Procurement_notes.docx

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MOI UNIVERSITY
SCHOOL OF BUSINESS
COURSE OUTLINE
PROCUREMENTInstructors: Mr. Eric Too (MSC)
Contacts: +254 726925692/+254 794959739
Email Address: juicietoo@gmail.com
Mode of Delivery: Moodle, The BigBlue, googlegmail
Mode of Assessments: Tests, Assignments and Examinations
Course Description: With the ever-increasing pressure of competition among
companies, the move towards consolidation of global production and the
improvements in communication and transportation systems, it emphasizes sourcing
of supply from around the world.
To that end the sourcing of materials or the engagement of service providers is taking on an
international perspective, this alters dramatically the role of procurement, to a more strategic and
global posture. Three forces guide the development of the supply chain: the supply chain concept,
the trends within global business and a strategic shift being taken by an increasing number of
enterprises toward core competencies.
Today’s global logistics and supply chain management systems would inevitably be enabled by
Internet technology. The rapid development of Internet and information technology has posed new

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challenges and opportunities in conducting procurement and CRM over the Internet, that is, E-
procurement and e-CRM. This course examines the strategic nature, business models, operating
procedures, technological trends, and implementation issues of e-procurement and eCRM in
today’s business environment
Course objectives
By the end of this course, students will be able to:
• Learn the principles of e-procurement
• Understand how to implement an e-procurement system
• Learn how to manage an e-procurement system
• Discuss how to improve internal customer service
• See how to apply past supplier performance for better selection
• Explain supply chain management,
• Propose the main performance drivers of supply chain performance.
COURSE OUTLINE:
Introduction;
• Procurement”
• Distinct categories of Procurement
• procurement tools and applications
• Procurement platforms
• Types of electronic payments are most common today

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• Advantages of e – commerce
• Disadvantages of e – commerce
• Limitations of implementing e – commerce
Theoretical framework of e-procurement
• Disruptive Innovation Theory
• Innovation Diffusion Theory
• Technology Acceptance Theory
Legal provisions in procurement management
• Definitions
• Components of the Procurement Legal and Regulatory Framework
Tendering
• Pre-qualification & Registration
• Public Invitation
• Tender Submission
• Tender Evaluation
• Tender Award
Supply Chain Management
• Definition of supply chain management
• Importance of supply chain concept
• Major flows in supply chains
• Supply chain view and types
• Supply chain performance metrics
• Drivers of supply chain performance

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What exactly is procurement?
According to CIPS’ website, procurement is: “The combined use of electronic information and
communications technology (ICT) in order to enhance the links between customer and supplier,
and with other value chain partners, and thereby to improve external and internal processes.
Procurement is a key component of e-business and e-commerce.”
Procurement” is the business – to – business or business – to – consumer or business – to
–government, where purchase and sale of supplies, work, and services are done through the
Internet, and share information through electronic system. The procurement value chain consists
of indent management, tendering, Auctioning, vendor management, catalogue management,
Purchase Order Integration, Ship Notice, invoicing, and payment. This part of the value chain is
optional, with individual procuring departments defining their indenting process. In
works procurement, administrative approval and technical sanction are obtained in
electronic format. In goods procurement, indent generation activity is done online.
Categories of Procurement
1. Business – to – business (B2B). Is simply defined as procurement between companies E.g.
Intel selling microprocessor to Dell.
2. Business – to – consumer (B2C). Is procurement between companies and
consumers, involves customers gathering information, purchasing physical goods or

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receiving product’s information’s over an electronic network. Example – Dell selling me
a laptop on internet.
3. Consumer – to – consumer (C2C). Procurement or C2C is simply commerce between
private individuals or consumers. For example:- Mary buying an iPod from Tom on·
4. Business – to – government (B2G). Is generally defined as procurement between
companies and the public sector. It refers to the use of the Internet for public procurement,
licensing procedures, and other government-related operations. Example: Business pay
taxes, file reports, or sell goods and services to government agencies.
5. Government – to – customers (G2C). The electronic commerce activities performed
between the government and its citizens or consumers, including paying taxes, registering
vehicles, and providing information and services
E-procurement tools and applications
1. Electronic systems to support traditional procurement-These include mainframes and
personal computers (PC), Electronic Data Interchange (EDI) and Enterprise
Resource Planning (ERP).
2. EDI (Electronic Data Interchange) is an application whereby electronic messages can be
exchanged between computer programs of two separate organizations. Messages can
automatically be sent, transmitted and stored between computers without retyping or
keying data.
3. Internet as a support or complement to traditional procurement. There are various types
of internet based applications that serve different purposes. Some well-known applications
that use the internet are described below:

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4. Electronic mail (e-mail); Email is an Internet based application through which electronic
messages are exchanged between people.
5. World Wide Web (WWW) - The WWW is a major service on the Internet. The World
Wide Web is made up of "Web servers" that store and disseminate "Web pages,"
which are "rich" documents that contain text, graphics, animations and videos to
anyone with an Internet connection.
The history of procurement
The origins of procurement or “procurement” begin in the 1980s, with the development of
electronic data interchange (EDI). This development, while ancient by today’s standards, was
groundbreaking for the time. EDI allowed customers and suppliers to send and receive purchase
orders (and invoices as well) using call-forward networks, and eventually email.
In the 1990s, technology, as it tends to do, improved and software companies began to develop
online catalogs specifically for use by vendors. Since, e-procurement software has become an
amalgam of the two: a platform for sending and receiving electronic orders (as well as myriad
other expenses such as travel) and various catalogues.
Marketplaces have also proven to be a popular addition to e-procurement software. Marketplaces,
to borrow CIPS’ definition, are: virtual marketplaces for partners, suppliers, distributors, agents
and customers.”
The benefits of procurement
So, we’ve already said – in broad strokes – that e-procurement improves customer/supplier
relationships and strengthens internal business processes. But for a more nuanced look at those
benefits (and for a list of other positives), CIPS has compiled a very detailed list of procurement
benefits.

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Here are some of my favourites:
 The automatic processing and auctioning of orders (electronic POs, e-invoicing etc.)
and of related trading documents and data, thereby enhancing the speed and certainty
of doing business at a lower total cost;
 Improved workflow of the internal procurement process – this enables end-user self-
service and decentralization, with control through company-specific catalogues;
 New functionality such as e-requests for quotation and online bidding in auctions
using electronic bids;
 Connectivity to external supply chains, and the allowance of shared real-time
information for enterprise resource planning and supply chain management;
 Improvement in supply chain mechanisms, leading to mutual benefit for all using
procurement software;
 Knowledge of your purchasing process – procurement software will give you the
visibility you want into your spending. The data e-procurement software gives you
is absolutely critical.
Choosing the right procurement software
Of course, not all procurement software options were created equal – some have many features
and are geared toward huge corporations, while other e-procurement options are lighter on features
and marketed for small- and medium-sized firms.
Before beginning an e-procurement consider the following:
 Agree on clear objectives with senior management on what your business needs;
 Define the value chain and then the key business and procurement processes, including
those that will benefit from e-purchasing;

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 Define the applicable computer systems, applications and databases involved;
 Carefully examine issues of security (potential data corruption, hacking etc.).
Not all questions, of course, apply to all organizations interested in e-procurement software.
Always tailor your e-procurement questions to suit the needs of your business. Make sure it is a
good fit for you.
Procurement software, in most cases, can do as much or as little as you need it to do. If you are
just looking to create POs, e-procurement software can do that. If you work in a large, bustling
organization and you want software that handles travel expenses, tracks inventory, offers real-time
and the receipt of all goods, procurement software can do that as well.
The future of procurement
So, where does e-procurement software go from here? In broad strokes, it becomes more nimble
and more mobile.
According to CIPS: “Mobile technology has enabled improved access, delivering and sharing at
other personal and enterprise levels. This is transforming procurement by enabling better
connections and collaborations between buyers, suppliers, customers and other trading partners.”
One critical future trend: the evolution of cloud-based applications. Cloud-based procurement
software solutions remove cumbersome technological infrastructure and, in many cases,
eliminates lengthy training courses. E-procurement is indeed becoming agile.
Procurement Practices for Adoption
Information and Communication Technologies are changing the way organizations do business,
particularly the adoption of e-business and e-commerce. E-procurement is an example of ebusiness
and e-commercial activity. It has been defined as the use of information technologies to facilitate
business-to- business (B2B) purchase transactions for materials and services (Wu et al., 2007).

