Implementing a web-based
tender management system for capital project procurement.
By Pieter Boshoff.
For more information see
www.remy-is.com
Benefits
Using an e-tendering solution
can help you reduce both direct costs (the actual project cost) and indirect costs
(those associated in procuring the project and managing delivery). You can increase
tendering efficiency, reduce lead-time and improve tendering controls. The key benefits
of e-tendering are:
Improved Supplier
Management —
E-tendering solutions enable your company to locate suppliers with the best prices
and quality, and help streamline the negotiation and contracting as well as the
delivery processes.
Cost Reductions
and Procurement Savings
— E-tendering helps you increase the productivity and lower the cost of your project
staff. You can reduce reliance on paper-based documents, such as request for proposals,
responses, and contracts.
Improved Documentation
— E-tendering
helps improve reporting and record keeping by electronically tracking and
recording your transactions. This is invaluable in resolving disputes that may arise
and in simplifying audits.
Increased Speed
— E-tendering
helps employees automate many routine tendering tasks (such as approvals), eliminate
redundant tasks (re-use of master templates), and increase tendering efficiency.
Deployment Considerations
and Questions
Following are five areas
to consider before deploying an e-tendering solution:
Strategy
— Have a clear vision of
your tendering operations and obtain senior management sponsorship.
•
What are your tendering
needs?
•
With how many of
your suppliers can you realistically employ automated tendering processes?
•
Is your tendering
process automated? Is it Internet based? Is it secure—to protect sensitive financial
data? Are you large enough to require that your partners use e-tendering if they
want to do business with you?
•
Do you understand
the benefits of an e-tendering system?
•
Does senior management
support this initiative?
Process
— Consider your processes,
and those of your suppliers, in the areas of: tendering, bidding and monitoring
of the works (delivery).
•
Do you have product
and service standards for the projects/services you buy?
•
Do you have an electronic
tendering approval process?
•
Are these key areas
integrated seamlessly?
People
— Training, organizational
culture, and organizational structure must support the change in the tendering process.
Staff support is crucial to success.
•
Who will use the
tendering system? Have you created the appropriate security procedures and policies
for controlling who has access to information?
•
How Web-enabled is
your tendering department? Do they have the skills and equipment they need?
•
Does your staff support
using Internet-based technologies for tendering?
Technology
— Reliable, scalable, secure,
accessible, and manageable computer networks, applications and tools are essential
to support these activities.
•
Is your proposed
tendering system compatible with your suppliers?
•
How well equipped
is your network to support tendering automation?
•
How scalable, reliable,
and secure is the proposed solution?
Service and Support
— In addition to people
and technology, you will want to consider outside services for rapid deployment
(planning, design, and implementation) and operation of your e-tendering solution.
Consider the following:
•
Can I reduce my time
to implement and/or my costs if I hire a services organization with expertise and
experience deploying e-tendering solutions, rather than training my staff to perform
this one-time task?
•
What is the cost
to my business if the system is not available? How can I proactively identify and
resolve problems?
•
How can I protect
my customer/business data, applications, and networks from ongoing security threats?
Success Measurements
Measuring the success of
your e-tendering solutions is similar to measuring the success of your engineering/procurement
departments.
Indications of progress
are reflected through:
•
Decreased lead-time
for tendering
•
Increased on-time
deliveries
•
Decreased number
of disputes with suppliers
•
Decreased delivery
of off-spec items
•
Decreased prices
due to increased supplier visibility and better negotiations
•
Decreased number
of design reviews/change orders
•
Improved inspection
speed and reporting
Some indirect measurements
are minimized costs, including:
•
Tendering cost
•
Bidding cost
•
Printing and mailing
costs
•
Inspection costs
E-tendering can directly
or indirectly affect these metrics. Measuring and monitoring your e-tendering activities
is crucial to identifying problematic and successful areas: they provide insight
into what your company is doing right and wrong. They act as tools that can help
you pinpoint the activities to investigate and adjust.
A Case Study
A case study was done
using a container terminal operator and an e-tendering solution named iSpec/TenderWiz Enterprise.
The Barriers Identified
While the world of e-commerce
has enveloped a global marketplace the issue of implementing simple technology steps
in reality can be a minefield of unexpected issues. Within the scope of the implementation,
the review team looked at both the change management issues for the Operator and
the barriers to the projects success from the supply chain. Generally, these issues
fell into three areas:
1.1.
Pure change management - doing things differently / picking up new innovations
1.2.
Technology enablement or – skills to implement.
1.3.
