OVERVIEW OF THE PROCUREMENT PROCESS Presented to NDMA By
Presentation Outline
Session’s
Objectives Introduction Stages of the Procurement Process Questions/comments/discussion
Sessions Objectives To
describe the overview of the procurement process. To identify Key Performance Indicators in each stage of the procurement process. ’ Procurement Process.
Introduction
Definition of Procurement - Acquisition by purchase, rentals or hire purchase, tenancy or any other contractual means of any type of works, assets, services or goods. - Procurement of goods, works and services in any institution contributes greatly to the success of the institution, depending on how well it is conducted. -Majority of Kenya Vision 2030 flagship projects to be delivered through public procurement.
Introduction Contd…
Objectives of Prudent Procurement - Acquisition of items in the most cost effective manner to ensure that they are provided in the right quantities, at the right quality, from the right source in timely and right delivery period at the lowest evaluated price.
Measurement of Prudent Procurement Management - Service level - Greater Efficiency-Minimize delays
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Stages of the Procurement Process 1.
Need(s) Identification -Responsibility for identification of requirements at Departmental level, Organizational level. -Consider type of goods, works and services; and when and where needed. Possible
Risk
Consequences
Failure to secure ongoing supply critical to the organization.
What to do
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Failure to achieve key organizational results. Total costs of procurement too high.
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Analyze organization’s procurement portfolio, function & capability and undertake strategic procurement planning.
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Undertake Procurement Planning -Departments supply their procurement plans which are consolidated. -Procurement commenced on satisfaction that sufficient funds exist. Risk
What to do
Consequences
Insufficient lead-time. •
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Inadequate supplier response. Higher prices.
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Involvement of procurement officers in project planning phase.
Stages of the Procurement Process Cont’d…
3. Specification of Requirement -It consists of definitive descriptions on the object to be procured. -Specifications must be clear, accurate and Complete. -Provision of information that the supplier requires in order to reliably meet the user’s expectation. -Need for market survey to assist with preparation of specifications e.g bills of quantities -Specification to be drawn by the user of the product or service and the Supply Chain Management function -Consultants may be used in preparation of specifications and bidding documents
Stages of the Procurement Process Cont’d…
Risk Biased or restrictive specifications/ToR/SoW.
Possible Consequences •
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Claims of unethical or unfair dealings. Inadequate supplier response.
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SoW.
What to do •
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Apply relevant international standards where available.
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Use functional performance specifications.
organization’s Procurement Manual.
Insufficient responses. Offer of goods/services that do not meet needs. Difficulty in evaluating competing offers. Possibility that evaluation process may not stand up to audit scrutiny.
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Be familiar with the requirements of the specification/ToR/SoW. Get training in writing specifications/ToR/SoW. Allow industry to preview requirements. Seek offers again and incur extra management effort.
Stages of the Procurement Process Cont’d… 4. Preparation of Tender Documents -Containing Specifications-Bills of quantities, drawings, evaluation criteria, Price schedule, tender forms, sample contract, Preferences Risk Requisition splitting.
Possible Consequences •
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Wrong approach to market.
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Claims of unethical or unfair behavior. Inability to achieve economies of scale. Higher total cost of acquisition. Inadequate or inappropriate supplier response. Higher prices. Selection of inappropriate procurement method.
What to do •
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Training requisitioners in procurement. Separation of functions to ensure possible breaches are identified and prevented. Analyse supply markets.
Stages of the Procurement Process Cont’d… Risk Use of inappropriate evaluation criteria.
Possible Consequences •
Inadequate or inappropriate result.
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Not achieving best value.
What to do •
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Loading of costs in offers.
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Seek offers again and incur extra management effort. Check with the market.
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Many qualifications to tenders.
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Develop commercially acceptable terms.
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Too few bids.
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Use standard conditions of contract.
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Terms and conditions unacceptable to suppliers.
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Uncertainty among suppliers because of new and unusual conditions of contract.
Loading of costs in offers.
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Disruption.
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Adverse impact on the organization’s professional recognition.
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Allocate risks appropriately.
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Loading of costs in offers.
