Procurement Management Best Practices

8/17/2019 Procurement Management Best Practices

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Procurement Management:Best Practices

Krishan BatraPrincipal Advisor

UNDP/OLPS

6 October 2006


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Learning Objectives

• Overview of Procurement Facts• Understanding Procurement Chain• Procurement Plan• Su l! Positioning• "is# $anagement• Procurement Oversight

• Contract %evelo ment & 'dministration• 'tlas (PO & '$ $odules)• * +e will wal# !ou through sim le and e,citing journe! of rocurement management-


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Procurement DefnedThe term “procurement” refers to theprocess of acquiring goods, works andservices. The process spans the whole cycle

from identification of needs through to theend of a services contract or the useful life ofan asset. [1]

/10 U %P Fin "eg 21 31(a) ($arch 2334)


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Procurement 'uthorit!6• 7he 'dministrator has delegated oversight anda roval authorit! to CPO• 7he CPO delegates the authorit! to ""8 %irectors

and 9eads of :ureaus for award of contract valued

at less than ;1338333•


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Components of Delivery

Consultants (SS') ===== 13>

7ravel ====== ?>U @ ======= 4>Fellowshi s ======= 2>Project Personnel (SC) A12>Project staff (233 & .33 Series) A1?>

Boods

Service=========== 54 >

.>

Boods andServices

54>

Project Staff(233 & .33

Series)1?>Project

Personnel (SC)12>

Fellowshi s

2>U @4>

7ravel?>

Consultants(SS')13>


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UNDPGlobal Procurement

Trends


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! "mount

C>

2?>

1.>

4.>

E 2 4 F

2 4 F G .3 F

.3 F G 133 F

H 133 F

! #ount

C3>

.C >

.> 1>

E 2 4 F

2 4 F G .3 F

.3 F G 133 F

H 133 F


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"tlas Transactions $ !% with &alue ' 1(( )

21>

1I>

D>D>1?>

2?> '

'P

'S

JC

9K

L'C

* Note: HQ data includes IAPSO and UNV


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Procurement & %eliver!6• %eliver! com rises mainl! of following com onents6 Boods8

Services8


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Procurement Chain6

R ! So"rcin#$Potential S"ppliers% Receipt and Openin#

&endorA'ard (ontract/POApproval b) (PO (reate &endor

val"ation o* O+ersRevie' B) (ontracts

(o,,ittee

Biddin#


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Public Procurement Life Cycle

ProcurementPlan

ProcurementImplementatio

n

ProcurementEvaluation

ProcurementFormalization


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Procurement Planning6• 7his should ta#e lace well before ta#ing an! urchasing

action•


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Procurement Plan6• ' rocurement lan describes which roduct will be

ac uired from vendor as well as when and how the! will beac uired +hat8 +hen8 9ow

• 7em late A


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ProcurementPlanningProcurement planning, prior to any action taken in Atlas, is essential

for the timely solicitation of quotations, bids or proposals; the awardof contracts; and the delivery of inputs. Procurement planning entailsmore than the selection of a procurement method for various goods,works and services and when to schedule activities, but combines thelegal and institutional frameworks in which procurement must becarried out. Business Units should consider the following

!ypes of goods, works orservices required;"ethod of procurement;

potential sources;#stimated costs;$ource of funds;

%equisitions;&elivery time and place;#valuation criteria;

'usti(cation for non)competitive procurement;and%eview of *AP and A*P.


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Procurement Planning

WHAT?WHEN?

HOW?


