Understanding the many phrases of procurement

Understanding the many phrases of procurement

03 December 2019 By Matthew Larkin - Digital Marketing Officer at YPO

YPO world of procurement figure

There are many complicated terms and acronyms when it comes to procurement, so we rounded up the information to help people understand it a little better!

Procurement is the process of finding and acquiring goods, services or works from an external source, often by tendering or a competitive bidding process. But what are the common phrases of the procurement processes and what do they mean?

What is a Framework?

A procurement framework is a compliant agreement put in place with a potential supplier or group of suppliers, who normally provide a common product or service. Frameworks give buyers a route to market to buy goods and services without running lengthy full tendering exercises. 

 

How is a DPS different to a framework?

A Dynamic Purchasing System is similar to an electronic framework agreement, with two exceptions, new suppliers can join at any time and it is to be run as a completely electronic process. Dynamic Purchasing Systems are used exclusively by public sector organisations. They save time and money by being a quick and easy way to access goods, services and works through an OJEU compliant route.

 

What is an OJEU?

The Official Journal of the European Union is an online journal of public sector contracts above a certain value. Public sector contracts with an overall value above the OJEU threshold (£181,302) should be advertised on the OJEU journal to allow suppliers to see these opportunities and bid if desired.

 

Should I choose Further Competition?

Also known as a mini-competition or mini-tender, this is a competed procurement exercise between the awarded suppliers on a framework or DPS. A customer can test the market by having their requirements sent to the registered suppliers who are then invited to submit a specific tender to fulfil these requirements.

 

Should I choose Direct Award?

This option is sometimes available on a framework, but not normally for a DPS. It allows a buyer to make an award to their chosen supplier without opening up their procurement exercise to other suppliers. This can be a fast and straightforward way to procure goods in a compliant way, however it can limit competition.

 

What is Quality Versus Price Ratio?

Often tenders place greater emphasis on price or quality, depending on the desired outcome. Tenders for highly price sensitive, or routinely purchased goods and services may place an emphasis on lowest price, whereas a more complex, technical requirement may place more emphasis on highest quality.

 

What does MEAT mean? 

MEAT stands for Most Economically Advantageous Tender and many tenders use this approach to award the winning supplier. Tenders are scored and then the winning supplier is selected via a MEAT approach which identifies the overall winner based on a combination of individual price and quality scores.

 

What is Total Life Cycle Cost?

Cheapest is not always best and it can be useful for buyers to consider more than the initial purchase price of a product or service. Total life cycle costing takes into account recurring and non-recurring costs over the full life span or a specified period of a product or service. It includes purchase price, installation cost, operating costs, maintenance costs, and remaining (residual or salvage) value at the end of ownership or its useful life.

 

Popular acronyms:

  • KPI
    Key performance indicator will be monitored to help measure the performance of suppliers against their contractual obligations to identify that service levels are being met.
  • TUPE
    The transfer of undertakings (protection of employment) regulations is to preserve continuity of employment and to safeguard employment rights of all employees whose employment transfers to a new employer as a result of a relevant transfer.
  • SLA
    Service level agreements are agreed during the tendering process and set out exactly what is expected from an organisation should the contract be awarded to them.
  • RFQ
    Request for quotation is simply a customer or PSBO asking for pricing relating to a specific project.
  • PQQ
    Pre-qualification questionnaire is a document used in a restricted OJEU tendering process and the responses are used to help shortlist suppliers. 
  • ITT
    Invitation to tender is a document used in the tendering process and will advise of when and where tenders should be submitted.

For more information about any of the frameworks we have available, explore our World of Procurement. 

Categories: Procurement , Frameworks

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