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The scope of e-business includes information exchange, commercial transactions and knowledge
sharing between organizations (Croom, 2007), whereas e-commerce focuses only on
commercial transactions (Cullen & Webster, 2007). Some of the technologies associated with
e-commerce include websites, e-mail, extranets, intranets and EDI (Mclvor & Humphreys, 2004).
The following are the e-procurement practices for adoption.
Registration process of users
According to the State of the Art Report a full tender documentation should be possible to be
browsed and/or downloaded by suppliers with the minimum effort. If a Contracting Authority
requires a supplier to be registered before viewing /downloading the full tender documentation,
the registration process should be as simple as possible. Apart from the registration process as
such, registered users need to be given the appropriate access rights to the stored data, as
well as, the actions they can perform on that data. The registration details of suppliers need
to remain secure in order to satisfy the confidentiality and equal treatment principles.
Electronic submission of tenders
The e-tendering phase primarily consists of the electronic submission of tenders. In the restricted
procedures, a preliminary selection stage is involved, when only qualified suppliers are invited
to submit a tender.
According to the State of the Art Report the system needs to be in a position to identify and
authenticate a supplier during the submission process. The authentication of suppliers is a very
sensitive area, as stakeholders need to find a balance between two slightly contrasting issues;
interoperability and security. The first principle implies the creation of an operational
environment where all suppliers can participate to competitions using interoperable tools,
satisfying minimum requirements. The second principle implies the possibility to verify suppliers’

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identity in an electronically secure way. A crucial functionality for an e-Procurement system is
its ability to “lock” all submitted tenders until the pre-defined tender opening time and/or until
designated procurement officers authorize the opening of Tenders following simultaneous action.
Mechanism for encrypting and locking submitted tenders
According to the State of the Art Report, the French DPSM system has developed a mechanism
for securing the transmission and storage of supplier tenders. Through this mechanism, when a
supplier uploads a tender to the e-Procurement system, a virus check is performed first. Assuming
no detection of a virus, the document is encrypted according to a private key which is created
for each competition. Subsequently, the tender documents are stored in a secure hosting
environment, until their opening time. Only the president of the contract awarding committee can
obtain the private key for decrypting the tender documents, which in turn can be obtained from
the system only after the expiration of the e-tendering deadline.
Functionality of updating a tender
Further to the submission of tenders, and assuming the deadline for tender submission has not
expired, a supplier can be provided with the functionality to update his submitted tender
documentation. A version control mechanism may be used in this area, so that previous versions
of documents are not completely discarded from the system, as this may be in use in cases of
disputes or reporting purposes by the Contracting Authority.
Tender opening
The opening of bids is a sensitive phase of the e-procurement procedure, as during this
process the Contracting Authority gains access for the first time to the full tender documentation
from all tenderers.

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According to the State of the Art Report the European legislation defines that the access to data
transmitted electronically by tenderers’ can be possible only through simultaneous action of
different authorized persons.
The Contracting Authority can have a dedicated space for each tender, where the submitted tenders
are stored until the opening phase. A crucial procedure that needs to be followed during tender
opening is to analyze the system logs and identify any attempts for accessing the tender documents
during the locking period, as well as, if these attempts have been successful. If such an incident is
captured, the Contracting Authority may have plans in place for handling the situation.
Publishing Notices
According to the State of the Art Report this involves preparation and publication of notices
to official electronic notice boards. The e-notification phase mainly consists of the publication
of Preliminary Information Notices (PINs), Contract Notices (informing suppliers of new
business opportunities), Corrigenda and Contract Award Notices (reporting the result of a
competition). The publication notification requirements depend on the chosen awarding
procedure.
Electronic signatures
Electronic signatures are used for ensuring the proof of origin of electronically transmitted
documents.
According to Schlosbon (2014) an electronic signature is referred to as a person's electronic
expression of his or her agreement to the terms of a particular document. According to the State
of the Art Report Advanced electronic certificates are issued by Certification Authorities (CA)
and are used for producing electronic signatures by their possessors. An electronically signed
document guarantees the identity of the person who signed it. Furthermore, electronically signed

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documents ensure the consistency of the data of an electronically transmitted document. If a signed
document is tampered, the signature is automatically invalidated. Therefore, the usage of advanced
electronic signatures could be the ideal medium for ensuring the authenticity of tenderers and
the integrity of data submitted by tenderers.
Audit trailing and tracking
According to the State of the Art Report, a cornerstone principle on e-Procurement imposed by
the EU legislation is that of traceability; the ability of the system to record all its interactions with
users in system logs. The objective is to enhance the desired security aspect, as such logs can be
analyzed and provide legal evidence on system failures or irregular activities.
Reporting and timely updates
The EU legislation requires Member States (ME) to be in a position to report the ongoing or
completed procurement competitions upon request from the EU. Reports should normally include
details of the contract notice, the details of the admitted tenderers (including reasons for their
selection), the rejected tenderers (and reasons), the successful tenderer (and reasons). Reports
should provide details about the negotiation procedure, reasons for pausing an e-Auction and
reasons for not awarding a contract. Suppliers wish to know their performance in one-off
competitions and sales through their e-Catalogues. Contracting Authorities want to understand
their spending policy, as well as, the savings achieved through the use of the e-Procurement
system.
Integration with financial systems for automated invoicing and payment
Significant benefits can be achieved by integrating an e-procurement repetitive purchasing system
to the financial systems of Contracting Authorities and suppliers. Such integration can facilitate
automated invoicing and payment, through constant status monitoring and automated

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settlement processes. Such integration can achieve significant benefits for both buyers and
suppliers, not only in terms of time saving, but also by allowing the error-free storage and analysis
of Contract Authorities’ spending and suppliers’ sales.
Capability to manage volume Capacity for concurrent submissions at the closing time A
common issue with e-procurement is the submission of tenders very close to the e-tendering
deadline.
Suppliers usually define their best offer for a business opportunity until the closing hours of the e-
tendering phase and they submit their offers almost simultaneously a few hours or even minutes
before the closing time .This in turn can potentially generate difficulties, as the IT infrastructure
needs to cope with the concurrent submissions, without creating unavailability or disruption
problems. According to the State of the Art Report there is need to establish submission deadline
extension policies, which detail precisely the conditions and actions to be taken when system
failures occur during the closing stages of e-tendering, due to volume capacity problems and
to use monitoring tools to closely supervise the behavior of the system (residing servers,
underlying network functioning) in order to identify potential and actual problems and be in
a position to take appropriate actions. If an extension to the submission phase is given, all
participating suppliers need to be promptly notified of the new deadline.
Platform for Supplier Contacts
This another e-procurement activity identified in literature. In this case the buyers’ request for
quotes, Request for Proposals (RFP), request for information and bids are all contained in supplier
contact. Rink and Fox (1999), include supplier contact as part of the procurement activities in any
stage of a product-life cycle, from requesting for quotes, to requesting for volume discounts and

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bids. Segev et al (1998), report that the RFP ranked third in frequency-fuse as a negotiation
technique, after face-to-face contact and bids.
WILLINGNESS AND READINESS TO ADOPT E-PROCUREMENT
The willingness and readiness to adopt e-procurement has several indicators among organizations.
While some these indicators are organization specific, others are strategy inclined while some are
policy related.
Despite the great benefits of e-procurement technologies, their adoption is still at their early stages
(Davila et al. 2003). A variety of factors may affect a firm’s decision to adopt and implement a
particular ICT. Kwon and Zmud (1987), classified the variables that potentially influence ICT
adoption into five broad categories; individual, task and innovation related, organizational and
environmental characteristics. Petterson et al., (2003), also showed that the following
organizational and positively affected the adoption of ICT in SCM: organization size,
decentralized organizational structure; supply chain strategy integration; transactional climate
and supply chain member pressure and environmental uncertainty. Kwon &Zmud (2987),
also suggested that these factors may be important to differing degrees depending on the context
or technology.
Literature further raises the following willingness and readiness factors in adoption of
procurement.
Organizational factors
The main organizational factors that appear to impact on the likely adoption of e-procurement are
size of the organization and type of operation. Frohlich, (2002), found that e-Procurement is more
evident in bigger organizations than smaller ones. Small to Medium Enterprises (SMEs) often lag
behind larger organizations in e-procurement adoption. Harland et al. (2007), and Berlak and

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Weber (2004), attributed this to owners’ attitude, resource poverty, limited IT infrastructure,
limited knowledge and expertise with information systems. Nonetheless, Harland et al. (2007),
argued that e-procurement adoption can be viable for SMEs through either web-based enterprise
cooperation or if the SMEs can see the business case for e-adoption. It is also argued by Melville
et al. (2004), that some types of organizational operations seem to lend themselves to e-
procurement. The use of e-procurement applications often goes hand-in hand with repetitive
purchases from suppliers, reducing human intervention and paperwork and often resulting
in improved performance for buyers and suppliers (Sanders, 2005; Subramani, 2004).
Therefore, it is likely that in organizations where the use computers is common and there is readily
available internet, the adoption of e-procurement would become easier than in organizations where
there is no computer and internet usage.
Readiness factors
Mehrtens et al. (2001b) argue that organizational readiness and external pressure impact on
ebusiness strategy. Many firms are experiencing a number of major problems in implementing
ebusiness projects, due to hasty decisions in the presence of considerable media and software
vendor hype, and often no theoretical basis behind the determination of which applications are
most appropriate (Cox et al., 2001). To attain the greatest benefits, purchasing processes should
be evaluated and improved before adopting e-procurement tools (Presutti, 2003). Internet
technologies enable integration with trading partners, yet amplify the need for fundamental
organizational change (Power & Singh, 2007). B2B seller competence depends on change
disposition (Rosenzweig & Roth, 2007) within the organization.
Some organizational change fundamentalists have argued that there is need to integrate the need
for e-procurement adoption amongst the solutions to the dissatisfier in the organization. Usually

