OVERVIEW OF THE PROCUREMENT

PROCESS
Presented to
NDMA
By
VINCENT OGONJO

Presentation Outline

Sessions Objectives

Introduction

Stages of the Procurement Process

Conclusion

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.

To enhance overall participants understanding of the
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.
Importance of Procurement
- 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

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
Consequences

Risk
Failure to secure
ongoing supply
critical to the
organization.

Failure to achieve key

organizational results.
Total costs of
procurement too high.

What to do

Analyze organizations
procurement portfolio,
function & capability
and undertake strategic
procurement planning.

2. Undertake Procurement Planning

-Departments supply their procurement plans
which
are consolidated. -Procurement
commenced on satisfaction that sufficient funds exist.
Possible
Consequences

Risk

What to do

Insufficient lead-time.

Inadequate supplier
response.
Higher prices.

Involvement of
procurement
officers in project
planning phase.

Stages of the Procurement Process Contd

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 users 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 Contd

Risk
Biased or restrictive
specifications/ToR/SoW.

Inadequate specification/ToR/
SoW.

Possible Consequences
Claims of unethical or unfair
dealings.
Inadequate supplier
response.
Significant variety in offers
received.

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.

What to do
Use functional performance
specifications.
Apply relevant international
standards where available.
Follow advice in the
organizations Procurement
Manual.
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 Contd

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

Wrong approach to market.

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

Training requisitioners in
procurement.
Separation of functions to
ensure possible breaches are
identified and prevented.
Analyse supply markets.

Stages of the Procurement Process Contd

Risk
Use of inappropriate evaluation criteria.

Possible Consequences

Inadequate or inappropriate result.

Not achieving best value.

Consider implications of the evaluation

criteria.

Loading of costs in offers.

Many qualifications to tenders.

Develop commercially acceptable terms.

Too few bids.

Use standard conditions of contract.

Check that responsibility for risks is not

allocated to suppliers for factors outside
their control.
Use standard conditions.

Loading of costs in offers.

Disruption.

Adverse impact on the organizations

professional recognition.

Seek the legal offices approval to

conditions of contract.

Allocate risks appropriately.

Loading of costs in offers.

Ensure that staff is suitably trained.

Great variation in offers.

Review documents before issue.

Know your market.

Difficulty in clarifying and closing offers

because of extensive requests from
suppliers for clarification
Supplier complaints.

Political intervention.

Implement standardized procedures for

responding to inquiries.

Withdrawal of offers.

Advise all suppliers of all responses to

inquiries received.

Uncertainty among suppliers because of new and

unusual conditions of contract.

Actual or perceived favouritism in providing

information.

Seek offers again and incur extra

management effort.
Check with the market.

Terms and conditions unacceptable to suppliers.

Provisions of inadequate information.

What to do

Stages of the Procurement Process Contd

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
proposals, Low
value procurement, Restricted tender
Risk
Delayed requisitions to create false
emergencies.

Possible Consequences

Claims of unethical or unfair

dealings.
Higher total cost of acquisition.

What to do

Selection of inappropriate
procurement strategy.

Inadequate or inappropriate
result.
Not achieving best value.

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
management effort.

Stages of the Procurement Process Contd

6. Publicizing the procurement opportunity(ies)

- Advertising in newspapers, notice boards, websites

7. Availing bidding documents to bidders

-Ensure early preparation
8. Submission of Bid Documents
- 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 Contd

9. Opening of Bids
- Appointment of tender opening committee,
bidders
may participate, and minutes prepared.
Risk

Possible Consequences

Actual or perceived breach of

confidentiality.

Supplier complaints.

What to do

Political intervention.
Mistrust by suppliers.

Establish formal security

procedures.
Perform regular security
audits and reviews.
Advise suppliers of
security measures.
Train staff.

Stages of the Procurement Process Contd

10. Bid Evaluation:
This step involves:
a.Preliminary evaluation- Analyzing bids based on
mandatory requirements
b.Technical Evaluation- comparing each tender to the
technical requirements
c.Financial Evaluation- comparing tenders to determine
the evaluated price of each Tender
d.Post
d.Post qualification
qualification-- 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

Failure to observe effective

evaluation procedures.

Possible Consequences

Inconsistency in evaluation of
offers.
Potential for ethical dilemmas.
Subjectivity in outcome of
evaluations.

Failure of offers to meet needs. Need to re-tender.

What to do

Failure of evaluation to identify

a clear winner, leading to
selection on subjective grounds
or new criteria.

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.

Selection of inappropriate goods/services.

Insufficient number of responses.

No response from known high-quality

suppliers.

Possible Consequences

Failure of supplier to fulfil contract.

Failure of the goods/services to meet the

need.

Need to start procurement again.

Delays to procurement schedule.

Poor value for money due to limited

competition.

What to do

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.

Failure of offers to meet needs.

Seek early industry participation.

Greater uncertainty about suppliers

capabilities.

Know your market.

Request tenders from selected suppliers.

Stages of the Procurement Process Contd

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
duly signed
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 Contd

Risk
Contract approval
not obtained.

Possible
Consequences
Delays in
contract award.

What to do

Ensure
adherence
throughout
process to rules
and procedures.
Ensure adequate
documentation
of process.

Stages of the Procurement Process Contd

13. Creation of Contract
-Contract signing
-Parties involved
-Contract documentation involved in creation of a contract

14. Contract Management

-Execution of contract
-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 Contd

Risk
Masking, by apparent agreement, of
different expectations of buyer and
supplier.

Deadlock on details of agreement.

Undue concession to suppliers

Possible Consequences
Contract disputes.

What to do
Define terms carefully.

Delivery delays.

Record each partys obligations.

Possible cost variation.

Clarify all ambiguities. before

signing the contract

Keep full and accurate

documentation.
Investigate better ways of sharing
risks.

Delays in delivery.

Need to restart the procurement.

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.

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 Contd

Risk
Variations in price and foreign
exchange.

Possible Consequences
Cost overruns.

Risk
Leaving the choice of the freight
Unwillingness of the supplier to
forwarder to the suppliers.
accept the contract.

Failure by either party to fulfill the

Shipping of certain goods without
conditions of the contract.
having the recipient governments
permit of importing these goods.

Possible Consequences
Many different freight forwarders
Delays in delivery.

handling the organizations

transport
of goods.
Need to restart
the procurement.
No control over performance 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.

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
supplier but ensure that the
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
the
procurement
process.
progress reports.

Ensure that all staff working on

the project know the contract
conditions and the buyers
responsibilities.

Establish appropriate recordkeeping systems.

Maintain accurate records and

documentation.

Stages of the Procurement Process Contd

15. Inventory Management
-Warehousing
-Stock levels
-Stock controls
-Stock replenishment

16. Disposal
-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
procurement process to get it right first time;
-These steps are key in delivering an organizations
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.
(Owen Williams)