WHAT IS PROCUREMENT?

 

Definition of procurement

 

what is procurement 

Procurement  is  the  management  of  sustainable  acquisition of  goods, works  and  services to  optimize  money  through a professional, audit able, and transparent framework. It is otherwise described as the whole process of acquiring goods and services from a third party through standardized procedure.

 

The major objectives of good procurement are:

 

Right quality: performance and conformance (from reliable supplier)

Right quantity: how many we need (ensuring cost effectiveness)

Right time: when actually needed

Right place: at a particular destination (ware house, store, school etc)

Right price: achieving the lowest possible total cost.

 

Procurement principles

 

Accountability:

 

This is an obligation that an official charged with an action or responsibility to give a transparent account of his or her action to the maximum at all times.

Such actions may be related to fund disbursement, purchase, procurement, project implementation, price verification, auditing, etc.

Professionalism:

 

This is the discipline where by educated, qualified, experienced and responsible officers have the technical skills to make decisions regarding purchase operations.

Transparency:

 

This is obligation to take action or discharge responsibilities with openness, truthfulness, fairness, honesty, and clarity.

Fairness:

 

This is obligation that equal opportunity to all potential bidders by showing consideration and impartiality in all stages of the procurement process.

Competition:

 

This is an open opportunity to all potential bidders who have the capacity to tender through advertisement pre qualification etc.

Value for money:

 

This is the achievement of highest returns through a mixture of;

1.      Efficiency:  maximum output from applied resources, least resources to achieve given output, lowest cost for a given output.

2.      Effectiveness: achieving desirable goals, reducing operational costs, wastages and losses.

Ethical approach:

 

This is exemplary approach to all procurement processes that cannot be questioned or criticized.

Corruption:

This is the desire of using official position to improperly enrich oneself or of those close to oneself through misuse of power entrusted to an individual or a group of individuals and consequently, undermining the objectives by defeating value for money, transparency and accountability.

 

Procurement management

 

Procurement management is the whole process of acquiring works (civil works, new construction, rehabilitation and renovation), goods (office equipment), services (consultancy services) and training from the beginning to the end (delivery). Proper procurement management usually starts from identification of need Planning, execution and completion.

Goods and work                

 

Identification of need:

 

This is the stage where the purchaser or employer or organization. States identify their need. For example, construction of new class rooms, renovation, rehabilitation, provision of instructional materials, capacity building or training etc.

 

Planning:

 

Determination of scope of the expected activities the timing, the sources of funding and the resources available to enable you implements the identified needs. Central at the stage is the preparation of procurement plan.

Procurement plan is a guide detailing all the procurement activities expected to be carried out within a period of one year. It is usually prepared at the beginning of every year and updated quarterly. Such plans usually spell out the timing for different procurement activities hence release of funds may be based on realistic, approved and updated procurement plans.

 

Procurement method:

 

There are many methods of procurement but for the purpose of this work we will treat only three identified procurement methods, which are:

1.      Direct contracting or single sourcing

2.      Shopping

3.      Tendering

 

Direct contracting or single sourcing:

 

Is the method of procurement where only one manufacturer or supplier exists?  For example spare parts or supplementary services, or where incompatibility or disproportionate technical difficulties may occur or in repeat orders or in real emergency cases

 

Shopping:

 

Is a method where at least three quotations are sourced from supplier for a small job or activity? This is done based on knowledge of the contractors or supplier who has executed similar activities.

 

Tendering:

 

Is the method where major activities involving huge sums of money are advertised in newspaper or notice boards to ensure competition, transparency and efficiency in tendering process? This is done using the following methods.

1.      International competition bidding (icb); advertisement is made open to all bidders worldwide.

2.      Limited international bidding (lib); advertisement is not usually very necessary; invitation is usually made directly to known bidders worldwide who are manufacturers of the required activity.

3.      National competitive bidding (ncb); advertisement is limited to local bidders in the country.

4.      Caution; deliberate tender splitting is an offence and should at all times be discouraged.

 

Tendering process

 

The following tendering process is commonly used:

 

i.                   Preparation of tender document and drawings

 

Tender /bidding document and plan/ drawings are usually prepared by expert or consultants in a case where there is no capacity. Efforts should always be made to ensure that the tender documents are ready before advertisement.