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Ensure that staff is suitably trained.
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Great variation in offers.
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Review documents before issue.
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Know your market.
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Difficulty in clarifying and closing offers because of extensive requests from suppliers for clarification Supplier complaints.
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Political intervention.
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Withdrawal of offers.
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Actual or perceived favouritism in providing information.
Check that responsibility for risks is not allocated to suppliers for factors outside their control. Use standard conditions.
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Provisions of inadequate information.
Consider implications of the evaluation criteria.
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Seek the legal office’s approval to conditions of contract.
Implement standardized procedures for responding to inquiries. Advise all suppliers of all responses to in uiries received.
Stages of the Procurement Process Cont’d… Choice of Procurement Method -Open tendering (Open National Tender or International Open Tender)-preferred method -Others : Restricted Tender, Direct procurement, Request for quotations, Request for ro osals Low value rocurement Restricted tender Risk Delayed requisitions to create false emergencies.
Possible Consequences •
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Claims of unethical or unfair dealings. Higher total cost of acquisition.
What to do •
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Selection of inappropriate procurement strategy.
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Inadequate or inappropriate result. Not achieving best value.
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Early involvement of procurement officers in project planning. Training of requisitioners Seek justification of emergencies. When not justified follow regular procurement process. Agree on desired outcomes & objectives with client. Seek offers again and incur extra
Stages of the Procurement Process Cont’d…
6. Publicizing the procurement opportunity(ies) - Advertising in newspapers, notice boards, websites
7. Availing bidding documents to bidders -Ensure early preparation . u m ss on o ocumen s - provision of secure tender/Quotation box - no late tenders 9. Opening of Bids - Appointment of tender opening committee, bidders may participate, and minutes prepared
Stages of the Procurement Process Cont’d… 9. Opening of Bids - Appointment of tender opening committee, bidders may participate, and minutes prepared. Risk Actual or perceived breach of confidentiality.
Possible Conse uences •
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Supplier complaints.
What to do •
Political intervention. Mistrust by suppliers.
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Establish formal security procedures. Perform regular security audits and reviews. Advise suppliers of security measures. Train staff.
Stages of the Procurement Process Cont’d… 10. Bid Evaluation: This step involves: Analyzing bids based on a.Preliminary evaluationmandatory requirements b.Technical Evaluation- comparing each tender to the c.Financial Evaluation- comparing tenders to determine the evaluated price of each Tender d.Post d. Post qualificationqualification- where indicated in the tender documents a Procuring Entity may, prior to award of the tender confirm the qualifications of the lowest evaluated tenderer .
Risk
Possible Consequences
evaluation procedures.
Inconsistency in evaluation of offers. Potential for ethical dilemmas. Sub ectivit in outcome of evaluations.
Failure of offers to meet needs.
Need to re-tender.
Failure to observe effective
What to do
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Failure of evaluation to identify a clear winner, leading to selection on subjective grounds or new criteria.
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Perform regular audits of procedures. Ensure that staff are suitably trained and experienced. Ensure that the specification is understandable. Know the marketplace.
Claims of unethical or unfair Ensure that selection criteria are behaviour. appropriate, well defined, and measurable before tenders are called.
Risk
Selection of inappropriate supplier.
Possible Consequences
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Failure of supplier to fulfil contract.
What to do
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Selection of inappropriate goods/services.
Failure of the goods/services to meet the need.
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Insufficient number of responses.
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Need to start procurement again.
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Delays to procurement schedule.
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Poor value for money due to limited competition.
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No response from known high-quality suppliers.
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Failure of offers to meet needs. Greater uncertainty about suppliers’ capabilities.
Perform financial and technical checks on suppliers before awarding the contract. Reject offers from unacceptable suppliers. Improve evaluation procedures. Ensure that users are involved with the evaluation. Improve technical evaluation procedures responsibility for handling in-confidence documents. Use a proven and recognised way to notify the suppliers of the requirement. Allow for sufficient time for suppliers to prepare offers. Consider publishing two to three-year forward estimates of major purchase budgets.
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Seek early industry participation.
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Know your market.
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Request tenders from selected suppliers.