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e-procurement is viewed as a solution to a common implanted or genuine dissatisfier in the
organization, the rate of consideration and adoption of the technology is likely to be high. While
Osmonbekov et al. (2002) argue that lack of readiness has been attributed mainly to human
readiness, there is need for procurement managers to ensure their own organizations are ready for
e-adoption (Hartley et al., 2006). This is because Frohlich (2002) found that internal barriers to
e-adoption are more significant than customer or supplier barriers. This argument further
points to how procurement managers in the PDEs have guided the entity in preparation of all
stakeholders to adopt changes in the procurement process. It is not surprising therefore that e-
procurement adoption sometimes gets shot down from the procurement departments for lack of
readiness even amongst the procurement officers.
Supply factors
E-procurement is more likely to be beneficial in dispersed supply chains as it helps coordination
(Liao et al., 2003). Different actors in supply chains have got different power, legitimacy and
urgency to implement e-procurement and e-procurement can have an effect on trust in supply
chain relationships (Gattiker et al., 2007; Klein, 2007). Lack of assistance and the structural inertia
of large organizations in supply chains can be a disincentive to implement e-business ( Zhu et al.,
2006). Different industries show different propensities to e-procurement adoption, related to
existing use of information exchange infrastructures prior to the advent of the internet (Cagliano
et al., 2005).
The greatest benefits of e-business occur when its application is fully integrated throughout the
supply chain (Currie, 2000). Some literature has pointed to the possibilities of greater integration
and collaboration across e-business-supported supply chains (Mclvor & Humphreys, 2004).
procurement is more likely to be adopted if it is perceived that suppliers have capability to deal

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with it; there are difficulties in integrating information systems across firm boundaries in supply
chains if suppliers lack capability (Bagchi & Skjoett-Larsen, 2003).
Strategic factors
There is a growing adoption of e-values amongst organizations that want to take poll position in
the industry they operate on. A company may adopt e-technologies as part of its overarching
business strategy, contributing to improving firm performance and increasing competitive
advantage. Wu et al (2003) argues that the strategic use of e-business has been considered in
several studies, and how e-business strategy aligns with the overarching business strategy of a
firm. As argued by Porter (2001), this means that the Internet has become a powerful source of
competitive advantage if it is integrated in firms’ overall strategies.
Soliman and Youssef, (2001) posit that an e-business strategy should specify the aims, goals and
context of the application; these choices should be aligned with other organizational and
managerial choices, and integrated with the organization’s processes. This is supported by studies
by Graham & Hardaker (2000), who suggest that if organizations are being strategic in their e-
procurement adoption, they may have a specific procurement strategy, and that this will align
with broader organizational strategy. In the long run organizations shall avoid over riding
strategic direction competences. However, what is most important is to ensure that there is
organizational buy in from all stakeholders to avoid implementation shortfalls.
Policy factors
Policy factors relate to the environmental guidelines provide by the oversight bodies in relation to
the e-procurement adoption. Though public procurement can be used to support broader
government policies, through both traditional and e-procurement processes an electronic
procurement can be seen as a policy tool to support the delivery of public procurement policy,

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improving transparency and efficiency (Carayannis & Popescu, 2005; Croom & Brandon-Jones,
2005) . A favourable environment needs to be provided by policy to ensure its success. This is
because e-procurement can assist a government in the way it does business by reducing transaction
cost, making better decisions and getting more value (Panayiotou et al., 2004). The National
Electronic Governance Framework (2010) also recommends e-procurement adoption in Uganda.
Therefore, with ever-advancing capabilities of technology being an important driver of
eprocurement implementation for PDEs and businesses, there is no doubt that e-procurement
can facilitate improved accuracy, reduced clerical work, reduced order-cycle time, and increased
productivity (Hayword et al., 2001).
Therefore, an important driver towards e-procurement adoption and implementation is the
realization of the potential benefits that may be achieved with its adoption especially by PDEs
where the biggest expense of taxpayer revenue is.
CHALLENGES TO E-PROCUREMENT ADOPTION
The PDEs’ adoption to e-procurement is certainly one of the grounds where the digital divide
is more even with the high public expenditure on ICTs to aide procurement in the developing
countries, there has not been commensurate adoption of e-procurement in their PDEs. This is
attributed to several e-procurement adoption challenges including these highlighted below:
Reluctance to Change
Users’ reluctance to changes in business processes was identified by Day et al. (2003) as a major
barrier to the whenever change is proposed in most institutions, there is a high level of reluctance
from the members (employees) in these institutions. The reluctance is born out of the uncertainty
associated with the change. Change Management literature has identified lack of mass buy-in to

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the proposed changes as a critical cause of such reluctance by employees to adopt proposed
changes.
Perceived Risks
In another study, Saeed and Leith (2003) examined buyers’ perceptions of e-procurement risks
and arrived at transaction risks resulting from wrong products purchased due to incomplete or
misleading information; Security risks resulting from unauthorized penetration of trading
platforms and failure to protect transaction related data while being transmitted or stored; and
Privacy risks arising from inappropriate information collection and information transparency.
It is possible these risks limit the adoption of E-procurement in PDEs because these perceptions
apply to suppliers and buyers alike. One such perception is the worker apprehensions about being
replaced by automated procurement systems. Therefore until there is certainty about the above
perceptions, it is possible e-procurement adoption shall remain a myth.
Fear of Competition
Dai and Kauffman (2002) uncovered a number of issues relating to whether the market place was
ready to take on B2B services, particularly those of e-procurement exchanges. In their findings
they realized that there were inequities in power valence between and among trading partners
participating in electronic environments like B2B exchanges. They realized that since most of the
power was held by channel masters there would be challenges accompanying building a single
point-of contact between a large multi-unit business firms that want to offer a single B2B interface
to its corporate customers. They found that trading partners would have to make changes in the
way they manage their customers and the way its customer relationship management functions
work. This usually breaks the trust and the resultant reluctance to share data and information.
Transaction Costs

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Lee and Clark (1997) identified transaction cost economics as a challenge to adoption of
eprocurement. They also argued that there are several associated risks in setting up electronic
market mechanisms such as opportunism by unscrupulous market participants and asset
specificity. The latter has to do with the need for a firm to commit certain resources to deploy IT
applications and infrastructures needed to link its internal business processes with those of the e-
marketplace trading platform. They note that sometimes these integration links are complex which
makes it difficult to transfer use of such connections with other trading platforms or trading partner
networks.
Establishment costs
Attracting suppliers to an e-procurement service can be a significant obstacle, as this signifies
changes to the way they conduct business with the public sector. This most probably involves
significant costs. In particular SMEs that are often lacking funds or IT expertise, might consider
e-procurement as a significant obstacle in conducting business with the public sector. This can
result in exactly the opposite outcome from what the country wishes to achieve. Rather than
creating an open-competition and equal-treatment-to- all environment, it can create procurement
environment where only certain types of suppliers participate in the process.
Privacy and security
While investigating the adoption of e-procurement in Singapore, Kheng and Al-Hawandeh (2002)
found that there were concerns over security and privacy of procurement transaction data.
Secondly security requires significant investments in hardware, software, and personnel training
to participate in e-procurement are prohibitive. Third, the laws governing B2B commerce, crossing
over to e-procurement, are still undeveloped.

