Procurement & Purchasing Consulting

Negotiations are resource-intensive and demand significant expertise. Therefore, it is essential to conduct a cost-benefit analysis to determine whether starting a negotiation process is worthwhile. This is where Caranda excels.

Most agreements benefit all involved parties when negotiated through a structured process. There are often hidden values that can only be identified when the parties communicate effectively and focus on interests, criteria, and alternative solutions. Negotiations require specialized expertise across the entire procurement or project organization. A negotiation team that shares a common platform of negotiation theory and terminology will achieve more with less effort over time.

Caranda will soon launch both general courses and competence programs in negotiation techniques, as well as tailored courses for individual companies. Our programs will combine theory and practice, and we also provide operational support during negotiations. For companies that frequently negotiate significant values, we have seen great benefits from team-based competence building, fostering organizational learning and development in negotiation techniques over time.

Challenging Situations

For many, negotiation situations can be challenging and uncertain, requiring effective organization both internally with in the company and in dealing with counterparts. Caranda has a team of experienced consultants from various industries who regularly assist with:

• Selecting and preparing negotiation teams
• Developing negotiation strategies and providing guidance on negotiation tactics.
• Facilitating and conducting negotiations
• Providing in-house competence programs and open courses in negotiation techniques.

For most businesses, procurement is a central part of their operations. To ensure good purchases and proper processes around them, thorough preparation is essential.

Thorough preparation ensures that the procurement process considers efficiency, integrity, and quality while adhering to the fundamental principles of good procurement processes:

• Competition
• Equal treatment
• Predictability
• Verifiability
• Proportionality

When these principles are met, efficiency, integrity, and quality are promoted in the procurement process. Adequate preparation is not the most time-consuming part of a procurement, but it can be the most critical aspect of the process.

Caranda can contribute to ensuring a thorough preparation process at all levels, laying the best foundation for a successful purchase.

As a company, your reputation and trust in the market rely on ethically sound procurements. To build a positive reputation, it is essential that you, as a purchaser, emphasize actions over words, and the ethical aspect of procurement can be up held through thorough preparation.

Thorough and well-thought-out market research often leads to competitive advantages through better procurement.

During the market research phase, businesses seek to gain knowledge about the supplier and product market while establishing a market strategy for the procurement process. This phase also involves validating the specification to align it as best as possible with potential suppliers in the purchasing phase.

Staying updated on trends is crucial, as market knowledge is perishable due to the constant changes and developments in the market we buy from. New technologies, regulations, and trends continually reshape the market, often resulting in the emergence of new suppliers and products. Therefore, it’s essential for companies to continuously stay informed about the current supplier market. Effective market research can also serve as a strategic tool for the company, influencing product and service development, negotiation preparation, understanding the competitive landscape, and benchmarking against the organization’s product strategies, delivery agreements, and service offerings.

Supplier engagement is the key to driving healthy competition. Caranda possesses extensive experience and high expertise in conducting market analysis and providing assistance during the market research phase. We aid in analyzing the current market, gathering information about the industry, supplier market, products, technologies, and trends. Supplier engagement is key to fostering healthy competition. Aligning the company’s needs with suppliers who can best deliver the service is crucial. The market we address holds the expertise in what we intend to purchase. We assist our clients in connecting with the supplier market to link needs and deliverables together, ensuring that the prerequisites for a successful procurement process are met.

Implementing procurement agreements is crucial to ensure that goals and intentions are realized.

Procurement is a cross-functional activity that encompasses various functions such as finance, legal, security, production, operations, and management. Having good experience in procurement is highly beneficial in understanding the different processes within an organization. To succeed in a procurement process, it is crucial to involve and manage various stakeholders throughout the entire process. The Procurement Wheel can serve as a useful tool to ensure effective collaboration.

What is essential once an agreement is reached? It is especially crucial to uphold what has been agreed upon earlier in the procurement process and implement it, ensuring that the customer receives deliveries from the supplier as per the agreement. After the agreement is reached, both parties are required to “fulfill” the contract. This means that the supplier delivers the agreed-upon goods and services, and the buyer pays for and utilizes them as intended. Together with the supplier, we have a common goal through the procurement: to create value together. To achieve this, we must establish routines and systems that support the implementation of procurement agreements.

