Transaction Management vs Procurement: Finding The Right Solution

At some point, procurement teams are going to come across a project that doesn't fit neatly into a regular procurement process. Being able to identify when a particular project requires a more bespoke solution, is a necessary lever a procurement team can implement if required.

When is a regular procurement process not the right tool for the job?

When there's a specific project or major delivery, at time it falls more into a transaction process rather than a procurement one. This is because the project requires a more bespoke delivery model than just rolling out the normal procurement process and associated tender templates. Using a standard tender template in these situations is like trying to fit a square peg in a round hole. Procurement teams need to be aware when they're facing a project of this kind.

These kinds of projects that require a Transaction Management approach are usually high value - often in the range of hundreds of millions to billions of dollars. They also have more of a commercial focus. Transaction Management is generally going to be a bespoke process that's aimed at achieving the best commercial outcome. Procurement can sometimes have a greater focus on compliance, but in the cases of major transactions the commercial outcome is much more important than just ticking the procurement compliance boxes.

For major transactions, it is important to remember that it is not a 'business as usual' requirement, but rather a major project that needs a dedicated team to effectively deliver the targeted outcome.

What kinds of transactions require a different solution?

How then, can you recognise when this different approach is called for?

A Transaction Management approach is for high value, complex and usually one-off projects (even though they may have a long operational period after construction). An example would be for large infrastructure projects delivered through an alliance model. This is where the client and you, as the contractor, are partners in making sure the project gets delivered - things like building a tunnel or a toll road. These can be known as a PPP (public-private partnership project), where the contractor or a consortia ends up owning the asset for a period of time after it's built, but it's constructed on behalf of the government who are engaged throughout the whole design and construction phase. Running a normal procurement process isn't going to get the level of detail that's required for a project of this kind. A bespoke, interactive negotiated process, on the other hand, can.

Whatever the specifics of the project are, it's going to be one where the traditional model of releasing a tender out to suppliers using standard processes and templates and expecting a good outcome isn't going to work. A whole project built around a specific and complex requirement requires a different skill set to manage and deliver. However, within the resourcing you currently have, you may not be fully across how to deliver a project of this kind. That's where we can help. At Procurement Co, we've worked with many clients to help them complete large transactions of this kind by putting together a dedicated team or managing the process on their behalf.

To learn more about how we can help you deliver a project of this kind, get in touch with a member of our team today.

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