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For instance, questions concerning the legality and force of e-mail contracts, role of electronic
signatures, and application of copyright laws to electronically copied documents are still
unresolved. Fourth, technical difficulties related to information and data exchange and
conversion such as inefficiencies in locating information over the internet using search engines
and the lack of common standards that get in the way of the easy integration of electronic catalogs
from multiple suppliers.
Virus protection & protection from malicious attacks
An e-procurement system usually involves the execution of several activities outside of the context
of the system. In particular, during the e-tendering phase, most reviewed e-procurement systems
allow for the preparation of supplier tenders in document processing applications, usually using
the MS Office software, or similar popular applications. This in turn means that a supplier
computer infected by a virus can potentially generate tender documentation which includes
dangerous computer viruses. Although it is relatively straightforward for a computer system to
virus -check the tender documentation when received by a supplier, the complication arises with
regards to the validity of a virus infected offer. Another major threat for Internet based systems is
that of malicious attacks. In the recent years, there are numerous examples of malicious attacks to
the most prestigious Internet systems. It appears that no matter the provisions in place, attackers
can still achieve their aims in breaking into systems, or making them unavailable for a period of
time.
Electronic signatures
The drawback in utilizing this technology is the limitations in interoperability. Each Certification
authority (CA) establishes its own methods for modelling this technology, usually abiding to local
or national rules. The various CAs do not necessarily interconnect and therefore suppliers that

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have a certificate from a CA are not necessarily trusted by another CA. This in turn means that a
fully interoperable system needs to trust all CA, which is difficult to achieve. Furthermore, the
time for obtaining the necessary software or hardware from a CA is usually lengthy and may
require the physical presence of a supplier in the CA premises for approval. These issues make
the utilization of certificates and electronic signatures in an e-procurement system a significant
hurdle for interoperability, potentially excluding suppliers from taking part in a business
opportunity.
Procurement platforms that replace traditional procurement include the following:
Describe e-sourcing tools and their use in procurement and supply.
1. E-sourcing; E-sourcing supports the specification phase; it can be used to pre-qualify
suppliers and also identifies suppliers that can be used in the selection phase. For suppliers
the benefit is: “marketing” and for the buying organizations the benefit is facilitating the
sourcing of suppliers. The UN Global Market Place (UNGM www.ungm.org) is an
example of an E-sourcing tool.
2. E-tendering supports the selection stage and acts as a communication platform between
the procuring organization and suppliers. It covers the complete tendering process
from REOI via ITB/RFP to contracting, usually including support for the analysis and
assessment activities; it does not include closing the deal with a supplier but facilitates
a large part of the tactical procurement process. It results in equal treatment of
suppliers; transparent selection process; reduction in (legal) errors; clear audit trial; more
efficiency in the tactical procurement process and improved time management of tendering
procedures. Some UN organizations such as UNDP-IAPSO and UNHCR have used E-

23
tendering in the formulation of long-term agreements for vehicles, tents,
motorcycles and pharmaceuticals through an in-house developed tendering portal.
3. The electronic auction (e – Auction) is an e-business between auctioneers and bidders,
which takes place on an electronic marketplace. It is an electronic commerce which occurs
between business to business (B2B), business – to – consumer (B2C), or consumer – to –
consumer (C2C). The auctioneero6ers his goods, commodities or services on an auction
side on the internet. Interested parties can submit their bid for the product to be auctioned
in certain specified periods. The auction is transparent; all interested parties are allowed to
participate in the auction in a timely manner. The two major types of the electronic auction
are “forward auction” in which several buyers bid for one seller's goods and “reverse
auction” in which several sellers bid for one buyer's order.
4. E-ordering and web-based ERPE-ordering is the process of creating and approving
procurement requisitions, placing purchase orders, as well as receiving goods and services
ordered, by using software systems based on the Internet.
5. E-informing is not directly associated with a stage in the procurement process; it is the
process of gathering and distributing procurement information both from and to internal
and external parties using Internet technology.
6. Enterprise resource planning (ERP) is a method of using computer technology to link
various functions- such as accounting, inventory control, and human resources – across an
entire company. ERP is intended to facilitate information sharing, business planning, and
decision making on an enterprise –wide basis. That said, both MRP and MRP II paved the
way for the rise of Enterprise Resource Planning software.

24
7. The electronic auction (e – Auction) is an e-business between auctioneers and bidders,
which takes place on an electronic marketplace. It is an electronic commerce which occurs
between business to business (B2B), business – to – consumer (B2C), or consumer – to –
consumer (C2C). The auctioneero6ers his goods, commodities or services on an auction
side on the internet. Interested parties can submit their bid for the product to be auctioned
in certain specified periods. The auction is transparent; all interested parties are allowed to
participate in the auction in a timely manner. The two major types of the electronic auction
are “forward auction” in which several buyers bid for one seller's goods and “reverse
auction” in which several sellers bid for one buyer's order.
8. E – Catalogues are an online catalogue which is in Dip book format containing the detailed
listing of your o6erings including part number, descriptions, delivery terms and prices.
9. E – Payment is a subset of an e-commerce transaction to include electronic payment for
buying and selling goods or services o6ered through the Internet. Generally we think of
electronic payments as referring to online transactions on the internet, where payments are
actually e6ected electronically.
The following types of electronic payments are most common today.
1. E-Credit/E-Cards·
2. E- Internet. Consumers and businesses can transfer money to third parties from the bank
or other account online (Telegraphic transfer).
3. Mobile Payments
Advantages of e – commerce·
• Sales time for transaction – fast transaction·
• Accuracy of information·

25
• Facilitate international trade·
• Easy for supplier price comparisons·
• Enhancement of just in time procurement·
• Increased sales – as vital communities created·
• Costs saving in order processing
Disadvantages of e – commerce·
• Loss of ability to inspect the product from remote location personally ·
• Rapid developing pace of underlying technologies·
• DiAcult to calculate returns on investment·
• Not everyone is connected to the Internet
Limitations of implementing e – commerce
• Most of the suppliers are not IT – literate·
• Power problems·
• No good communication network to support e – commerce especially to rural areas·
• Can be vulnerable to forgery if system is not well controlled·
• No enough expert to support the system·
• Poor ICT infrastructures to support the system (www, server and internet)
Foundations of e-procurement
• Theoretical framework of e-procurement
• Legal provisions in e-procurement management
Theoretical framework of e-procurement
Disruptive Innovation Theory

26
This theory points out that e-procurement is an innovation. As such it requires continual
improvement. Because of such improvements, it disrupts the normal procurement operations and
processes. The theory of disruptive innovation is characterized by: small and costly client base
and non-attractiveness at the initial stages of implementation, some level of acceptance as the
system is implemented, new competition as innovation continues and continuous quality
improvement to improve adaptability to user and stakeholders needs.
Disruptive innovations require critical resources, processes and values. Critical resources include
resources supporting the normal business activities such as; People, technologies, product designs,
brands, customer and supplier relationships, relationship management with its clients and suppliers
and marketing activities. Critical processes include decision making protocols and coordination
patterns that supports operations of an existing business operations. In addition, organizational
cultural values, belief system and assumptions are also critical. The theory of disruptive innovation
recognizes the fact that public organizations and systems are less flexible. Therefore, the adoption
of e-procurement strategies requires a strategic and proactive approach so as to build the system
within the existing structures rather than adoption of completely new systems. Adequate
preparation in terms of the right technology, leadership to foster change process, training of the
employees and awareness campaign among users is critical. It is important to note that sometimes
disruptive innovations may only work in the short run.
Technology Acceptance Theory
According to this theory, emerging technologies cannot improve organizational effectiveness and
performance if the change has not been accepted by the users. The theory of technology acceptance
is one of the most popular theories in understanding adoption of computer technologies. Adoption

27
of any innovation or especially information technology based requires investment in computer
based tools to support decision making, planning communication.
However, these systems may be risky. It is therefore very critical that the systems are specified on
organizational preference and logic. It is also necessary to understand that people may resist
technological changes. There must be an effort to understand why people resist changes and the
possible ways through which such issues can be resolved. Appropriate organizational culture must
be inculcated; the change must be adopted in an incremental way accompanied by communication.
Everyone involved must be informed on their roles and empowered to perform the respective roles.
Theory of technology is based on two assumptions; perceived usefulness of the system such us;
improved performance, enhanced productivity, effectiveness and efficiency in operations etc. and
the perceived ease of use of the new systems such as ease to learn, ease to use, ease to control and
ease to remember. This theory brings an understanding that acceptance and use of new technology
is a function of the users‟ feelings about the system and its perceived benefits.
Innovation Diffusion Theory
Innovation diffusion theory was proposed by Rogers (1962). The theory presents that innovation
is a process aimed to improve economic development. According to innovation diffusion theory,
innovation is defined as an idea perceived as new by individuals. Swaminathan (2007) defined
innovation as „all the scientific, technological, organizational, financial, and commercial activities
necessary to create, implement, and market new or improved products or processes Innovation
theory brings on board four important elements‟. The first element is innovation that puts attention
on the ability to come up with more efficient and better ways of doing things.
This theory categorize adopters of innovation into five categories; innovators, individuals who
want to be the first to try the innovation, Early Adopters, people who represent opinion leaders,