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Supply Positioning (Port olio Analysis):

Su l! Positioning rovides a mechanism fordiscriminating between the com onents of the total

urchasing re uirements whether goods8 wor#s or

services8 and a tool for develo ing s ecificstrategies to meet the needs of the organiMationwith res ect to each grou of urchases


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1D

Supply Positioning

Few majorsourcesFew alternativesQ S ! critical"ow value

Few sources monopoly #ig$ costQ S ! critical%o alternatives

&any sources

&any alternatives"ow value

&any sources

&any alternatives#ig$ cost

S'!A' *+ S +,!*'- S'!A' *+ +!*'*+A"

'A+'*+A" A+Q,*S*'*.% 'A+'*+A" P!.F*'


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Purc$asing oals

nsuresupplies+ost

insensitivity Fre/uent

review

nsuresupplies+lose price

management+ontinuous

review

AutomateDelegate

ive low

Proftcontri0ution

'a1e ris1sSee1

S'!A' *+ S +,!*'- S'!A' *+ +!*'*+A"

'A+'*+A" A+Q,*S*'*.% 'A+'*+A" P!.F*'


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Purc$asing ActionScenarios

"ong term contracts4u5er stoc1sPrice inde6ationFind alternatives

+ontingency planning

&edium or long7termcontractSupplier in ormationSupplier development

Price management+ontinuous review

Simplepurc$asingproceduresSystems

contractingStoc1less

purc$ase

S$ort7termcontracts Active sourcing&ar1et 1nowledgePrice

determination

S'!A' *+ S +,!*'- S'!A' *+ +!*'*+A"

'A+'*+A" A+Q,*S*'*.% 'A+'*+A"P!.F*'


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Ris Management

• "is# is art of the rocurement environment•


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WriteSpecifications

TOR and SOW

val"ate O+ers

Ris Management Prepare

SolicitationDocuments

Seek, Clarifyand Close

OffersAward Contract

Manage t eContract

(hoose aProc"re,ent -ethod

.denti*) Needs

Ne#otiate the(ontract val"ate theProc"re,ent


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"is# $anagement6• e! to effective and efficient deliver!• 7his should be integrated in da! to da! management• $ore im ortant when we are moving from *arms length- to

* artnering-• 7! ical "is# factors6 :u!er ris# factors8 Su lier "is# Factors8

Contractual relationshi ris# factors8 J,ternal ris# factors• 7ools and techni ues for managing ris#s6 ("is#s8 Li#el!

conse uences8 what to do)

A


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"is# $anagement6

• Selecting a rocurement method• See#ing8 clarif!ing and closing offers•


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Risk Cost Deliver Et!ics

Overstate,ent o*Needs

& & N

Understate,ent o*Needs

& & N

.ns" cient1"ndin#

& & N

.,practical i,e*ra,e *orS"ppl)

& & N

No AvailableSol"tion

& & N

1ra"d & & -

Ris : !dentifying Needs


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Ris : "riting Re#uisitions

Areas o" Conse#uence

Risk Cost Deliver Et!ics Narro'/ Biased

Speci3cations

& & -

De3nition o*

.nappropriate Prod"ct

& & N


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Ris : $olicitation DocumentsRisk Cost Deliver Et!ics

er,s and (onditionsUnacceptable toS"ppliers

& & &

Uncertaint) a,on#st(ontracts d"e to(onditions o* (ontract

& & &

Provision o*.nade4"ate.n*or,ation

& & &

Biased Re4"ire,ents & & &

.nade4"ateRe4"ire,ents

& & &


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Risk Cost Deliver

Et!ics

1ail"re to .denti*)Potential So"rces

- & &

Lac5 o* -ar5etResearch

- & &

S"pplier

-onopol)

- & &

Selection o*.nappropriate-ethod

- & &

Ris : Procurement Met%od


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Risk Cost Deliver

Et!ics

1ail"re to

Ade4"atel)AddressS"ppliers.n4"iries

N - &

Act"al orPerceived1avoritis, inProvidin#.n*or,ation

N - &

Ris : $ee & Clarify andClose '(ers


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Risk Cost Deliver Et!ics1ail"re to Observe

+ective

val"ationProced"res

& & &

Breach o*(on3dentialit)

& & &

1ail"re o* O+ersto ,eet Needs

& & &

1ail"re o*val"ation to

.denti*) a (lear

& & &

Ris : )valuation of '(ers


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Risk Cost Deliver Et!icsSelection o*.nappropriate

