MEASURING PROCUREMENT PERFORMANCE INRWANDACASE STUDY: SOCIAL SECURITY FUND OFRWANDA: YEAR JULY 2010-JUNE 2011
Importance of procurement: public sector procurement at 8% (US$3.2 trillion) of the worldwide GDP of US$40 trillion Rwanda: more than 40 % of all public expenses. but still organizations face delays, poor deliveries, fund misuses and other losses Some studies suggest that in developing countries, the procurement function is transitioning from a clerical non strategic unit to an effective socio-economic unit How about Social Security Fund of Rwanda
Two objectives: showing the areas of improvement by measuring procurement performance highlight challenges faced by the procurement function specifically in those weak areas.
Efforts improve performance of the procurement function public procurement is still a theater of poor works, poor quality goods and services, poor deliveries even corruption procurement performance measurement had been attracting attention from long ago 1931, the National Association of Purchasing Agents (NAPA), USA organized a contest on the topic.
In 1945, guidelines on procurement performance in USA 2004, the European Institute of Purchasing Management (EIPM) organized a conference “Measuring Purchasing Performance” We know about audits generalizing that the procurement function is not performing without indicating the criteria used to reach that conclusion or just basing it on financial statements is not reasonable (Muhwezi, 2006).
Questions can be asked: how to judge the performance if it measured against irrelevant criteria or if it is not measured at all do public institutions have a framework for measuring procurement performance? Etc.
For the purpose of this research two questions will be asked: What are the areas of improvement in the SSFR procurement performance? What are the challenges faced by the procurement function specifically in those areas of weak performance?
Techniques of data collection: Documentary technique Interview technique Methods of data analysis: Analytical method Deductive method Sample: 30 OCB tenders out 122; 41 are OCB
Definition: Many different definitions meaning of purchasing performance still difficult. covers broader areas of procurement, for instance (Knudsen, 1999) Van Weele (2006) performance= effectiveness + efficiency Sabine Adotévi(2004): performance= how well the process+ how good the outcome. We keep performance= effectiveness + efficiency
WHY MEASURING PURCHASING PERFORMANCE?• From different authors:• Identify areas for improvement• Ensure that procurement directly contributes to fulfillment of corporate objectives• provides information for analysis and decision making• enhanced profitability• cost reduction,• Etc
Many from different authors: SMART: Specific, Measurable, Agreed, Realistic, Time d. Easy to measure Contributing directly to the delivery of one or more corporate objectives Linked to corrective actions and outcomes, so that people could see the value that the Procurement function was delivering
SSFR has no P.P measurement framework Proposed one aligned with SSFR corporate objectives: Corporate objective Procurement indicator PROVIDE QUALITY SERVICE QUALITY TO CUSTOMERS PREPARE AND IMPLEMENT DELIVERY ORGANIZATIONAL PLANS EFFECTIVE FUND COST MANAGEMENT DEVELOP A CAPABLE AND RESPONSIVENESS RESPONSIVE ORGANIZATION
Procurement performance indicator TargetsQUALITY The number of request for repair should zero during its guaranty period Durability: product purchased should last the for the whole warranty periodDELIVERY All deliveries should be done in the time stipulated in the contract The level of defects should be zero defects.COST All contracts should be below or equal the estimated budget Cost avoidance: the number of request modified should reach 20% of all received requests
Procurement Performance indicator Procurement ObjectivesCOST………. A price market research should be conducted for each tenderRESPONSIVENESS Each customer’s query should be have a response within 48 hours after receipt The renewal of fixed time contract should be done before the expiration date Upon request information should be available within 3 days to the public.
Scoring: The scoring method proposed assumes that under a certain frequency (like below or above half repetition), the indicator under reasonable performance will be considered as unrated or the score will be zero. For instance as the sample is 30, the scoring will be 100 points at maximum (30) and 0 points at the frequency of 15.
Balanced score card:General Indicator Specific indicator ScoreQUALITY NUMBER OF REPAIRS 86,6% DURABILITY(warranty period) 66,7 %DELIVERY DELIVERY TIME 33,3 % DEFECTS REJECTION RATE 66,7%COST COST AVOIDANCE 73,3% PRICE MARKET RESEARCH 33,3% PAYMENT VS BUDGET 80%RESPONSIVENESS QUICKNESS OF SATISFYING 33,3% CUSTOMER REQUEST CONTRACT RENEWAL 75% ACCESSIBILITY TO INFORMATION 73,3%
Areas where score is below 70%: Durability Delivery time Defect rejection rate Market research Quickness of customer satisfaction
Durability: Testing Carelessness of users Fear of retendering delivery time Suppliers accept penalties(1/1000 per day) Land locked country: dependence on external factors(transport, fuel price, ……)
Defect rejection rate Tenders awarded to lowest price bidders Transport Market research Awareness quickness of customer query satisfaction Structure Nature of some tenders(investment projects)
Introduction of a procurement policy Draft a framework for procurement performance measurement To place public procurement unit directly under the Director General’s office Allocate more time to market research Advocate foe the inclusion of investment project under special procurement (law)
It is a human being work Not perfect Critics, suggestions, advices and corrections are more than welcome.Thanks.