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Procurement best practices


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Procurement best practices

  1. 1. Welcome to Best Procurement Practices Workshop 3-7 March 2008, Istanbul 1
  2. 2. Project Procurement Management: Best Practices Krishan Batra Principal Advisor UNDP/PSO 2
  3. 3. Learning Objectives 3-4 March 2008 • Overview of Procurement Facts • Understanding Procurement Chain • Procurement Plan • Supply Positioning/ LTAs • Risk Management • Procurement Oversight • Ethics, Probity and Accountability • Contract Management • Engaging and Managing Consultants. • Procurement and Law “ We will walk you through simple and exciting journey of procurement management” 3
  4. 4. Learning Objectives: 5-7 March 2008 • • • • • • • • • Developing Specifications/SOW/TOR Supplier Sourcing Procurement Methodology Tendering Process Selection of Consultants: SSA Shipping, Insurance & Shipping Terms Contract Types Strategic Sourcing (e-tendering) e-Procurement 4
  5. 5. BEST PRACTICES • Best Practices are defined as techniques that business units may use to help detect and avoid problems in the acquisition, management, and administration of contracts. Best practices are practical techniques gained from practical experience that may be used to improve the procurement process 5
  6. 6. Procurement Defined The term “procurement” refers to the process of acquiring goods, works and services. The process spans the whole cycle from identification of needs through to the end of a services contract or the useful life of an asset.[1] [1] UNDP Fin. Reg. 21.01(a) (March 2005). 6
  7. 7. Changing Business Scene • Purchasing is a professional activity in transition. • The function that used to be called purchasing or procurement has expanded to become Supply Management. • Pivotal role brings procurement closer to strategic planning. • Emerging role is proactive and more strategically oriented. • Move from reactive procurement to Strategic Supply Management • From a tactical focus to strategic focus. 7
  8. 8. Strategic Plans & Procurement • Strategic Plans sets the overall direction for support to programme countries to achieve national development objectives. • UNDP mission is to help countries accelerate progress on human development. Hence aim of UNDP advocacy, policy advice and technical support should be real improvements in people’s lives. • Dual Roles of UNDP: First pillar upholds the UNDP Role to coordinate and enhance efficiency and second pillar to provide advocacy, policy and technical support in poverty reduction, democratic governance, crisis prevention and recovery, and environment and sustainable development. 8
  9. 9. BUSINESS MODEL • There will be stronger emphasis on providing knowledge, policy advisory. • Focus efforts on areas where it has mandate and comparative advantage. • Will seek to build more extensive partnerships with CSOs to scale up the scope and impact of its work. • Bring advisory support closer to ground. • Expand Knowledge networks 9
  10. 10. Guiding Criteria • • • • • • Contribution to acceleration of MDG Creation of effective institutions. Expansion of national and local capacities Promotion of sustainable development Support to UN partnerships Provision of ‘last resort” in case of national capacity or crisis. • Withdrawal from specialized sectoral activity, infrastructure with no capacity building, standalone procurement, small-scale projects without country wide impact. 10
  11. 11. Integrating Procurement Strategy (Into Corporate Strategic Plan) • What to procure? • Promoting transparent & competitive procurement. • Substantial reduction in frequency of audit observations on procurement transparency • Professional Development. • Regionalization 11
  12. 12. UNDP Global Procurement Trends (million USD) 12 12
  13. 13. Procurement & Delivery: • Delivery comprises mainly of following components: Goods, Services, Individual Consultants, Travel, etc. These fall under procurement. • Procurement is the key pillar of delivery. • Procurement is presently treated as a mechanical process. • One needs different type of skill sets to manage different type of goods and services. • One need market and product knowledge. It is not about 3 quotations. • It is about partnering with supply sources • Move from tactical to strategic mode ( Presently we 13 spend 100% of our time on fire fighting)
  14. 14. UNDP Procurement Trends (million USD) 3000 RBEC 2500 Total 2000 Prog. Delivery 1500 1000 866 2168 377 379 0 2002 2003 2431 541 309 431 331 1755 826 500 2359 2004 2005 2006 2007 14 14
  15. 15. Procurement Breakdown Goods Service ----------- 76 % 85% Consultants (SSA) ----- 9% Travel ------ 7% UNV ------- less than 1% Fellowships ------- less than 1% Project Personnel (SC) – 8% 15 15
  16. 16. Average Contract Amount (1000 USD) $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $1,894 $1,563 1,563 1,894 $814 $463 $549 $249 HQ RBA RBAP RBAS RBEC $380 RBLAC * Overall $672,000 OTHER (PAPP) 16
  17. 17. 0 - 2.5 k 2.5 k -30 k 30 k -100 k 100 k -1 m >1 m Total PO Amount (million USD) 89 526 271 435 205 1,526 PO Count 98,509 64,475 5,186 1,738 87 169,995 17 17
  18. 18. Average Contract Amount (1000 USD) 18 * Includes PAPP data 18
  19. 19. ACP Review Cycle ACP Secretary prepares the review notes (case summary) and sends it to the ACP Members by Monday Requestor submits the case to ACP Secretariat by Friday, 3pm EST 1 Day 1 Day CPO reviews the ACP recommendations and Approves/Withholds/ Rejects the case. The CPO action is done by Wednesday. SECRETARIAT ACP MEMBERS REQUESTOR 2 Days CPO Based on the ACP recommendations, the Chair forwards the case to the CPO for Approval/ Withholding/ Rejection. The Chair forwards the case to the CPO by Monday. ACP Members review the notes and prepare for the ACP Meeting on Wednesday. ACP Meeting takes place every Wednesday at 1pm. 1 Day ACP MEETING 1 Day 1 Day ACP CHAIR ACP MEMBERS ACP Secretary uploads the ACP recommendations on ACP online by Thursday. Notification sent to ACP Members. 1 Day ACP Review Cycle = 8 Working Days * Based on the assumption that the Requestor has provided all the relevant information to facilitate ACP Review ACP Members review the recommendations and they can add their comments by Friday. 19 19
  20. 20. Regional Bureau for Europe and CIS 20 20
  21. 21. Procurement Fact Sheet: RBEC (‘000s USD) Goods S e rvic e s Tot a l De live r y P roc ure me nt a s %of De live# of P O' s ># of ACP S ubmis ry 100k Tot a l Goods S e r vic e s Albania 520 5,767 6,287 8,248 76% 6% 70% 4 8 Armenia 882 3,492 4,374 5,955 73% 15% 59% 2 5 Azer baijan 6,259 5,296 11,555 13,209 87% 47% 40% 0 0 Belarus 9,515 4,212 13,727 17,336 79% 55% 24% 11 21 Bosnia 3,162 11,932 15,094 19,893 76% 16% 60% 33 34 Bulgaria 799 7,561 8,360 10,681 78% 7% 71% 6 7 Croat ia 978 6,697 7,675 9,427 81% 10% 71% 3 14 Cypr us 179 3,169 3,348 17,498 19% 1% 18% 9 5 Geor gia 1,991 4,631 6,622 8,822 75% 23% 52% 1 3 Kazakhst an 966 3,190 4,156 6,527 64% 15% 49% 0 3 Kosovo 744 12,874 13,618 14,894 91% 5% 86% 12 5 4,550 6,302 10,852 16,322 66% 28% 39% 16 8 Kyrgyst an 21 21
  22. 22. Procurement Fact Sheet: RBEC (‘000s USD) # of G oods S er vi c es T ot al D el i ver y P r o c u r eme n t a s % o f D e l i v er y Tot a l P O' s > 100k # of AC P S u b mi s s i o ns Goods S e rvic e s Lat via- Republic of 43 1,101 1,144 1,398 82% 3% 79% 0 1 Lit huania- Republic of 87 850 937 1,108 85% 8% 77% 0 0 482 3,422 3,616 4,254 4,098 7,676 5,321 11,647 77% 66% 9% 29% 68% 37% 8 9 4 17 Poland 235 5,604 5,839 10,650 55% 2% 53% 16 0 Romania 341 2,502 2,843 6,257 45% 5% 40% 2 6 2,220 9,596 11,816 13,270 89% 17% 72% 1 6 Serbia and Mont enegro 335 1,496 1,831 24,875 7% 1% 6% 0 15 Tajikist an 4,298 9,738 14,036 18,796 75% 23% 52% 0 22 Turkey 1,223 11,589 12,812 21,138 61% 6% 55% 0 6 899 892 1,791 2,689 67% 33% 33% 0 1 Ukraine 7,467 11,331 18,798 25,788 73% 29% 44% 0 17 Uzbekist an 3,506 9,174 12,680 15,309 83% 23% 60% 3 6 Macedonia Moldova Russian Federat ion Turkmenist an 22 22