S"pplier

& & &

Selection on.nappropriateProd"ct

& & &

.ns" cientN",ber o*Responses

& & &

No Response *ro,Kno'n 8i#h9

& & &

Ris : *+ard of Contract


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Risk Cost Deliver Et!ic

sUn,atched :pectations o*B")er and S"pplier

& & &

Deadloc5 on A#ree,ent & & &

Und"e (oncession toS"ppliers & & &

1ail"re to Acco,,odateStandard (onditions

& & &

;rossl) Un*air or Onero"sRe4"ire,ents

& & &

1ail"re to Re


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Risk Cost Deliver Et!ics

1ail"re to AssessS"pplier sPer*or,ance

N N &

1ail"re to Assess theProcess

N N &

Loss or Da,a#e o*;oods in ransit

N N &

1ra"d N N &

Ris : )valuate t%eProcurement


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Risk Cost Deliver Et!ic

s&ariations in Price and("rrenc) 1l"ct"ation

& & &

Un'illin#ness o* S"pplier toAccept the (ontract

& & &

1ail"re o* ither Part) to1"l3ll the (ontract

& & &

.nade4"ate Ad,inistrationo* (ontract

& & &

Acceptance Be*ore(o,pletion

& & &

.ncrease in Scope o* 7or5 & & &

.ntellect"al Propert) & & &

hird Part) Liabilit)

Ris : Managing t%e Contract


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Oversight 7ools6

• "eview b! C'P & 'CP• "eview of C'P re orts

• Procurement 'udit• %ocumentation submitted for increasedrocurement authorit!

• "oving Procurement Officers


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Procurement Oversight6• e! ur ose is to mitigate ris#s• Com liance with F"" and Procurement $anual• Sco e of oversight covers mainl! following

A "e uirementsNSO+N7O"NS ecifications A Kualit! "e uirements A Procurement Process6 7rans arenc!8 $ethod8

Jvaluation Criteria8 Conflict of interest if an!

A Pa!ment Schedules A Shi ing 7erms and insurance A


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Scope o* A(P Revie''b,ective: Mitigate Ris

•Procurement Process6 7rans arenc!8 $ethod

•S ecificationN7O"NKualit!

• 'vailabilit! of Funds

•@alue for $one!NCost %etailsNConsulting Fee•Jvaluation $odalit!

•Performance Securit!N+arrant!

•Shi ingN


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'dvisor! Committee on Procurement

• Jstablished b! CPO to oversee major contracts• "eview contracts which involve commitments to a su lier

with res ect to a single re uisition or series of re in acalendar !ear valued at ;1338333 or more

• Pro osed contracts which generate income of ;138333• 'n! amendment of a contract reviousl! reviewed b! 'CP

where the contract amendment or a series of amendmentseither increases the total amount b! 23> or ;1338333

whichever is less• 'n! amendment not reviousl! submitted to the 'CP

where the revised total contract amount e,ceeds ;1338333


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'CP6

• Pro osed contract that leads to series ofcontracts amounting more than ;1338333

• %is osal8 +rite=off or transfer of goods withasset value ;.38333 or more

• 'll vehicle accidents or losses when grossnegligence is the cause

• Procurement of services related to individualconsultants with contract amount e,ceeding;1338333


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"# *u+missions (,

11>

23>

23>12>

14>

22>

9K

'

'P

'S

JC

L'C9K ' 'P 'S JC L'C 7otalII 1D4 1?1 13D 1.2 1I? ?I2

53 m 145 m 14? m 11I m .2 m I m 4II m

C R f


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Common Reasons forRe,ection

1ail"re to "nderta5e a co,petitive e:ercise.,per,issible ="sti3cation *or 'aiver OR or State,ent o* 7or5s or Speci3cationsinco,plete

OR or State,ent o* 7or5s or Speci3cationstoo restrictive or biased.ncorrect eval"ation ,ethodolo#) or criteria1ail"re to s"b,it re4"ested doc",entation

*or A(P revie'(on


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e! Observations6• SO+N7O" not clear8 :iasedN


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Oversight at a Blance6

• umber of cases from ":L'C6 2 4• umber of cases from ":'P6 2.• umber of cases from ":'6 234• umber of cases from ":JC6 D4• umber of cases from ":'S6 ?I• umber of cases from 9K units6 1.?

