Costs and price are often the most hotly debated area when the buyer and supplier negotiate with each other. Drafting suitable pricing appendix will prompt supplier to focus more on cost management rather than charging the buyer unnecessary expense. In this series, we examine different pricing arrangements, when you should apply it and how to manage supplier’s performance with these arrangement. Schedule of rate Schedule of rate is a schedule in which unit price of each item is listed. The…

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Construction procurement is particularly complex and risky. Forming a contract in construction may take lots of time and energy of both client and contractor. Therefore, standardisation in construction contract would help the buying organisation to save their precious resources. Furthermore, the wording of these model form contracts is accurate as it has been agreed among the professionals within an industry. However, becoming too reliant on model form contract also contains inherent risks. The organisation may not fully understand the implications…

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Business entities often have their own standard terms and conditions at hand. These terms are often drafted carefully by legal professionals with the purpose of protecting the rights of issuer. However, over-protection of one party’s benefits may come at the expense of the other. For example, a procurement manager told me that the legal manager in her company embedded a limit of liabilities into the standard terms. In this clause, the company shall only pay the supplier up to 50%…

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For much of human history, the enactment of law is the monopoly power of states. This practice preserves the sovereignty of a country, but it erects a great barrier to international trade since the legislation in each country is different which substantially raises the costs of doing business overseas. The boom of international trade in the late 20th century had prompted countries and international organisations to unify international trade laws. The United Nations Convention on Contracts for the International Sale…

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For much of human history, the enactment of law is the monopoly power of states. This practice preserves the sovereignty of a country, but it erects a great barrier to international trade since the legislation in each country is different which substantially raises the costs of doing business overseas. The boom of international trade in the late 20th century had prompted countries and international organisations to unify international trade laws. The United Nations Convention on Contracts for the International Sale…

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If you have joint any procurement training, probably you would hear that the specification is one of the most important documents in procurement and supply. This proclamation may sound straight forward to you, but some people may argue that other documents are even more crucial to procurement processes. In fact, in contractual law, the specification plays a fundamental role because the most essential obligations arise from it. This blog post will clarify the relation between the specification and an implied…

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One of the greatest concerns of private sector is profit opportunity. Which factors determine the level of profit that a private company can have? In the book Competitive Advantage Creating and Sustaining Superior Performance, M. E. Porter gives 2 central questions relating this above issue: Question 1: What are the determinants of industries’ attractiveness for long-term profitability? Not all industries have the equal opportunities for gaining profitability. The inherent profitability of each industry is one of the most important influencing…

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According to Michael E. Porter, market and industry segmentation is an important part of firms’ competitive strategies. This technique is often used by companies who are trying to expand their market share and increase revenue. Interestingly, Stephen Carter, the author of L4M2 study guide, thinks that professional buyers can use the same technique to manage the supply market. However, not many purchasers grip this technique well. In this post, we introduce and explain the fundamentals of segmentation technique and how…

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To support good governance, the presence of written policies is a must. In procurement, clear policies and guidance will promote good ethical practice and collaboration. Eventually, these outcomes will translate to higher synergy and productivity. In an organisation regardless of the size, the procurement function should have the following policies: Policy on roles and responsibilities of procurement officers Like any other function, procurement should deploy the division of labour. The larger an organisation is, the more important this policy plays….

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In the past, procurement was considered as a secondary function of which the only job was consuming the organisation’s budget. Recently, due to the development of professional bodies who educate and improve procurement’s competencies, more and more organisations pay attention to procurement and supply chain, consider these functions as strategic parts to achieve long-term objectives. What makes procurement so important? We believe that procurement can play the following roles within an organisation: Profit generator: When talking about procurement, most people…

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