 

ii.                 Advertisement for pre- qualification or bidding

 

Advertisement for the activities to be carried out is to be published in at least two newspapers of wide circulation or government media applicable in the state. As for the ministries and agencies advertisement is to be published in tender journal usually published fortnightly.

 

iii.              Pre-qualification

 

For complex specialized activities and to save time, a pre-qualification of contractors/suppliers may be necessary to limit the number of bidders and to short list only qualified bidders.

 

iv.               Sale of bidding documents/ drawings

Bidding document/drawings are sold in order to cover administrative charges. They are sold for the whole lots of the targeted activities and not on lot by lot basis. The fees should be reasonable so as not to discourage potential bidders.

 

v.                 Pre-bid conferences

 

Where necessary a pre-bid conference could be organized to clarify some difficult aspects of the bid or to respond to bidders seeking clarification. This is very common in works contracts.

 

vi.               Bid submission

Bids are to indicate clearly the address of submission, venue, date, and time.

 

vii.            Bid opening

Bids are to be opened immediately after submission in the presence of bidders or their representatives, members of the civil society or the press to ensure transparency and minimize the risks of bid tempering. The bid price, bid security, and other conditions as stated in the document should be read out openly. Minutes of the bid opening are to be produced immediately and forwarded to right authority.

 

Bid evaluation/selection

Bid evaluation is usually carried out by a committee of professionals and the procurement officer. Members of the evaluation committee should declare any conflict of interest and exclude themselves from the evaluation process.

 

Post qualification

 

This is necessary in order to confirm the status of the recommended contractor/supplier if they were not pre-qualified and to confirm the genuine of the bid security, confirm the address of the bidder etc before award.

 

Contract award/ agreement

 

The successful bidder is usually notified in writing (through an award letter) informing him/her and signs a contract agreement with the organization. Where necessary awrd of major contracts should be published in at least two national dalies with the description of the contract, name of contractor and price or an annual report of the procurement activities to be compiled and printed in a handbook for distribution to all stakeholders as a transparency measure.

 

Contract management

 

1.     Mobilization

An acceptable percentage as applicable to the state is allowed, in cases of federal government, the maximum percentage allowed is 25%. The amount to be released to contractors/consultants should be covered by an unconditional acceptable advance payment bank guarantee from a reputable bank.

2.     Final delivery

Delivery period to be determined based on the type of contract or assignment or activity. It is recommended that smaller contract and consultancy training activities to be executed between one and three months while works contracts to be executed within six months and one year depending on the complexity.

 

Monitoring procurement

 

This is the process of accessing procurement compliance with respect to the legal framework, levels of authority and established procurement. It is also the means of measuring performance through benchmarks/ performance indicators, value for money and achieving objectives.

 

Contract performance

 

Proper planning and close monitoring and supervision of contractors/ suppliers and consultants are necessary to avoid price variations. The successful contractors /suppliers should be monitored at intervals through regular site visits to ensure execution at the right time, with the right quality and right quantity, at the right place and at the right price. Successful contractors/consultants can be issued with the job completion certificate after the completion of the project or supplies.

 

The steps followed in the procurement of services from consultants

 

Consultancy services;

 

1.      Preparation of the terms of reference(TOR)

2.      Preparation of the cost estimate for the assignment(budget)

3.      Advertisement to invite expression of interest

4.      Short listing to identify qualified consultants

5.      Preparation and issuance of the request for proposals(RFP)

6.      Preparation and submission of proposals by consultants

7.      Evaluation of technical proposals –quality evaluation

8.      Evaluation of financial proposals – cost evaluation

9.      Combination of quality and cost (QCBS)

10.  Negotiation

11.  Signing of contract.

 

Selection methods for consultants for procurement

 

1.      Quality and cost based selection (QCBS)

2.      Quality based selection (QBS)

3.      Selection under fixed budget

4.      Least cost selection

5.      Consultancy qualification

6.      Single source selection