Stages of the Procurement Process Cont’d… 11. Award of Tender by Tender Committee -Tender committee Quorum to be FIVE including the Chairman -Decision through consensus -Minutes of Tender Committee to be prepared and 12. Notification of Award -Notification to winner and losers simultaneously -Bidders have a right to seek administrative review on Procuring Entity's decisions -Bidders right to seek Judicial Review
Stages of the Procurement Process Cont’d…
Risk Contract approval not obtained.
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Possible Consequences Delays in contract award.
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Ensure adherence throughout process to rules and procedures. Ensure adequate documentation of process.
Stages of the Procurement Process Cont’d… 13. Creation of Contract -Contract signing -Parties involved -Contract documentation involved in creation of a contract
14. Contract Management -Inspection and quality assurance-by Inspection & Acceptance committee -Handling, claims and disputes -Administering payment provisions-Overdue payments to be paid with interest -Variations to Contracts allowed on price and quantity as per Regulations -Contract Termination - To be approved by the tender committee.
Stages of the Procurement Process Cont’d…
Risk Masking, by apparent agreement, of different expectations of buyer and supplier.
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Possible Consequences Contract disputes.
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What to do Define terms carefully.
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Delivery delays.
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Record each party’s obligations.
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Possible cost variation.
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Deadlock on details of agreement.
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Delays in delivery.
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Need to restart the procurement.
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Undue concession to suppliers
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Increase in costs because of legal action. Reduction in value for money. Claims of unethical and unfair practices. Purchase of less suitable product. Inefficiency and misuse of resources.
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Clarify all ambiguities. before signing the contract Kee full and accurate documentation. Investigate better ways of sharing risks. Distinguish between essential and non-essential goals and requirements for negotiations. Negotiate on commercial terms. Ensure that negotiators are adequately trained.
Stages of the Procurement Process Cont’d… Risk Variations in price and foreign exchange.
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Possible Consequences Cost overruns.
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Risk Leaving the choice of the freight Unwillingness of the supplier to forwarder to the suppliers. accept the contract.
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Failure by either party to fulfill the Shipping of certain goods without conditions of the contract. having the recipient government’s permit of importing these goods.
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Possible Consequences Many different freight forwarders Delays in delivery. handling the organization’s transport of goods. Need to restart the procurement.
No control over erformance of freight forwarders in case of delays. Contract disputes. Goods arrive at the country of destination but cannot Failure or partial failureenter. to satisfy the needs. Recipient may be required to pay the cost of storage in the port and Delays. applicable liner charges until the Inability of anyone to work on the permit / authorisation is issued. project or procurement. Cargo may deteriorate or go Legal action. missing during this waiting period.
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What to do Agree on prices and the basis of prices.
Determine the basis and formula for calculating Whatvariations to do in the solicitation document. Choosing the right Incoterm so that Seek legal redress if noncontrol of Freight Forwarder is acceptance causes loss. under the control of the organization. Negotiate the concerns of the supp er ut ensure t at t e Long Term Agreements with integrity of the contract remains. prequalified freight forwarders. Review Past Performance Knowledge of which countries Record. require which licenses for which goods. proper contract Ensure management. Request such licenses already in advance, i.e.inspections as early asand possible Hold regular get during thereports. procurement process. progress Ensure that all staff working on the project know the contract conditions and the buyer’s responsibilities. Establish appropriate recordkeeping systems. Maintain accurate records and documentation.
Stages of the Procurement Process Cont’d… 15. Inventory Management -Warehousing -Stock levels -Stock controls -Stock replenishment
-Identification of stores to be disposed -Disposal committee -Disposal report -Disposal plan -Disposal methods -Disposal documentation
Conclusion -Understanding the key steps aid early planning; By passing a step may lead to non-compliance and sanctions; -It is important for all players involved in the -These steps are key in delivering an organization’s objectives; -As a key success factor, there is need for top management support at all levels -These steps are legal requirements.
Questions/Comments/Discussion “You need to understand what you are buying, and why, how it will affect your business, and what the potential risks are. That detailed understanding may be beyond the scope of a procurement department.”
