The Procurement Assessment

Note:  This article originally appeared in a 2002  issue of ICN’s Tools & Tactics and has been updated for presentation here.

You’ve trained and coached your staff, coached key executives and IT project managers, made presentations, developed form agreements, created a deal repository . . .  But, are those involved in evaluating, buying and paying for technology acquisitions actually following your processes?  Have you changed your organization’s culture, making sure that the new procedures are “stick-ing”?  How much success are you having in negotiating those deals?

There is no doubt that best-in-class technology procurement organizations have processes and tools in place, and their personnel are both trained in the methodologies and use the tools and re-sources available.  Their results demonstrate cost savings, vendor management, resource and fi-nancial control and short and long-term risk avoidance. 

A Procurement Maturity Model (PMM)  might take this form:

How do we measure the maturity of your procurement organization?  The Procurement Assess-ment is the most comprehensive way for an organization to audit its current utilization of the methods, tools and resources you’ve put in place.  A Procurement Assessment will measure your progress toward achieving best practices and will help you establish annual goals for your or-ganization.

Look at the following four areas:

Level 1 Level 2 Level 3
Initial Efforts Methodology Established Integrated Method-ology, Standards
Common  language   established

Cultural and management change initiatives

Integrated  methodology establishedCross-functional teams Cultural and management supportPolicies established
Issues addressed organization Focus on individual projects Intangible benefits made apparent
Training Level 1 Tangible benefits   made apparent Form Agreements
  Training Level 2 Deal repository
    Training Level 3
Level 4 Level 5
Comprehensive Continuous Improvement
Integration of resources, tools, culture Continuous learning, process improvements
Vendor policy     and management Lessons learned, knowledge transfer
Qualitative and quantitative measurement of results Strategic planning

• Processes.  Robust processes based upon sound industry best practices provide the requi-site infrastructure to move a procurement organization forward. Processes provide consis-tency of approach and the organizational discipline that assure that best practices are syn-thesized within the organization.

• Resources. Appropriate, experienced, knowledgeable and professional resources must be available when required. An organization must commit to attracting top talent or out-source the IT procurement function to knowledgeable experts.

• Tools. Effective tools provide consistency of approach and also streamline the overall procurement process. Some of the more important tools include deal checklists, standard form contracts, templates for Requests for Proposals, Requests for Information, vendor evaluation matrices and so forth. These tools and others must be fully integrated into pro-curement processes.

• Organization. There must be organizational commitment that supports and nurtures the development and use of an IT procurement function.
Determine the effectiveness of your organization

The Procurement Assessment works as follows:

Develop the Survey Tool. The procurement management team develops a survey that will elicit responses from the organization on current practices and knowledge in the four categories:  proc-esses, resources, tools and organization. The survey asks a series of questions to ensure compli-ance with the required processes and procedures or to evaluate current practices as they relate to industry best practices. Although the internal procurement organization may perform this audit in some companies, having an outside party perform the audits gives the process a measure of inde-pendence, avoids “turf wars,” and may provide more focus for senior management.

Determine Survey Population.  The size of your organization will determine the number of par-ticipants.  Generally, a sample of ten to fifteen individuals from a variety of functional roles should be included.  A representative cross-section of people from the CIO office, procurement, vendor management, IT project managers who are involved in procurement activities, finance, end-user deal makers and legal should comprise the survey population.

Conduct Kick-off Meeting.  An initial meeting with the survey population to explain the proc-ess and answer questions is an important step in preparing them for their participation.

Conduct Interviews.  Using the customized Procurement Survey described above, interviews of the survey population are conducted.  Interviewing in-person on a one-on-one basis enables par-ticipants to be more candid in their responses. (Complete candor may be achieved when a third-party conducts the survey.) 

Summarize the results and prepare the findings.  Following completion of the interview phase of the survey, the obvious next step is to analyze the results and prepare a report that sum-marizes the current status of the company’s processes, resources, tools and organization. The outcome of the analysis should be a reliable indication of your company’s progress towards achieving a best-in-class technology procurement organization.  Based on the levels of the find-ings, the team can determine the maturity of the procurement process and create (or update) the plan to reach the next level. 

Conduct Executive Briefing.  The results of the Procurement Assessment, next action items, strategies and recommendations should be discussed in a briefing with appropriate personnel.  Because executive buy-in is critical to a successful implementation of best-practices procurement processes, the results should also be summarized and sent to the technology procurement stake-holders including the CIO, the procurement management, legal and key senior business manag-ers.

By performing a number of assessments over time, you can gain a sense of whether processes, tools and resources are being successfully integrated into your procurement organization and take appropriate corrective action if necessary.

Our experience has proven that most businesses can benefit – financially and functionally – when they evaluate the quality of their existing procurement programs.  By implementing the right procurement methodology, you can realize considerable savings with minimal impact on your core business.