Why is implementation important?

When we enter into agreements, it is essential to ensure that users of the contract receive sufficient information about goals, benefits, and content, as well as proper training on how to use the contract. Training and knowledge transfer should contribute to establishing ownership and clear responsibilities. Reviewing the scope of the procurement with involved parties is, for example, vital to ensure that all requirements and needs are understood in the same way. Common understanding is essential to help the organization use the contract as planned.

Good implementation of agreements is crucial not only because it involves familiarity but also understanding of why the agreement was made and what the organization aims to achieve with it on both operational and strategic levels. It may be vital, for instance, for the survival of a company in the market. The procurement agreement can be a strategic goal to reduce costs and secure jobs. Knowing the purpose of the agreement makes it easier to understand why “we do what we do” and what actions we need to take to achieve the desired benefits.

Ensuring Effective implementation of agreements required :

• Clear definition of roles and responsibilities.
• Establishing routines and processes for implementation.
• Making the agreement known to the users. It is essential to allocate time to educate users about the agreement.

Information about the agreement may cover the following topics:

• Background for entering into the agreement and review of terms
• Contact information for the parties involved in the agreement
• Duration, scope, and expected value of the agreement
• Agreed quality and delivery timeframe for the delivery
• Agreed cooperation and follow-up level
• Agreed billing and possible price adjustments
• Agreed procedures for change orders, warranties, complaints, and any sanctions
• Uncertainties related to the agreement

Effective contract management sets apart the best companies from the rest, primarily because they dare to set quantifiable goals and steer their actions accordingly to ensure continuous improvement. Contract management involves measuring and controlling performance based on key indicators related to time, cost, and/or quality. Another critical success factor in this phase is the organization’s ability to define roles and responsibilities related to contract management. This approach allows turning contract management into a competitive advantage through increased focus, enhanced expertise, and limited additional effort.

Contract management is a core area within procurement-driven value chains, and Caranda proactively assists in:

• Defining roles
• Establishing KPIs (Key Performance Indicators)
• Implementing systems for follow-up
• Deviation handling
• Change management.

The company also possesses the knowledge and capacity to assist in cases of disagreements, conflicts, and dispute resolutions, adapting their role to the specific needs of each customer, whether as contract advisors, client representatives, or negotiation leaders.

Cross-disciplinary expertise is crucial for successful contract management, and Caranda works with individual contracts or entire contract portfolios tailored to customers’ needs. They identify the type of contract or contract portfolio involved and the appropriate level of management. The required competence and resources for contract management vary between non-critical and strategic purchases, volume purchases, and bottleneck purchases. Caranda contributes to establishing new work methods that are well-established and communicated by the company’s management.

The regulations concerning public procurements are comprehensive and constantly evolving. Procedural errors can lead to costly delays, liability for damages, and reputational damage for the contracting authority.

Caranda’s lawyers possess specialized expertise in public procurement regulations, combined with a deep understanding of how to best apply the provisions of these regulations to ensure successful procurements.

Thoroughly developed competition documents that comply with regulatory requirements are necessary to avoid procedural errors, potential cancellations, and liability for damages. We create and quality assure templates for competition documents, standard contracts, and evaluation matrices.

Our lawyers are integrated into our project teams and provide ongoing legal advice and quality assurance.

We also plan on providing tailored courses at all levels for public contracting authorities who seek to enhance their knowledge of public procurements. Leveraging our extensive experience in practical procurement execution, our course instructors deliver knowledge that blends theory and real-world practices.

Caranda also assists suppliers in public procurement processes, including preparing and ensuring the quality of bids. We offer courses for suppliers aiming to enhance their competence in competing in the public sector.

Best Value Procurement (BVP), also known as Performance-based procurement, is a modern method for procurement and acquisitions that significantly reduces risks, costs, implementation time, and follow-up requirements.

BVP is a comprehensive approach for procurement and project management based on the Best Value Approach (BVA) philosophy developed at the University of Arizona, which is grounded in the Information Measurement Theory (IMT).

