Business Case & Procurement: Useful Or Not?

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Author: Margaret Gilbert

Procurement often occurs without a business case or providing reasoning for procurement. This equally applies to procurement plans. The lack of clarity is a bit disconcerting and shows the lack of reasoning as to how procurement is undertaken.

Equally, organisations do not have a procurement plan for upcoming procurement which provides useful information to suppliers and which allows suppliers to gear up. The purpose of a business case is to outline the background of procurement of the product/service, the need for new procurement, the issues, budget requirements, any training needs, implementation and any transition issues.

Business cases are a part of public procurement but not always undertaken for private procurement   The business case has recommendations and is sent to management for approval.

|Some business cases are not done well and can be rejected until the necessary information is found and included.  This can include the results of sourcing, likely budget and most importantly likely transition issues.

A business case is a part of planning and pre-work and should include budgetary consideration.

Benefits of business case:

The benefits of a business case is to be able to clearly outline the current situation and what future requirements look like. In addition to be able to provide a time frame, budgetary requirements and other detail.

It provides clarity around the procurement rather than operating by ‘I think that we need…’ to ‘We do need this and…’.

It provides management with a clear outline so it can be approved especially in respect to budget requirements.

Negatives of business cases:

Time is given as a reason for not preparing a business case. More time will be needed later to fix issues from not having a business case.

What is needed:

A template would take away the uncertainty as to what is required for a business case.

Useful checklist:

  1. Have you relevant information?
  2. Have you considered the budget requirement?
  3. Do you have detail as to what is required?
  4. Do you need to get approval – and from whom?

Benefits of procurement plan

The major benefit of placing your upcoming ears’ procurement on the website is that suppliers can be aware and plan to be ready. It will take some work and will need to be updated on a regular basis.

Value

Documenting the procurement plan is essential so that if there are questions raised then there is documented evidence to back up the question. The business case, budget, tender preparation is the forerunner of going out to tender.

Summary

A business case is often required and it is useful in that it provides an opportunity to think clearly as to why you want to make a change from existing requirements to new requirements, and to look what at the issues are in relation to transition, training, budget issues and the like.

A business case does take time and this should be factored into the timeframe of pre-tender.  To make it easier, using a template will take away the guesswork.  Shortcuts are not the answer.

 

Margaret’s book ‘Contract Matters: A Future for Procurement’ is available through  margaret@corpcontracts.co.nz or www.contractmatters.com , $30 book, $15.00 for e-book.

 

 

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