Procurement glossary of terms for all procurement activity

A

Acceptance Letter
Letter that creates an immediate binding contractual relationship between the purchaser and the successful tenderer prior to entering into a formal Contract.

Act of God
An event that was not only unforeseen but also had catastrophic consequences and, could not have been prevented. Typically, a natural disaster that impacted on the ability of parties to fulfil their contractual obligations.

Added Value
A phrase often used to classify non-cash releasing benefits realised through the procurement process. The “added value” from the procurement process may include risk reduction, stakeholder training, exclusivity, preferential access to resources etc., all of which would be classified as ‘added value’ benefits.

Addendum
Additional information about the tender, provided to all registered potential suppliers after the initial advertising date.

Aggregation
Adding together the value of separate linked Contracts for the same supply / service over a maximum of 4 years.

Appraisal
A detailed assessment of the general capacity of a contractor, supplier or service provider to meet certain general criteria or standards.

Asset Fixed
Fixed assets are assets that are not to be sold to customers, cannot be quickly converted to cash and are used to create economic benefit by use in the production or service process in the longer term.

Asset Tangible
Tangible assets can be seen and touched and have physical form.

Audit Trail
System or paper generated evidence showing how certain processes and functions were carried out and by whom.

B

Balance Sheet
When companies publish their financial accounts, one of the most valuable sources of information about the company’s status is the balance sheet or statement of financial position. The report details the company’s assets, liabilities and equity, and is a snapshot of the company's financial condition at a time.

Battle of the Forms
The battle of the forms describes the situation that results when parties involved in a commercial transaction exchange documentation with differing terms and conditions. In the event of a dispute between the parties, the courts have to decide what was agreed between the parties and, in the absence of a Contract, the courts in some jurisdictions will seek the last unchallenged counter offer. In practice this often favours the supplier, as the quotation, order acknowledgement, proof of delivery and invoice all supersede buyer communications.

Benchmarking
Comparison of performance and / or pricing against other providers of similar services, particularly those recognised as adopting Best Practice or Best Value.

Best Practice
The most effective and desirable method of carrying out a function or process derived from experience rather than theory.

Best Value
Best value is a trade-off between price and performance that provides the greatest overall benefit under the specified selection criteria. The term is closely associated with value for money. Seeking best value involves considering the quality of the solution proposed, the total life costs, service and support issues, sustainability etc. In higher value procurement projects, the bid evaluation criteria and their respective weightings will give expression to the perception of what represents the best value.

Bid Rigging
Bid rigging occurs when suppliers communicate with each other before lodging their bids and agree amongst themselves who will be the successful bidder and at what price.

Bid Rotation
A form of collusion in which a relatively stable set of bidders for contracts which are routinely awarded to the lowest bidder collude between themselves as to which of the bidders should win which contract. For example, bidder A may submit the lowest bid for contracts let over a particular time period or for a particular scope of work. The other bidders will deliberately inflate their bids on the express understanding that their turn will come. On the expiry of their turn, bidder A will inflate their subsequent bid in order for it to become bidder B’s turn to win the contracts. Bid rotation relies upon a relatively stable community of bidders, regular tenders and predictable behaviour by the buyer.

Blanket Order
A blanket order is an order raised with a supplier for a specific range or category against which individual requirements will be drawn down over a period. Typically, the overall quantities are not known precisely at the start of the arrangement, so a commitment is given to fix the terms of the agreement for a specified period, for example, six months or 12 months.

Boilerplate Clause
The phrase ‘boilerplate clause’ refers to those terms within an agreement which are standard to many agreements and which are included within draft Contracts as a means of reducing organisational risk.

Breach of Contract
When parties have entered into a legally binding agreement and one party fails to fulfil their obligations under the terms of that agreement, they are said to be in breach of the agreement.

C

Capital Expenditure
Capital expenditure [CAPEX] is an amount spent by an organisation to either acquire or upgrade a long-term asset and which is considered a major investment by that organisation, having value to be used over several years.

Carbon Footprint
The carbon footprint is the total greenhouse gas emissions caused by an organisation, event, product or person. Organisations commission an emissions assessment in order to assess their carbon footprint so that a strategy can be developed to reduce it.

Cartels
A group of suppliers acting illegally in concert to artificially influence the price and/or quantity of supply.

Call-Off Contract
A Contract made following a formal tendering process with one or more contractors, suppliers or service providers for a defined range of works, goods or services covering terms and conditions (including price) which users ‘call-off’ to meet their requirements. See Framework Agreement.

Chartered Institute of Procurement & Supply (CIPS)
CIPS is a not for profit professional body working for the purchasing and supply professions. With an objective of "leading excellence in procurement and supply", it aims to promote good practice and provides services for the benefit of a procurement community. CIPS have designed a level based qualification program as follows:-

  • Professional diploma in procurement and supply (CIPS level 6)
  • Advanced diploma in procurement and supply (CIPS level 5)
  • Diploma in procurement and supply (CIPS level 4)
  • Advanced certificate in procurement and supply operations (CIPS level 3)
  • Certificate in procurement and supply operations (CIPS level 2) Upon completion of the professional diploma and with sufficient procurement experience, candidates can acquire full membership (MCIPS). Before acceding to full membership, students hold associate member status (ACIPS). Higher status may also be achieved through recommendation and achievement in the form of a fellowship (FCIPS).

