February 11, 2022

FACTORS AFFECTING EMPLOYEE SATISFACTION WITH REWARD SYSTEMS The degree to which one is satisfied with the reward system is related to the following: – Fairness Expectation and value Internal comparisons External comparisons Self evaluation Total reward package a) Fairness Is concerned with the extent to which the employees think the system is fair. This fairness can be seen, in that; rewards are commensurate with ability, contribution and effort. To be fair, pay must be felt to match the level of work and the capacity of the individual to do the work b) Expectation and value Satisfaction is high when rewards meet expectations as to their value and the value of the reward is commensurate with the effort and skills to obtain it. c) Internal comparison Employees are more likely to be satisfied if they feel they are being paid correctly in relation to what others gain for similar jobs in that organization. Dissatisfaction may arise due to perceived inequities in pay levels d) External comparison Unclear prediction of the levels of reward is likely to cause anxiety among employees – consequently, employee commitment and satisfaction may be eroded. e) Self evaluation People always attach a level of value to what they believe they are worth. Satisfaction with rewards will result if the rewards are in line with what people believe they are worth. Self-evaluation should be considered with great caution because people have a tendency to over rate their own valuation f) Total reward package Overall satisfaction depends on the result of a mix of rewards, rather than a single reward. A HR manager should carefully consider the reward mix. It is important to note that intrinsic benefits and extrinsic benefits are both valuable to employees. INFLUENCE OF CORPORATE CULTURE AND ORGANISATION The reward system should fit the corporate culture. The organization structure can influence reward system. A highly structured organization – very bureaucratic, will tend to centralize its activities. A reward system in such a structure will be centralized and controlled from central point. A loose structure – explains how rapidly a company growing, may not wish to put in place overly formalized reward procedures. Such an organization needs flexibility and as such the reward system will be flexible enabling the organization respond quickly to change. Flexibility may be seen in terms of remuneration mix, benefits available,    and involvement of other managers in pay administration. A flattened structure or delayered structure requires better teamwork among managers. This will call of group rather than individual pay systems especially bonuses and incentives – encouraging teamwork and not individual performance. A highly decentralized structure – where authority is dispersed to lower levels of the organization (employee empowerment) – the various units of the organization are allowed to input to the decision making process concerning rewards. At times heads of departments may determine how much increment his/her employees should get the kind of benefits and the remuneration mix. Their recommendations on reward matters are taken seriously.

REWARD POLICY A policy is a guideline that helps managers make day-to-day decisions. Reward policy is an organizations’ statement on the implementation of reward management and strategies required, to achieve the reward policy. A reward policy is a broad expression on how the organization intends to reward its employees. Such statements usually cover certain aspects: – Basis of reward Market rates/internal rates reconciliation Line managers involvement Level of flexibility BASIS OF REWARD This explains whether is to be based on performance for example, or based on seniority, or on skills etc MARKET RATE AND INTERNAL RATE RECONCILIATION This explains the reconciliation of tension between the need to achieve external competitiveness and a reasonable degree of internal equity. Market rates especially competitor’s influence rewards. There is need for a balance between external tension and internal tension. LINE MANAGERS INVOLVEMENT The policy needs to express the extent to which decisions on pay can be delegated to line managers. Involvement of line managers or no involvement should be defined by the policy. To get involved Line Managers must be adequately trained on techniques of decision-making as concerns reward management LEVEL OF FLEXIBILITY (Mix) This explains the degree to which a flexible approach can realistically be adopted towards total remuneration. Address the extent to which one can mix basic salary and benefits selectively. An inflexible policy does not take care of all the employees’ interests. DEVELOPING REWARD POLICIES Reward policies are developed on the basis of the organizations reward philosophy. An organization may have either a negative or a positive philosophy on reward. A positive philosophy is that which is concerned with the level or quality of its remuneration.  Such an organization regularly reviews its package with an aim of attracting, retaining and motivating its workforce – it does not wait for a push or a threat to review its salary policies. Such a company is honest and it objectively remunerates employees – offers them what they deserve and not what it thinks.   