  23. 23. Atlas Transaction Statistics 2007 Requsition Total Count Percentage PO HQ RBA RBAP RBAS RBEC RBLAC Grand Total 1,933 19,259 21,671 6,777 11,996 6,485 68,121 3% 28% 32% 10% 18% 10% 110% HQ RBA RBAP RBAS RBEC RBLAC Grand Total Total Count 7,630 42,324 36,652 15,319 36,454 31,600 169,979 Percentage 4% 25% 22% 9% 21% 19% 100% # of Req /# of PO ( %) 25% 46% 59% 44% 33% 21% 40% Voucher HQ RBA RBAP RBAS RBEC RBLAC Grand Total Total Count Percentage Vendor Total Count Percentage Active Vendors Active Vendor % Buyers Total Count Percentage 26,183 243,149 189,562 95,676 182,782 302,202 1,039,554 3% 23% 18% 9% 18% 29% 100% HQ RBA RBAP RBAS RBEC RBLAC Grand Total 13,783 139,700 88,708 51,270 106,804 248,036 648,301 2% 22% 14% 8% 16% 38% 100% 4,907 32,795 15,543 12,861 27,162 45,739 139,007 36% 23% 18% 25% 25% 18% 21% HQ RBA RBAP RBAS RBEC RBLAC Grand Total 370 394 260 192 322 306 1,844 20% 21% 14% 10% 17% 17% 100% 23 23
  24. 24. AUDIT ISSUES • • • • • • • • • • • • • • Delegation framework List of all contracts that required a waiver of the competition process. Procurement plan. Procedures in place for those country offices that did not submit plans. How many of them submitted these plans? Code of conduct for all staff in the procurement office. Evidence of supplier review to prevent trade with terrorist suppliers. Minutes of meetings of ACP. Records of all fraud reported on the fraud system as well as processes in place to address fraud. Procedures in place to address green procurement. Controls implemented to prevent splitting of orders. Post Facto contracts – goods purchased without orders and delivered, Retroactive – purchases without orders of contracts and the supplier has not delivered the goods/services. Results of training of program staff/statistics. Expenditure reports for HQ (excluding personnel expenses). Access to ATLAS. 24
  25. 25. Certified Procurement Staff HQ 15% RBLAC 18% RBA 22% RBAS 7% 130 140 HQ 120 RBA 100 RBEC 18% 144 160 116 114 RBEC RBLAC 95 RBAP 80 RBAS 60 RBEC 43 40 RBLAC RBAP 20% 20 0 HQ RBA RBAP RBAS 25
  26. 26. Confusion of Buying vs. Contracting • What is “Buying”? What is Purchasing? What is Procurement? What is Contracting? • When one party is prepared to pay another party for supply of goods or services, then subject to conditions, the party enter into a “contract”. • If the risks involved are low, then contract can be in the form of PO. However in case of complex or high value contract, one require detailed documentation covering rights and obligations of both parties of the contract. • Thought procedure for both purchasing and contracting is same. 26
  27. 27. Procurement Authority: • The Administrator has delegated oversight and approval authority to CPO • The CPO delegates the authority to RR, Directors and Heads of Bureaus for award of contract valued at less than $100,000 • Increase of procurement authority can be delegated by the CPO based on needs and capacity. • RR and Directors can sub-delegate the authority in writing. • Oversight mechanism is CAP and ACP. 27 • Accountability
  28. 28. Procurement Dashboard 28 28
  29. 29. Procurement Certification CO/ Offices Certified Buyers •PAPP 42 •Bolivia 24 •Panama 22 •PSO 9 •Liberia 9 •Turkmenistan 8 •UNV 8 •BDP 7 •Iran 7 •Mali 7 •Rwanda 7 Total - 937 29 29
  30. 30. Indicators for Delegation: • Procurement Volume • Procurement Capacity – Number of certified procurement persons – Head of Procurement – Roving Procurement Officers • • • • Quality of Submissions to CAP/ACP Effective use of Atlas Procurement Plan Audit Rating (Procurement) 30
  31. 31. Procurement Chain Write Specifications TOR and SOW Identify Needs Prepare Solicitation Documents Choose a Procurement Method Seek, Clarify and Close Offers Award Contract Evaluate Offers Manage the Contract Negotiate the Contract Evaluate the Procurement 31
  32. 32. Procurement Chain: Sourcing (Potential Suppliers) REQ Receipt and Opening Bidding Evaluation of Offers Approval by CPO Create Vendor Review By Contracts Committee Award Contract/PO Vendor 32
  33. 33. ICF Control Points 33
  34. 34. Requisition Process Flow Requisition creation: Budget check: - In UNDP any Atlas user can create an approved requisition. Therefore, the documentation of the project manager’s approval must take place outside Atlas. This documentation could take different forms depending on the circumstances – for example, the procurement plan attached to the project document or a signed copy of the purchase requisition. - In UNDP, commitment control is implemented in the PO level. Hence although a preencumbrance is created once the budget check is performed, the actual budget line will not be impacted. Buyers receives duly approved and budget checked requisition through workflow and proceeds with the procurement activities. 34
  35. 35. PO Process Flow PO creation: -Once all procurement and contracting process are completed in accordance with UNDP regulations and rules buyers will then create a PO in Atlas. -Enter AM profile information for procurement of goods -If the vendor does not already exist in the system, users would have to enter the vendor information and submit for approval before creating a PO PO approval: Budget check: - once the PO is completed, it would be routed for the budget owner’s approval - once the PO is approved by the budget owner, Buyer would need to perform budget check to create encumbrance in the system before dispatching to vendor. Dispatch PO 35
  36. 36. Payment Process Flow Receipt creation: -Once the goods or services is received, the requisitioner will then create a receipt in the system. -Asset Creation: -Once the receipt is created back ground processes will then pick up any transaction which has an AM profile and bring it over to the AM module. Voucher creation: - Once an invoice is received, the finance users will then create a voucher to process the payment Budget check: -In UNDP no additional approval is need for PO-vouchers. -Users need to perform budget checks to liquidate the encumbrance and create an expense in the commitment control. Matching: -The matching process is scheduled and performed automatically in the backend. -The matching process validates information between PO, receipt and voucher. Payment 36
  37. 37. Specifications for Goods: • • • • Functional Specification: What? Performance Specification: How much? Reference to product standards Inspection and testing: Pre-shipment testing • Incidental Services: Supervision during installation, Training, Operation Manual • Final Acceptance: Criteria for final acceptance 37
  38. 38. Terms of Reference (TOR) • TOR may be compared to technical specifications for the purchase of goods or works. • Areas to be covered are: • Objective: What is the anticipated result of services. • Background: What is the history of assignment. Any constraints. • Scope of Work: What is the consultant expected to do? Degree of details. Are there any specific decision points during the performance of work? • Purchases: Are any hardware requirements connected with the assignment? When should such deliveries to the client be made and on what terms? • Reports: How and when will the report be presented? • Contributions: What is the client going to provide in the 38 way of facilities, professional support and physical facilities?
