Masterful Terms of Procurement

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Procurement is confusing.

Too many acronyms and no detailed explanations.

I made a simple list to change that:

1. SoW (Scope of Work) - A document specifying what good or service your client is looking to buy.

2. RFP (Request for Proposal) - Your client wants a price, but they also would like to hear about innovative solutions they haven't thought of.

3. RFQ (Request for Quotation) - The scope is defined, submit your price based on scope.

Short note: Both RFQ and RFP are used interchangeably by clients. Ask clarifying questions.

4. RFI (Request for Information) - The least "serious" of the three. Your client might just want to gather some market data. But, being helpful here can set you up for later when the RFQ/RFP is coming around.

5. PO (Purchase Order) - This can be two things: Either your client 'signing' the contract in absence of a written signed one. Or the document complementing the signed contract that enables you to issue invoices. Given the complexity and pitfalls of logistics & service agreements, for contracts larger than +$5M I recommend signing a contract.

6. TCO (Total Cost of Ownership) - This is important. Nobody likes hidden fees. Go through examples and make sure this is crystal clear.

7. Incoterms - Incoterms shift risk from one party to another. Be 100% sure you understand what you're agreeing to.

8. Best & Final Offer (BAFO) - This is your last chance. Take it seriously and submit your best offer when it's due. After that, you shouldn't have any more room to move.

9. Frame Contract (Framework Agreement) - The contract I mentioned in #5. Be sure to use easy language that non-lawyers understand and can act on.

10. Time & Materials (T&M) Based Contract - A term often used for logistics and services. It means one thing: You are going to get paid for the time you spend working and the material used.

11. Cost Breakdown - In simple terms: How did you derive your total price? A detailed overview of the different cost items (like drivers, fuel, maintenance, equipment, etc.). Offer full transparency here & you'll gain a lot of credibility with your client.

12. NDA (Non-disclosure agreement) - usually signed at the beginning of an engagement, this document details confidentiality between two parties.

And that's it.

The 12 most important procurement terms from my perspective.

Hope you enjoyed this.

Best,

Gereon

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