A negative philosophy is seen in the form of dishonesty and subjectively in determining remuneration package. Such companies wait for a threat before they act on salary. Reviews are piece-meal with employee contribution to the company taken for granted. Reward polices should be developed upon the understanding of the following: – Factors affecting performance and motivation Those factors affecting reward levels Factor affecting employee satisfaction with reward system The influence of corporate culture and organization FACTORS AFFECTING PERFORMANCE AND MOTIVATION i) Performance For a high performance index to be achieved, the following should be considered: – Employee empowerment Employee guidance Employee empowerment – recognizes that the employees have the ability; skill and knowledge that is needed to achieve the level of competence required. Employees must be empowered to achieve full potential of their ability, skills and knowledge. Empowerment is done through, delegation of work and authority, but retaining responsibility, participatory management or participatory decision making process, allow for innovation and initiative, learn to accept errors as human. Guidance – this dictates that a supervisor or manager must be available when needed by the subordinate or staff. Absence may lead to frustration, reduced performance etc. it may lead to loss of many hours if not readily available. Employee should be enable to perform through guidance and support provided to them. Guidance is through quality of leadership and autonomy they are given to decide, act and exercise control over their work. ii) Motivation This is an important factor in the development of rewards system. It is important to consider motivational factors before a decision is made on reward systems. Motivation may be based on various motivational theories, the most common being Influence of expectation theory Expectancy Theory Employees are likely to work harder based on their anticipation, that they can get the reward desired. This can only work under certain variables when the employee has skill is competent and that the target is attainable then this expectation theory can function. Financial rewards work or act as incentives only if people’s expectations that they can earn the money is high. Money may not guarantee the employee’s improved performance. FACTORS AFFECTING REWARD LEVELS Individual worth – is concerned with the value of contribution made by individuals to the achievement of organizational goals. Such contribution must be quantifiable. External relativities – concerned with consideration for the values of the service to the buyer and seller the employer and the employee respectively. Internal relativities – this is concerned with the value of the job within the organization. Within an organization pay levels are affected by real or perceived differences between the value of the jobs and the individual contributions made by the jobholders. Trade union pressure – this is done through the CBA’s. They use numerical strength to influence pay decisions – e.g. KNUT’s achievement of better pay for its members

A public private partnership (3Ps) is a government and one or more private sector companies. 3Ps involves a contract between public sector authority and a private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. Management of Public Private Partnership Contract. 3Ps contracts are essentially concessionary contracts including financing by investor when the owner has limited budget or borrowing capacity. The 4 principle roles for the private sector in PPP schemes include: 1) To provide additional capital. 2) To provide alternative management and implementation skills. 3) To add value to the consumer and the public at large. 4) To provide better identification of needs and optional use of resources. When to adopt PPP contracts. PPP schemes have developed in part due to financial shortages in the public sector. They are used mainly: For revenue earning projects e.g. to toll roads, power, water, transport, health, and education. Where the proposed tariff is an attraction to the investor and offers value for money to the public. Criteria used in the formation of PPP contracts. 1. The proposed tariff, (revenue to investor) is a major consideration in the bid evaluation. 2. The project should be economically viable for the public sector. 3. The project should be economically viable for the public sector. 4. Appropriate balance for risk and award between the public and private sector. 5. Public sector must achieve value for money. Advantages of PPP Contracts. 1. Brings in resources and expertise from the private sector.\ 2. Improved value for money in the procurement of public service through competition. 3. Improved operational and commercial performance. 4. Cost and risk shared by investor. 5. Acceleration of infrastructure provision. 6. Easter implementation. 7. Improved quality of service. 8. Generation of additional revenues. 9. Enhanced public management. Disadvantages of PPP contracts. 1. Contracts are complex and tendering process have long lead times. 2. Effective contract management and performance monitoring systems are required. 3. It may not be politically acceptable. 4. It locks public sector into long time private sector financing and commitments. 5. Possible conflict between planning and environmental consideration cost of re-entering the business of the operator.