Over the past 20 years, BVP has been successfully applied in more than 1700 projects, particularly in larger construction projects. It has been widely used in over 300 projects in the Netherlands alone. In Norway, the Agency for Public Management and eGovernment (Difi) promotes pilot projects and has documented them on anskaffelser.no.

Several major public companies, including Nye veier AS, Omsorgsbygg Oslo KF, Trondheim, and Rælingen municipalities, have embraced this method. Besides regular construction contracts, Nye veier has also achieved positive outcomes by utilizing BVP for procuring operation contracts.

Maximizing Performance, Minimizing Risk: Best Value Procurement simplifies, streamlines, and enhances procurement processes. It is based on the belief that the supplier is the expert and has the most significant impact on project risks. BVP is especially suitable for procurements where access to the market’s best expertise is required and the supplier’s performance significantly influences the outcome.

BVP has achieved remarkable success in various categories, including ICT, construction, infrastructure, and welfare technology/health, as these often involve complex procurements with numerous dependencies and potential high risks.

Suppliers must demonstrate their expertise and ability to mitigate the client’s risks. BVP emphasizes minimizing decision-making processes, thus reducing risk and transaction costs for both parties.

Client Must Define Delivery and Project Objectives: In a BVP competition, the client must describe a delivery (end result) and 4-5 functional project objectives. Here is an example for the procurement of an elementary school:

Delivery:

Design, construction, and complete delivery of an elementary school with outdoor facilities for 750 students (grades 1-7), 20 students (grades 1-10) with special needs, a multi-purpose hall with a playing area (25x45m). All necessary fixed installations shall be provided as described. Additionally, the Supplier should strive to adhere to aesthetic guidelines.

Project Objectives:

• Buildings and outdoor areas that significantly contribute to a conducive learning environment, personal development, and a positive working environment for the building’s users.
• The lowest possible cost for the municipality over the expected lifetime of the school.
• Minimal inconveniences for stakeholders/local residents during the construction project.
• The lowest possible environmental impact over the expected lifetime of the school.

Supplier Must Formulate Performances: In their bid, the supplier must specify performance statements that demonstrate how the project objectives will be achieved. These statements should be formulated SMART (Specific, Measurable, Acceptable/Ambitious, Realistic, and Time-bound). The statements should be supported by numerical values and clear (dominant) information, convincing the evaluation committee that the supplier is the best choice for the task. Regarding the above objectives, the supplier’s performance statements may look like this:

Performance Statements:

• We will ensure a customer satisfaction rate of 9 out of 10 for the overall delivery and project objective 1.
• We will achieve a 20% reduction in total lifecycle costs.
• Mass transportation will be reduced by 30% compared to the preliminary design. Transport and construction will be carried out without risk incidents for neighbors. Noise limitations will be in accordance with T-1442.
• We will reduce the school’s environmental impact over its expected lifetime by at least 25% in terms of greenhouse gas emissions.

Best Value Procurement Process (BVP): The Best Value Procurement method is characterized by:

• The client publishes a budget or maximum price.
• The project has clear and prioritized objectives, and the specification is short and function-based.
• Suppliers compete on price, expertise/performance, risk understanding, and added value.
• Interviews are conducted with key personnel, evaluated, and become part of the contract.
• The winner (also called the best supplier) enters a concretization phase led by the supplier, where the offer is detailed in collaboration with the client before contract award is confirmed.
• The client acts as a quality manager, not a quality controller.

BVP reduces resource use for both the client and the supplier. For instance, Rijkswaterstaat (NL), the Dutch organization responsible for building and maintaining canals, dikes, and roads, achieved excellent results using BVP:

• Offers were 15% lower in price.
• The need for personnel for contract follow-up was reduced by 50%.
• Project time was reduced by 15%.
• A low level of conflicts was observed during implementation.

BVP Method in Line with Public Procurement Regulations

Caranda – Your BVP Partner

Caranda has certified consultants and extensive experience with BVP. We have provided supplier support and led procurements using the BVP method for both private and public clients.

We are experts in procurement-driven value chains, have ambitious goals for our BVP initiative, and can demonstrate excellent results.

Contact us to discuss how your procurement needs can be efficiently addressed using the Best Value Procurement method.