• umber of cases withheld for a roval6 .1>• umber of cases if *subject to- is included6

earl! 44>


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Procurement certification

• Course has been designed in=house b! OLPS• 'ddresses basic rocurement olic! and standard 'tlas

Procedures• Objective6 1 Jnhance learners com rehension of U %P

rocurement olic! and rocesses 2


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3eneral 4ating

Procurement @olume .383338333Purchase Order "aised Count 1.54

7otal value 2383338333non=PO @ouchers above 28433 (US%) Count 533

7otal value I?38333

J Procurement 2383338333%J Procurement 1383338333

'genc! P rocurement 3

Count7otal value 1?38333Count .7otal value .338333

5 !verall .4>

5 6anagement of 7irect ayment $non8 !% 9 days5 6anagement of ayment $ !% 1 days5 :ead Time 13ND

Submission of Plan Qes ' roval of Plan Qes

Kualit! of Submissions 5 Total%elegated Procurement authorit! 438333 (US%)POs issues between 1338333 and %elegated

'uthorit!Count .

7otal value 1D38333POs issued above delegated authorit! Count

7otal value 338333

umber of staff with bu!er rofile ?umber of staff Certified 4

rocurement &olume

;igh value transactions $ !%.38333 G1338333

"dvisory #ommittee on rocurement

rocurement #apacity

H 1338333

:ow value transactions $ !%

rocess Time

rocurement lan

ProcurementDas%board!ndicators


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Blobal Fund Procurement6• Procurement forms nearl! ?3> of the roject amount• Focus is on 9


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Long 7erm 'rrangement6 A L7' offer a number of advantages6 A the! offer the value for mone! advantages of centraliMed

rocurement without the commonl! associated level ofbureaucrac!

A a single tendering e,ercise over the life of the arrangementreduces administrative effort and cost for the %e artment

A the initial tendering rocess will have identified com etitivesu liers8 who should then offer more com etitive riceson the basis of the e, ected value of business

A ualit! assurance and legal re uirements will have beendealt with at the outset A Com letion "e ort


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Long 7erm 'rrangements6 A call=offs are covered b! U %P Standard 7erms and Conditions

combined with s ecial terms and conditions a ro riate to theitems being rocured and will8 in general8 rovide better

rotection than individual small urchases under the su lierRsstandard conditions

A the agreed range of items or services should be at short noticethus reducing or avoiding stoc# holding for goods and reducingdown=time on e ui ment maintenance and re airs

A the su lier benefits in terms of lanning stoc# levels andcontinuit! of su l!

A a mutuall! beneficial longer=term wor#ing relationshi can beestablished with su liers

A Call=off create legal obligation and not L7'


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Purchasing Card6

• 7ool for rocurement of low value contracts i eless than ;28433

• 'ims to reduce ett! cash and number of

a!ment transactions• $onthl! limit set at ;138333• Can t be used for rocurement of assets

• Facilitate P2P• o transaction fee• Pa!ment c!cle .3 da!s


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Procurement Process6• Planning is not an anal!sis but identif!ing the activities

and direction of activities• FormaliMation hase determine the sourcing a roach8

evaluation criteria and solicitation documents


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7i s on writing an effective SO+

• :e clear=use sim le8 direct language• Use active8 not assive tenses ( 7he seller shall conduct

the test as o osed to a test should be conducted===8language is the dress of thoughts)

• S ell the bu!er s obligation carefull!• Provide a ceiling on the e,tent of services•


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Purchasing a service6• Services are more difficult to evaluate than goods Boods

have objective standards• Su lier of services are often reluctant to rovide benchmar#• J,cellent services are eas! to monitor but mediocre or oor

services are difficult to evaluate• Boods can be returned whereas services cannot• Poor ualit! services ma! continue undetected and cause

greater roblems

• :ecause of above differences the re utation and thee, erience of su lier is more im ortant• e! urchasing criteria6 "e utation8 "eferences8 J, erience8