Third sector procurement is defined as procurement by non-governmental organizations which are value-driven and which principally re-invest their surpluses to further social, environmental or cultural objectives. It includes voluntary and community organizations, charities, social enterprises, cooperatives etc. Third sector organizations are very diverse in both size, scope, ranging from small, locally based community groups, social enterprises and large national charities. Some have no income at all and rely on the efforts of volunteers whilst others are run by paid professional staff. Third sector organizations are most commonly linked to health and social care, crime prevention and reduction, community transport, spot and recreation, learning and recreation, housing, welfare, advocacy and campaigning etc Funding arrangements Third sector organizations receive funding in two main ways: 1. Grants – funding that can be provided by public bodies as a means of offering financial support to third sector organizations to enable them to undertake work, designed and proposed by them, which it wishes to sponsor. A grant may be ‗general‘ to assist with the expenses of running and developing an organization (often grant-in-aid) for a service that forma part of its own businesses. 2. Procurement is the acquisition of goods and services from third party suppliers under legally binding contractual terms where all conditions necessary to form a legally binding contract have been met. Such acquisitions are for the direct benefit of the contracting authority, necessary for the delivery of its service or for the running of the business. All third sector procurement must adhere to government policies of the country that has funded that program, procurement or given the grants based on value for money and that country‘s procurement rules which exist to ensure all providers can compete for contracts on equal basis. Preferential treatment Third sector procurement practices should not or does not involve procurement of third sector organizations or local businesses, but these organizations must be allowed to compete on a level playing field with all other providers. The issue therefore is how to open up supply opportunities to third sector organizations, build effective relationships with them, and remove some of the barriers they face in successful delivery of third sector contracts. Within third sector procurement rules, there is scope to integrate environmental and social requirements into contracts where these are relevant to the subject matter of the contract. There are many examples of contracts that have legitimately included environmental and social requirements, covering issues such as energy efficiency, waste minimization, community benefits (recruitment of long-term employment), fair trade, and the purchase of fresh and seasonal produce. Advantages of third sector procurement There are many benefits and advantages that third sector organizations can bring to public sector delivery: 1. A strong focus on the needs of service users 2. Knowledge and expertise to meet complex needs and tackle difficult social issues. 3. An ability to be flexible and other joined up service delivery. 4. The capacity to build users‘ trust. 5. The experience and independence to innovate. Third sector organizations can deliver services in a different way, for example: Involving local people to build community ‗ownership‘ and benefits Building the skills and experience of volunteers Increasing trust within and across communities, thereby building social capital. Overview of challenges and barriers faced by third sector procurement  Lack of early and effective consultation with third sector organizations in the development of policy, programmes and commissioning strategies, leading to poorly packaged and unattractive procurements. Failure to properly assess third sector organizations‘ capabilities and to consider them as serious contenders. Insufficient recognition given to strengths and skills particularly in key service key service areas. Risk-averse procurers who are worried that third sector organizations lack the resources, organization and business skills to deliver. Difficulty in finding out about contract opportunities and third sector procurement procedures and who to approach to become a supplier / provider. Trend towards using large scale contracts such as national or regional frameworks and rationalization of the supply base which can rule out many third sector organizations, particularly if they have difficulty forging sub-contractor alliances with prime. Complex and costly pre-qualification and tendering procedures with unrealistic timescales, prescriptive specifications and excessive contract terms which means invitations to tender may often be consigned to the ‗too difficult‘ pile. Procurers also sometimes have a tendency to favour known providers. Inappropriate allocation / balance of risks between third sector organizations and contracting authorities. Short term contracts which create too much risk for third sector organizations, in terms of not being able to recoup start –up costs and investments, and in the longer term making it difficult to plan and invest in service developments. Excessive monitoring, evaluation and reporting requirements which are disproportionate to the size of the contacts Suggested actions at each stage of the third sector procurement cycle 1. Understand the market through on-going dialogue. Get to know the third sector organizations within it, their organization and capabilities, their problems in dealing with you. 2. Consult early on viability of policies, programmes and procurement strategies. This should form part of a wider commissioning process. 3. Open contract opportunities with third sector organizations by providing information about how to become suppliers, wide publication of contract in accessible media, training and support. 4. Focus procurement on outputs / outcomes rather than processes to incentivize third sector organizations and capture their expertise and innovation. 5. Keep it simple and proportionate – reducing complexity and bureaucracy in turn reducing costs of procurement to third sector organizations