  39. 39. Specifications for Civil Works: • • • • • • Introduction: General Description Scope of Works: List of activities to be performed. Time Schedule: Starting date and completion date Detailed Design and Drawing: Bill of Quantity: Estimated quantity of each item Site investigation report: Soil conditions, Ground Conditions. • Specifications and Standards: Set of instructions • Inspection and Testing: Specification of tests. • Commissioning: Final Inspection. 39
  40. 40. Tips on writing an effective SOW • Be clear-use simple, direct language. • Use active, not passive tenses ( The seller shall conduct the test as opposed to a test should be conducted---, language is the dress of thoughts) • Spell the buyer’s obligation carefully • Provide a ceiling on the extent of services • Identify all constraints and limitations • Include standards that will make performance measurement possible and meaningful • In case of goods, focus should be in providing 40 functional and performance specifications
  41. 41. Supply Market Analysis • This is technique used to identify market characteristics for specific goods and services that assist in planning. • It assists the unit to understand as to how the market operates and where it is heading. • Is advertising for information good enough? • Market Structure: How many suppliers? How are they geographically placed? • Horizontal and vertical integration. • Monopoly (cartel like), Oligopoly (2-10), monopolistic competition and perfect competition. 41
  42. 42. Quality Assurance Systems • • • • • • • Quality System Standards. Product Certification Programme Industry Association standards. Professional Association Accredidation GMP, GDP CE/ISO/DIN/BS/ASTM Building Code of Construction 42
  43. 43. Engaging and Managing Consultants • Consultant may be individual or an organization to provide expert advise. • Characteristics of a Consultant: – Engagement for a fixed period at agreed rate – Does not require day to day supervision. • Consultancy services, operational consultantsprofessional or non-professional services • When a consultant is not a consultant? • Steps: Identify the need, what is required from them? Select the consultant, Engage and manage the consultant, evaluate the result and record and report 43
  44. 44. Procurement Strategy This is the way forward to implement an overall change programme designed to place procurement process at the heart of UNDP activities so that it is able to contribute effectively to the UNDP’s mission. This is the foundation stone of strategic procurement. 44
  45. 45. Procurement Strategy: Objectives  To ensure that procurement supports UNDP’s principles.  To achieve best value for money on all procured goods, works and services.  To provide a corporate focus to procurement.  To detail the way forward on reforming and improving the procurement function.  To encourage long-term thinking and a commitment to strategic procurement.  To reduce the cost of the procurement process and ensure continuous improvement  To give due consideration to environmental concerns (Green Procurement). 45
  46. 46. Objectives        To ensure that risk is appropriately managed. To promote cooperative arrangements. To promote the development and use of performance measures. To ensure that procurement is undertaken in accordance with high professional standards and probity. To develop the scope for doing business electronically (eProcurement) To develop management information system To ensure a structured approach to procurement training and development for staff. 46
  47. 47. Organization A Center-Led Action Network (CLAN) approach is suited for an organization with widespread activities taking place with a high level of local autonomy. In CLAN, purchasing action stays at the local level but buyers do not act in isolation. Center Connection Local 47
  48. 48. Procurement Blueprint: Building Blocks The key factors which form a procurement strategy include Contribution and Influence Oversight Tools and Policy Organization Relationships High Performance Standards Promote best procurement practices/mitigate risks CLAN approach; High level of networking Vendor management (LTAs, UNGM, Supply Positioning) Systems Promote eprocurement Staffing and Training High Quality Professionals 48
  49. 49. Relationships • Procurement can no longer be considered an isolated function, working at arm’s length • it focuses on: - the relationship with suppliers - developing Long Term Agreements - the United Nations Global Market (UNGM) - Procurement Marketing (presenting UNDP as preferred customer) 49
  50. 50. Project Procurement: Key Activities Project Procurement Activities Planning Procurement Performance (Contract Administration) 50
  51. 51. Public Procurement Life Cycle Procurement Plan Procurement Formalization Procurement Evaluation Procurement Implementation 51
  52. 52. Procurement Plan • • Gateway to strategic approach Two levels of Procurement Plan – Annual Procurement Plan – Planning for Significant Purchases • Addresses all key aspects of the function • Align the outcomes with strategic plans • Steps required for developing procurement plan – Procurement profile (Past & Projected Procurement) – Supply positioning (Level of Risk Associated with each category) – Key supply markets (Market Research) – Impact of Purchasing activities on its key supply markets – Assessment of Procurement structure & capacity • Procurement Plans are mandatory for Country Offices seeking higher delegation of Procurement Authority In short, procurement planning is about getting smart about procurement 52 52 by focusing on strategic management
  53. 53. Procurement Planning: • This should take place well before taking any purchasing action. • It should not be limited to specific requisition but part of positioning the procurement unit to best advantage • The first task is to establish the significance to the buying organization of the purchased items and then to gain an understanding of the market conditions. • This require the use of following three techniques – Supply Positioning – Supplier Preferences – Vulnerability management 53
  54. 54. Procurement Plan: • A procurement plan describes which product will be acquired from vendor as well as when and how they will be acquired. What, When, How • Template – Items to be procured – Evaluation criteria – Procurement Method – Schedule/ Date of delivery – Ownership rights of the source code – Ownership rights of the production • One of the major initiative to improve procurement 54 system
  55. 55. Procurement Planning Procurement planning, prior to any action taken in Atlas, is essential for the timely solicitation of quotations, bids or proposals; the award of contracts; and the delivery of inputs. Procurement planning entails more than the selection of a procurement method for various goods, works and services and when to schedule activities, but combines the legal and institutional frameworks in which procurement must be carried out. Business Units should consider the following: Requisitions;  Delivery time and place;  Evaluation criteria; Justification for noncompetitive procurement; and Review of CAP and ACP.  Types of goods, works or services required;  Method of procurement; potential sources; Estimated costs; Source of funds;  55
  56. 56. Procurement Planning WHAT? WHEN ? 56 HOW?
