Dinesh DivekarDear friend,
Installation of roof sheets is capital work. These are capital expenses. For this you need to do the following:
a) Check the local market for the suppliers
b) Talk to them on telephone. Find out where they have done similar work
c) Ask quotations from at least three suppliers
d) Do not do just the price comparison. You have to select the vendor based on Total Cost of Ownership (TCO). For this you need to learn how to calculate TCO.
e) Select the vendor whose TCO is lowest. In addition to this, use the check list for the selection of vendors also.
f) Visit the past customers of the selected vendor. Obtain feedback from them. Record the observations of the customers'
g) Then come to capital budgeting. Find out what profit or savings your organisation will accrue by installation of this roof sheets. Based on this try calculating Internal Rate of Return (IRR).
h) Put up statement of case (SOC) for the capital expenses to your management. Obtain approval.
i) Once the SOC is approved, make an agreement with the selected vendor. If the work is not of that high value then you may mention the terms and conditions (T & C) in the Purchase Order (PO) itself. In the T & C section, do not forget to mention the time period for the completion of work and above all quality parameters, penalties for delay etc.
j) Issue the PO to the vendor.
k) On completion of the work, do the quality check and settle the vendor's dues as per PO
l) Preserve the documents for next five years. After five years find out whether estimated IRR was correct. What is the discrepancy in IRR? Why it was positive or negative?
I conduct the training on Capital Purchase and also on Contract Management. Many purchase managers do barely 50% of the above. Nobody calculates IRR. But then it is important for you to do this.
For your training requirements, feel free to contact me.
All the best!
Dinesh V Divekar
From India, Bangalore
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