28
Early Majority individuals who need to see evidence that the innovation works before they can
adopt it, Late Majority, skeptical individuals who only adopts an innovation after it has been tried
by the majority and Laggards, individuals who are very skeptical of change and are the hardest
group to involve in the innovation process.
According to innovation theory, rate of adoption of innovative strategies can be looked at in terms
of; relative advantage given to the organization, compatibility, complexity, trial-ability of the new
strategies and observability to the stakeholders within the social system. The second factor is
communication that lays information and creating and sharing information relating to innovative
initiatives in the organization. The third element is time that considers the duration involved in the
innovation-decision process. The last element is the social context of the new systems (Rogers,
1997). Diffusion of innovation strategies requires evolution and reinvention of products and
people so that they are able to perform better (Les Robinson, 2009).
1. Barahona, J. & Elizondo, E. A. (2012). The Disruptive Innovation Theory Applied to
National
2. Implementations of E-procurement. Electronic Journal of e-Government Volume 10 Issue
2 2012
3. Davis, F. D. (1986). A technology acceptance model for empirically testing new end – user
information
Legal provisions in procurement management
Procurement legal and regulatory framework refers to the policies, laws, guidelines or regulations
that govern procurement in an organization. Every organization (public sector, private sector or
third sector entities) have some rules governing the acquisition of goods, works and services to
ensure fulfillment of its goals. When we speak of public procurement legal and regulatory

29
framework, we mean the set of laws, regulations, and policies that govern the implementation of
the procedures and processes necessary to acquire goods, works and services of public sector
organizations.
The significance of procurement legal and regulatory framework is to clearly define the rules that
govern the procedures and processes of every aspect of public procurement management and
ensure achievement of the principles of public procurement to the fullest. The legal and regulatory
framework for procurement in every country is also usually intended to support the economic
development policies of that country. It is important to note that public procurement is a part of
the actual implementation of government expenditure in the Gross Domestic Product (GDP)
Economic Model. How procurement is conducted is very important to the achievement of delivery
of public goods and services and economic development. Public procurement legal and regulatory
framework is intended to ensure this.
Components of the Procurement Legal and Regulatory Framework
1. Constitution. it is the organic law which is the foundation of all laws in that country. No
law is supposed to contradict this body of law, but support it. According to the Merriam
Webster Dictionary, a constitution is the basic principles and laws of a nation, state or
social group that determines the powers and duties of the government and guarantees
certain rights to the people in it. National procurement policies or laws must support the
constitution. Anything to the contrary is null and void.
2. National Procurement Laws. These are policies or laws that generally define and govern
procurement using public funds. These laws are not to contradict the constitution of the
country. Examples of national procurement laws include the Public Procurement and
Concessions Act 2010 of Liberia, the Public Procurement Act (Amendment) 663 of Ghana,

30
and the Public Procurement and Assets Disposal Act 2015 of Kenya. Usually, the national
procurement law of a country originates from the legislature.
3. Procurement Regulations. Next to the Procurement Laws are the regulations in some
countries. These are legal instruments that support the national procurement law. They
usually originate from the procurement regulatory body of the country. These regulations
support the procurement law by providing detailed explanations of provisions of the
procurement law.
4. Standard Bidding Documents. These are documents used in the solicitation of offers
from the market. These documents are customized to define the terms and conditions of
tendering for a particular procurement opportunity. They define what is required, extend
invitation to tenderers, define the evaluation criteria, tell who is qualified to bid, how offers
should be prepared and what the tenderers need to know about the specific tendering
process. Every system has standard bidding documents for goods, works and services
which can be customized to address specific tendering needs. These documents should not
contradict the regulations and national procurement policies or laws.
5. Procurement Manual. This is a document that gives detailed or step-by-step explanation
of the processes and procedures required to implement procurement of goods, works and
services under the different procurement methods.
6. Procurement Policies. These are policies specific to the individual public sector
institutions spending public funds. They outline the organization’s specific procurement
related processes including authorities, and trail to follow when initiating a procurement
process. The organization procurement policy must support and not contract the national
procurement law.

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7. Contracts. It is an agreement enforceable by law. Every successful procurement process
usually ends in a formal contract which binds the government and the supplier, contractor
or service provider to perform an obligation. The obligations of both parties are defined in
the terms and conditions of the contract.
E-Tendering
E-tendering is where the procurement process is conducted online. It is a legal requirement for
public bodies to use electronic means of communication and information exchange in regulated
procurement procedures. Further, the e-tendering process helps to ensure fairness, transparency
and auditability, as well as simplicity for bidders. E-tenders are therefore very common in public
sector. To participate in an e-tender, you must therefore identify the portal used by the buyer and
register with a username and password. From there, you can:
• Find suitable tender opportunities
• Submit an expression of interest (EOI)
• Complete and submit an SQ (selection questionnaire) – commonly referred to as a PQQ (
pre-qualification questionnaire )
• Complete and submit an e-tender
• Download all relevant bid and tender documents
• Ask and receive responses for questions pertaining to the PQQ and tender via the
clarifications process
• Track the progress of your PQQ or tender
• Receive notifications of any changes to the specification of the PQQ or tender

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•
documents.
Benefits of e-tenders
• E-tendering is useful because it guides you through a very structured process. Unlike
traditional tendering processes, e-tendering takes you step by step through the tender and
sometimes requires you to complete one part before you can progress to the next. Even if
that is not the case, the e-tender system will be divided into discrete sections and will
usually have very prescriptive questions, making it easier to provide the buyer with the
information they require.
• With the layout and the questions clearly stated, you do not have to worry about format or
form, and no one can benefit from any design or creative advantages. For that reason,
etendering goes some way to levelling the playing field. With a conventional tender, factors
such as design flair and addressing criteria beyond what has been requested may unduly
impact on the outcome. With an e-tender, everyone is answering the same questions and
often within a set word limit, so it should be much easier for the evaluator to reach an
objective decision.
• E-tenders very often include fool-proofing mechanisms. For example, most major portals
prevent bidders from submitting an e-tender unless they have completed all the mandatory
sections or, at the very least, provide a warning that sections are incomplete or
that documents have not been attached. This means it is almost impossible to submit a non-
compliant bid in terms of non-completion of mandatory questions.
• Using an e-tendering portal (e-portal) also means that it is much easier to pick up where
you left off. Many major e-tendering portals even provide a progress bar and percentage,

33
telling you much you have completed and how much of your bid is outstanding, which is
handy for project management and keeping your tender on track.
Disadvantages of e-tendering
• The downside of this type of tendering is that there can be a lot of questions. It can seem
like a marathon, and often the questions do not seem to link through to one another. When
writing a proposal, you can think about telling a cohesive story throughout the course of
your submission, but e-tenders with highly prescriptive evaluation criteria and pre-defined,
word-limited questions make that challenging.
• The questions can be disjointed and badly worded, which can further break up the flow of
the finished submission. Sometimes, the e-tenders are very dense and confusing, difficult
to navigate and even more difficult to access in the first place, which might deter less
experienced bidders from participating.
• A further downside of e-tendering could be that its highly prescriptive structure does not
always leave as much room for innovation. It can be done, but you need to present
innovations within the context of the questions being asked. Nonetheless, it is much harder
as generally you are not permitted to draw on design, individuality or many supporting
documents.
• Whatever you do when you are completing a tender opportunity via an e-tendering system,
save your work regularly and leave yourself plenty of time. The e-portals can become slow
and unresponsive when a lot of bidders are accessing the site. Typically, this happens close
to the submission deadline, particularly for major tenders with many interested parties, so
try to log on and submit your e-tender much earlier.
Registration

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1. The Bidder is requested to visit the link Bidders Manual Kit‘ at
https://moefcc.euniwizard.com and Central Public Procurement (CPP) Portal (URL:
http://eprocure.gov.in/eprocure/app) .
2. Bidders are required to enroll
on the e-Procurement Portal
(URL:https://moefcc.euniwizard.com with clicking on the link “Online bidder
Registration” on the e-tender Portal by paying the Registration fee of Rs. 2360/- per year
through online banking.
3. As part of the enrolment process, the Bidder will be required to choose a unique username
and assign a password for their accounts.
4. During enrolment/ registration, the Bidder should provide the correct/ true information
including valid email-id & mobile no. All the correspondence shall be made directly with
the Contractors/ Bidders through email-id provided.
5. For e-tendering, possession of valid Digital Signature Certificate (Class III Certificates
with Signing + Encryption key usage) issued by any Certifying Authority recognized by
CCA India (e.g. Sify / TCS / nCode / eMudhra etc.), with their profile.
6. Upon enrolment on e-procurement portal (URL:https://moefcc.euniwizard.com ) for
etendering, the Bidder has to register their valid Digital Signature Certificate with their
profile.
7. Only one valid DSC should be registered by a Bidder. Bidders are responsible to ensure
that they do not lend their DSCs to others which may lead to misuse and should ensure
safety of the same.