Private sector procurement, on the other hand, is the process of acquiring goods and services to satisfy the needs of a particular private entity (usually a business, for profit or not). These are goods and services needed for (i) the operation of the business or (ii) the business to use in the process of production of goods and/or services they provide to their customers. Respecting the former, a primary example are goods such as stationary, furniture, office equipment, etc. needed for a business to operate, and respecting the latter, are all the goods and services needed to satisfy customer demands. Similarities between Public and Private Sector Procurement Public sector and private sector procurement organizations are designed to acquire goods and services. The main difference between these two types of organizations is the purpose for acquiring those goods and services. One is focused primarily on a social benefit, the other is profit centric Getting Value – Private and public organizations share a similar objective in getting value for money in all procurement activities. They focus on purchasing goods and services at the right prices and often engage in cost-reduction negotiations with suppliers. Secondly, organizations in the public and private sectors serve the public — but differently. Public entities serve the public through provision of free or low-cost services, while private organizations do so by selling products and services at higher rates based on competition, which can lead to superior service. Differences between public and private procurements Private sector procurement activities are for supporting the principal business objective of a company, which is to make a profit. This does not rule out the fact that private entities may also seek social benefit; however, it is not their primary business objective. In the public sector, the two main reasons for acquiring goods and services are: (i) for supporting government operations, and (ii) to provide public services. Source of funding – Source of funding is another fundamental difference between private sector and public sector procurement. While private sector procurement is funded by owners or shareholders of the company, funds used in public procurement are primarily from taxes and/or grants and loans obtained by the government on behalf of the country. Bureaucracy – Working for a government organization or public enterprise entails dealing with an increased level of red tape or rules which must be adhered to in order to complete a task. Procurement professionals working in the public sector have to place greater emphasis on following policy and acting transparently. As they are acting on behalf of the government they must be seen to be acting ethically. Public sector procurement is governed by the public procurement rules. In most countries, there is a law that governs the procurement of goods, services and works with public funds. These rules set the basis for managing procurement and the various methods permitted under different circumstances. Public procurement must also adhere to certain principles. The process should be open to public scrutiny, depending on the procurement method used, and any confidentiality agreement stemming from the particular procurement method used. Sometimes, the procurement law is comprehensive, with high level of detail; sometimes it covers only the fundamentals, leaving the details for further development in procurement regulations, guidelines and manuals (institutional frameworks), which should expand on but not contravene the public procurement law. With respect to oversight, the private sector procurement process is mostly closed to public scrutiny, Shareholders may, however, require reviews of the procurement process. Public sector procurement, in contrast, is open to public scrutiny, and public procurement practitioners are accountable for their actions, and need to ensure public procurement is managed in accordance with the objectives, principles and procedures defined in the public procurement rules. Public procurement management, requirement identification and budget allocation, procurement planning and strategy development, procurement method selection, solicitation documents preparation and advertisement, bid and proposal submission, evaluation and selection, and contract award to closeout, are all addressed in the procurement rules. Public procurement practitioners are not at liberty to use a procurement method not stipulated in the procurement rules or not identified for a specific type of procurement requirement. Any deviation from public procurement rules requires justification and clearance from a designated approving authority, sometimes a Tender Board, before the action is carried out. Under private sector procurement, procurement practitioners answer only to management, and are responsible for their actions; public sector procurement practitioners are public servants and are accountable for what they do or fail to do when managing public funds. The ultimate aim of public sector procurement is to provide public services and support government operations at all levels within a country. ―Private sector is more flexible and open to innovations; they are profit and people driven. Public sector is highly regulated and sometime can be seen as inflexible.‖ Procurement in the public sector (local government) is mechanically driven to meet procedures/regulations and often interfered with politically. Risk of challenge is not seen as a serious concern. Because of the Public Contracts Regulations most of the public sector is too risk averse to procure effectively. One other significant difference is that the public sector seems frightened to talk to suppliers, relying too much on the use of formal processes &arm‘s length negotiations.‖ Public sector procurement is too rules based (for very understandable reasons) to allow for much innovative procurement and to take advantage of shifts in the market.  Procurement in the public sector is more bureaucratic than in the private sector. It is much slower and more constrained by rules and regulations, for European, national and even local levels. Agility – Procurement professionals working in the private sector often must be more agile and able to respond to change quickly. A focus on the bottom line – As private enterprises focus on generating profit, procurement professionals often are constrained by meeting cost reduction targets. Participation of Stakeholders – Public sector procurement professionals have a larger group of stakeholders to report to including tax payers, members of parliament, clients and vendors.