  57. 57. False Assumptions • • • • Any one can Buy Price is always related to cost Price is always related to volume Buyer power increases with the size of the organization • Price list are set in stone • Negotiations downwards endangers service and quality • Sealed bidding is the most secure method 57
  58. 58. Supply Positioning (Portfolio Analysis): Supply Positioning provides a mechanism for discriminating between the components of the total purchasing requirements whether goods, works or services, and a tool for developing specific strategies to meet the needs of the organization with respect to each group of purchases. 58
  59. 59. Supply Positioning STRATEGIC SECURITY Few major sources Few alternatives Q/S/R critical Low value TACTICAL ACQUISITION Many sources Many alternatives Low value STRATEGIC CRITICAL Few sources/monopoly High cost Q/S/R critical No alternatives TACTICAL PROFIT Many sources Many alternatives High cost 59
  60. 60. Purchasing Goals STRATEGIC SECURITY Ensure supplies Cost insensitivity Frequent review TACTICAL ACQUISITION Automate Delegate Give low attention STRATEGIC CRITICAL Ensure supplies Close price management Continuous review TACTICAL PROFIT Profit contribution Take risks Seek opportunities Wheel & deal 60
  61. 61. Purchasing Action Scenarios STRATEGIC SECURITY Long term contracts Buffer stocks Price indexation Find alternatives Contingency planning TACTICAL ACQUISITION Simple purchasing procedures Systems contracting Stockless purchase Cash purchases STRATEGIC CRITICAL Medium or long-term contract Supplier information Supplier development Price management Continuous review TACTICAL PROFIT Short-term contracts Active sourcing Market knowledge Price determination 61
  62. 62. Long Term Arrangement: – LTA offer a number of advantages: – they offer the value for money advantages of centralized procurement without the commonly associated level of bureaucracy – a single tendering exercise over the life of the arrangement reduces administrative effort and cost for the Department – the initial tendering process will have identified competitive suppliers, who should then offer more competitive prices on the basis of the expected value of business – quality assurance and legal requirements will have been dealt with at the outset 62 – Completion Report
  63. 63. Long Term Arrangements: – call-offs are covered by UNDP Standard Terms and Conditions combined with special terms and conditions appropriate to the items being procured and will, in general, provide better protection than individual small purchases under the supplier's standard conditions – the agreed range of items or services should be at short notice thus reducing or avoiding stock holding for goods and reducing down-time on equipment maintenance and repairs – the supplier benefits in terms of planning stock levels and continuity of supply – a mutually beneficial longer-term working relationship can be established with suppliers – Call-off create legal obligation and not LTA 63
  64. 64. Scope of ACP Review Objective: Mitigate Risk •Procurement Process: Transparency, Method •Specification/TOR/Quality •Availability of Funds •Value for Money/Cost Details/Consulting Fee •Evaluation Modality •Performance Security/Warranty •Shipping/Insurance •Licensing/Copyrights •Use of LTA •Type of Contract •Payment Terms •Environmental Impact 64
  65. 65. Regional Distribution of ACP Cases (By Number) HQ 12% RBLAC 22% RBA 20% RBEC 21% RBAS 10% RBAP 15% 65 * Total 1052 cases
  66. 66. Regional Distribution of ACP Cases (By Amount) RBLAC 17% RBEC 10% RBAS 9% RBAP 15% HQ 21% RBA 28% 66
  67. 67. % of Cases Approved after First Round of Review 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 87% 78% 78% 67% 80% 66% 57% HQ RBA RBAP RBAS RBEC RBLAC OTHER (PAPP) * Overall 73 % 67
  68. 68. ACP Reports - summary 68 * http://
  69. 69. Common Reasons for Rejection  Failure to undertake a competitive exercise  TOR or Statement of Works or Specifications incomplete  TOR or Statement of Works or Specifications too restrictive or biased  Incorrect evaluation methodology or criteria  Failure to submit requested documentation for ACP review  Conflict of interest  Value for money not obtained  Incorrect procurement method used  Incorrect shipping terms cited  Cost Matrix not provided  No information about the software, as to number of licenses, who will maintain etc. 69
  70. 70. Action Plan • • • • • • • • • • • • • • Translation of all documents to Spanish Implementation of e-Procurement Use of Reverse Auction Ensure the implementation of Specification Templates Implementation of CAP Online More interaction among procurement practitioners on the region Training of CAP and RACP members Increased certification Develop Long Term Arrangements Work closely with Government to develop LTAs. Use each other country office if others are better in some field of procurement. Strengthen Contract management Profiling of office in line with practice areas Requisition is a must. 70
  71. 71. Oversight Tools: • • • • Review by CAP & ACP Review of CAP reports Procurement Audit Documentation submitted for increased procurement authority • Roving Procurement Officers 71
  72. 72. Procurement Oversight: • Key purpose is to mitigate risks • Compliance with FRR and Procurement Manual • Scope of oversight covers mainly following – Requirements/SOW/TOR/Specifications – Quality Requirements – Procurement Process: Transparency, Method, Evaluation Criteria, Conflict of interest if any – Payment Schedules – Shipping Terms and insurance – IP, Type of Contract, Availability of funds, CAP report 72
  73. 73. Scope of ACP Review Objective: Mitigate Risk •Procurement Process: Transparency, Method •Specification/TOR/Quality •Availability of Funds •Value for Money/Cost Details/Consulting Fee •Evaluation Modality •Performance Security/Warranty •Shipping/Insurance •Licensing/Copyrights •Use of LTA •Type of Contract •Payment Terms •Environmental Impact 73
  74. 74. Scope of ACP Review Objective: Mitigate Risk •Procurement Process: Transparency, Method •Specification/TOR/Quality •Availability of Funds •Value for Money/Cost Details/Consulting Fee •Evaluation Modality •Performance Security/Warranty •Shipping/Insurance •Licensing/Copyrights •Use of LTA •Type of Contract •Payment Terms •Environmental Impact 74
  75. 75. Common Reasons for Rejection  Failure to undertake a competitive exercise  TOR or Statement of Works or Specifications incomplete  TOR or Statement of Works or Specifications too restrictive or biased  Incorrect evaluation methodology or criteria  Failure to submit requested documentation for ACP review  Conflict of interest  Value for money not obtained  Incorrect procurement method used  Incorrect shipping terms cited  Cost Matrix not provided  No information about the software, as to number of licenses, who will maintain etc. 75
  76. 76. Supplier Sourcing: Best Practice • • • • Decide: Select: Monitor: Supply Intelligence: Researching suppliers is time consuming job. D&B has largest database. It has 100 millions suppliers of the world. D&B rating 76
  77. 77. Procurement Methods • Request for Quotation (RFQ)   most flexible and least formal contract amount exceeds USD $2,500 but less than USD $100,000. • Invitation to Bid (ITB)   normally used when entity is not required to propose technical approaches to a project activity (i.e., goods and civil works) contract amount is USD $100,000 or more. • Request for Proposal (RFP)   used in the procurement of complex goods (e.g., functional specifications cannot be expressed) and services recommended for all contracts exceeding USD $100,000. • Direct Contracting     value of procurement is less than USD $2,500 there is no competitive marketplace for the requirement There is a Long Term Agreement (LTA) there is genuine exigency for the requirement. Purchasing Card 77
  78. 78. Ten Commandments of Bidding • • • • • • • • • • Suitable Package Early Warning Non-discrimination Accessibility Neutrality Formality Confidentiality Consistency Objectivity No Negotiation before award 78
  79. 79. Purchasing a service: • Services are more difficult to evaluate than goods. Goods have objective standards • Supplier of services are often reluctant to provide benchmark • Excellent services are easy to monitor but mediocre or poor services are difficult to evaluate. • Goods can be returned whereas services cannot • Poor quality services may continue undetected and cause greater problems • Because of above differences the reputation and the experience of supplier is more important • Key purchasing criteria: Reputation, References, Experience, Current Clients, Equipment, price etc. 79
  80. 80. Purchasing Services: • Many services such as secretarial and cleaning are often bought as generics. Other services such as application software development , advertising are bought as professional. • Purchasing is not involved fully in procurement of services • Word of mouth is the one of the key ways in which buyers of services exchange information. • There are five roles, Users, Buyers, Influencers, Deciders, gatekeepers • Market Research, pre-qualification of suppliers • Interviewing the companies and asking them to make 80 presentation for better clarification before technical evaluation.