Technology itself (ISP issues: bandwidth, uploading limits)
Supplier Adoption
From the supply side the
review highlighted that suppliers had a high interest and acceptance of the inevitability
of e-tendering and were quick to learn and adopt it. The issues that arose were
of a technical nature: mainly regarding the available bandwidth of internet service
providers. However these issues were mostly easy to resolve.
General Observation
In using the iSpec/TenderWiz Enterprise software,
some procedural differences were found. However these were improvements resulting
from automation and were easy to adapt to. In essence, the implementation of iSpec/TenderWiz Enterprise
did not change the tender process, it just automated and enhanced it, thereby improving
productivity, transparency and cost-effectiveness.
Production – Specification
Creation and Approvals
In the production phase,
the ROI review looked at the issues of specification writing, question design, price
modeling for bids, question scoring, weighting design and tender compilation. The
software based evaluation imposed a different approach to the current manual procedures
with tender master template design becoming marginally slower which in-turn was
offset by the quality and productivity gains. However, once this task was
completed all future tenders were prepared in a fraction of the time. The original
manual process of tender preparation and approval took an average of 67 days - more
than 5 times longer than the new average of 13 days using iSpec/TenderWiz Enterprise. A best case of
2 days was also noted. This was a situation where two tenders were almost identical
and the system allowed for duplication of such a tender which then required only
minor adjustments for completion.
Distribution
In the distribution stage,
the evaluation considered the tender submission and the tender management process.
This included the internal tender production cycle of printing and collating tenders.
Production costs (printing and binding) were excluded although noted to be very
high for some large tenders. With the need to print and bind the tender documents
entirely removed, the submission was immediate. The iSpec/TenderWiz Enterprise software automates the
entire process of tender publication and supplier invitations. The time saving on
this step was practically 100%.
Process Management
For this phase of the e-tendering
cycle, the task of supporting tenders in the field was considered. This included
handling questions by suppliers and sending the responses to all suppliers where
relevant, publishing addendums and collecting supplier responses. The iSpec/TenderWiz Enterprise service
automated all of these tasks, allowing the suppliers to work on their bids online,
request clarifications and receive responses and addendums online and with the advantage
that the iSpec/TenderWiz Enterprise system validates all their submissions and supplies feedback on progress.
The use of iSpec/TenderWiz Enterprise resulted in a productivity improvement well in excess of 300%.
Vendors reported that some bids were completed in a matter of 2-4 days rather the
the usual 3-4 weeks. At an average cost-to-bid of $75,000 on a complex tender this
converts to significant savings.
Analysis of Tender Bids
In the analysis review,
the ROI benchmark looked at all the tasks of data entry, data coding for scores,
price reviews for bids, question scoring, presentation of data internally and question
auditing. In this phase of the process the automated capabilities of the iSpec/TenderWiz Enterprise application
totally reset expectations. Firstly, the system automatically scores all fully compliant
submissions, leaving only the non-compliant items for evaluation and scoring. The
overall time saved using the application was estimated at a massive 80% over the
current manual approach.
Contract Negotiations
In the fulfillment cycle
the benchmark looked at the process of creating a tender contract. As contractual
terms and conditions are included in the e-tender, software automation considerably
assists in the drafting of the final contract document, removing a time-consuming
manual process. For supplier negotiations and internal management reporting, the
iSpec/TenderWiz Enterprise software provided an array of charts and reports that allowed easy data comparisons.
The estimated time saving for this phase was a 50% reduction.
Contract Management
Included in this phase of
the e-sourcing cycle are performance monitoring and automated tracking; including
penalty (liquidated damages) calculations, manufacturing inspections, performance
testing, data gathering, MRO spares and procedure delivery and final inspection
and commissioning tests.
The ROI - Return on Investment
Based on a simple return
on investment model, the automated e-tendering process was found to deliver impressive
productivity savings. The use of iSpec/TenderWiz Enterprise resulted in a 46% reduction in time. (Based
on a flat labour rate of $100.00 per hour, the e-tendering process was estimated
to reduce costs from $23,500 down to $12,700 for the average tender).
Across each stage of the
tenders studied, the Operator noted significant time savings and operational improvements;
the actual time from tender creation to bid submission was reduced by an average
63%, and the time to manage tender responses was reduced by an average of 67%.
Actual number of items negotiated
on during evaluation and contract awarding increased as a result of improved transparency,
but resulted in a dramatic reduction of post-contract negotiations, design reviews
and change orders.
Summary
E-tendering activities help
you manage your suppliers, reduce costs, improve information flow and streamline
your tendering process. During your deployment of e-tendering solutions, you will
have to manage change in your strategy, process, people, and technology. Effective
deployment will improve your overall business performance, with positive results
in the areas most important to your business: lower costs and higher profits.