Public sector procurement is the process of acquiring goods and services for the operation of government and to provide public services. It is carried out within a specific legal framework based on certain principles aimed at making the fulfillment of public procurement requirements competitively available to qualified firms and individuals in a transparent and nondiscriminatory manner based on pre-established selection criteria. The goal of public procurement is to provide everything necessary for the operation of government and, specifically, public services to the population within a country. Other definitions of public procurement include: Purchase of commodities and contracting of construction works and services if acquisition is effected with resources from state budgets, local authority budgets, state foundation funds, domestic or foreign loans, revenue from economic activities of the nation (draft policy framework for public procurement in Kenya).  Procurement by a public entity using public funds. Characteristics of public sector procurement Items procured range from very low value items such as pins to huge complex projects costing billions of shillings e.g Thika Highway Procurement of items is effected through public funds and for public consumption. Public procurement has three main pillars; legal, institutional, organizational. It‘s a participatory function. Complexity and bureaucracy Centralized purchasing through tender systems It‘s an economic tool that has impact socially, economically and politically. It attracts great interest from; general public, civil society, government, private sector, professional organizations Public procurement takes a large fraction (50- 60%) of the government budget. Through public procurement, governments provide essential services to their citizens; education, health, infrastructure, defense etc Business activity in a political, environment. Involves various stakeholders: taxpayers, Consumer, Private sector , the governments Non-discriminatory, equitable treatment to all bidders. No corruption, collusion, Accountability and transparency Openness and clarity Organization of Public procurement Bodies involved 1. National level. Government (Ministry of finance). Public Procurement Oversight Authority (PPOA) Public Procurement Oversight Advisory Board Public Procurement Administrative Review Board. 2. Organizational level. 3. Accounting officer Tender committee Procurement committee Tender opening committee Procurement department Negotiation committees User departments Receiving and inspection committee Disposal committee The role of public sector procurement Public procurement is effected through use of public funds (tax revenue). Goods, works and services procured are consumed by the citizens, who are the tax payers. Public procurement facilitates; economic growth and development poverty eradication private sector development trade and investment Involves management of large sums of money. • Through public procurement, the government delivers services to the citizen; builds infrastructure, provides education and health, hires consultancies etc. Authority of public sector procurement Public procurement draws its authority from the following; The constitution ( sec 227, chapters 6, 13) PPDA, 2015 PPDR, 2006 Public private partnership regulations, 2011 Public procurement code of ethics for procuring entities.

Risk 1: Requirements Inflation As the project progresses more and more features that were not identified at the beginning of the project emerge that threaten estimates and timelines. Solution: Constant involvement of customers and developers. Risk 2: Employee Turnover Key personnel leave the project taking critical information with them that significantly delays or derails the project. Solution: Increased collaboration and information sharing on the team. Risk 3: Specification Breakdown Explanation: When coding and integration begin it becomes apparent that the specification is incomplete or contains conflicting requirements. Solution: Use a dedicated Product Manager to make critical trade off decisions. Risk 4: Poor Productivity Explanation: Given long project timelines, the sense of urgency to work in earnest is often absent resulting to time lost in early project stages that can never be regained. Solution: Short iterations, right people on team, coaching and team development. Risk 5: Scope is ill defined The general risk of an error or omission in scope definition. Risk 6: Estimates are inaccurate – Inaccurate estimates is a common project risk Risk 7: Stakeholder conflict over proposed changes Explanation: Change requests may be the source of stakeholder conflict. Solution – Executive Support Risk 8: Executives fail to support project The project team may lack the authority to achieve project objectives. In such cases, executive management support is fundamental to project success. When this doesn’t materialize the project fails. Risk 9: Executives become disengaged with project Executive management disregards project communications and meetings. Risk 10: Conflict between executive stakeholders disrupts project Members of executive management are combative to the project or there is a disagreement over project issues at the executive level. Risk 11: Executive turnover disrupts project A key executive leaves the company, the resulting disruption becomes a project issue. Risk 12: Exchange rate variability When costs are incurred in foreign currencies exchange rates can have a dramatic impact Risk 13. Change