  81. 81. Why an RFP? • In competitive contracting, there are two methods : ITB or a RFP. • ITB is used when goods or service is well defined and can be specified in detail. Selection solely on the basis of cost. • RFP is a negotiated procurement process and provides flexibility to the contractor and the company. 81
  82. 82. Designing an Effective RFP: “Never tell people how to do things. Tell them what you want to achieve and they will surprise you with their Ingenuity” 82
  83. 83. RFP: Introduction • Tool to promote competition for procurement of services. • A vehicle that allows both buyer and supplier to establish a dialogue and to work from same set of rules. • RFP should encourage creative thinking by suppliers • A successful RFP process require that it has clear technical requirements, project budget, implementation and project management details. • Use RFI if you wish to validate technology and requirements. • If you don’t know where you are going, any road will get you there. • Allow time for an independent review of the RFP. • Only qualified suppliers should participate in the RFP 83
  84. 84. Basic Elements of an RFP: • Statement of Purpose: the nature of the services to be provided and the overall objectives of the contract. • Background Information: Overview of the program, statistics, existing facilities, an honest accounting of current problems and strengths. • Service Specification: Sets out in specific and measurable terms the services 84 required,
  85. 85. Basic Elements of an RFP: How they are to be delivered and the duration they are required. • Performance Standards: Minimum performance standards and method of monitoring • Instructions to the Offerors • General Terms and Conditions • Special Terms and Conditions • Evaluation and award process 85
  86. 86. Basic Elements of an RFP: How they are to be delivered and the duration they are required. • Performance Standards: Minimum performance standards and method of monitoring • Instructions to the Offerors • General Terms and Conditions • Special Terms and Conditions • Evaluation and award process 86
  87. 87. Anatomy of an RFP: • Project overview and administrative information • Technical Requirements (Requirements are the heart of this) • Management Requirements.(Project Plan) • Supplier Qualifications and references • Pricing Section • Contracts and licenses • Appendices 87
  88. 88. Value Tree: • Overall Value – Technical Factors • Reliability • Quality – Management Factors • Personnel (Education, Performance, Exp.) – Price Factors • Cost and Fee • Realism • Reasonableness 88
  89. 89. Evaluation Factors: • Key Considerations: Management, Technical and Financial • Analysis: – What things should be evaluated – What are their attributes – Which attributes are relevent – What is their relative importance Best Value: Value of a proposal is the sum of the weighted values of the applicable evaluation factors for award. 89
  90. 90. BEST PRACTICES: RFP • Pre-proposal conference. • RFI (If technical requirements are not clear) • Product Demonstration particularly for software • References and site visits • Word “must” is used to designate the mandatory requirements. • Debriefing the unsuccessful suppliers 90
  91. 91. Best Practices: RFP • • • • A Requirement states a need and is measurable. Requirements must be meaningful Requirements must not include the solution Requirements shall not be combined that may restrict competition. • Pricing should be broken down into individual components and tasks. • “ Shall” indicates a requirement and hence no exception. “Will” is used to denote the statements of intent. “Should” is used to describe project goals 91
  92. 92. Best Value for Money: To get the best value for money, you must consider costs that the buyer will incur in addition to the Offeror’s price, including: • Cost to administer the contract • Life-cycle cost of the product • Quality of the product • Past performance of the supplier 92
  93. 93. Evaluation Team: RFP • Evaluation team shall be of 3-5 persons and a Chairperson • Evaluation team is normally the one who wrote RFP. The specialists may be used to evaluate particular section. • Attention to details to grasp the difference between proposals • Should not be handled as a consensus method. 93
  94. 94. RFP: Decisional Rules • Lowest Priced technically acceptable – Technical factors are used to qualify offerors – An offer is either acceptable or not – Price is the only factor for decision • Best Value: – Define the factors that contribute to value – Relative Importance of each – How to measure the value of individual factor performances 94
  95. 95. Contracting Do’s & Don’ts • SOW – Incorporate the SOW as an addendum – It should state expectation in terms of quality, performance, delivery and so on – This is accurate representation of deliverables • Keep it Simple: Should stay away from attempts to draft legalese. Leave it to legal department • Post Contract Processes • Online Contracting – Take advantage of online contracting for low value procurement 95 – Don’t forget to check T&C
  96. 96. Global Fund Procurement: • • • • • • • Procurement forms nearly 80% of the project amount. Focus is on HIV/AIDS, Malaria and TB UNDP is involved in 28 countries as PR and for support services in 5 countries Total project amount is nearly $650 m but annual delivery is nearly $200 m. OLPS has one full time Procurement Advisor working very closely with the country offices and major suppliers. Major suppliers are IDA, Mission Pharma, CIPLA, UNICEF, UNFPA, IAPSO etc. UNDP has LTA with them. OLPS Procurement Advisor is focusing on assisting the country office to improve delivery, help them in transferring knowledge to the counterpart, help them build supply chain. 96
  97. 97. Purchasing Card: • Tool for procurement of low value contracts i.e. less than $2,500. • Aims to reduce petty cash and number of payment transactions. • Monthly limit set at $10,000 • Can’t be used for procurement of assets. • Facilitate P2P. • No transaction fee 97 • Payment cycle 30 days.
  98. 98. Execution Modality: • DEX: Under this we treat all vendors and NGOS as contractors • NEX: Ensure that procurement rules complies with the best international practices. • Country Office Support to NEX. (Follow UNDP Guidelines) • NGO Execution • UN Agency Execution 98
  99. 99. Asset Management: • • • • • • • What is asset? Types of assets: Capital and non-capital Profiles of assets Who can add/ retire assets? Theft and loss of assets Tracking of assets Assets for management and development project • Major concerns of external auditors • Disposal: Clearance by CAP/ACP 99
  100. 100. Contracting Do’s & Don’ts: • Risk Assessment – Be aware that each contract has a finite amount of risks that is acceptable – Focus should be shift as much risk to supplier – Don’t use the supplier terms and conditions • Contract Methodology – Determine the contract type that mitigates risks – Don’t overlook the importance of TOR • Contract Execution – Include your T&C in RFQ, ITB & RFP – Have the supplier sign and return the RFP as a pre100 requisite for being awarded business.