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8. Bidder can then log into the site through the secured login by entering their user ID/
password and the password of the DSC/ e-Token.
Searching for Tender Document
1) There are various search options built in the CPP Portal, to facilitate Bidders to search
active Tenders by several parameters. These parameters could include Tender ID,
Organisation Name, Location, Date, Value, etc. There is also an option of advanced search
for Tenders, wherein the Bidders may combine a number of search parameters such as
Organisation Name, Form of Contract, Location, and Date, Other keywords, etc., to search
for a Tender published on the CPP Portal.
2) Once the Bidders have selected the Tenders they are interested in, they may download the
required documents/Tender Schedules. These Tenders can be moved to the respective „My
Tenders‟ folder. This would enable the CPP Portal to intimate the Bidders through SMS/e-
mail in case there is any Corrigendum issued to the Tender Document.
3) The Bidder should make a note of the unique Tender ID assigned to each tender, in case
they want to obtain any clarification/help from the Helpdesk.
PREPARATION OF BIDS:
1. Bidder shall go through the tender document carefully to understand the documents
required to be submitted as part of the bid. Bidders shall note the number of covers in which
the bid documents have to be submitted, the number of documents - including the names
and content of each of the document that need to be submitted. Any deviations from these
may lead to rejection of the bid.

36
2. Any pre-bid clarifications if required, then same may be obtained online through the tender
site, or through the contact details given in the tender document.
3. Bidders should get ready in advance the bid documents to be submitted as indicated in the
tender document/schedule in pdf/xls/rar/zip/ jpg/ dwf formats. If there is more than one
document, they can be clubbed together using zip format. Bid documents may be scanned
with 100 dpi with black and white option which helps in reducing size of the scanned
document.
4. To avoid the time and effort required in uploading the same set of standard documents
which are required to be submitted as a part of every bid, a provision of uploading such
documents (e.g. GST registration copy, annual reports, auditor certificates etc.) has been
provided to the bidders. Bidders can use “My Document” available to them to upload such
documents. These documents may be directly attached from the “My Document” library
while submitting a bid, and need not be uploaded again and again. This will lead to a
reduction in the time required for bid submission process.
SUBMISSION OF BIDS:
1. Bidder should log into the site well in advance for bid submission so that he/ she upload
the bid in time i.e. on or before the bid submission time.
2. Bidder should prepare the Cost of bidding document/ EMD as per the instructions specified
in the tender document. The original Cost of bidding document/ EMD should be posted/
couriered/ given in person to the concerned official, latest by the last date of bid submission
or as specified in the NIT/ tender documents. The details of the DD/ any other accepted
instrument, physically sent, should tally with the details available in the scanned copy and

37
the data entered during bid submission time. Otherwise the uploaded bid shall be liable for
rejection.
3. Bidders should select the payment option as “offline” to pay the Cost of bidding document/
EMD and enter details of the DD/BC/BG.
4. Bidder should digitally sign and upload the required bid documents one by one in
respective “Tender Cover” as indicated in the tender document.
5. Bidders should note that, the very act of using DSC for downloading the tender document
and uploading their offers is deemed to be a confirmation that they have read all sections
and pages of the tender document without any exception and have understood the complete
tender document and are clear about the requirements of the tender document.
6. Bidders are requested to note that each document to be uploaded for the tender should be
less than 2 MB. If any document is more than 2 MB, it can be reduced through zip/rar and
the same can be uploaded. For the file size of less than 1 MB, the transaction uploading
time will be very fast.
7. Utmost care shall be taken for uploading ‘Schedule of Quantities & Prices’ and any change
/ modification of the price schedule shall render it unfit for bidding.
8. Bidder shall download the Schedule of Quantities & Prices i.e. BOQ_XXXX.xls, in XLS
format and save it without changing the name of the file. Bidder shall fill their respective
rates in figures (financial quotes) and other details (such as name of Bidder) in light blue
background cells, thereafter save and upload the file online in financial/price bid (Finance)
cover without changing the filename. No other cell should be changed.

38
9. Bidders are requested to note that they should necessarily submit their financial bids in the
‘Finance‘ cover in the format provided and no other format is acceptable. If the template
of “Schedule of Quantities & Prices” file is found to be modified/ tampered by
the Bidder, the bid shall be rejected and further dealt as per provision of clause no. 12.0 of
ITB including forfeiture of EMD.
10. The Bidders are cautioned that uploading of financial bid elsewhere i.e. other than in
financial cover shall result in rejection of the tender.
11. Bidder should submit their bids through online e-tendering system to the Tender Inviting
Authority (TIA) well before the bid submission end date & time (as per Server System
Clock). The TIA will not be held responsible for any sort of delay or the difficulties faced
during the submission of bids online by the Bidder at the eleventh hour.
12. After the bid submission (i.e. after clicking ―Freeze Bid Submission‖ in the portal), the
Bidder should take print out of system generated acknowledgement number, and keep it as
a record of evidence for online submission of bid, which will also act as an entry pass to
participate in the bid opening.
13. Bidder should follow the server time being displayed on Bidder‘s dashboard at the top of
the tender site, which shall be considered valid for all actions of requesting, bid submission,
bid opening etc., in the e-tender system.
14. All the documents being submitted by the Bidder would be encrypted using PKI (Public
Key Infrastructure) encryption techniques to ensure the secrecy of the data. The data
entered cannot be viewed by unauthorized persons until the time of bid opening. The
confidentiality of the bids is maintained using the secured Socket Layer 128 bit encryption
technology. Data storage encryption of sensitive fields is done. Any bid document that is

39
uploaded to the server is subjected to symmetric encryption using a system generated
symmetric key. Further this key is subjected to asymmetric encryption using buyers / bid
openers public keys. Overall, the uploaded tender documents become readable only after
the tender opening by the authorized bid openers.
Assistance to Bidders
1) Any queries relating to the Tender Document and the Terms and Conditions contained
therein should be addressed to the Tender Inviting Authority for a Tender or the relevant
Contact person indicated in the Tender.
2) Any queries relating to the process of Online Bid Submission or queries relating to CPP
Portal in general may be directed to the 24X7 CPP Portal Helpdesk.
An invitation to tender (ITT, otherwise known as a call for bids or a request for tenders) is a
formal, structured procedure for generating competing offers from different potential suppliers or
contractors looking to obtain an award of business activity in works, supply, or service contracts,
often from companies who have been previously assessed for suitability by means of a supplier
questionnaire (SQ) or pre-qualification questionnaire (PQQ).
An ITT differs from a request for quotation (RFQ) or a request for proposal ( RFP), in which case
other reasons (technology used, quality) might cause or allow choice of the second best offer. An
RFP is a request for a price from a buyer but the buyer would also expect suggestions and ideas
on how the project work should be done. RFPs are thus focused on more than just pricing/cost,
they entail a bit of consulting from the contractor or vendor. The closest equivalent to an ITT in

40
the mainstream private sector is an RFP which, since public money is not involved, typically has
a less rigid structure
Types of invitation to tender
• Open tenders, open calls for tenders, or advertised tenders are open to all vendors or
contractors who can guarantee performance.
• Restricted tenders, restricted calls for tenders, or invited tenders are only open to selected
pre-qualified vendors or contractors. The tender stage may form part of a two-stage process,
the first stage of which (as in the expression-of-interest (EOI) tender call) was itself
advertised, resulting in a shortlist of selected suitable vendors.
• Sole source tenders, where only one potential supplier is invited to submit a tender.
The reasons for using restricted tenders differ in scope and purpose. Restricted tenders can come
about because of:
• confidentiality issues (such as in military contracts)
• the need for expedience (as in emergency situations)
• a need to exclude tenderers who do not have the financial or technical capabilities to fulfill
the requirements.
A sole source tender may be used where there is essentially only one suitable supplier of the
services or product.
A typical invitation to tender in any project has the following sections:
• Introduction & Project background
• Legal issues: proposed terms and conditions of contract
• Supplier response required
• Timetable for choosing a supplier

41
• Requirements for tender submission
• Introduction & Project background
a. Company Background
Insert no more than approximately two paragraphs of information about your
organisation.
b. Background to the Project
[Insert Company Name] is currently reviewing the provision of (subject) services to
[Insert Company Name] throughout the country. To this end, there may be changes to
the strategic and/or operational processes regarding how [Insert Company Name]
meets (subject) requirements for the organisation. This has led to the release of the
ITT. Following this process, [Insert Company Name] may award a new contract in (due
course or put in a date) regarding (subject) services.
• Legal issues: proposed terms and conditions of contract
a. Evaluation Criteria and Process (add/delete as appropriate to the requirement)
A set of detailed evaluation criteria has been prepared by [Insert Company Name] for the
evaluation of every Submission. Within each stage an initial evaluation will consider whether or
not every instruction and requirement contained within the ITT has been fulfilled.
The evaluation criteria will be based upon some or all of the following aspects of the Bidders’
proposals in (not in order of significance) :
b. Commercial
i. Competitive price
ii. Price clarity
iii. Management information provisions iv. Contractual compliance

