Procurement Glossary of Terms

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PROCUREMENT Glossary of Terms

Version 1 August 2012


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Glossary of terms

Addressable spend

Operational Efficiency

Addressed spend

Outturn cost

Adjudication

Parent company Guarantee

Agentrics

Payless notice

Allowance

Performance bond

Building information modelling

Plant

Bundle procurement

Pre order meeting agenda

Category

Professional Indemnity insurance

Category Management

Provisional sum (defined)

Category Management Plan

Provisional Sum (Undefined)

Category Sourcing Process

Request for information

Change order

Request for proposal

Comparable

Request for quotation

Consultant agreement

Retention

Contractors all risks Insurance

Retention bond

Cost avoidance

Small and Medium sized enterprises

Cost Control

Stage 1/2/3? Design

Cost Reduction

Subcontract agreement

Cost Saving

Supplier relationship management

Delay notice

Supply chain

Demurrage

Supply Chain management

Early Procurement Involvement

Tender launch meeting

Economies of Scale

Trend analysis

End Life Forecast

Valuation

Forecast

Value Cost reconciliation report

Lifecycle costing

Value Engineering

Logistics

Value Management

Market equivalent value

Variation

Non-addressable spend

Vendor

Notice to Commence

Win Plan

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Kier Construction Terminology (Abbreviation in brackets) Addressable spend

Definition

Addressed spend

Spend which is controlled by some type of framework, rebate or pricing agreement

Adjudication

the final judgment in a legal proceeding; the act of pronouncing judgment based on the evidence presented

Agentrics

An electronic bidding and sourcing tool currently being evaluated by the Group

Allowance

A sum of money set aside in the construction contract for items which have not been selected and specified.

Building information modelling (BIM)

Building Information Modelling (BIM) is the process of generating and managing data about the building, during its life cycle. Typically BIM uses three-dimensional, real-time, dynamic building modelling software to increase productivity in the design and construction stages.

Bundle procurement

The application of procurement benefits by utilising economies of scale with prospective vendors

Category (CAT)

A product or service

Category Management (CAT)

A strategic procurement approach to managing products and services, which satisfies stakeholder requirements by integrating supplier sourcing, supplier management, supplier development and supplier relationships management to deliver increased value

Category Management Plan

The formal plan which outlines the timing, resource requirements and perceived benefits of addressing individual categories, allowing priorities to be set and progress to be tracked The formal strategic sourcing process utilised as part of category management

Category Sourcing Process

Spend which is not currently address but is theoretically addressable by Procurement, subject to resource availability and / or willingness by Kier stakeholders to allow the procurement function to address it

Change order

Change to the works information instructed by the Employer.

Comparable

Similar in size, amount or quality of something else.

Consultant agreement (Consult/ag)

Trading terms and conditions agreed with the Consultant

Contractors all risks Insurance (CAR)

The policy covers all risk of damage to the "works, plant, equipment and materials during the course of construction

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Kier Construction Terminology (Abbreviation in brackets) Cost avoidance

Definition

Cost Control

the process of controlling how much a company or organization spends so that costs are not greater than an agreed budget, or a particular method that is used to do this

Cost Reduction

The reduction in cost of a material or service measured at a point in time, compared to a previous point in time, subject to comparable scope and specification

Cost Saving

Cost saving could be a temporary affair and may be at the cost of quality.

Delay notice

A formal written notice to inform the Employer or the Contractor regarding delay to the completion of activity or entire contract.

Demurrage

Additional fees charged by a carrier when rail freight cars and ships are held beyond a pre-agreed to time.

Early Procurement Involvement (EPI)

As the words suggest.

Economies of Scale (EoS)

The most efficient operating level. The point where it costs less per unit to produce

End Life Forecast (ELF)

An estimate of cost to completion of the project

Forecast

An estimation of the future demand for a product. It is usually stated as a quantity (or value) over a specific time period. There are a number of inputs into a forecast, such as: historical data, market trends, marketing data and sales force feedback.

Lifecycle costing

Lifecycle costing enables project sponsors and delivery teams to evaluate the combined capital and operating costs of construction work.

Logistics

Managing and controlling the flow of goods from the source of the production to the marketplace.

Market equivalent value (MEV)

Comparable- data analysis.

Non-addressable spend

Notice to Commence (NTC)

Spend currently "out of scope" to the procurement function, possible due to it being addressed by another Kier business function, or where it is client specified A formal written notice by the Employer to commence contract works.

