3 February 2011 | Oltesh Thobias

Public bodies have to provide value for money. Oltesh Thobias offers advice on getting it right first time.

Procurement is increasingly recognised as an important part of organisational development. To have the most impact, purchasing needs to be involved from the start of a process. Stakeholder involvement, sufficient resources, proper planning and the involvement of the right people are other key elements of success. If all this is done properly, cost savings and value for money will be realised. Here are the steps for an effective and efficient process.

1. Offer guidance
Ensure internal customers are given proper guidance and support before they submit their requirements. And make sure procurement is involved from the start.

While user departments know what they want, they may not have sufficient knowledge regarding the length of time it takes and the appropriate procurement method. The purchasing team can provide information to facilitate proper execution of the process.

Ideally, when the requirement is identified, a discussion between procurement and the internal customer will enable both parties to understand the requirements of each and establish the best way forward. There are many benefits to be gained from this approach (see list, right).

2. Assess project risks
The internal customer and purchasing should examine all the possible risks that could occur during the procurement or implementation of the project. 

Procurement risks could include: failure to attract sufficient responses; requests for clarifications that lead to delays and extension of the bid submission; bidders failing to meet minimum evaluation criteria; failure to conclude negotiation with the selected bidder; and evaluation delays.

Risks that can happen during implementation of the contract could include: failure of the contractor to execute the project according to the requirements of the customer; project execution delays; cost overruns; cancellation of the project and more.

3. Involve stakeholders
Some projects may have an impact or dependence on an organisation’s existing equipment or systems. Equally, projects could benefit several stakeholders both inside and outside the organisation. It’s imperative all parties are brought on board to get their input and address any areas of concern.

4. Consider seeking external expertise
Consult experts for projects of a technical nature when there is not sufficient knowledge or expertise within the organisation. Requests for information via the internet or newspapers can also prove handy.

5. Find sufficient resources
Projects often stall because they lack the financial or human resources to see them concluded. For example, organisations often set a budget aside to discover the lowest evaluated bidder far exceeds it.

And it terms of HR, a lack of qualified people with the knowledge and commitment to manage the project can incur delays. This could happen, for example, during implementation of an IT system that requires users from every department to provide their inputs and requirements. While the contractor knows what is expected from them, users are expected to play their part for successful execution.

6. Form an acquisition plan
An acquisition plan enables the organisation to track the movement of transactions from the point at which the requirement is realised through to the signing of the project completion certificate. Planning should involve the customer, procurement and all stakeholders.

Potential bottlenecks should be identified and areas prone to delays highlighted. Project management techniques should be used to ensure adherence to the plan.

7. target the right bidders
Placing procurement opportunities in the right media has a direct influence on responses. The choice of advertising media such as newspapers (local, national, international), magazines, journals, your own website, international websites such as that of the United Nations Development Business, United Nations Global Marketplace or DG Markets (the largest international portal for tenders and procurement) should be made with a view of reaching the right recipients.

Good timing of the advert is also important. For example, running an advert just before a major season or religious holiday may affect the number of responses.

8. Evaluate bids correctly
While evaluation criteria will have been agreed and published during the procurement process, it is important that the actual evaluation of bids follows the criteria published in the tender document.

Poor evaluation leads to the award of contracts to providers who are either not qualified or lack the requisite capacity.

9. Involve legal and technical experts
It is imperative that negotiations involve all stakeholders. Negotiations will depend on the nature, scope, size and duration of the project. This should involve all the stakeholders, i.e. lawyers, procurement experts, user departments, finance, etc. Selection of the negotiation team should also take into account the individual members’ knowledge of the subject and their involvement in the process to ensure that the deal is signed in a spirit of ‘win-win’.

10. involve key players early
While an organisation may have all resources it needs for the implementation of the project, efforts should be made to ensure key players are involved from the start.

If necessary a multidisciplinary and multifunctional team should be set up. For example, if an organisation is implementing an IT system it should draw members from business process, such as an inventory management section, procurement, finance and budget management department and most importantly IT and telecommunications teams.

11. monitor the project
Most projects experience delays if they are not closely monitored. Delays will attract cost overruns and mean the company will fail to meet its objectives.
It is also vital to analyse project outputs to monitor performance. This enables the organisation to correct areas of weakness and apply lessons learned to future projects.

12. Record savings made
While most of us view procurement as a cost centre, it can also be a source of profit. When procurement is performed based on fairness, competitiveness and transparency coupled with competent teams from both the internal customer and procurement departments, the organisation will realise value for money because it will select goods or services with a reasonable total acquisition cost.

Early birds: Benefits of early discussions between procurement and internal customers

• Procurement is able to provide information on similar projects performed in the past
• Procurement can consolidate requirements from across an organisation
• Understanding the size, length, scope, and the terms of reference means procurement can establish the best way forward
• Procurement can examine the impact the projects have in relation to other existing equipment or systems in an organisation
• Purchasing gets the chance to establish the estimated timescale for the procurement and advise the customer
• It’s possible to establish if there is enough capacity within the organisation – especially when writing Terms of Reference, conducting evaluations and carrying out negotiation. The organisation may then decide to involve external experts if needed.

☛ Oltesh Thobias is principal procurement officer at African Development Bank