42
c. Service Capability
Service delivery experience
Service delivery models (including business continuity)
Quality
Compliance with Service Levels
Culture and ability to work with [Insert Company Name]
Ability to adapt to changing business requirements
Continuous improvement plans
d. Long term roadmap proposals
i. Innovation and added value
ii. Strategic fit
e. Financial
i. Financial strength demonstrated across the Bidder’s group structure. Please
include your company’s revenue and net results for the last two years with your
response.
ii. An established financial track record demonstrated for the legal entity that TC
would be contracting with (please include your company’s registration number
and registered address in your response).
f. Level of Compliance with ITT
i. Understanding of all parts of the ITT
ii. Proposals / bids provided are in accordance with the Instructions
iii. Adherence to the timescales to send back responses

43
You are reminded that throughout the process [Insert Company Name] will continually assess all
contact with the bidder’s organisations including compliance to the process, presentations and on-
site representatives. [Insert Company Name] reserves the right at its sole discretion to disqualify
without further consideration any submission that does not satisfy this basic requirement
• Supplier response required
This section provides detailed instructions to be followed in responding to this ITT.
Included are Response Guidelines and [Insert Company Name] Contact Information. You will
be required to submit a written proposal as part of the response in the form set out. You should
submit two hard copy sets of written responses, one of which should be unbound and also an
electronic copy of the document, which should be labeled clearly. Responses should be on A4
paper, with sequential page numbering. Your Bid Manager should sign all responses. The
sections should use the same paragraph numbering system as this ITT and should specifically
to:
• [ Name and e-mail address of Procurement representative ]
• [ Insert full address ]
• [Insert Company Name] reserves the right to disregard any response submitted after the
timetable deadline.
• You are expected to supply all required information, or clearly state the reason for being
unable to do so.
• Any assumptions used in preparing responses should be clearly stated. Any appropriate
supporting documents e.g.; maps, brochures, organisation charts, etc. should be
included.

44
• Questions relating to clarification of the ITT will only be accepted in writing to the
[Insert Company Name] representative. Likewise, all responses from [Insert Company
Name] will be written and may also be made available to other vendors (subject to
confidentiality). In the event that any answer materially affects the ITT specifications,
an amendment to the original requirement will be escalated to all vendors. [Insert
Company Name] will attempt to answer any question within 3 working days of receipt
of that request; otherwise it will respond within that timescale notifying you of the
estimated time to obtain the information.
• [Insert Company Name] reserves the right to modify the provisions of this ITT at any
time prior to the scheduled date for written responses. Additional scope and
requirements can be added. Notification of such changes will be provided to all
vendors.
• Should you wish to propose a deviation from the specification please ensure that you
clearly identify and highlight where appropriate in your response
• By submitting a response, you are committing to an understanding that you understand
the requirement and have sufficiently addressed all aspects of the tender and
information contained within the data room and that you have checked all stated details,
such as prices, to be correct and as intended.
• All information supplied by [Insert Company Name] in this tender to date, and any
further information supplied during the tender process is subject to the confidentiality
agreement you have signed.

45
• Requirements for tender submission, for example a fully completed but otherwise
unamended form of tender must be submitted by the specified deadline.
Evaluation of Bids:
Bid evaluation is the organized process of examining and comparing bids to select the best offer
in an effort to acquire goods, works and services necessary to achieve the goals of an organization.
The best offer recommended as a result of bid evaluation is referred to as the lowest responsive
evaluated bid. It may also be called the most economically advantageous tender (MEAT ).
Timetable for choosing a supplier
General
of
Confirmation
of this
receipt
document
Email confirmation:
Deadline for
submissions
Insert date]
[
Selection of Presentation to[Insert Company Name] evaluation team on the
providers for
interview
[Insert date]
Contract
implementation
date
]
[Insert date
Email Copies of
this document
If you would like a word copy of this document please email
[Insert contact name]
Questions Questions arising from this document should be given to[Insert
contact name]or in his absence,[Insert contact name]
Full contact details [Insert contact name][Insert company position][Insert full
address]

46
Bid evaluation is the responsibility of a body known as the Bid Evaluation Panel. How this panel
is called depends on the organization. Synonymous terms are quotation review panel, bid review
board or tender review committee, to name a few. Most procurement Legal and Regulatory
Frameworks require it to be an ad-hoc body with at least three members knowledgeable in
Procurement, with technical expertise in the specific item being procured and a representative of
the user entity. Prior to evaluation of bids, the evaluation criteria are predefined and included in
the bidding documents. The bid evaluation panel evaluates bids based on the predefined criteria
only and recommends award to the lowest responsive evaluated bid.
Lowest Responsive Evaluated Bid versus Lowest Priced Bid
Public Procurement are usually confused when it comes to the difference between lowest
responsive evaluated bid and lowest priced bid. A lowest responsive evaluated bid, as the phrase
suggests, is a bid that has been examined and determined to be responsive to formal qualification
requirements, evaluated in detail, found to be compliant with pre-defined evaluation criteria, and
found to have the lowest price after price evaluation and comparison. On the other hand, the lowest
priced bid is the bid with the lowest price read-out at the public bid opening event without being
evaluated. Therefore, the bid recommended for contract award may not necessarily be the bid with
the lowest read-out price.
Evaluation Criteria
Evaluation criteria are the standards against which bids are evaluated. Generally, evaluation
criteria can be categorized into three categories including (i) mandatory criteria, (ii) weighted
criteria and (iii) weighted criteria with mandatory elements (UNDP, 2016).
Mandatory criteria are used in straightforward bid evaluation methods where they are rated as
pass/fail, responsive/non-responsive or comply/non-comply. They are usually used in evaluation

47
for goods procurement, but may also be used for the procurement of services and infrastructure
works. The mandatory criteria are the first criteria against which bids are evaluated in order to
eliminate bids that do not conform to these requirements (UNDP, 2016).
Weighted criteria are criteria which can be measured in terms of degree of responsiveness. The
scale used to measure the degree of responsiveness depends on the procurement method and
category of procurement. Usually this applies to the evaluation of services.
Weighted criteria with mandatory elements are criteria that have mandatory minimum
requirements defined and are measured above that minimum requirement (UNDP, 2016); for
example, a requirement may be set for a consultant to be fluent in at least two international
languages and a rated score may be assigned for persons with additional international language
capabilities, if the additional language adds value to the requirement.
Stages of the Bid Evaluation Process
I will classify the bid evaluation process into four basic stages including
(1) Preliminary examination for responsiveness to formal qualification requirements,
(2) Evaluation for compliance with technical requirements,
(3) Price/financial evaluation and
(4) Post qualification/due diligence.
Preliminary Examinations for Responsiveness to Formal Qualification Requirements: During
preliminary examination, bids are examined to ensure they are from eligible companies or
countries, that the bid is submitted with all requirements that bid securities (when required) are
valid, and that tax and other legal and commercial requirements are met. All bids determined non-
responsive at this stage are not considered for the next stage.

48
Evaluation for Compliance with Technical Requirements: At this stage, the panel evaluates for
compliance with specified quality (specifications). They also look at issues such as the bidder’s
experience, delivery schedule, compliance with quantity specified, works schedule, after sale
services, warranty and other requirements specified in the bidding documents. These are, however,
not fixed but predetermined based on the particular case. Bids that do not comply with the technical
requirements are not considered for price/financial evaluation. Before price evaluation, all bids
that are not responsive would be listed and clear reasons recorded for their not being eligible for
further evaluation.
Price/Financial Evaluation: At this stage, the panel examines the offered price for computational
errors and, depending on the procurement type (goods, services or work), takes into consideration
factors such as provisional sums and discounts, etc. Where bids are priced in more than one
currency, all currencies are converted to a single currency for evaluation based on exchange rate
from a specified source, as stated in the bidding documents. The corrected/evaluated prices are
then compared and bids ranked in order beginning with the lowest responsive evaluated bid. A
price reasonableness analysis is also done to ascertain that the price of the recommended bidder is
fair given the prevailing market conditions.
Contract awarding
It is the method used during a procurement in order to evaluate the proposals (tender offers) taking
part and award the relevant contract. Usually at this stage the eligibility of the proposals have been
concluded. So it remains to choose the most preferable among the proposed. There are several
different methods for this, which are obviously related to the proposition method asked by the
procurement management

49
Methods of awarding contract
Least price
This method is the simplest and oldest of all. Under this the procurement contract is awarded to
the best price. Some relevant methods are these of examining the overall or in parts and in total
discount in a given price list or on a given budget. One of the proposed for Public tenders by the
EC
Most economically advantageous
This is applicable to proposals of different quality within the limits set. Under this the proposals
are graded according to their price for value and the contract is awarded to the one with the best
grade. Similar to this is the grading of the proposals according to time, making the proposals
needing less time of implementation seems more valuable. One of the proposed for Public tenders
by the EC.
Meanvalue
The contract is awarded to a bid closer to the mean value of the proposals. This may apply to
procurements where numerous proposals are expected and there is a need for a marketrepresenting
value.
Exclusion of the extremes
Under this method the proposals that are deviating from the most from the mass of the proposals
are excluded and then the procedure continues with one of the above methods.
There are also many variants and/or combinations of these main methods.
Supply chain management
Supply chain management (SCM) is the active management of supply chain activities to maximize
customer value and achieve a sustainable competitive advantage. It represents a conscious effort

