1. The first section is the decision as to whether goods should made in house or procure the goods elsewhere, the make or buy decision. To procure the goods elsewhere it should be at lower cost and better quality. For this decision we will need a clear understanding of what we want as to develop a solid price we need to specific about what it is we want.
2. The contractual relationship depends on whether we go to single or multiple suppliers. Turnkey contract is where a client decides all work will be undertaken by a single supplier. Partnering is where to or more organisations work together to complete the project, usually used as an organisation will have a specialist area and may not be able to deliver the product but paired with another organisation they can.
3. There are various forms of contracts that need to be considered. These are single contracts where the client purchases from a single supplier. Parallel contracts where there are single contracts with numerous suppliers all running parallel of each other. Sequential contract is when one supplier completes one element and another supplier carries out the next section of work.
4. The preferred method of payment for the goods procured under contract will need to be decided on by the sponsoring organisation. This is known as payment terms, the decision on which payment term used is usually based on risk. There are four types of payment method, fixed price contract, unit time and materials contract, cost plus contract, target cost contract.
5. The final section is supplier selection, how to engage with the right contractor. These is usually done over a number of steps,
a. Defining the requirements and making sure these are correctly identified.
b. Issuing the Invitation to tender
c. Answer and bidders queries on the tender
d. Receive and evaluate the bids using a complex matrix
e. Award the contract