Operational Efficiency

Benefits accrued through process efficiencies.

Outturn cost

The final cost following order or contract completion, taking into account all costs which were unknown at order placement

An expense that has been avoided.

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Kier Construction Terminology (Abbreviation in brackets)

Definition

Parent company Guarantee (PCG)

A parent company guarantee (PCG) to be provided by a contractor's parent company in connection with the contractor's obligations under a building or engineering contract.

Payless notice

A notice issued to subcontractors if the payment is reduced. A performance bond is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.

Performance bond (Perfbond) Plant

Under NEC contract, plant is described as permanent material used in the works

Pre order meeting agenda (POMA)

Meeting held post tender to interrogate a company’s submission to ensure completeness.

Professional Indemnity insurance

An insurance policy that protects employers from liabilities arising from errors made by the designers.

Provisional sum (defined)

Defined provisional sums are sums of money intended for elements of the Works which have not been sufficiently designed but where there is certain defined information available, SMM7 states that ‘where Provisional sums are given for defined work the Contractor will be deemed to have made due allowance in programming, planning and pricing preliminaries’

Provisional Sum (Undefined)

relate to work where the employer is unable to provide detailed information and the contractor is not deemed to have made allowances for it in its price or programme (General Rule 10.6). In short, a contractor’s entitlement to an extension of time and/or indirect costs for a provisional sum depends largely on whether it is defined or undefined.

Request for information

A formal request for a supplier proposal which outlines the supplier's capability, capacity, commitment (perceived level of) and cost (attitude to cost management and cost transparency etc.)

Request for proposal (RFP)

A formal request for a supplier proposal, which includes cost / price and outlines detail as to how a product or service could or will be supplied

Request for quotation (RFQ)

A formal request for a supplier quotation

Retention

Monies retained from subcontractors and paid in full if all defects are rectified in a timely manner.

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Kier Construction Terminology (Abbreviation in brackets) Retention bond (Retbond)

Definition

Small and Medium sized enterprises (SME)

Defined under EU law - based on number of employees and either turnover or balance sheet total. Medium sized companies - employees <250, Turnover <50m euros or Balance sheet total <43m euros. Small companies - employees <50 , Turnover <10m euros or Balance sheet total <10m euros. Micro companies - employees <10, Turnover <2m euros or Balance sheet total <2m euros. These ceilings apply to the figures for individual firms only. A firm which is part of larger grouping may need to include employee/turnover/balance sheet data from that grouping too.

Stage 1/2/3? Design

RIBA Stages

Subcontract agreement (Sub/ag)

Trading terms and conditions agreed with the subcontractor

Supplier relationship management (SRM)

Supplier relationship management (SRM) is a discipline of working collaboratively with those suppliers that are vital to the success of your organisation, to maximise the potential value of those relationships

Supply chain (SCH)

Encompasses every effort involved in producing and delivering a final product, from the supplier's supplier to the customer's customer. Four basic processes - plan, source, make, deliver - broadly define these efforts, which include managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer is the oversight of materials, information, services and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies.

Supply Chain management (SCM)

It guarantees that the Subcontractor will carry out all necessary work to correct structural and/or other defects discovered immediately after completion of the contract, even if full payment has been made to the contractor.

Tender launch meeting (TLM)

See Subcontract Minimum Standard document

Trend analysis

Analysis involving comparison of the same item (such as monthly orders) over a significantly long period to (1) detect general patter of a relationship between associated factors or variables, and (2)

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Kier Construction Terminology (Abbreviation in brackets)

Definition project the future direction of this pattern.

Valuation

Application for payment

Value Cost reconciliation report (VCR1)

Comparison of cost incurred against value. Also known as earned value.

Value Engineering (VE)

The systematic process of reducing the cost of producing a product without reducing its quality or how effective it is.

Value Management

Value management is a style of management, particularly dedicated to motivating people, developing skills and promoting synergies and innovation, with the aim of maximising the overall performance of an organisation. Applied at the corporate level, value management relies on a value-based organisational culture taking into account value for both stakeholders and customers. At the operational level (project oriented activities), it implies, in addition, the use of appropriate methods and tools.

Variation

Change to the works information instructed by the Employer.

Vendor

A person or company that provides something for sale.

Win Plan

Strategy prepared to ensure that we win the project

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