Buying Stuff

How do you buy stuff and make sure that when you set out to buy something you know what it is that you want before you buy it. Then…once you’ve bought it and the work begins, how do you make sure that at the end you can clearly identify if you’ve got what you paid for?

The steps you go through to buy stuff:

1. Write down what it is you need (not want) to buy
2. Find people in the market who can deliver what you need and create a ‘long list’ (i.e. more than three)
3. Select from the ‘long list’ the three that seem most suited to your needs (location, reputation, product range, etc)
4. Request quotations or estimates from the suppliers you have selected for your ‘short list’
5. Compare the estimates from each supplier and score each on their quality and price
6. Select the winning quote and contract for the product or service
7. Validate the outcome of the product or service once completed

 

Step 1 – Write down what it is you really need

Yes, you heard it right…..this is all about getting you to identify what your ‘need’ not what you want. I want a Ferrari but a Ford will server perfectly well to satisfy my need to get from A to B.

If you can start your definition of what you are going to buy with a ‘statement of minimum requirements’ you will save a lot of time when you receive the estimates from your suppliers. It’s easier to add things in later than it is to strip them out once they are included.

So you start with a blank sheet of paper and on it you have the headings:

• Description (what are you asking to be provided)
• Start Date
• Deliverables (what do you expect to receive)
• Success criteria (i.e. what does good look like)
• Milestone dates (are there key dates that affect the work or that it can be chunked up into)
• End date
• Estimate of value (what are you expecting to pay for what you need)

Great – you now have your ‘Specification’ of what you need.

Once you have undertaken this exercise you have a much better idea of what you are entering the market to purchase. Well done!

Step 2 – Find people in the market who can deliver what you need

So you now have a clear view of what you need and the next step is to find the people who can deliver it to you.

Research is the key here, you want to find a good selection of people that have delivered what you want before. You may ask the Gods of Google to help you in your quest here to develop a ‘long list’ of 5-10 suppliers that you think can deliver what you need.

Step 3 – Select your ‘Short-List’ of Suppliers

Once you have the long list then take a look at the types of Suppliers you have found that ‘could’ deliver you what you need, there will now be some criteria that will help you narrow these down.

• Personal criteria – these could be reputation, fairtrade supplier, etc
• Market criteria – competitiveness, geographic location, size, experience, customer ratings, etc

Now rank each of the suppliers against your criteria (Hi-Med-Low or 1 – 5) to give you a league table.

Now review the scores and pick the top 3 from the table to down-select to a ‘short list’ of the suppliers who are most suited to deliver what you need.

Step 4 – Request Quotations

So you’ve found the people that you think can deliver what you need. So now dust off your ‘Specification’ and re-visit what you have written in light of the research you have undertaken in reviewing the market, you have learnt more and identified some other deliverables or criteria that help define your Specification.

Make contact with your short-listed suppliers and share with them your specification of what it is you need and ask them for an estimate or quotation.

In asking a Supplier to provide an estimate you need to consider what sort of commercial arrangement you want to enter into with them. And they all relate to how much risk and transparency you want to take on, or lay out to the Supplier.

• Fixed Price contract – you get a single cost for the work to be completed based on the information within your Specification. The supplier then provides a price based on their judgement of how much effort they will need to put in to deliver what you need. Should the work take longer or cost more then the Supplier has taken the risk and must deliver to the price they have quoted, equally if the work is easier and completed more quickly then the Supplier still gets paid the same amount and makes more profit from you as their reward for taking the risk.
• Time and Materials contract – you get an ‘estimate’ of the amount of time (man days of work) and materials that the Supplier believes the work will take. You pay for any materials used at an agreed price and then every hour/day spent on the job you will be billed an agreed cost per unit of time. If the estimate proves to be too high then the work is completed for less cost than estimated But if the work takes longer then you will need to pay for the additional time and materials required to complete the task. You are then taking the risk on the work and the Supplier has no risk because any costs they incur you will have to pay for.

Be clear with the Supplier which form of contract you would like to enter into, and be prepared for some Suppliers to be risk-averse or to ask more questions of you to help assess the risk associated with the work.

Step 5 – Compare the Estimates provided by the Suppliers

Now that you have the estimates back from your Suppliers you can review and compare the quality and costs of what they are proposing to deliver to you.

Using the key sections that you wrote down in Step 1 to create your specification you can now compare how each of the Suppliers estimates compare to each section (i.e. Deliverables, Milestones, Success Criteria and costs). By ranking each supplier on each section, again giving a Hi-Med-Low or 1-5) you can apply a more scientific approach to which Supplier you choose.

Once you’ve compared then you can decide which of the responses offers the best fit for your individual need – and beware selecting on cost alone, there can be truth in the phrase ‘you get what you pay for’.

Step 6 – Contract for the work

You are now ready to ‘Contract’ for the work. This is a legal process and while not scary it is good to be aware of what now happens.

A contract is an agreement between two parties that creates an obligation to perform a particular duty.

For the contract to be legally enforceable it needs:

• An Offer (the Estimate or Quotation)
• An Acceptance (A signed agreement or Order)
• A Consideration (i.e. the value given and received, the work gets done to your satisfaction)

The ‘Offer and Acceptance’ needs to exhibit the following:

• Both parties must express their contractual intent
• The ‘Offer’ must be clear and definite
• The ‘Acceptance’ must be clearly communicated

The ‘Offer’ element between the parties being clear and definite is where the ‘Specification’ comes in. The Milestones (time for performance), the Description and Deliverables (scope of services) and the ‘Price’ included in the Offer all contribute to ensuring it is clear and definite.

Step 7 – Validate

People often make the mistake of waiting until the work is complete and only then validate that what has been delivered is what’s needed. And guess what…….it’s not what was expected.

There is nothing wrong with building in checks to confirm that the work is progressing along the right lines as it rolls along before it is finished.

To validate the work is delivering what is needed you must review the deliverables and the milestones with the Supplier to confirm that the work is progressing to time and quality. The success factors that you wrote into your ‘specification’ are key here as they describe what good looks like. If the work is not turning out as the deliverables you described you needed, or the quality does not match what you said good looked like in your specification then make changes and talk to the Supplier to change course.

Well Done! You’ve read and hopefully understood the process of buying stuff – you can now go and use this to turn your idea into a business faster!