management overload A large number of change requests dramatically raises the complexity of the project and distracts key resources. Risk 14: Process inputs are low quality Inputs from stakeholders that are low quality (e.g. business case, requirements, change requests). Risk 15: Project team misunderstand requirements When requirements are misinterpreted by the project team a gap develops between expectations, requirements and work packages. Risk 16: Under communication Communication is a challenge that’s not to be underestimated. You may need to communicate the same idea many times in different ways before people remember it. Risk 17: Users have inaccurate expectations The risk that users believe the project is building an apple when you’re really building an orange (i.e. users don’t understand the product that’s coming their way). Risk 18: Resource shortfalls Inability to secure sufficient resources for the project. Risk 19: Learning curves lead to delays and cost overrun When your project team need to acquire new skills for the project there’s a risk that productivity will be low. Also, resources who are negative towards the project may actively or passively sabotage project efforts:. . Risk 20: Low team motivation Your team lacks motivation. This is a particularly common risk for long running projects. Risk 21: Architecture fails to pass governance processes Plan for any architectural or technology governance processes that the project may need to pass. Risk 22: Architecture lacks flexibility The architecture is incapable of supporting change requests and needs to be reworked. Risk 23: Architecture is not fit for purpose The architecture is low quality. Risk 24: Architecture is infeasible The architecture is impossible to implement, excessively costly or doesn’t support the requirements. Risk 25:Technology components aren’t fit for purpose Technology components are low quality. Risk 26: Delays to required infrastructure Delays to infrastructure such as hardware or software. Risk 27: Failure to integrate with business processes The risk that your product will fail to fit into the existing business. Risk 28: Requirements fail to align with strategy Your requirements conflict with the firm’s strategy. If you sense that this is the case, list it as a risk. Risk 29: Requirements fail to align with business processes The requirements make no sense in the context of the business. Risk 30: Requirements are ambiguous Requirements are unclear and open to interpretation. Risk 31: Requirements are low quality Requirements aren’t fit for purpose. Risk 32: Requirements are incomplete You can spot obvious holes in the requirements. Risk 33: Decisions are low quality Decisions aren’t fit for purpose. Risk 34: Decisions are incomplete Issue resolutions that don’t address the issue or create more issues. Risk 35: No response to RFP The risk that there is limited response to an RFP. This occurs when the RFP terms are unacceptable to vendors or if your firm has a bad reputation amongst vendors. Risk 36: Low quality responses to RFP Half hearted responses to your RFP that are unusable. Risk 37: Failure to negotiation a reasonable price for contracts Inability to negotiate a reasonable price for contracts. This occurs when the requirements or contract terms make vendors nervous. Risk 38: Unacceptable contract terms Inability to negotiate acceptable contract terms. Risk 39: Conflict with vendor leads to project issues The relationship with vendor turns to conflict and project issues mount. Risk 40: Conflict between vendors leads to project issues Your vendors develop conflict with each other and cooperation breaks down. Risk 41: Vendors start late The risk of a late start. Risk 41: Vendor components fail to meet requirements A vendor misunderstands requirements or delivers components that are completely off the mark. Risk 42: Vendor components are low quality Vendor components aren’t fit for purpose. Risk 43: Vendor components introduce third party liability Vendor components introduce liability (e.g. they violate patents). Risk 44: Loss of intellectual property Vendors spy on you. Risk 45: Project team lack authority to complete work If you lack specific authorities required to deliver the project list this as a risk. Risk 46: Authority is unclear It’s unclear who has the authority to accomplish a project objective. Risk 47: Delays to stakeholder approvals impact the project The

LYSONS has suggested the following reasons for the importance of purchasing staff being knowledgeable about specifications: The primary purpose of purchasing is to contribute to the profitability of an undertaking by obtaining better quality products or services in terms of fitness for use at the least possible total cost. Purchasing staff are the intermediaries between the user and the supplier. They are therefore responsible for checking the competences of products or service specifications. When negotiating with suppliers, purchasing staff must know what they are negotiating for. The satisfaction of the user requirements depends on obtaining reliable suppliers Purchasing staff should be expert in the application of value analysis and the provision at the design or specification stage of innovative suggestions aimed at achieving cost reduction without detriment to the requirement performance, reliability, quality and maintainability. Purchasing staff should be able to advise on whether or not any of the requirements stated in the specification are liable to cause commercial, environmental or legal problems.

