Procurement Advice:
How to be Sure it’s Impartial.
There are many procurement consultants who can provide advice on optimising procurement within your business. A key factor in your choice of advisor must be whether the procurement advice they provide is totally impartial and puts your business interests first. Whether this is the case will depend on how the consultant gets paid for his or her services.
Typically, this will be in one of the following three ways:
An Hourly Consultancy Rate
This may seem to have an immediate advantage in that you could agree a budget for a certain number of hours and know exactly what you will pay. However, this approach means you pay up front, and have little opportunity for quality control.
The procurement consultant will get his or her fee regardless of how much money their recommendations actually save you. They have no incentive to work that bit harder; if anything, they have an incentive to work longer and charge you more.
Free Consultancy
In certain specialist areas, such as gas, electricity and telephony, free advice is widely available. For obvious reasons, it can seem a very attractive option. But if you aren’t paying for the advisor’s time or web facilities, someone else must be.
Whenever the phrase: ‘We won’t charge for our services’, is used, you can be sure that commission is involved. Such advice can’t be completely impartial, because the consultant will always be balancing their own interests against yours.
A Fee Equal to a Percentage of Savings Made
The way this works is that you are charged an agreed percentage of the value of the savings. Reputable consultants will not invoice you until the savings are actually delivered, with the best arrangement being when nothing is due until the end of the first year.
Companies that work in this way are demonstrating that they are confident in what they do. Their advice will be impartial because the more savings they find for their clients, the more money they make themselves. They will look at your long-term interests rather than at just providing a quick fix - because it’s in their interests to continue to seek and find more savings for each of their clients.
When making decisions about procurement, it’s important to be clear about the motivations behind any advice you seek. If you make sure the consultant has a clear incentive to work on behalf of your business, you can be confident that you will get the most cost-effective and sustainable recommendations.
