Procurement Specifications

What are the types of specifications?

The two main types of procurement specifications are performance and conformance.

Conformance specifications can also be referred to as prescriptive or technical specifications. A conformance specification is essentially a design specification, providing specific instructions on how a product should be made or a service delivered. Examples include drawings, samples, brands, recipes, and technical standards. Conformance specifications pose higher risks for the buyer, as they outline exactly what they require from the supplier. If the product or service does not operate as expected, provided it has been produced in line with the specification, the responsibility lies with the buyer. A technical specification is a form of conformance specification that outlines the standards a product or service must meet, such as the International Organization of Standardization (ISO) or the British Standards Institute (BSI).

A performance specification, in contrast, details the specific performance that is required but does not state the method needed to achieve that performance. In other words, it outlines what the product or service must do but doesn’t specify things like materials or the processes the supplier must use to create it. Performance specifications pose a higher risk for the supplier, as they are free to choose the processes and/or materials required. If the product or service is not functionally fit for requirements, responsibility lies with the supplier. Performance specifications include outcome and output specifications, functional specifications and statements of work.

An outcome specification details what needs to be achieved (the outcome), and the capabilities required to meet this outcome. A functional specification is a type of outcome specification that states what a product should do or how a service should be provided. An output specification describes what is needed.

A statement of work is a type of specification commonly used for projects or services. It usually consists of activities and deliverables, delivery timescales, and any other factors, such as materials, that may be required to produce the product or service.

Consider, for example, different types of specifications for the production of a wooden bench. A conformance specification would outline everything from the materials to the production processes required to prepare the bench. A performance specification would describe what is needed and allow the supplier freedom of choice for materials and production. For example, an output specification would describe what is needed: a 2-meter-long, hard-standing wooden bench that could withstand weather degradation caused by rain, wind and sun, with a warranty agreement for materials and repair. An outcome specification would explain why the bench is needed: to provide a comfortable seating space for two people to sit next to each other, that can withstand weather conditions and general wear and tear, and support 550kg of weight.

Typical differences between a performance and conformance specification

Conformance

• Outlines specific processes, methods, quality standards or materials
• Input focused
• Higher risk to the buyer
• Limited opportunity for supplier input
• Focused on the how and the what

 

Performance

• Outlines what needs to be achieved
• Output focused
• Higher risk to the supplier
• Gives the supplier opportunities to provide solutions or innovations not previously considered by the buyer
• Focused on the what, not the how

 

 

Why are specifications important?

Specifications are significant documents at two key stages of the CIPS Procurement and Supply Cycle: stage one - defining the business need and developing the specification, and stage five – developing documentation (pre-qualification questionnaire and detailed specification).

Including a specification when defining business needs helps procurement and supply functions to ensure that the products or services they purchase are fit for purpose and appropriate for fulfilling the original business requirement. Specifications are also a necessary part of the documentation to be sent to suppliers when requesting quotations (RFQs) or sending invitations to tender (ITTs). Specifications outline to the supplier a clear, accurate description of what products or services are required, and enable them to provide a bid or quotation to match.

Failure to provide adequate specifications can lead to:

• Suppliers delivering products or services that are not fit for purpose.
• Wasted resources (such as time and money) to rectify.
• Insufficient bids or quotes from suppliers .
• Potential legal or safety consequences if working in a regulated environment (leading to additional issues such as reputation damage, loss of sales, fines, etc.).

Cross-functional working for specification development

Specifications should be developed using a cross-functional team. This ensures that all stakeholder and operational requirements are considered. For example, the creation of a specification for a new piece of IT software may require a team consisting of the following.

• The end user, to accurately describe why and when the software is needed, and what it must do.
• A finance representative to contribute to discussions around the budget.
• A representative from the IT department to discuss system compatibility.
• A member of the procurement team, to discuss market conditions and potential suppliers.

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