1.) Management, Direction and Control – The most common mistake in any type of procurement method is that the owner tries to manage, direct and control the vendor. This will lead the vendor to become reactive which will decrease the utilization of expertise and increase risk. The vendor should know the best way to do a job and the vendor should be able to prove this with dominant metrics. Managing, directing, and controlling is not necessary. It causes higher costs, more transactions, and an increase in risk.
2.) Negotiation of Contract – After a vendor is selected for a project, the details of the contract have to be made. This is not a time for the owner and vendor to negotiate over price, scope, or details. In this phase the vendor listens to the owner’s needs, wants, and limitations for the project. Based on the owner’s information, the vendor will use his expertise to create a plan to satisfy all the needs. The vendor becomes the offeror of the contract and the buyer or user becomes the acceptor of the offer.
3.) Owners Make Decisions – Decision making happens when a situation is complex and non-transparent. It is astounding how many professionals make very important decisions that have no logical reasoning.The use of dominant information replaces the need for decision making both on the owner and expert contractor functions. Dominant information is identified as the language of metrics or performance information. Metrics creates transparency that allows everyone to understand a situation and minimizes the need for decision making.
4.) Vendors Maximize Scope – Most vendors are encouraged to maximize their scope in an effort to win a project. The problem is that they might not have the capability to follow through with what they promised. By maximizing their scope vendors increase their risk, and cost significantly. We want the vendors to minimize their scope to whatever they are positive they can do. This allows a vendor to do higher quality of work at a lower cost with lower risk.
5.) Trust & Relationships Used to Minimize Risk – Professionals shouldn’t trust anyone! Whenever you have to trust someone your risk and stress increase. True experts don’t rely on trust but they make things simple and transparent enough so that everyone understands it. This way you don’t need to trust them but you know they will perform at a high caliber. The only true way of minimizing risk is by creating transparency.
Learn Successful Procurement Methods!
Dr. Dean Kashiwagi has developed a system that streamlines the process of purchasing and contract management so that the most qualified vendors are selected and empowered to perform their expertise at an optimal level.
These books explain the theory behind the system, give examples of its implementation, and provide detailed instructions on how to implement.