  101. 101. Practical Tips: • Procurement must be framed with clear and accurate clients requirements and appropriate evaluation process. • If there is one thing you have to get right, it is evaluation methodology. Once its is put out, you have crossed the rubicon. • Purchasers must be scrupulous in ensuring fairness of the process, even if it means issuing an addendum or clarification to all vendors. • Bid closing time is the closing time-being late means automatic disqualification. • Vendor must be legal and viable business entity • Evaluation team should comprise of multidepartment 101 team –no conflict of interest
  102. 102. Practical Tips: • • • • • • • Hard work at the start pays off for both buyer and seller While developing specifications, determine if the requirement is a mandatory requirement i.e. must meet for consideration of offer. Benchmark the each specific requirement. Suppose you give 10 marks to a point, what benchmark the vendor will have to meet. Purchaser should act as a non-voting member to give guidance on procedural matters. Purchaser will invite end users and other knowledgeable persons to participate Evaluation panel should comprise of either 3 or 5 members. Best value concept (Combined Scoring Concept) 102
  103. 103. Contracting Modality: • • • • • • • • 100, 200 and 300 series Contracts Service Contracts (SC) SSA Reimbursable Loan Agreement (RLA) Non-Reimbursable Loan Agreement Professional Services Contract Institutional Services Contract Long Term Arrangement (LTA) 103
  104. 104. Contract Types: • Fixed Price Contract (Lump Sum) – Requirements are well defined • Time and Materials Contract ( Fixed Unit Price) – Major cost elements are known but quantities not defined, Ceiling Price, per-hour labor rate, terms for reimbursing direct material costs • Percentage Contract • Cost Reimbursement – Requirements are too vague – Ceiling Price 104
  105. 105. Selection of Contract Types (Implementation) Project Life Cycle (Conceptual) Cost (High) (Low) Technological Challenge Procurement Risks Time & Materials (Low) (Specific) (High) Fixed Price Requirements (Vague) 105
  106. 106. Performance Security • • • • • • • • Required to ensure compliance with contract requirements Buyer require some form of performance guarantee Performance Bond: Irrevocable and unconditional type. A performance bond is issued by a surety or bonding company. Legal terms of bond are more complicated but have the same effect as a bank guarantee. Letter of Credit: A confirmed, Irrevocable standby letter of credit may be used as an alternative. Performance security are limited to percentage of the value of the contract. Performance Security should not be the only remedies for breach The remedies may be cancellation, Liquidated Damages ( To cover late delivery) Retention Clause 106
  107. 107. Shipping Terms: INCOTERMS • “ E” Term: EXW • “F” Terms: FCA, FAS (Free alongside Ship), FOB • “C” Terms: CIF, CFR, CIP (Carriage and insurance Paid To), CPT • “D” Terms: DAF (Delivered at Frontier), DEF (Delivered Ex Ship), DEQ (Delivered Ex Quay, DDU, DDP 107
  108. 108. Bill of Lading: • • • • • • This can be likened to transferable cloakroom tickets They acknowledge receipt of goods in a certain conditions This is a document of title A clean bill of lading states that goods are received in good conditions The document covering the carriage of goods by sea is called B/L It covers: – Beneficiary – Port of shipment and destination – Marking and number of boxes – Weight and dimensions – Whether freight is pre-paid “Receiving of Goods-Received but contents unchecked” 108
  109. 109. Third Party Inspection • Carried out to ensure that goods conform to standards and specifications of the purchase contract. • Inspection can be carried out during manufacture, at the pre-shipment and post shipment stage and/or after arrival/installation at the site. • Cost of inspection varies from 1-2% depending on scope • Legal liability is very limited • Inspection before shipment is suitable for – – – – Where goods are procured from a distant source Where transportation costs are significant factor Where the return of rejected goods would be impracticable. Where inspection at the point of destination would be unsatisfactory. 109
  110. 110. Freight Forwarding • Shipping term determine the involvement of buyer in arranging transportation, and their port and custom clearance. • To arrange transportation, it is necessary to know: – What modes of transport techniques are available – What services are available and are appropriate – What are the current and prospective freight rates – What documentation is involved – What are the risks and to what extent carriers will indemnify for loss and under what circumstances. • Buyers often this knowledge and turn to freight forwarders • They have knowledge of port, custom rules • They work on commission basis. They also receive commission from the carrier. 110
  111. 111. Cargo Insurance: • Protection against financial losses resulting from damages, fire, war, strikes, pilferage and theft, breakage, non-receipt of entire or part of consignment and damage suffered by goods during transit and declared general average. • Coverage should cover cost of goods+ Freight+ 10% to cover admin cost. • Duration of coverage (Pre-shipment and post shipment) • Insurance during storage • Blanket Policy of UNDP ( Rate 0.24%) • Claim Procedure • Does it cover when goods are in transit over land or on its own wheel 111
  112. 112. Cargo Insurance: • Institute Cargo Clauses: A, B and C Type • CIF/CIP only require C cover without war and strikes • C Type does not cover Drop Damage, Loss Overboard. • A Type covers all risks except war and strikes • C Type cover GA, Fire, Explosion, Perils of the sea, overturning • Damage due to Improper packing and Delay are not covered by any type. 112
  113. 113. Risk Management • Risk is part of the procurement environment • It involves systematic identification, analysis, treatment and where appropriate accepting the risks • Agreements to limit a supplier’s liability to UNDP and third party (Indemnity. Guarantee, warranty) 113
  114. 114. Risk Management Write Specifications TOR and SOW Identify Needs Prepare Solicitation Documents Choose a Procurement Method Seek, Clarify and Close Offers Award Contract Evaluate Offers Manage the Contract Negotiate the Contract 114 Evaluate the Procurement
  115. 115. Risk Management: • Key to effective and efficient delivery • This should be integrated in day to day management • More important when we are moving from “arms length” to “partnering” • Typical Risk factors: Buyer risk factors, Supplier Risk Factors, Contractual relationship risk factors, External risk factors • Tools and techniques for managing risks: (Risks, Likely consequences, what to do) – Identifying the need – Developing the specifications 115 – Contract documents
  116. 116. Risk Management: • Selecting a procurement method • • • • • • • • Seeking, clarifying and closing offers Identifying the preferred supplier Evaluating Offers Negotiating the contract Managing the contract Evaluating the procurement process Disposals Impact of each of the above on cost, timetable, user acceptability, integrity and competence 116
  117. 117. Risk: Identifying Needs Risk Cost Delivery Ethics Overstatement of Needs. V V N Understatement of Needs. V V N Insufficient Funding. V V N Impractical Timeframe for Supply. V V N No Available Solution. V V N Fraud. V V M 117
  118. 118. Risk: Writing Requisitions Areas of Consequence Risk Cost Delivery Ethics Narrow/ Biased Specifications V V M Definition of Inappropriate Product. V V N 118
  119. 119. Risk: Solicitation Documents Risk Cost Delivery Ethics Terms and Conditions Unacceptable to Suppliers. V V V Uncertainty amongst Contracts due to Conditions of Contract. V V V Provision of Inadequate Information. V V V Biased Requirements. V V V Inadequate Requirements. V V V 119
  120. 120. Risk: Procurement Method Risk Cost Delivery Ethics Failure to Identify Potential Sources. Lack of Market Research. M V V M V V Supplier Monopoly. M V V Selection of Inappropriate Method. M V V 120
  121. 121. Risk: Seek, Clarify and Close Offers Risk Failure to Adequately Address Suppliers’ Inquiries. Actual or Perceived Favoritism in Providing Information. Breach of Confidentiality. Cost Delivery Ethics N M V N M V N M V 121
  122. 122. Risk: Evaluation of Offers Risk Cost Delivery Ethics Failure to Observe Effective Evaluation Procedures. Breach of Confidentiality. V V V V V V Failure of Offers to meet Needs. Failure of Evaluation to Identify a Clear Winner. V V V V V V 122
  123. 123. Risk: Award of Contract Risk Selection of Inappropriate Supplier. Selection on Inappropriate Product. Insufficient Number of Responses. No Response from Known High-Quality Suppliers. Cost Delivery Ethics V V V V V V V V V V V V 123