After agreement about what information will be included in the specification and an appropriate structure, it must be formatted into a useable specification. There is a range of information that can be included in a specification. Including particular topics will depend on the nature of the goods or services being specified. 1. Identification Title. 2. Table of contents. 3. Introduction. 4. Scope. 5. Background information or history of the required goods and services. 6. List of terms, symbols and acronyms (glossary). 7. List of relevant documents. 8. External approvals. 9. Security aspects. 10.Environmental and ergonomic limitations. 11.Detailed requirements. 1. Identification Title Use a simple description of the specified goods or services for the title. The title should be as broad as possible to allow alternative solutions to be offered. Use broad, open titles to describe the basic function (for example, ―Materials Handling Equipment‖ or ―Waste Management‖) where more than one type of solution may be available. Where a range of goods or services is required the title should encompass the generic nature of those goods or services. 2. Table of contents A table of contents needs to be considered particularly for longer and more complex specifications. 3. Introduction An introduction sets the scene for the specification by describing the required goods or services in the larger context of the department/agency. A well written introduction will increase potential suppliers‘ interest in the invitation and help them to understand the department‘s/agency‘s needs. Detailed requirements should not be included in the introduction. The decision to use an introduction will be influenced by such factors as: The expected level of public awareness about the department/section The complexity of the required goods or services The novelty or innovativeness of the required goods or services or their intended use The need to describe the required goods and services in a larger context. 4. Scope The scope is a general statement or summary about the required goods or services. Complex specifications are more likely to benefit from a scope section than simple ones. However, even for simple specifications a scope may represent an effective way to highlight the main aspects of the requirement. Consider writing the scope as a stand-alone statement of the requirement. This will permit procurement officers to use the scope in offer and contract documents as well as in advertisements seeking offers. The scope should include a brief description of the requirement and the application, purpose or function of the goods or services required. 5. Background information or history of the required goods and services Goods or services that are complex may be better understood by potential offerors if their history is explained. Giving offerors information about how and why the requirement arose can help them decide their best solution. Background information includes: The origin of the need for the required goods or services. The current need for the goods or services. An outline of the research which has been undertaken into the goods or services. What options (if any) have been considered. What options have been dismissed and why. A description of the current system, equipment and methods which will be replaced by the goods or services being defined or solutions being sought. How this requirement is related to earlier purchases and perceived future requirements. The implications for the user resulting from implementing the selected solution. 6. List of terms, symbols and acronyms (glossary Use acronyms and symbols sparingly. Do not assume that such words and phrases will be understood or interpreted correctly by offerors (if in doubt, research the market to find the commonly used terms). Use a glossary to define abbreviations, acronyms, technical terms or symbols if there is a need to use them. Jargon should not be used (unless it is a well-accepted industry standard). Use accepted definitions or standards to explain acronyms and symbols. Place the glossary where it best assists reading and understanding the specification. 7. List of relevant documents Provide a list of all documents referred to in the specification rather than including the actual documents or extracts. Documents that are readily available commercially, or which offerors can reasonably be expected to already hold, do not need to be provided. However, unusual or hard to find documents should be provided to offerors. But be prepared to provide a copy of any relevant document if an offeror makes the request. Documents most commonly referred to include other specifications, Standards, reference publications, Codes of Practice, Acts of Parliament and Government directions and regulations. Nominate the part(s) of the specification to which each document applies. Determining which documents to reference should be part of the analysis of the requirement. List only primary documents (that is, those documents actually referred to in the specification). Secondary documents should not be listed as they are automatically invoked by implication. 8. External approvals A contractor may need approval from a relevant authority to perform certain work under the contract. For example, to make an electrical connection, close roads or access properties for survey work. It is normally the contractor‘s responsibility to make arrangements for obtaining any approvals or certifications necessary for the completion of the task in accordance with the laws. 9. Security aspects Define the required security measures the offeror may need to consider.

Step 1: Planning and analysis The foundation of a good specification is in the planning and analyses which are undertaken before writing begins. Key people who can help such as procurement staff, technical officers, project officers and managers and end users need to be involved. Planning and analysis will provide a better understanding of the requirement(s) and may reveal alternative solutions. Planning and analysis are particularly important when developing complex requirements. These may take some time to define, perhaps even years in the case of major equipment. The accuracy and detail of the definition is likely to improve as information is gathered and assimilated. Define the requirement(s) and then approach industry to see what is available to meet the department‘s/agency‘s needs. If industry is approached too early in the development process, there is the risk of deciding the solution to the problem before the requirement(s) is fully defined. In some cases potential solutions may be discovered and explored which may allow refinement of needs. Think in terms of the performance required or the functions to be performed. In other cases, however, solutions may not be readily available or there could be the danger in stating a solution up front that may restrict offers of alternative solutions. In this situation, a full explanation of the issue or problem is needed. Breaking down the requirement(s) in terms of function and performance will better define the need. Defining the requirement(s) in terms of the lowest level functions or sub components should also help to discover conflicts and inconsistencies within the requirement(s). Alternative solutions, too, may be revealed