Scope of Work
A Scope of Work (SOW), is a document defining
the work required to complete a project.
For example, an SOW may be included in an RFP
(Request for Proposal) process.
SOW's contain (but are not limited to) the
- Description of Work
- Induction Information
- Contractor Equipment to be used
- OH&S Guidelines
- Licenses, Permits
7 stages of negotiation
The 7 stages of negotiation in Procurement are
2. Relationship Building
3. Information Gathering
4. Information Using
6. Closing the Deal
7. Implementing the Deal.
Shared Services is about consolidating a
business function (eg: Procurement), into it's own
focused business unit, and providing this internal
service to the rest of the organization.
For example, a large energy company has many sites
that all do their own Purchasing and Procurement.
Management decides to create a centralized Procurement
team that will expertly handle all Procurement matters
for the company. This is an example of a Shared
When goods are available from more than one supplier,
and it is decided to only source these from a single
supplier, this is known as Single Sourcing. There
always should be a good reason for Single-Sourcing,
especially those of higher value.
For example, a requisitioner at a mine site requests
the Procurement department to order an hydraulic motor
worth $22000, and wants it ordered only from Joe's
Hydraulics. The Procurement department advise that any
orders over $10000 must go through a 3-quote RFQ
process, unless there is a good reason for the single
The requisitioner fills out the company's
Single-Source Approval Form, stating this is an
emergency order and Joe's Hydraulics are a local company
and can get the motor to them immediately.
The Procurement department accept this reasoning and
the motor is single-sourced.
Six Sigma is a business methodology that aims
to improve quality and performance by eliminating
defects to a statistical quality of less than 3.4
defects per million units.
Six Sigma initially was used initially in
manufacturing industries but can be applied in most
Sole-Source Procurement occurs where a
product/service can only be sourced from one vendor,
usually due to some unique characteristic that only one
vendor can fulfill, meaning there is no competitive bid
The term Sole-Source is often confused or used
interchangeably with the term Single-Source.
spend analysis procurement
A Procurement Spend Analysis involves breaking
down the total spend (eg: by category, commodity,
geographical location etc), with the aim of identifying
savings opportunities and increasing compliance. Some
organizations utilize spend analysis software for
For example, a mining company has a total spend of X.
This spend is broken down into categories such as
Underground Equipment, Plant Equipment, Materials
Handling, Transport, I.T., Facilities etc. The spend
is further broken down into more specific
sub-categories, and analysis is undertaken on eg:
how many vendors are being used for this sub-category,
and are there savings opportunities through eg:
negotiation, consolidation, contract etc.
A Stakeholder can be defined as person or
group who have a direct or indirect influence in, and/or
are affected by an organization's
For example, a Procurement Officer for a company
would be considered a stakeholder in any projects that
the company is involved in.
standard model contracts
Standard Model Contracts are pre-made contracts for
the purpose of simplifying the drafting process. Of
course, the provided standard terms and conditions need
to be read through thoroughly, and refined to suit your
purpose. They are made available for many different
industries and many can be found on the internet from
purchasing institutes and bodies. As a matter of fact,
Standard Model Contract out of a popular business
Strategic Sourcing is about developing long-term
strategic relationships with the right suppliers, by
analyzing the company's spend, aligning a sourcing
strategy with corporate objectives, focusing on the
total cost of ownership, and therefore obtaining better
value and outcomes for the company.
A Subcontractor is an entity that performs
part or all of another entity's contract.
For example, a manufacturing company that builds
trucks for the mining industry may use subcontractors
for its welding and auto-electrical work.
supply chain management
What is the definition of Supply Chain Management?
'Cooper and Ellran' define it as "an integrative
philosophy to manage the total flow of a distribution
channel from the supplier to the end user".
Sustainable Procurement is about taking into account
external criteria of Environment (eg: energy
wasted in manufacturing product; environmental cost of
disposal), Social (eg: working conditions;
diversity), and Economic impact (eg: supporting
local business economy; local job creation).