Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement (2017)

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procurement Best practices and tCO Implementation at airports 11 GA = general aviation; NH NP = non-hub non-primary; NH P = non-hub primary Airport Type N um be r of A ir po rt s Figure 3-1. Procurement methods at airports. Source: Clearview Business Service. Figure 3-2. Strategic procurement: value contribution curve.

12 Guidebook for Considering Life-Cycle Costs in airport asset procurement Procurement Strategy Having a procurement strategy in place can guide the organization through short- and long- term plans and help facilitate the transition of procurement practices from their current state on the spectrum to class-leading practices. The essential elements and characteristics of such a strategy are as follows (Local Government Victoria 2013, Blascovich et al. 2014): • Leadership buy-in, support, and commitment toward implementing procurement best practices. • Policies and procedures in place to support implementing procurement best practices and incorporating TCO into procurement policy. • Alignment of business units under a common strategy when dealing with procurement and management of assets. As part of the research informing this guidebook, airport personnel were asked if other divisions provided input into the procurement process or if it was conducted in a silo. The majority of the airports indicated that other divisions provided input during the procurement process (Figure 3-3). • Collaboration between business units to encourage communication and cooperative working environments. • Communication plan to increase awareness of the various business units and the activities and services they provide, as well as about procurement processes. • Increased involvement of the procurement division throughout the phases of a project. • Increased capability of procurement personnel in – Policy and procedure development, – Risk management, – Negotiations, – Bid evaluation, and – Project management. • Accurate and consistent data collection, analysis, and reporting processes to assist in decision making – KPIs in place to measure outcomes and benchmark progress and – Available information and data about vendors and their capabilities. • Optimized procurement processes to reflect market conditions. GA = general aviation; NH NP = non-hub non-primary; NH P = non-hub primary Airport Type N um be r of A ir po rt s Figure 3-3. Asset procurement process at airports.

procurement Best practices and tCO Implementation at airports 13 Additionally, as part of the research informing this guidebook, airport personnel were asked to rate the procurement process implemented at their airports. The majority of the airports gave their process a satisfactory rating as presented in Figure 3-4. The rating was on a scale of 1 to 10, where 1 is not very successful and 10 is very successful. Procurement Best Practices For an organization to adopt leading procurement practices, it first must know what they are, then work to customize and ingrain those that fit their culture and business objectives. Not all best practices make sense for every organization and every circumstance. This section lists general procurement best practices gathered from across different industries, and then lists those specifically from the power generation utility industry because of the depth of procurement experience that exists there. General • Establish procurement policies and procedures that together serve as a roadmap for the organization. This guidance would provide the answers and clarifications to the business units on procurement, including responsibilities, outcomes, and processes. • Equip procurement professionals with the needed skills to effectively and efficiently conduct their work and master their roles. These professionals should have an understanding about the organization and the implemented systems and processes in order to align the procurement with the different business unit strategies. Additionally, procurement professionals should have a strong understanding of the market and the vendors to collaborate with them on changes and process improvements. • Incorporate TCO in the procurement evaluation process. Provide vendors with the details about TCO, how these values are analyzed, and how the vendor will be chosen based on TCO and not based on lowest initial cost. As part of the research informing this guidebook, airport GA = general aviation; NH NP = non-hub non-primary; NH P = non-hub primary Airport Type N um be r o f Ai rp or ts Success Rang Figure 3-4. Asset procurement process rating at airports.