Purchasing Capital Assets

Course running order

Purchasing Capital Assets

Course objective

To cover the practical aspects of specifying, tendering, and evaluation of competing options for capital expenditure. A practical tools and techniques oriented course aimed at arming attendees with a toolkit for managing this element of their procurement mix.

Who should attend?

All teams involved in the management of asset procurement. Engineers and decision makers also involved in the procurement of assets.

Duration

A 3-day course, single manned

Course running order

Session One

· Defining assets
o The importance of asset procurement to the organisation
o A statement of strategic intent
o A long term commitment to a course of action
o A financial impact on the company’s performance

· Financial definition of assets
o Current assets
o Fixed assets
o The impact of fixed asset procurement on the financial position of companies
o What is the organisations commitment to asset procurement?

Session Two – A look at the business process

· The asset procurement process
o A brief review of the asset procurement process and tools and techniques
o The need for a business case
o The importance of financial appraisal to the success of the case
o Project buying approach
o Role of the purchasing agent

· An overview of the purchase cycle of an Asset procurement
o Definition of need, Specifying need and the importance of total cost of ownership approaches, design of sourcing strategy, contract strategy, competition management, supplier selection and the importance of financial appraisal, contract award, through life contract management,

· Some examples of the effect of good and bad procurement management

Session Three – Managing tenders for assets

· Defining needs
o The importance of the specification as the legal baseline
o Using performance specifications to increase options for supply
o Keeping the requirement open to all v’s using an existing installed supplier.

· Specifying on a total cost of ownership basis
o Defining the operating environment
o Defining the technical needs for the prime equipment
o Defining the training needs of the operators
o Defining the maintenance regime
o Defining the break / fix regime
o Defining the support needs
o Defining the bug fix and error correction regime
o Defining the upgrade rules and backward compatibility regime

· Creating a service level agreement and setting service and performance levels for each of these needs
o How to write a service level agreement
o How to set a Key performance indicator

Session Four – Supplier selection

· Seeking and selecting suppliers
o Finding suppliers in a worldwide market
o Appraising suppliers of assets
o Key issues in supplier appraisal
o Technical excellence and ability to execute (over the life of the contract)
o Geographic footprint of the support capability
o Technical staff
o Spares stock
o Software support
o Financial security of the vendor

· Selecting the sourcing strategy
o OEM or agent?
o Use of agency agreements

Session Five- Setting up and managing the tenders

· Structuring the tender document
o
o Background aim and objectives
o Specifications and service level agreements
o The intended approach to contract management and administration
o Key Personnel
o The terms for
§ Supply of the goods including the spares
§ Services
· Maintenance
· Training
· Upgrades
§ Software and other intellectual property rights
· Software support upgrades bug and error correction
o Pricing structure
§ Use a total life cost approach to cost
o Appendices
§ Names and addresses
§ Company HSE
§ Company CSR
§ Site access rules

· Setting up contracts

· Key Contractual terms
· For goods
o Liquidated damages for delay
o Acceptance of the goods
o Transfer of title and property and risk in international contracts
o Fitness for purpose
o Guarantee, warranty and Defects liability clauses
o Remedies for default
o Managing stage payments
o Retentions and retention periods
o Which incoterm?

· For software
o Intellectual property rights in the software
o Definitions of Bugs and errors
o Definitions of upgrades and backward compatibility

· For services
o Liquidated damages for failure to supply to the set service levels
o Fitness for purpose
o Termination

Session Six – Managing the competition

· Competition
o PQQ and ITT structures
o The need for careful attention to a total life cost structure for the pricing evaluation
o Post tender negotiation approaches
o Using building block techniques to drive down price and total cost

· Evaluating offers on a total life cost basis
o Investment appraisal
o Break even
o Cash flow balance
o Discounted cash flow techniques
o Internal rates of return
o True rates of return

Session Seven – Managing the contract

· Setting up and managing the ongoing relationship

o Administrative structure of the contract
o Quality assurance
o Commercial matters
o Amendments, variations and claims
o Payment of stages
o Meetings
o Key personnel

· Managing the relationship
o Using balanced scorecards
o Managing with balanced scorecards
o Dealing with
§ Variations to contract
§ Buying spares
§ Upgrades
§ Maintenance
§ Disposal

Session Eight – The business case

· Developing the business case – getting to yes.
o The structure of the business case for purchase of a major asset
o Total life cost analysis
o Investment appraisal treatments
o Risk and sensitivity analysis
o Governance structure, financial management, and resources for the project