thoroughly describes a strategic procurement process. It consists of 13 stages that can be divided into pre contract award stages and post contract award stages. The Cycle helps to ensure that procurement activities are aligned with the organizational goals and deliver value for money. In this essay, we are going to analyze FIVE stages of the Cycle, which are:

• Stage 4: Pre-procurement - market test and engagement

• Stage 5: Develop specification and documentation

• Stage 8: Bid and tender evaluation and validation

• Stage 10: Warehouse logistics and receipt

• Stage 11: Contract performance and improvement

These stages are important, but they tend to receive less attention than other stages like defining needs or market analysis.

Stage 4: Pre-procurement - market test and engagement

This stage happens after the organization has defined the need, analyzed the market and devised a strategy or plan. The objective here is to decide whether it is a good time to purchase from the market, or the organization should amend its plan by postponing the purchase or changing the specification. In this stage, procurement department can conduct market research and analysis to determine which product life cycle stage that their intended item belongs to. Product life cycle can have an impact on how supplier charges a buyer, i.e., they may charge higher price during introductory stage of product life cycle. Procurement department can also assess the seasonal demand and supply for the product and decide whether it is the best time to purchase. Other factors can also be taken into account, such as upcoming change in product regulations or new emerging technologies. For example, according to a report by McKinsey & Company (2023), global demand for electric vehicles (EVs) is expected to increase by 25% in 2023 due to environmental policies and consumer preferences, which may affect the availability and cost of EV components.

Stage 5: Develop specification and documentation

Stage 5 is a stage before the contract award, where the organization finalizes the specification and prepares the documentation for the supplier vetting process.

Specification

In this stage, the organization refines and elaborates the specification in detail, based on the need defined in stage 1 and the market analysis conducted in stage 2 and 4. The specification should cover all the technical, functional, quality, environmental, social, and ethical aspects of the goods or services to be procured. The specification should also be aligned with the organizational goals and objectives, and follow the SMART criteria (specific, measurable, achievable, relevant, and time-bound). For example, according to CIPS, the organization could implement value analysis which is a useful tool to create a specification that focuses on the functions and benefits of the goods or services rather than their features or characteristics.

Documentation

In addition to the specification, the organization also needs to prepare the necessary documentation for later stages. These documents may include:

• The request for quotation (RFQ) or invitation to tender (ITT), which are formal documents that invite suppliers to submit their bids or tenders for the procurement opportunity.

• The draft contract terms and conditions, which are legal documents that outline the rights and obligations of both parties in case of a contract award.

• The performance management framework, which are documents that specify how the performance of the supplier and the contract will be measured and managed throughout its life cycle. This may include key performance indicators (KPIs), service level agreements (SLAs), balanced scorecard, feedback surveys, etc.

• These documents should specify:

• The process for supplier selection, such as pre-qualification criteria, shortlisting methods, evaluation techniques, etc.

• The instruction for suppliers, such as how to submit their bids or tenders, what information to provide, what format to use, etc.

• The deadline for submission, which is a fixed date and time by which suppliers must submit their bids or tenders.

• The assessment criteria, which are weighted factors that will be used to compare and rank the bids or tenders based on their quality and value for money.

Transparency

By disclosing these pieces of information in advance, the organization will ensure a fair and open competition among suppliers. This will also enhance transparency and accountability in the procurement process and reduce the risk of corruption or favoritism. According to OECD, transparency is one of the key principles of good governance in public procurement that promotes efficiency, effectiveness, integrity, and trust.

Stage 8: Bid and tender evaluation and validation

Stage 8 is the stage where the organization evaluates and compares the bids or tenders submitted by the suppliers based on the pre-defined criteria.

Opening

In this stage, the organization opens all the bids or tenders simultaneously in a public or witnessed event, after the deadline for submission has passed. This ensures fairness and transparency in the procurement process and prevents any tampering or manipulation of the bids or tenders. According to CIPS (2023), opening bids or tenders should follow a standard procedure that includes recording the names and details of the suppliers, checking for completeness and compliance of the documents, and sealing them for further evaluation.

Assessing

In this stage, the organization assesses each bid or tender against the criteria that were specified in the ITT or RFQ. The criteria may include price, quality, lead time, financial performance, CSR, etc. Depending on the complexity and value of the procurement, the organization may use different methods to evaluate and score the bids or tenders, such as lowest price, highest quality, most economically advantageous tender (MEAT), best value for money (BVM), etc. For example, according to OECD (2023), MEAT is a widely used method that considers both qualitative and quantitative factors in determining the best offer.

Stage 10: Warehouse logistics and receipt

Stage 10 is the stage where the organization manages the storage, transportation, delivery, and acceptance of the goods or services procured.

Preparation

In this stage, the organization plans and arranges the necessary resources and facilities to receive the goods or services. The organization should consider the difference between goods and services receipts. Goods require warehouse space and equipment, such as trucks, pallets, electric handling equipment, etc. Services do not require warehouse space, but may require other resources, such as personnel, tools, software, etc. The organization should also communicate with the supplier about the delivery schedule, location, method, etc.

Receipt

In this stage, the organization receives the goods or services from the supplier. The organization should follow a standard receiving procedure that specifies how to handle, load, unload, store, and locate the goods or services. The procedure should also include any special requirements or instructions for handling hazardous materials, fragile items, perishable products, etc.

Inspection

In this stage, the organization inspects the goods or services against the specification and documentation. The organization should check the quality and quantity of the goods or services and verify that they match with the contract terms and conditions. The organization should also record any discrepancies, damages, defects, or non-conformities and report them to the supplier for resolution. According to CIPS, inspection is a critical step to ensure that the procurement outcome meets the expectations and requirements of the organization and the stakeholders.

Stage 11: Contract performance and improvement

Stage 11 is the stage where the organization measures and manages the performance of the supplier and the contract throughout its life cycle.

Monitoring

In this stage, the organization monitors and evaluates the contract performance using key performance indicators (KPIs) and service level agreements (SLAs). KPIs are measurable factors that reflect how well the supplier delivers the goods or services in terms of quality, quantity, timeliness, etc. SLAs are contractual agreements that specify the expected service levels, remedies, and penalties for non-compliance. For example, according to CIPS, KPIs and SLAs are useful tools to ensure that the supplier meets the requirements and expectations of the organization and the stakeholders.

Reviewing

Besides monitoring, the organization also needs to review the contract performance regularly with the supplier. The organization should host meetings or workshops to discuss the results of the KPIs and SLAs, identify any issues or challenges, provide feedback and suggestions, and resolve any disputes or conflicts. The organization should also document and report the outcomes of these reviews and communicate them to all relevant parties. According to UNDP, reviewing is an important step to maintain a good relationship with the supplier and foster trust and collaboration.

Improving

In addition to reviewing, the organization also needs to improve the contract performance continuously with the supplier. The organization should encourage innovation and creativity in finding new ways to enhance the quality and efficiency of the goods or services. The organization should also support learning and development for both parties by sharing best practices, lessons learned, and new knowledge. According to OECD, improving is a key step to achieve continuous improvement and value for money in procurement.