July 22, 2024
Procurement Process – The Three Types of Procurement Specification

Whenever your organisation makes a purchase a description of what the user wants has to be given to the supplier. Unless there is a way of making sure that the message of what is required is not distorted there is a risk that the supplier will misinterpret your requirements.

One mechanism for providing clear and unambiguous messages of what is required is the purchase specification. There are three types of specification.

First, there are commercial specifications. These are specifications produce by a national or governing body such as the British Standards Institute. They set out standards for the quality of materials that should be used, the quality of work needed in production and any critical dimensions, chemical composition or allowable tolerances.

Nuts, bolts and chemicals are the kind of items often covered by commercial specifications. They are all items with a wide application and so manufacturers can plan production with the confidence that there will be a large demand. This confidence allows them to have long production runs which give them high levels of efficiency and low cost. These low costs can be passed on to the buyer in the form of lower prices. This is one reason for specifying a product with a commercial specification whenever possible.

The second type of specification is the design specification. This specification gives precise details for how a product is to be made or a service delivered. It provides in-depth detail for both functional and non-functional requirements and covers assumptions, constraints, performance, dimensions, weights and reliability.

If the cost of the standard item is unacceptably high or if there is a supply risk because the product is protected by a patent, it may be worthwhile developing your own specification in order to increase the potential supply base.

The danger in doing this is that you may produce a specification that is too detailed and so incur unnecessary cost because it does not allow suppliers to use their expertise in finding the most efficient way to produce it.

It may also mean that you are unintentionally assuming all responsibility for the performance of the purchase. For example, if you specify that a dimension should have a tolerance of 0.01 centimetres when it should really be 0.005 centimetres then the responsibility for any product failure is yours.

The third type of specification is the performance specification. This avoids the drawbacks of the design specification by providing the specific performance that is required but not the method of achieving that performance.

This means that suppliers are free to choose the materials they use and the manufacturing process (or delivery process if it is a service that you are buying). Giving this freedom to suppliers should result in lower costs which can be passed on to you as a lower price.