in the process. Planning and analysis Consultation and information gathering Writing the specification Vetting the specification and obtaining approvals Issuing the specification, as part of the “Invitation to Offer” process Managing amendments to the specification Revising and storing the specification Step 2: Consultation and information gathering Developing specifications requires consultation and can be perceived as an evolutionary process involving close and continuous liaison between the end-user, technical officers, project Officers / managers, procurement officers and the specification writer. Valuable information and advice relating to the requirement can be obtained by discussing it with procurement officers, technical officers and other users of similar goods or services within the department/agency. Procurement officers should be involved from the start of the process (that is, the information gathering and design stages). Other sources of information include: other departments or agencies (including federal and local governments) industry – either industry associations or particular companies (ensure that industry does not assume pre-offer negotiations) educational institutions, for example, universities and Standards Australia Industry Capability which can assist in identifying and evaluating appropriate local industry capabilities Other users of the goods or services. These organizations may help to refine the requirement and also suggest potential solutions. Step 3: Writing the specification Some writing tips: Use simple, clear language without jargon (to minimize misinterpretation). Define terms, symbols and acronyms (include a ―Glossary of Terms‖). Be concise. Do not explain the same requirement in more than one section. Define each aspect of the requirement in one or two paragraphs where possible. Adopt a user-friendly format. Number the sections and paragraphs. Seek feedback from someone unfamiliar with the requirement. Discuss the draft and refine it. There are no fixed rules on formats and structures because each specification reflects a different requirement or need. A specification should list the functional, performance and technical characteristics separately. Step 4: Vetting the specification and obtaining approvals After writing the specification, ask a colleague who is unfamiliar with the requirement to critique it from a potential supplier‘s view. Try to identify improvements by considering: Readability Simplicity of meaning Clarity Logic. Seek approval from the appropriate financial or procurement delegates in the department/agency after vetting the specification but before issuing it. Step 5: Issuing the specification The specification should be included as part of the ―Invitation to Offer‖ document. Step 6: Managing amendments to the specification Should a need arise to amend the specification during the ―Invitation to Offer‖ process, the amendment should be authorized by the project manager. The amended specification should be noted in the project files and all offerors or potential offerors must be given a reasonable opportunity to offer to the new specification. Step 7: Revising and storing the specification The specification should be reviewed at the end of the procurement activity to ensure that it effectively defined the goods or services that were actually bought. If areas for improvement are identified, revise the specification with the benefit of hindsight. When the review of the specification has been completed and if it relates to goods or services that are likely to be procured frequently, keep it on file. Before each procurement, review the specification to ensure that it reflects your department‘s/agency‘s needs at that time. Alternatively, institute a program to review specifications on a regular basis.

When the requirement is complex and there are many potential solutions, consider refining the requirement and developing the specification in stages. This approach allows requirements to be refined in response to a narrowing range of solutions. Key considerations when refining a requirement in stages Ensure that all participants understand that the process is in stages to refine the specification and that their input may be incorporated in the final version. Revise the specification after each stage to incorporate additional information or refinements. Maintain the functional and performance nature of the specification. Ensure that the final version of the specification allows for the development of practical and effective evaluation criteria. Ensure that all activities are directed at obtaining goods or services which will meet the needs of the user.

Stakeholder is a person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization’s actions, objectives and policies A stakeholder is anybody who can affect or is affected by an organization, strategy or project. They can be internal or external and they can be at senior or junior levels. Some definitions suggest that stakeholders are those who have the power to impact an organization or project in some way. For example: ‘People or small groups with the power to respond to, negotiate with, and change the strategic future of the organization‘. Some examples of key stakeholders are: 1. Creditors, 2. Directors, 3. Employees, 4. Government (and its agencies), 5. Owners (shareholders), 6. Suppliers, and 7. The community from which the business draws its resources. An example of a negative impact on stakeholders is when a company needs to cut costs and plans a round of layoffs. Who is involved in developing the specification? Users of the procured goods or services should be involved in defining their requirements together with appropriate project officers, technical officers (for example, information technology or medical staff) and procurement officers. Why is Stakeholder Participation Important? People are not very good at defining, particularly in detail, what they want. However, people are fairly good at indicating what they think they want and then when an option is presented to them what they like and don’t like about it. In other words, we need to work with our stakeholders to identify what they think they want, produce something which reflects that understanding, get feedback from our stakeholders, and then update our solution to reflect our improved understanding. The implication is we need to work in a more evolutionary and collaborative manner if we’re to provide solutions which reflect our stakeholders actual needs, and to do that we must work closely and regularly with stakeholders. How to write a specification Developing specifications should involve close and continuous liaison with stakeholders (specification writer, technical experts and specialists) and users of the goods and/or services. For more complex procurement, a staged approach to developing and refining the specifications should be considered. This may involve developing an Expression of Interest (EOI) specifying the requirements at a high level. As the process moves towards the short-listing and/or limited market approach phase, the specifications must become more detailed. Organisations should consider standardising the format and applying uniformity to specifications, as far as possible. This can help to reduce the cost of the market engagement process.