Almost all charities have similar requirements for their goods and services – why not use some of that common demand to create better leverage on your price negotiations?
If you review your spend profile you will find there are numerous common areas of goods and services that the majority of Charities are contracting for – all individually. These usually include things like insurance, IT, buildings maintenance, print, recruitment, telephony, fundraising, vehicles, fire safety, travel booking and so on.
According to the Charities Commission numbers there are an estimated 200,000 Charities in the UK – imagine the greater leverage that you would have in negotiations with suppliers if some of you came together to go to market?
What is Collaborative Purchasing?
Collaborative procurement is simply a means to deliver greater efficiencies through the combined purchasing power, and with charities increasingly dealing with a reducing income, working in small groups on common requirements can help mitigate this.
Not to share single Contracts or have any shared liabilities but solely to be able to use the bigger ‘carrot’ for suppliers to be able to negotiate better rates, better T&Cs, better payment terms and so on, but still have your own individual Contract at the end of the process as you have always done.
By working with other charities, as well as driving better pricing, this approach can result in fewer tendering exercises, which leads to lower administrative costs and allows the organisations to spend more time focusing on their specialised services.
So, we’re in a collaborative mode and want to lead joined up buying. Our Trustees and Board want savings, everyone wants better Contracts, where do we start?
In reality, when it comes to people tasked with placing orders from different charities having been steered to work together, there’s a more or less a standard set of objections;
- “We do it better already.” We’ve been fulfilling our Charity’s requirements for a long time already and working with another organisation would lower our standards. There’s always a better practice out there – why not take free advantage of it?
- “We’re already locked into Contracts” – Why invest time in something we don’t need yet? Tenders can be run such that the successful supplier picks up each Charity’s business as & when any existing contracts come to an end. Suppliers know and understand this and bid accordingly. This allows you to take advantage of the cumulative leverage now ready for when current Agreements expire.
- “They have different processes.” Everything they do is complicated and will slow us down. All individual needs & requirements are laid out in the tender documents with all KPIs and SLAs included in the specifications. No single party’s processes take precedence over another’s and the collaborative process would be facilitated, run and driven by ProVantage Procurement to the timescales agreed by the group.
- “We want our own Contract”. There isn’t any appetite here to ‘share’ any legal Agreements. There is no ‘sharing’ of Contracts – each Charity will contract directly with the supplier in the same way as if you’d tendered alone but with the advantage of the bigger pot of business as leverage.
- “We don’t have time for that.” I’m already overworked and underpaid, so why would I take this extra work on? If it’s done properly it will result in less work than you currently need to do. Absolutely no control over processes or decision making is lost but the legwork involved is done by ProVantage and the results brought back to the participants at agreed gateways for decisions.
- “They only mind their own interest.” We’re custodians of our charity’s best interests, as much as they are so we’d end up having to accept their specifications. Again, because there is no ‘sharing’ of Contracts each Charity contracting with the supplier will have their own best interests at the heart of their own Agreements in exactly the same way as had they contracted directly themselves once more.
To get past these hurdles there is considerable value in using a third party to facilitate and administer the process. Partly so no one charity has to pick up the resources required for this and partly as the third party have no axe to grind in terms of affiliations to any one of the participating charities – so helping get past the idea that any outcomes would be more in favour of one charity than the others.
ProVantage Procurement can facilitate and support the specification writing, market sourcing, tendering, shortlisting, negotiating and contracting with you, ensuring you get the Best Value you need to demonstrate for your money – but taking away the drain on resources that fulfilling your requirements demands.
What are the key benefits of collaborating?
- Buying Power
Partnering with other charities on goods or services you all need can save you time and money. Not only are you offering a larger pot of business to suppliers, but you represent a larger slice of the market, giving you more leverage for negotiation. By collaborating with others, you’re maximising your purchasing volumes and achieving benefits from economies of scale that could not be enjoyed alone. - Negotiate Better T&Cs
- It’s not just about the unit prices – having greater leverage means you can better negotiate payment terms, delivery charges, upgrades, support, replacements and so on – anything that would normally carry a cost to your charity in one form or another.
- Savings for the Suppliers
Alongside the benefits for your organisation, there are benefits for the market too. When organisations collaborate, instead of having to tender five times for the same amount of business, suppliers only have to complete one set of documents and go through one single process. Less work involved in winning business means fewer resources are needed – generating savings for them that are passed on to you! - Process Efficiencies
Most Charities recognise that competitive procurement processes are necessary to ensure compliance and achieve Value for Money. So, why not save time and resources by doing these together? As well as avoiding the duplication of five separate tenders for the same goods or services (giving you time to spend on your frontline activities), collaboration will help reduce the risk of non-compliance & greatly reduces instances of duplication of efforts. - Sharing Best Practice
Probably the simplest benefit – by working with others, we can all utilise their expertise, gain new ideas for our own organisations, and build our knowledge and capabilities.
How to make It work In practice with a 3rd party facilitating
If there were two or more Charities looking to trial a no-obligation Tender using their combined spending powers, ProVantage Procurement will help manage the process by;
- Agreeing participants
- Carrying out a (free) detailed spend analysis for each to identify common areas of spend
- Agree areas to review & agree timescales/priorities
- Agree on a small set of KPIs – objectives, savings, efficiencies, processes etc
- Agree tender list with the Charities, raise & run tender process, liaise with suppliers, collate all the responses then bring results back to the group for discussion for next steps, if any.
- If proceeding to Contract, ProVantage will also help negotiate the T&Cs to ensure they’re in the charities’ favour
If you would be interested in ProVantage Procurement working with you on a free granular spend review with other Charities to see where we could suggest areas to reduce your direct and indirect costs, please contact Peter Roberts on 07827 014303 or peter.roberts@provantageprocurement.co.uk