The procurement function typically acts as the interface between the organisation and suppliers.
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Procurement’s primary role of taking a business requirement – finding a supplier, negotiating a deal and then ordering the item is hinged on the comprehensives of specifications.
Specifications have implications on the quality and cost of the anticipated output thereby affecting the competitiveness of the organisation.
Specification can be attributed in two ways, characteristics related to things – the part, component or raw material and secondly to actions — functions, processes, procedures, services and performance.
The major risk anticipated from specifications is the narrow definition that has implications of limiting suitable alternatives and the most suitable product or service may not be obtained thereby increasing costs.
Specifications can be drawn so tight that competition is thereby limited. The most common restricted type of specification is the use of brands.
When a brand is used, compliance is only achieved when the brand specified is delivered and alternatives are not accepted.
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Where brands are not used, narrow definition of requirements would involve specifications based on absolute measure rather than the use of ranges in specifying the minimum and maximum acceptable level of compliance.
This is very common in vehicle specifications where issues such as power, torque, engine size, tyre sizes, capacity of the fuel tank, etc, vary brand by brand. Using outright measures therefore limit competition to suppliers or distributors of the specified brand. It may only be fair when there are many suppliers of that type of brand.
The other dimension of risk associated with specifications is the definition of inappropriate products or service.
Inappropriate specifications differ from narrowly defined specifications in that narrow specifications satisfy requirements yet limiting competition.
Inappropriate specifications results in the need not being satisfied. In the process, time is lost due to increased downtime and related costs are inevitably increased.
Using the same example of vehicle specification, inappropriate specifications would be like requesting for attributes of a lorry when a saloon is required. The vehicle acquired would not be fit for the purpose.
The specifications would not be consistent with the need at hand.
This inevitably adds costs from unnecessary capital outlay in the event of over-specification; delays are expected when the process of rectifying the error on the mis-procurement would be corrected; competitiveness is thereby lost.
The other most common problem is on the choice of the specification, whether to adopt compliance or performance specifications.
Where compliance specifications are used, the buyer specifies the details of the attributes of the goods, services or works.
The role of the supplier is to comply with the attributes specified.
The risk of non-performance of the design rests with the buyer – the owner of the design.
Performance specifications detail the minimum or and maximum output required after the necessary constraints has been laid out.
It is the prerogative of the supplier to design a product that meets the attributes stated given the limitations.
The risk of non-performance thereby rests with the supplier in this instance. The most common risk in procurement arise when a buyer provides a design and at the same time requires manufacturers to design and manufacture from his design.
Where designs have been provided, the specification seizes to be a performance specification such that supply simply needs to comply with the buyer’s designs. Risk management in specifications writing is paramount and the risk increases as the project scope increases.
Nyasha Chizu is a Fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity. Feedback: [email protected] Skype: nyasha.chizu
