Understanding Procurement Lifecycle is very important for business owners, solopreneurs, freelancers, bidding Organizations(sellers), sales teams, business development teams and bid management staff. You need to get familiar with the concepts of Procurement and Public Procurement applicable to your business and applicable to bidding.
Being a seller, all of these teams are directly involved in the Procurement Lifecycle and you need to thoroughly understand the procurement processes followed in their respective industries.
Let’s begin with the Procurement Lifecycle. Usually, for the sellers, this starts when they receive the Tender Document or when they find any notification from buyers about the procurement. For the buyers, this starts when they get a requirement/request to buy something or when they feel pain for which a solution is critically needed. This may vary for the sellers in case the buyers involve the sellers right from the beginning. The buyers’ purpose is to solve a problem.
The sellers’ purpose is to provide a cost-effective solution and add value to the buyers. When the requirement is known to the buyers, they prepare the RFXs and either send them directly to potential sellers or publish on open platforms inviting all potential sellers to submit the proposals.
When the requirement is new or unknown to the buyers, they take the help of the subject matter experts, external consultants or the potential sellers to prepare RFXs. Many times, when the buyers do not have the competency to assess the requirement, they tend to take the help of the seller, or a group of sellers, or external consultants in writing technical requirements, estimating budgets, and writing complete tender documents.
In such situations, the sellers get an opportunity to work with the buyer right from the beginning and have good chances of becoming a preferred bidder. The term Incumbent is used for sellers who are already executing some other projects for the buyers. Sometimes, the policies do not allow the Incumbents to participate in the procurement because they are well connected with the buyer, though at times, Incumbents are also allowed to bid. It depends on the policies of the buyer organisations.
EOI/RFI/RFI/Vendor-Registration/Vendor Empanelment/RFT/RFP/ITT/NIT/Tender/Bid are the terms used in the industries to address a document wherein the requirements are specified in a formal written document. We normally purchase goods/services in our day to day life. As a customer/consumers, we go through a journey right from identifying the need, researching the products/services, selecting and buying. The Procurement Lifecycle works in a similar manner. The customers may be at any stage of their buying journey when they find the sellers.
Here aresome key points of the Procurement Lifecycle. Being a seller/bidder organisation, it is quite important for you to know what is happening on the other side. As a seller, you prepare how to sell your goods and services. Likewise, the buyers also take appropriate actions while buying the goods and services. This will help you to step in wherever and whenever your presence is required to impact the buyer before you have an RFX in your hand.
The Procurement process starts when the buyer identifies the need to purchase something that will solve their pressing issues. It includes the tasks related to:
- Identifying the goods/services to procure.
- Identifying the requirements.
- Preparation of RFX Documents.
- Identifying the potential sellers.
- Inviting the sellers to submit the proposals.
- Evaluating and shortlisting of the winning bidder.
- Negotiation of the contract terms and signing of the final agreement.
- Release of work orders.
- Receipt of invoices from the sellers.
- Verification of invoices and validation of project deliverables.
- Release of payments to the sellers as per the agreed milestones.
- Maintain all records.
- Issuing a formal letter of completion to the sellers.
However, the procurement concept may get more complex depending on the complexity of the project. You may have to deep dive further to learn if required. The T&Cs differ according to the product or the project.
For example, the T&Cs while purchasing a television are different from those while purchasing a laptop; depends whether it is related to constructing a house, a multi-storey apartment, construction of a manufacturing unit, a chemical processing plant, or a dam; differs on the basis whether it is for an Application Development Project or an Application Hosting Project.
The complexities vary from project to project and so do the dependencies. Hence, the contractual terms and conditions vary with the items being purchased.