Collaboration
An arrangement under which bodies operate together to procure goods / services. Combined buying power can improve services and prices and share the administrative overhead.

Collusion
A fraudulent arrangement between two or more parties whereby prices or service requirements are manipulated to get around competitive tendering.

Common Procurement Vocabulary (CPV)
The numerical system of identifying goods and services in the tendering process. Also used as part of the procurement process to identify services offered by the tendering organisation.

Consortia
brief description for consortia

  • APUC - (Advanced Procurement for Universities and Colleges) Limited
  • HEPCW – Higher Education Purchasing Consortium, Wales
  • LUPC – London Universities Purchasing Consortium
  • NEUPC – North Eastern Universities Purchasing Consortium
  • NPG – Northern Procurement Group
  • NWUPC– North Western Universities Purchasing Consortium
  • SUPC – Southern Universities Purchasing Consortium
  • TUCO –The University Caterers Organisation

Consultant
An organisation or individual employed for specific tasks, usually where specialist knowledge or objective review is required.

Contract
A contract can be written or verbal. It’s a binding agreement made between two or more parties to perform specific acts and is enforceable by law.

Contract Award Notice
Notice of an award of contract published in the Official Journal of the European Union (OJEU), in fulfilment of the requirements of EU public procurement directives.

Contract Management
Good contract management is critical over the life of a contract to ensure: -

  • That value for money is achieved through full compliance with the contract requirements;
  • That the terms and conditions of contract are met in full;
  • That the goods and / or services provided by the supplier meet the members specified requirements.

Contract Notice
Notice published in the Official Journal of the European Union (OJEU) seeking expressions of interest or inviting companies to tender.

Contract Value
The total monetary value of a contract over its full duration.

Contract Variation
An addition or alteration to the terms of Contract that is mutually agreed to by both parties to the Contract. A Contract variation can be documented by letter or a deed of variation.

Corrigendum
A corrigendum is issued to correct a technical error or ambiguity in a European Standard, a Technical Specification or a Technical Report, inadvertently introduced either in drafting or in printing and which could lead to incorrect or unsafe application of the publication. Corrigenda are not issued to correct errors that can be assumed to have no consequences in the application of the publication, for example minor printing errors. Corrigenda are not issued to update information that has become outdated since publication.

Cost Plus
The method of payment for contracts for which tenderers quote a lump sum or % addition to their costs.

Counter Offer
A counter offer is a conditional response to an offer made by the other party in a negotiation. If the seller offers to sell at a price of £100, and the buyer responds with ‘I will offer you £90’, that is a counter offer. Legally, a counter offer supersedes the original offer, so the buyer may subsequently say ‘OK, I will accept the offer of £100’, but the original offer is no longer capable of acceptance and the buyer’s comments are themselves an offer which the seller may choose to accept.

D

Default
A breach of a contract condition e.g. a delay in the promised delivery.

Deliverables
A collective name for the tangible goods and /or services that the supplier or contractor is required to supply under an agreement.

Direct Award
Direct awards can be made under multi-supplier Framework Agreements framework arrangements which set out all the terms under which contracts may be called off without further agreement.

Dutch Auction
In procurement terms the phrase is sometimes used for the discouraged practice of 'price shopping'. For instance, supplier A quotes a price of £100 and supplier B quotes £105. The buyer then approaches supplier B and invites them to re-quote in the light of the fact that another supplier has quoted a price of £100. If supplier B offers a price of £95, the buyer then approaches supplier A, and so on. This is seen as unprofessional as it involves disclosing confidential information and undermines trust in the relationship.

Dynamic Purchasing System (DPS)
An electronic process for making commonly used purchases which meet the requirements of the contracting authority and which is limited in duration, open throughout its validity to any economic operator that satisfies the selection criteria and has submitted an indicative tender that complies with the specification. It is to be run as a completely electronic process and should be set up using the restricted procedure.

E

Electronic Submission of Tenders
From 18 October 2018 all communication and information exchanged in tender processes for contracts above £181,302 must be carried out electronically including the submission of tenders.

Evaluation
Detailed assessment and comparison of contractor, supplier or service provider offers against financial and quality criteria.

F

Framework Agreement
An arrangement under which a contracting authority establishes with a provider of goods, works or services, the terms under which contracts subsequently can be entered into or ‘called off’ (within the limits of the agreement) when needs arise.

I

Input Specification
Input specifications describe the technical standards which need to be met.

Invitation to Tender
An invitation to contractor, suppliers or service providers to bid for the provision of works, goods or services. Also known as an ‘ITT’.

K

Key Performance Indicator
A key performance indicator [KPI] is a term for a performance measure that is important to the organisation, business unit or individual who is being measured. In procurement, KPIs are typically used as measures of supplier performance and may be part of a contract or service level agreement.