  124. 124. Risk: Negotiate the Contract Risk Cost Delivery Ethics Unmatched Expectations of Buyer and Supplier. V V V Deadlock on Agreement. V V V Undue Concession to Suppliers. V V V Failure to Accommodate Standard Conditions. V V V Grossly Unfair or Onerous Requirements. V V V Failure to Reflect the Terms Offered and Agreed in the Contract. V V V Inadvertently Creating a Contract without Proper Approvals. V V V 124
  125. 125. Risk: Evaluate the Procurement Risk Failure to Assess Supplier’s Performance. Failure to Assess the Process. Loss or Damage of Goods in Transit. Fraud. Cost Delivery Ethics N N V N N V N N V N N V 125
  126. 126. Risk: Managing the Contract Risk Cost Delivery Ethics Variations in Price and Currency Fluctuation. V V V Unwillingness of Supplier to Accept the Contract. V V V Failure of Either Party to Fulfill the Contract. V V V Inadequate Administration of Contract. V V V Acceptance Before Completion. V V V Increase in Scope of Work. V V V Intellectual Property. V V V Third Party Liability. 126
  127. 127. Ethics, Probity & Accountability • Public funds and hence require more than usual public scrutiny. • Probity means integrity, uprightness and honesty. • Transparency and accountability gives confidence to suppliers to participate. • Ethics are moral values that guide the procurement persons in their tasks. • Ethical behavior cover the concept of honesty, integrity, probity, fairness. Avoiding conflict of interest etc. • Check list: – Is the action legal? – Can I justify it? – What would happen if action is publicly scrutinized? – Do I think that it is right thing to do? 127
  128. 128. Procurement Accountability: • Definition: The accountability in procurement means that staff is responsible for actions and decisions that they take in relation to procurement and for the resulting outcomes. The staff is accountable through established lines of accountability. • How does accountability help? The accountability encourages the efficient, effective and ethical use of the organizational resources. This is the main watchword for UNDP procurement process. • Fundamental elements of Accountability: 128
  129. 129. Accountability: – Procurement Policy: – Documentation: It is important and provides record of procurement activities. This need to be strengthened. – Disclosure: Annual procurement plan must be published to provide confidence. – Notification: The revised procurement plan calls for publishing all major procurement notices and award of the contract. This is being followed to a limited scale. – Dealing with complaints: The procurement protest procedures 129
  130. 130. Why focus on Ethics? • Increased business volume=>higher pressure • Added Scrutiny (Due to recent cases of misconduct) • A breach of ethics affects credibility, which is difficult to recuperate. • Impropriety can harm the reputation of the organization 130
  131. 131. Definition of Ethics • Ethics is the discipline related to the issue of right and wrong, moral duty and obligation, moral principles and values, and to moral character. • Ethics: Greek word “ethos’…implies character and customary behaviour. • Morality: Latin word “mores’…refers to social customs. 131
  132. 132. Common Ethical Risks • • • • • Conflict of interest Fraud Corruption Coercion Collusion – Ethics encourages responsible conduct, while compliance prevent misconduct. – Ethics is self imposed while compliance is externally imposed – Ethics is personal responsibility while moral compliance is legally driven 132
  133. 133. Procurement Ethics: • • Conflict of interest: A conflict of interest may exist when a staff is involved in an activity or has a personal interest that might interfere the objectivity in performing the function. (Code to guide relationship) It can arise: – When an staff takes outside employment or has financial interest – When personal relationship with staff of other business entity could influence the decision. Gifts and Gratuities: – May not accept gifts or gratuities from any supplier for themselves or for their family – May not take advantage of their position to seek discounts on procurement for personal use. This is construed as a gratuity – May accept advertising novelties. 133
  134. 134. Procurement Ethics: • Integrity: – Open and effective competition – Environmental sustainability • Ethics vs. Compliance ( Ethics encourages responsible conduct and compliance prevent misconduct; Ethics is self imposed) • Code of conduct (Established in the new CAP User Guidelines) • Ethical belief is a personal choice, however ethical conduct can be mandated by an organization. • Ethics are moral boundary or values within we work 134
  135. 135. Procurement Ethics: • Integrity: – Open and effective competition – Environmental sustainability • Ethics vs. Compliance ( Ethics encourages responsible conduct and compliance prevent misconduct; Ethics is self imposed) • Code of conduct (Established in the new CAP User Guidelines) • Ethical belief is a personal choice, however ethical conduct can be mandated by an organization. • Ethics are moral boundary or values within we work 135
  136. 136. Fraud vs. Corruption • Fraud is defined as “dishonestly obtaining a benefit by deception or other means” and includes both tangible and intangible benefits. • Fraud means the intentional , false representation or concealment of facts for the purpose of inducing another. • Corruption means the practice of offering, giving, receiving directly or indirectly of value to influence the action of procurement staff. 136
  137. 137. Contract Management • It is post-award phase – Compliance with contract requirements • Time and quality control • Dealing with performance problems • Management of bid/performance security – Measurement of performance and reporting • Certification of reporting • Contract Close –out – Management of contract changes • Variation orders • Contract amendments – Resolution of claims and disputes • Settlement of claims • Contract termination 137
  138. 138. Contract Administration: • Def.: Those activities and actions taken by the buyer and supplier during the time from contract award to contract closeout. They may include follow up, expediting and supplier management function. • Issues to be addressed: Inspection procedures, penalties for non-conformance, Payments, rejection, termination, debriefing, procurement protests, PO closing in Atlas, claims for losses, consultants charging billable hours without measurement of progress, new person being assigned, substitution of products etc. • Step One: Ensure that there is a designated contract administrator • Step 2: Define the duties of the contract administrator 138 and assist in developing contract administration plan
  139. 139. Contract Administration: • Step 3: Perform random checks. Noncompliant situations must be identified. • Step 4: Ensure good communication • Step5: Participate in the contract renewal or rebid decision. Enter the vendor rating and close the PO in Atlas. 139
  140. 140. Scope of ACP Review Objective: Mitigate Risk •Procurement Process: Transparency, Method •Specification/TOR/Quality •Availability of Funds •Value for Money/Cost Details/Consulting Fee •Evaluation Modality •Performance Security/Warranty •Shipping/Insurance •Licensing/Copyrights •Use of LTA •Type of Contracts •Payment Terms 140
  141. 141. Advisory Committee on Procurement • Established by CPO to oversee major contracts • Review contracts which involve commitments to a supplier with respect to a single requisition or series of req in a calendar year valued at $100,000 or more • Proposed contracts which generate income of $10,000 • Any amendment of a contract previously reviewed by ACP where the contract amendment or a series of amendments either increases the total amount by 20% or $100,000 whichever is less. • Any amendment not previously submitted to the ACP where the revised total contract amount exceeds $100,000. 141
  142. 142. ACP: • Proposed contract that leads to series of contracts amounting more than $100,000. • Disposal, Write-off or transfer of goods with asset value $30,000 or more • All vehicle accidents or losses when gross negligence is the cause. • Procurement of services related to individual consultants with contract amount exceeding $100,000. 142
  143. 143. ACP Submissions 05 11% 22% 20% HQ A AP 15% 20% 12% HQ 99 40 m A 175 154 m AP 181 158 m AS AS 107 119 m EC 132 32 m LAC 198 96 m EC Total 892 599 m LAC 143
  144. 144. Common Reasons for Rejection  Failure to undertake a competitive exercise  Impermissible justification for waiver  TOR or Statement of Works or Specifications incomplete  TOR or Statement of Works or Specifications too restrictive or biased  Incorrect evaluation methodology or criteria  Failure to submit requested documentation for ACP review  Conflict of interest  Value for money not obtained  Incorrect procurement method used  Incorrect shipping terms cited 144
  145. 145. Key Observations: • SOW/TOR not clear, Biased/ Inadequate specification or specific requirements or brand names • Evaluation Criteria does not cover all the deliverables and do not provide sufficient weight as per their importance • Wrong Procurement Methodology • Use of NGOs for procurement • Advance Payment on the very high side • Process too mechanical, Market research missing • Insufficient number of responses • Evaluation of Offers not done well 145
