Achieving the best deal for your organization – and being able to demonstrate it to stakeholders – depends on your ability to continually seek out and report on additional savings and benefits throughout the contract lifecycle. The search for added value doesn’t end with the completion of the procurement process.
For organizations managing long term contractual relationships, there can be a tendency to compartmentalize efforts to secure added value within the procurement process and to let the impetus to find savings and benefits slow down after the initial agreement is finalized.
In the long term, this can lead to missed opportunities for both buyers and suppliers to make their working relationships as efficient and mutually-rewarding as possible. Ensuring that agreed benefits are delivered – and new opportunities to add value are flagged up and exploited – requires a sustained emphasis on value as well as efficiency within the contract management process.
What constitutes added value?
Depending on the nature of any given procurement function, added value can take the form of general cost savings, efficiencies made possible by new technology or processes, provision of certain products or services for free or at a discount, and any actions that come under the banner of social value.
The rise of social value requirements in procurement in recent years has demonstrated that additional contractual value need not be seen purely in the context of cost savings or efficiencies, and that indirect community benefits serve to strengthen the position and capabilities of both buyers and suppliers as well as the communities they operate in.
How to track, demonstrate and maximize added value
Any added value achieved in a procurement process can only be properly quantified, benchmarked and reported on, relative to previous or parallel examples. Ideally you’ll have a central repository of all your current and historical contract information, along with end-to-end management functionality that permits the continuous recording, extraction, and comparison of value-specific information. This enables reporting on added value at the conclusion of each procurement process and at intervals during the contract lifecycle.
Implementing a standard set of reporting metrics that take account of differing priorities across product and service areas – and factors such as inflation when conducting retrospective comparisons – allows you to signpost the specific types of added value that are most beneficial to the organization in the long term and gives stakeholders and decision makers an insight into what can, and should, be achieved.
Crucially, added value should be prioritized in post-award contract
and supplier management
and engagement activities, with regular appraisals and reports on whether or not benefits have been delivered and if any new possibilities have presented themselves. Waste can end up eradicating any savings that have been secured, so placing an emphasis on added value within more general efforts to minimize spend leakage can contribute to maximizing additional benefits and overall efficiency in the long term.
Drive maximum value from every supplier contract with Proactis Contract Management