L

Leasing – Operating Lease
An operating lease is a lease in which all risks and rewards related to asset ownership remain with the lessor for the leased asset. In this lease, the asset is returned by the lessee after using it for lease term agreed upon. The ownership of the asset remains with the lessor for the entire lease period.

Leasing – Finance Lease
In a financial lease the risks and rewards related to ownership of asset leased are transferred to the lessee. Ownership transfer option at the end of the lease period is there with the lessee. The title might or might not be transferred eventually.

Light Touch Regime
Light touch regime (LTR) is a specific set of rules for certain service contracts that tend to be of lower interest to cross-border competition. Those service contracts include certain social, health and education services, defined by Common Procurement Vocabulary (CPV) codes.

M

Most Economically Advantageous Tender (MEAT)
The tender that will bring the greatest benefit having taken a number of factors into consideration including quality and cost.

O

Offer
In a legal context an offer is ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed’. Typically, suppliers make offers in the form of bids, quotations or tenders, which may then be accepted by the buyer. The offer defines the terms upon which the supplier is willing to be bound, which normally include price, date of delivery, payment terms and a description of the category. One of the essential prerequisites for the formation of a Contract is the existence of an offer.

Official Journal of the European Union (OJEU)
The Official Journal of the European Union is the official gazette of record for the European Union. It is published every working day in all of the official languages of the member states

Open Procedure
One of the procedures for procurement under the EU Directives, under which all eligible applicants are invited to tender in a one-stage procurement process.

Order Acknowledgement
Historically, suppliers would issue an ‘order acknowledgement’ to advise the buyer that a purchase order had been received. The order acknowledgement can become part of the Battle of the Forms. The practice of issuing order acknowledgements has declined in some sectors, as individual transactions occur within a broader business framework, such as an over-arching contractual agreement.

Output Specification
Output specifications, such as performance or functional specifications, describe the function that needs to be performed and the outcomes that need to be met by the solution.

P

Parent Company Guarantee
A parent company guarantee binds the guarantor (the ‘parent company’) to fulfil and complete a subsidiary company’s obligations and liabilities in the even of failure by that subsidiary to fulfil and complete its obligations and liabilities under a contract.

Pre-qualification
Pre-qualification describes the evaluation of potential bidders, before tenders are invited, against a list of criteria to ensure that only bidders which meet defined standards are eligible to bid, which can reduce the cycle time of the procurement process. Competitive tendering is predicated on the evaluation of offers on an ‘apples with apples’ basis, to ensure that bidders are of equal capability, or meet minimum professional and financial accreditation. In addition, the maintenance of standing lists of approved bidders can ensure that fair and open competition is demonstrated, and that bids can be evaluated on a broadly ‘like-for-like’ basis.

Prior Information Notice (PIN)
A short notice indicating that a call for tenders is planned. The publication of a PIN means that the deadline for submitting the tender from the publication of the contract notice may be shortened.

R

Restricted Procedure
Is a two-stage process which allows the tenderer to draw up a short-list of interested parties by undertaking a Pre-qualification stage, prior to the assessment of invitation to tender documents.

S

Selection Questionnaire (SQ)
The Standard Selection Questionnaire (SQ) is used to collect information to help decide which suppliers should be selected to participate in a tender exercise above EU thresholds.

SMEs
Small and medium sized enterprises, a term used to refer to smaller private sector companies with less than 250 employees.

Specification
A description of requirements and standards to which the goods, works or services should conform. Its purpose is to present prospective suppliers with a clear, accurate and full description of the organisation’s needs, to enable them to propose a solution to meet them.

Standstill Period
Following evaluation of all proposals and prior to completing the contract award you must notify all suppliers of your intention to award the contract. This notification should include the mandatory 10 days standstill period.

Sub-Contracting
The process where a contractor assigns part of the contract to another contractor(s).

T

Tenders Electronic Daily (TED)
TED (Tenders Electronic Daily) is the online version of the 'Supplement to the Official Journal' of the EU, dedicated to European public procurement. TED publishes 520 thousand procurement notices a year, including 210 thousand calls for tenders which are worth approximately €420 billion.

TUPE Regulations
TUPE refers to the "Transfer of Undertakings (Protection of Employment) Regulations 2006". The TUPE rules apply to organisations of all sizes and protect employees' rights when the organisation or service they work for transfers to a new employer. TUPE has impacts for the employer who is making the transfer (also known as the outgoing employer or the transferor) and the employer who is taking on the transfer (also known as the incoming employer, the 'new employer' or the transferee).

V

Voluntary and Community Organisation (VCO)
A general term used to refer to registered charities, non-charitable non-profit organisations, associations, self-help and community groups.

Voluntary Ex-Ante Transparency Notice (VEAT)
A contracting authority must advertise a contract opportunity by placing a contract notice in the Official Journal of the EU (“OJEU”). The rules permit contracting authorities to directly award contracts without publication of a contract notice if certain conditions are met, however. For example, the technical or artistic nature of the contract may be such that there is only one economic operator available to undertake the work.

W

Whole Life Costs
The systematic consideration of all relevant costs and revenues associated with the acquisition, ownership and disposal of an asset.