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Adding Value to Procurement Presented by: David Dise, CPPO 240/777-9910.

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Presentation on theme: "Adding Value to Procurement Presented by: David Dise, CPPO 240/777-9910."— Presentation transcript:

1 Adding Value to Procurement Presented by: David Dise, CPPO 240/

2 Introduction Session Objectives Define Value and its Application to Procurement Learn Ways to Evaluate the Value of Your Operation Identify Short and Long Term Strategies Pick Up Some Tools and Techniques

3 A Lesson in Value What is Value? “Worth in usefulness or importance to the possessor; having utility or merit. A principle, standard, or quality considered worthwhile or desirable.” (American Heritage College Dictionary) Cost vs. Value

4 A Lesson in Value The Highboy What is this Queen Anne Highboy worth?

5 A Lesson in Value The Personal Computer What makes a PC valuable…  Frequent malfunctions?  Bugs?  Viruses?  Long waits for help and support? So…why are they so valuable?

6 A Lesson in Value “Worth in usefulness or importance to the possessor; having utility or merit. A principle, standard, or quality considered worthwhile or desirable.” (American Heritage College Dictionary)

7 Perspectives on Value “The purchasing profession does not produce a tangible product per se. What we have to offer is service and value. Tempering these with world class principles will ensure that we remain indispensable.” Randy Shearer, CPCM, Modern Technologies Corp.

8 Perspectives on Value Purchasing is a Service Industry Purchasers Must Ensure Success Value is Determined by the Customer

9 Perspectives on Value

10 What is a Customer? “One that buys goods or services.” “An individual with whom one must deal.” Internal Customers  Departmental Users  Management  Elected Officials External Customers  Business Community  Constituents  General Public  Press/Media

11 Determining Value

12 Evaluating the Process If your customers had to pay for the services you render, would they consider it worth the price?

13 Determining Value Understanding “Process” as a Value factor Getting work done through related business activities Kinds of work Value adding Non-value adding Waste

14 Process Value Inputs (Upstream) ProcessesOutputs (Downstream)

15 Process Value Inputs (Upstream) ProcessesOutputs (Downstream) Work-around!

16 Determining Value Function vs. Process Task focus = Process hostility

17 Determining Value Function and Process Do task …Think process Signs of task focus…  INMJ  IDWIT  IDMB

18 Determining Value Procurement Goals Economy Efficiency Effectiveness What makes an organization successful? Is Purchasing really strategic? Align goals and processes

19 Determining Value Change must equal Improvement Tampering vs. Improving Improvement through… Identification Measurement Self Analysis Questions Focus on timeliness, quality, helpfulness, competition, streamlined procedures “People don’t resist change; they resist being changed.” – Peter Scholtes

20 Determining Value “Laws” of Organizational Change Peter Scholtes, The Team Handbook Things are the way they are because they got that way. Unless things change, they are likely to stay the same. Change would be easy if it weren’t for all the people. People don’t resist change, they resist being changed.

21 Determining Value Value is performing work with the customer in mind Remember the outcome – keep your eyes on the prize Self-check Customer expectations “Complexity and inflexibility are the enemies of improvement.” - Susan Williams, Orion Development Group

22 Process Identification Identify your core processes Impact the delivery of value? Account for a significant portion of costs or revenues? Exist independently of other processes you have identified? Measurable outcomes? “If you can’t measure it, you can’t manage it.” -Kaplan and Norton, “Using the Balanced Scorecard as a Strategic Management System”

23 Process Identification Identify your core processes Manage your core processes Define Understand Assess Improve Sustain

24 Process Evaluation Evaluation Tools Customer Surveys – KPI’s Audits, Internal and External  NIGP PMAP Informal Feedback

25 Evaluation Tools Customer survey results... What’s the problem with Public Procurement? Source: Doing Business with Government, NY: Paragon House Ü Bad specifications, written too narrowly to permit real competition (35%) Ü Too difficult to make contact with actual user (31.6%) Ü Confusion over individual responsible for specific purchasing decision (26.9%) Ü Reluctance to consider new products/services (23.9%) Ü Specifications written too generally and imprecisely (23.9%) Ü Absence of rigorous standards to weed out bad contractors (19.6%) Ü Mandated set-aside requirements (13.9%) Ü Too many sole source contracts (11.7%) Ü Unrealistic delivery requirements (10%)

26 Evaluation Tools Ü …more survey results Business Ratings of Public Policies and Procedures Source: Doing Business with Government, NY: Paragon House GOVERNMENT RATING TYPE EXCELLENT GOOD FAIR POOR Counties 13% 45% 28% 14% Cities 10% 44% 29% 17% Schools 14% 45% 27% 14%

