Knowledge of the scheduling of procurement requirements and of the timeline of each key milestone in the evaluation and selection process (duration of the evaluation process, approval requirements, contract negotiations, etc.) is crucial to effectively package procurement requirements.
What is procurement packaging?
There are two principal forms of procurement packaging: (i) the grouping (or bulking) of procurement requirements within a procurement category for the purpose of acquiring them under a single contract, and (ii) the division of one requirement into multiple lots, where bidders can submit bids for one, several or all lots (as would be stipulated in the solicitation documents), and where a contract could be awarded for each lot. On the one hand only one contract is awarded; on the other several contracts may be awarded.
Another form of packaging is done by grouping several procurement categories when this is considered most practical. An example of such packaging is when there is a requirement for acquiring a particular type of equipment, and where there may also be a requirement for the installation of the equipment, and sometimes training on the use of the equipment once installed. In such cases, it may be most practical to call for bids for the supply, installation and training on the operation and use of the equipment. Although this may seems the most logical arrangement, the equipment, its installation and training could also be procured from three different sources under three different contracts.
When to consider procurement packaging?
The packaging of procurement requirements should be considered during the requirements determination and procurement planning phases, so that the decision is taken into account during procurement scheduling.
What needs to be considered when deciding on packaging procurements?
The following needs to be taken into account when considering procurement packaging:
- If the group of requirements are needed (or can be received) simultaneously, or are there different delivery dates between requirements. Unless the selected supplier can deliver at different intervals, receiving all the goods at one time could result in a potential logistical problem; therefore, under these circumstances it may be preferable not to package the various requirements.
- The likelihood of local suppliers being able to fulfill the requirement and if the packaging would limit their participation.
- The availability of several suppliers that can provide a combination of procurement categories as may be required in the case of supply, installation and training.
- If the procurement unit lacks the capacity to coordinate several suppliers this may create a preference for packaging to reduce the number of suppliers that the procurement unit would have to coordinate.
When to avoid procurement packaging?
Procurement packaging should be avoided:
- When the failure of one supplier could have a negative impact on the outcome of a project, given the interdependence of requirements under a project.
- When it may limit competition or the participation of suppliers in the procurement process.
- When packaging a requirement into several lots may increase the need for supervision beyond the capacity of the unit responsible for contract administration.
- When there is no economic or efficiency gains to be derived from the packaging.