Current Clients8 J ui ment8 rice etc


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Purchasing Services6• $an! services such as secretarial and cleaning are oftenbought as generics Other services such as a lication

software develo ment 8 advertising are bought asrofessional

• Purchasing is not involved full! in rocurement of services• +ord of mouth is the one of the #e! wa!s in which bu!ers of

services e,change information• 7here are five roles8 Users8 :u!ers8


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Outline of SO+N7O"6

• :ac#ground• Out utsN deliverables desired•


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+h! an "FP

•


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%esigning an Jffective "FP6

“ Never tell people how to do

things. Tell them what you wantto achieve and they will surprise

you with their Ingenuity”


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:asic Jlements of an "FP6

• Statement of Pur ose6 the nature of theservices to be rovided and the overallobjectives of the contract

• :ac#ground


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9ow the! are to be delivered and the durationthe! are re uired

• Performance Standards6 $inimum erformance

standards and method of monitoring•


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9ow the! are to be delivered and the durationthe! are re uired

• Performance Standards6 $inimum erformance

standards and method of monitoring•


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Jvaluation Factors6

• e! Considerations6 $anagement8 7echnicaland Financial

• 'nal!sis6

A +hat things should be evaluated A +hat are their attributes A +hich attributes are relevent A +hat is their relative im ortance:est @alue6 @alue of a ro osal is the sum of the

weighted values of the a licable evaluation factorsfor award


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:est @alue for $one!6

7o get the best value for mone!8 !ou mustconsider costs that the bu!er will incur inaddition to the Offeror s rice8 including6

• Cost to administer the contract• Life=c!cle cost of the roduct• Kualit! of the roduct• Past erformance of the su lier


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@alue 7ree6

• Overall @alue A 7echnical Factors

• "eliabilit!

• Kualit! A $anagement Factors

• Personnel (Jducation8 Performance8 J, ) A Price Factors

• Cost and Fee• "ealism• "easonableness


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"FP6 %ecisional "ules

• Lowest Priced technicall! acce table A 7echnical factors are used to ualif! offerors A 'n offer is either acce table or not

A Price is the onl! factor for decision• :est @alue6

A %efine the factors that contribute to value

A "elative


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J,ecution $odalit!6

• %J 6 Under this we treat all vendors and BOS ascontractors

• J 6 Jnsure that rocurement rules com lies withthe best international ractices

• Countr! Office Su ort to J (Follow U %PBuidelines)

• BO J,ecution

• U 'genc! J,ecution

A


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Procurement 'ccountabilit!6

• 7efinition 7he accountabilit! in rocurementmeans that staff is res onsible for actions anddecisions that the! ta#e in relation to rocurementand for the resulting outcomes 7he staff is

accountable through established lines ofaccountabilit!• ;ow does accounta+ility help< 7he accountabilit!

encourages the efficient8 effective and ethical use of

the organiMational resources 7his is the mainwatchword for U %P rocurement rocess• =undamental elements of "ccounta+ility


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'ccountabilit!6 A rocurement olicy A 7ocumentation


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Procurement Jthics6• Conflict of interest6 ' conflict of interest ma! e,ist when a staff is

involved in an activit! or has a ersonal interest that might interferethe objectivit! in erforming the function (Code to guiderelationshi )


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Procurement Jthics6•


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Procurement Jthics6•


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'sset $anagement6

• +hat is asset• 7! es of assets6 Ca ital and non=ca ital• Profiles of assets

• +ho can addN retire assets• 7heft and loss of assets• 7rac#ing of assets

• 'ssets for management and develo ment roject• $ajor concerns of e,ternal auditors• %is osal6 Clearance b! C'PN'CP


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Procurement and the Law6

• +h! 9ave conditions of contract6 Boodwill• Formation of Contract

A Offer8 'cce tance and Consideration ( battle of Forms)

A Oral Contract• Contract Performance ( Fulfillment of according to its terms) A %ela! in su lier s erformance A Li uidated %amages

A 7ermination of Contract A Force $ajeure (French 7erm6 Une, ected event)

• "ights and Obligations of bu!er and seller


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Procurement & the Law6

• Securing Contract Performance A +arranties A Performance Buarantees

A


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Procurement & Law6• 9ow is contract discharged

A :! erformance8 Substituted contract8 7ime8 7ermination8:an#ru c!