  146. 146. Oversight at a Glance: • • • • • • • • Number of cases from RBLAC: 265 Number of cases from RBAP: 236 Number of cases from RBA: 205 Number of cases from RBEC: 75 Number of cases from RBAS: 89 Number of cases from HQ units: 138 Number of cases withheld for approval: 31% Number of cases if “subject to” is included: Nearly 55% 146
  147. 147. Procurement certification • • • • • • • Course has been designed in-house by OLPS Addresses basic procurement policy and standard Atlas Procedures. Objective: 1.Enhance learners’ comprehension of UNDP procurement policy and processes 2. Increase the level of competence utilizing the Atlas Applications. Target group is “Buyer” Online programme ( 6 hrs for online course and 2 hours for the exam.) Course managed by LRC Status: – – – – Number of people enrolled:731 Number of people who have passed simulated assessment: 345 Number who took official assessment: 321 Number who passed: 220 147
  148. 148. General Rating Procurement Volume Procurement Volume Purchase Order Raised non-PO Vouchers above 2,500 (USD) Procurement Dashboard Indicators Count Total value Count Total value NEX Procurement DEX Procurement Agency Procurement 30,000,000 1345 20,000,000 400 980,000 20,000,000 10,000,000 0 High value transactions (PO) 30,000 ~100,000 > 100,000 Count Total value Count Total value 6 180,000 3 300,000 Low value transactions (PO) + Overall 35% Process Time + Management of Direct Payment (non-PO) + Management of Payment (PO) + Lead Time 6 days 14 days 10/7 Procurement Plan Submission of Plan Approval of Plan Yes Yes Advisory Committee on Procurement Quality of Submissions Delegated Procurement authority POs issues between 100,000 and Delegated Authority POs issued above delegated authority + Total Count 6 50,000 (USD) 3 Total value Count Total value 170,000 6 600,000 Procurement Capacity Number of staff with buyer profile Number of staff Certified 8 5 148
  149. 149. Procurement Process: • Planning is not an analysis but identifying the activities and direction of activities • Formalization phase determine the sourcing approach, evaluation criteria and solicitation documents. It formalizes the requirement based on budget • Implementation covers all functions that pertain to the acquisition, including description of requirements, selection and solicitation of sources, preparation and award of contracts, and all phases of contract administration. It may also include logistics. • Final phase consists of audit, evaluation and feedback 149
  150. 150. Outline of SOW/TOR: • • • • • Background Outputs/ deliverables desired Inputs to be provided Schedule of completion Standards by which to measure performance Other Issues: 1) Use active Verbs (2) Avoid “Should” or”May (3) Use “Shall” for contractor and “will” for UNDP 150
  151. 151. Procurement and the Law: • Why Have conditions of contract: Goodwill • Formation of Contract – Offer, Acceptance and Consideration ( battle of Forms) – Oral Contract • Contract Performance ( Fulfillment of according to its terms) – Delay in supplier’s performance – Liquidated Damages – Termination of Contract – Force Majeure (French Term: Unexpected event) • Rights and Obligations of buyer and seller 151
  152. 152. Procurement & the Law: • Securing Contract Performance – Warranties – Performance Guarantees – Inspection • Termination and Remedies: • Settlement of Disputes; – Negotiation – Arbitration (UNCITRAL) – Litigation (Judicial Contest) 152
  153. 153. Procurement & Law: • How is contract discharged? – By performance, Substituted contract, Time, Termination, Bankrupcy • Intellectual Property • Letter of Intent; • Payment Terms; Performance Security • Remedies for lateness or failure to perform to specification – Liquidated Damages – Time is of the Essence( Time of performance shall be essence of this contract) Any delay converts into breach of contract 153 – Force Majeure
  154. 154. Procurement Certification: • • • • The course entails 6 hours of learning Passing marks: 80% Minimum Test comprises of 100 questions Programme will be managed by LRC through LMS • Site is 154
  155. 155. E-Procurement Solution Overview: • Electronic Attachment (TOR, Specifications, Evaluation Matrix etc.) • Catalogue Procurement (Direct Connect and local Catalogue): B2B • Access to external users (NEX and NGOs) • Cover procurement through Purchasing Card: P2P • Link to UN WEBBUY as a Direct Connect vendor • Business Services Procurement ( Concept of Commoditizing services- It was alien to many) • Move from tactical to strategic function • We live in “e” world 155 • Track the procurement cycle
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  158. 158. SSA Guidelines • Tool to hire individual contractors • SSA shall not be used for staff function. • As for LTA with companies, individual contractor can be hired up to 3 years( Max.) • Sourcing of individual contractor will be based on competitive process. • Selection is based on firstly evaluating technically and then financially. • Payment is based on number of days/ hours worked. • Procurement process and not a HR process. • SSA contractor is covered for Appendix D in defined terms • There are indicators to decide the consulting fee. 158
  159. 159. Procuring Services: • Contract Companies: – When companies are contracted, they provide individuals as agreed. – The company is responsible fpr performance – There are defined deliverables and the time frame – There is defined price • Contract Individuals: – – – – UNDP takes the responsibility of completion. There are defined deliverables. Contractor is paid based on T&M basis. Should not be used for staff functions 159
  160. 160. Individual Contractors: • When to Hire: Assignments that don’t require teams of personnel and no professional support of the office is required. In addition the experience and qualifications of the individual are of paramount importance. • When coordination, administration or collective responsibility become difficult due to high number, it is advisable to go for contracting the firm. • The overall responsibility is with the hiring organization i.e.UNDP. 160
  161. 161. Typical Country Office: • Maldives • Initial Scenario: – Number of staff: 11 – Annual Programme Delivery : $2.5 Millions • Scenario after Tsunami: – Programme Delivery: $50 millions (Time Bound) – Types of programmes (Livelihoods, Port reconstruction, environment, Malaria eradication..) • Types of Contracts to be used: 161
  162. 162. What is e-Procurement? • e-Procurement is trade of goods and services through the internet using a secured ecommerce platform. It brings together buyers and suppliers electronically, enabling both parties to reduce costs through improved processes. 162
  163. 163. ATLAS eProcurement Module Current Procurement Process Requisition Purchase Order Accounts Payable Number of Vendors – 406,065 Number of Requisitions – 34,907 Number of Purchase Orders – 135,000 Total Procurement – 1,350 million (USD) Total Expenses – 2.8 billion (USD) Total PO Expense – 950 million (USD) Procurement Analysis by Category – 25% could 163
  164. 164. Existing Limitation: • Requisition is not very intuitive and user friendly. • Detailed specifications and TOR can’t be attached at the REQ level. • It does not encourage the use of catalogues developed based on competitive process. • Procurement through purchasing card is not part of the existing PO module. • It is difficult to assess the status of the REQ. 164
  165. 165. How will I purchase? • • • • • • • • After being given access to the e-procurement module, you will create online requisition You will be directed to approved supplier catalogue if available. If not you will still complete online request as a special request. After you enter and submit a REQ, you can route it for approval via workflow Approved REQ are then sourced to a PO and dispatched electronically to the vendor. Vendor fulfills the order by shipping the requested items to the delivery address. The requester will verify the receipt of goods and services Vendor electronically forwards the invoice including the GRN which is validated within the system. Once matched, payment will be automatically made. 165
  166. 166. ATLAS eProcurement Module Procurement Process with eProcurement eProcurement Purchase (Requisition) Order Accounts Payable 166
  167. 167. ATLAS eProcurement Module Objectives: • Strategic procurement through Long Term Arrangements (LTA) • Single Point for entering all requisitions & ease of use • Electronic Attachments (Specifications, TOR, etc.) • Access to external users (NEX and NGO execution) • Global Fund Procurement • Ability to Share catalogs with Country Offices • Procurement through Purchasing Cards 167
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  169. 169. ATLAS eProcurement Module Requisition Cycle 169
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  171. 171. Thank you! 171