EconoBEE Newsletter – March 2007 – The Procurement Problem
The Procurement Problem
Procurement is worth 20 points on the Generic scorecard and 25 points on the QSE scorecard.
On the Generic scorecard it is worth as many points as equity ownership (without the bonus points).
The aim of preferential procurement is to support black owned businesses, EMEs, QSEs and generic companies that have a good BEE level. This is important. In order to score points on procurement, a company will have to identify its suppliers via the score they achieve. It is no longer sufficient to merely ask for the percentage of black ownership or black management. The entire score, or level of that supplier must be identified.
This can be a difficult task! Some large corporations have over 5000 suppliers, of all sizes. It can be a logistical nightmare to obtain verified information from each supplier. It gets more difficult. In our experience, only about 10% to 20% of suppliers will even respond to a request from a company for their score. Those suppliers themselves need to go through the process of obtaining a scorecard, including doing their own preferential procurement exercise.
Some issues around the procedure:
Encourage your suppliers to submit their information. They probably do not know how important it is to you that they give you their score. If they knew that by giving you a score, would help you in your own business, they would probably be more accommodating.
The reality is that most companies will have a low score. Explain to your suppliers that any score is better than no score at all. We know of many companies that are too embarrassed (or scared) to submit a score.
Where the supplier has a score or a rating, you should allow him to submit it to you.
If the supplier does not have a score you should send out a questionnaire to its suppliers. The questionnaire should be as simple as possible, but ask for sufficient information to be able to obtain a proper scorecard. See questionnaire for a sample questionnaire. The questionnaire should be easy to fill in and submit back to you, via a printed form, or an on-line site.
Assist the supplier. We can offer to host a workshop in your offices to explain the intricacies of the scorecard and why you need it so badly.
If the supplier does not want to fill in the questionnaire, he can choose to get a rating, or better still, do his own self-rating, which is implicitly allowed. Our EconoBEE Scorecard software is a low-cost starting point, and could be recommended to all suppliers.
Once supplier responses start coming in, you should create a simple database – we have even seen excellent Excel spreadsheets that handle this, or we can help you in this regard.
The responses should be analysed. If the response is a rating or document from a responsible source, it only needs a quick glance to ensure its accuracy. Alternatively it should be investigated and accuracy confirmed. The codes do say that it is not your responsibility to double-check all scorecards you receive, but you are entitled to check up on a scorecard and investigate further if you have reason to believe it is not accurate. Experts from our company will be able to give an informed opinion within a minute or two, without having to double-check all the information.
The information in the database to be captured should include the Type/Size of Company (ie EME, QSE, Generic), black ownership %, and the level achieved by the company.
Eligible procurement in your company should be identified, by value, type of goods/services and supplier. This information is obtained from your accounting/finance department.
We need to know the value spent with each supplier. This gets put into the same database/spreadsheet, ideally next to the companies’ own level.
The actual calculation is not that complicated once you have all the data in a nice formatted spreadsheet or database. You may download an example of the calculation here.