27 Short Term Strategies Communication Verbal and Written Skills Listening Skills User-Friendly Documents Standardize Specifications Meet Regularly with Users

28 Short Term Strategies Communication [insert mail delivery memo]

29 Short Term Strategies Communication Cooperation Active Participation in Organization Build Interdepartmental Relationships Intergovernmental Participation

30 Short Term Strategies Communication Cooperation Timeliness Establish Process Schedules Stick to Them Respond to Situations in a Timely Manner Return Calls and Messages

31 Short Term Strategies Communication Cooperation Timeliness Streamline the Purchasing Process Delegate Small Purchases Establish Controls Take away the Pain Remove Roadblocks

32  Value-based purchasing procedures  Plan and schedule operations proactively  Prepare cost-effective specifications  Make effective purchasing decisions  Choose the right contractor/vendor for the job  Use appropriate technology  Promote a healthy competitive environment  Regularly evaluate the effectiveness of the purchasing and materials management program Short Term Strategies

33 Long Term Strategies Professional Development Maintain Ethical Standards Education and Training Professional Certification Professional Association

34 Long Term Strategies Professional Development Agency Training Program Conduct Seminars for Users Conduct Seminars for Vendors Joint Seminars with Other Entities

35 Long Term Strategies Professional Development Agency Training Program Develop Cross Functional Teams Quality Circles Standards Committee Directed Work Teams

36 Long Term Strategies Professional Development Agency Training Program Develop Cross Functional Teams Build a Reputation of Accessibility Invite Feedback Respond to Criticism Build Bridges in the Business Community

37 Long Term Strategies Professional Development Agency Training Program Develop Cross Functional Teams Build a Reputation of Accessibility Develop a Customer-Focused Operation Emphasize Service and Line Functions Seek Out Staff Support and Buy-In Lead By Example Place a Supreme Value On People Treat Staff the Same as Customers

38 Long Term Strategies Professional Development Agency Training Program Develop Cross Functional Teams Build a Reputation of Accessibility Develop a Customer-Focused Operation Develop a Value-Added Mindset Seek Opportunity Cultivate Resourcefulness Pursue Innovation

39 Adding Value in the Process Prior to Solicitation Alternative Procurement Methods  Value-Based Factors  Competitive Negotiation vs. Bid  Prequalification  Contract Options

40 Adding Value in the Process Prior to Solicitation Alternative Procurement Methods Specification Development  Standardization  Clear, Concise, and Competitive  Favorable Contract Terms

41 Adding Value in the Process Prior to Solicitation Alternative Procurement Methods Specification Development Coordinate with Customers Utilize Existing Contracts Look for Cooperative Opportunities Consider Strategies and Options

42 Adding Value in the Process Solicitation Phase Take Ownership Administrate the Process Ensure Bases are Covered Deal with Inquiries and Protests Serve as Agency “Buck Stopper”

43 Adding Value in the Process Award Phase Lead in Negotiations Safeguard Your Agency’s Interests Handle Protests Ensure Contract Execution  Required Signatures  Coordination with Contractor  Bonding, Insurance, Licensing Requirements

44 Adding Value in the Process Contract Administration Ensure Delivery and/or Performance  Verify Inspection  Know the Rules  Don’t Settle for Less Take Care of Disputes  Don’t Disappear When Things Go Bad

45 Adding Value in the Process Contract Administration Ensure Delivery or Performance Take Care of Disputes Handle Contract Amendments, Extensions  Certified Payroll  Price Changes in Term Contracts  Progress Payments, Retainage  Contract Close Out Anticipate Change

46 Value-adding Tips Learn About Your Using Departments Spend Time at Their Place Give Your Users Options Don’t Just Say No Know Your Stuff Be the Procurement Expert Know Your Staff Be a Teacher, Trainer and Mentor

47 Value-adding Tips Involve Users in Your Policy Decisions Seek Input for Manuals, Procedures Be Accessible to Your Customers Internal and External Seek Out Opportunities to Add Value Be an In-trepreneur Take on the Tough Stuff Protests, Disputes, etc.

48 Value-adding Tips Seek Outside Assistance When Needed Colleagues, Consultants, Auditors Take Care of the Business of Purchasing Perform the Purchasing Function Cooperate, Communicate & Participate!

49 Summary of Objectives  Define Value and its Application to Procurement  Learn Ways to Evaluate the Value of Your Operation  Identify Short and Long Term Strategies  Pick Up Some Tools and Techniques

50 Adding Value to Procurement Presented by: David Dise, CPPO 240/


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