•


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D.

Contract Format6

• Purchase Order • Professional services contract•


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Practical 7i s6• Procurement must be framed with clear and accurate clients

re uirements and a ro riate evaluation rocess•


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Practical 7i s6• 9ard wor# at the start a!s off for both bu!er and seller • +hile develo ing s ecifications8 determine if the re uirement is a

mandator! re uirement i e must meet for consideration of offer• :enchmar# the each s ecific re uirement Su ose !ou give 13

mar#s to a oint8 what benchmar# the vendor will have to meet• Purchaser should act as a non=voting member to give guidance on

rocedural matters• Purchaser will invite end users and other #nowledgeable ersons to

artici ate

• Jvaluation anel should com rise of either . or 4 members• :est value conce t (Combined Scoring Conce t)


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Contracting %o s & %on ts6• "is# 'ssessment

A :e aware that each contract has a finite amount of ris#s that isacce table

A Focus should be shift as much ris# to su lier

A %on t use the su lier terms and conditions• Contract $ethodolog!

A %etermine the contract t! e that mitigates ris#s A %on t overloo# the im ortance of 7O"

• Contract J,ecution A


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Contracting %o s & %on ts• SO+

A


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Contract 'dministration6• %ef 6 7hose activities and actions ta#en b! the bu!er and su lier

during the time from contract award to contract closeout 7he!ma! include follow u 8 e, editing and su lier managementfunction

•


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Contract 'dministration6

• Ste .6 Perform random chec#s on=com liant situations must be identified

• Ste 56 Jnsure good communication• Ste 46 Partici ate in the contract renewal

or rebid decision Jnter the vendor ratingand close the PO in 'tlas


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Contract 7! es6

• Fi,ed Price Contract (Lum Sum) A "e uirements are well defined

• 7ime and $aterials Contract ( Fi,ed Unit Price) A $ajor cost elements are #nown but uantities not

defined8 Ceiling Price8 er=hour labor rate8 terms forreimbursing direct material costs

• Percentage Contract• Cost "eimbursement

A "e uirements are too vague A Ceiling Price


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$election of Contract Types

i,e >-aterials

Pro=ect Li*e ()cle

Re4"ire,ents

Proc"re,ent

Ris5s

2echnolo#ical

(hallen#e

-i.ed Price

Cost

/ Implementatio

n)

/ Conceptual)

(Specifc) / Vague)

(High)

/ Low)

(Low)

/ High)


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Procurement Certification:

• 7he course entails hours of learning• Passing mar#s6 ?3> $inimum• 7est com rises of 133 uestions• Programme will be managed b! L"C

through L$S•

Site is htt 6NNlearning und org


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J=Procurement Solution Overview6

• Jlectronic 'ttachment (7O"8 S ecifications8 Jvaluation $atri,etc )

• Catalogue Procurement (%irect Connect and local Catalogue)6:2:

• 'ccess to e,ternal users ( J and BOs)• Cover rocurement through Purchasing Card6 P2P• Lin# to U +J::UQ as a %irect Connect vendor • :usiness Services Procurement ( Conce t of CommoditiMing

services=


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d l ( f )


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SS' Buidelines (%raft)

• 7ool to hire individual contractors• SS' shall not be used for staff function• 's for L7' with com anies8 individual contractor can be

hired u to . !ears( $a, )•

Sourcing of individual contractor will be based oncom etitive rocess• Selection is based on firstl! evaluating technicall! and

then financiall!• Pa!ment is based on number of da!sN hours wor#ed

• Procurement rocess and not a 9" rocess• SS' contractor is covered for ' endi, % in definedterms

• 7here are indicators to decide the consulting fee


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Procurement Management Best Practices

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Transcript of Procurement Management Best Practices