1:20 PM
A good starting point is to look at the causes of commercial failure from the procurement point of view. This has two advantages, it helps to identify what might go wrong and it provides a checklist to make sure that you are covering all things which are needed for things to go right.
For low value/low risk procurement, commercial failure might not matter but if the value of the spend is high and/or the risk is high, then it makes sense to think very carefully about avoiding it. Because prevention is better than cure, the time to think is before starting the procurement process rather than later.
There is of course more to minimizing the risk of commercial failure than simply recognising and thinking about failure's causes. Procurement is a process involving planning, specifying, selecting suppliers, managing a contracting process (inviting tenders and negotiating) and then managing the contract itself. At each of these stages of the process, failure can almost be built in if there is insufficient attention paid to the process. It helps to consider each stage of the process and to analyse the possible causes of failure as a first step to taking preventative action. Each stage has between five and eight causes of failure. Some of the causes crop up at more than one stage which means that they are fundamental to good procurement.
It is by considering each of these causes and working through the actions needed to avoid them that risk of commercial procurement failure can be avoided or at least minimised. People doing procurement need to know the sources of the risk and what they can systematically do to avoid them. For professionals, this systematic analysis of risk might come as a result of their training but for other people either doing procurement independently, perhaps on a delegated basis, or working as a part of a team, the process is not obvious. Also, because it is poorly understood, it seems to be slow and time consuming but ignoring it can and does lead to major cost overruns.