What is Due Diligence?

Due Diligence is a formal phase of contract negotiation whereby both (or all) parties undertake a process to test and verify their understanding of the contract, risks, resources and commitments to be entered into. This will often include verification of financial information, staff that may transfer assets, property, maintenance and lease agreements, etc. Formal due diligence is not usually required for simple or routine contracts. A good due diligence process will enable parties to conclude a contract with a good understanding of the basis on which the contract is to be let and full awareness of resource implications and commitments. Conversely, failure to undertake due diligence may result in a failure to conclude a contract, or failure during the life of the contract. When entering into a major contract negotiation, the process will be greatly eased if the “buyer “has everything in place for the due diligence process, including inventories and full financial information.
Most organizations will carry out a PQQ (Pre-Qualifying Questionnaire), before they invite a supplier to tender for their services etc…but how does an organization carry out on-going analysis of how their supplier is performing? For a lot of companies this will be “it”, some will perform a “tick box” activity where they might check up on them via a desk top activity…but how many really check them out, via “right to audit” clauses in the contract, or actually go a visit the supplier at their offices, factories, or on the job ? this is something Oliver John Procurement Consultants can perform.

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