50
by the supply chain firms to develop and run supply chains in the most effective & efficient ways
possible. Supply chain activities cover everything from product development, sourcing,
production, and logistics, as well as the information systems needed to coordinate these activities.
The concept of Supply Chain Management (SCM) is based on two core ideas:
 The first is that practically every product that reaches an end user represents the cumulative
effort of multiple organizations. These organizations are referred to collectively as the
supply chain.
 The second idea is that while supply chains have existed for a long time, most organizations
have only paid attention to what was happening within their “four walls.” Few businesses
understood, much less managed, the entire chain of activities that ultimately delivered
products to the final customer. The result was disjointed and often ineffective supply
chains.
The organizations that make up the supply chain are “linked” together through physical flows and
information flows.
Physical Flows
Physical flows involve the transformation, movement, and storage of goods and materials. They
are the most visible piece of the supply chain. But just as important are information flows.
Information Flows
Information flows allow the various supply chain partners to coordinate their long-term plans, and
to control the day-to-day flow of goods and materials up and down the supply chain.
Importance of supply chain concept
SCM performance has a direct effect on the organization's overall performance. From a cost
control perspective, it's estimated that companies with extended global supply chains have

51
between 80% and 90% of their costs tied up in their supply chains. Also, the increased complexity
of modern supply chains caused by global sourcing, omni channel distribution and widespread
markets mean SCM is essential.
Customers have become more demanding and expect retailers to have stock of what they want or
will move on, causing a lost sale. If they order items online, they expect prompt, on-time delivery
and easy return processes for unwanted purchases. Many manufacturers are dependent on just-in-
time (JIT) manufacturing strategies that require delivery of components not only on time but also
not before time, and in exactly the required quantity.
Omni channel retailers have to figure out the best way to combine the sometimes conflicting
demands of brick-and-mortar stores and online retailing. Businesses need flexible and adaptable
supply chains that are able to respond quickly to capitalize on opportunities offered by rapidly
changing consumer practices.
Supply Chain is the management of flows.
There are five major flows in any supply chain: product flow, financial flow, information flow,
value flow & risk flow.
The product flow includes the movement of goods from a supplier to a customer, as well as any
customer returns or service needs. The financial flow consists of credit terms, payment schedules,
and consignment and title ownership arrangements. The information flow involves product fact
sheet, transmitting orders, schedules, and updating the status of delivery.
THE PRODUCT FLOW:
Product Flow includes movement of goods from supplier to consumer (internal as well as
external), as well as dealing with customer service needs such as input materials or consumables
or services like housekeeping. Product flow also involves returns / rejections (Reverse Flow).

52
In a typical industry situation, there will a supplier, manufacturer, distributor, wholesaler, retailer
and consumer. The consumer may even be an internal customer in the same organisation. For
example in a fabrication shop many kinds of raw steel are fabricated into different building
components in cutting, general machining, welding centres and then are assembled to order on a
flatbed for shipment to a customer. Flow in such plant is from one process / assembly section to
the other having relationship as a supplier and consumer (internal). Acquisition is taking place at
each stage from the previous stage along the entire flow in the supply chain.
In the supply chain the goods and services generally flow downstream (forward) from the source
or point of origin to consumer or point of consumption. There is also a backward (or upstream)
flow of materials, mainly associated with product returns.
THE FINANCIAL FLOWS:
The financial and economic aspect of supply chain management (SCM) shall be considered from
two perspectives. First, from the cost and investment perspective and second aspect based on from
flow of funds. Costs and investments add on as moving forward in the supply chain. The
optimization of total supply chain cost, therefore, contributes directly (and often very significantly)
to overall profitability. Similarly, optimization of supply chain investment contributes to the
optimization of return on the capital employed in a company. In a supply chain, from the ultimate
consumer of the product back down through the chain there will be flow of funds. Financial funds
(Revenues) flow from the final consumer, who is usually the only source of “real” money in a
supply chain, back through the other links in the chain ( typically retailers, distributors,
processors and suppliers ).
In any organization, the supply chain has both Accounts Payable (A/P) and Accounts Receivable
(A/R) activities and includes payment schedules, credit, and additional financial arrangements and

53
funds flow in opposite directions: receivables (funds inflow) and payables (funds outflow). The
working capital cycle also provides a useful representation of financial flows in a supply chain.
Great opportunities and challenges therefore lie ahead in managing financial flows in supply
chains. The integrated management of this flow is a key SCM activity, and one which has a direct
impact on the cash flow position and profitability of the company.
THE INFORMATION FLOW:
Supply chain management involves a great deal of diverse information–bills of materials, product
data, descriptions and pricing, inventory levels, customer and order information, delivery
scheduling, supplier and distributor information, delivery status, commercial documents, title of
goods, current cash flow and financial information etc.–and it can require a lot of communication
and coordination with suppliers, transportation vendors, subcontractors and other parties.
Information flows in the supply chain are bidirectional. Faster and better information flow
enhances Supply Chain effectiveness and Information Technology (IT) greatly transformed the
performance.
THE VALUE FLOW:
A supply chain has a series of value creating processes spanning over entire chain in order to
provide added value to the end consumer. At each stage there are physical flows relating to
production, distribution; while at each stage, there is some addition of value to the products or
services. Even at retailer stage though the product doesn’t get transformed or altered, he is
providing value added services like making the product available at convenient place in small lots.
These can be referred to as value chains because as the product moves from one point to another,
it gains value. A value chain is a series of interconnected activities which are required to bring a
product or service from conception, through the different phases of production (involving a

54
combination of physical transformation and the input of various product services), delivery to final
customers, and final disposal after use. That is supply chain is closely interwoven with value chain.
Thus value chain and supply chain are complimenting and supplementing each other. In practice
supply chain with value flow are more complex involving more than one chain and these channels
can be more than one originating supply point and final point of consumption.
In chain at each such activity there are costs, revenues, and asset values are assigned. Either
through controlling / regulating cost drivers better than before or better than competitors or by
reconfiguring the value chain, sustainable competitive advantage is achieved.
THE FLOW OF RISK:
Risks in supply chain are due to various uncertain elements broadly covered under demand, supply,
price, lead time, etc. Supply chain risk is a potential occurrence of an incident or failure to seize
opportunities of supplying the customer in which its outcomes result in financial loss for the whole
supply chain. Risks therefore can appear as any kind of disruptions, price volatility, and poor
perceived quality of the product or service, process / internal quality failures, deficiency of
physical infrastructure, natural disaster or any event damaging the reputation of the firm. Risk
factors also include cash flow constraints, inventory financing and delayed cash payment. Risks
can be external or internal and move either way with product or financial or information or value
flow.
External risks can be driven by events either upstream or downstream in the supply chain:
• Demand risks – related to unpredictable or misunderstood customer or end-customer
demand.
• Supply risks – related to any disturbances to the flow of product within your supply chain.
• Environment risks – that originate from shocks outside the supply chain.

55
• Business risks – related to factors such as suppliers’ financial or management stability.
• Physical risks – related to the condition of a supplier’s physical facilities.
• Internal risks are driven by events within company control:
• Manufacturing risks – caused by disruptions of internal operations or processes.
• Business risks – caused by changes in key personnel, management, reporting structures, or
business processes.
• Planning and control risks – caused by inadequate assessment and planning, and ineffective
management.
• Mitigation and contingency risks – caused by not putting in place contingencies.
TYPES OF SUPPLY CHAINS
The supply chain is typical for a manufacturing company. If the company is a traditional one, it
will produce items that will be stored in warehouses and other locations, making the supply chain
more complex. If the company uses a make-to-order business model, there will be no need for
storing finished products, but there will be need to store raw materials and components. Therefore,
it is clear that supply chains depend on the nature of the company. The following four models are
very common: integrated make-to-stock, build-to-order, continuous replenishment, and channel
assembly.
INTEGRATED MAKE-TO-STOCK MODEL
The integrated make-to-stock supply chain model focuses on tracking customer demand in real
time, so that the production process can restock the finished goods inventory efficiently. This
integration is often achieved through use of an information system that is fully integrated (an
enterprise system). Through application of such a system, the organization can receive real-time
demand information that can be used to develop and modify production plans and schedules. This

56
information is also integrated further down the supply chain to the procurement function, so that
the modified production plans and schedules can be supported by input materials.
An example of integrated make-to-stock is Starbucks Coffee (starbucks.com). Starbucks uses
several distribution channels, not only selling coffee drinks to consumers, but also selling beans
and ground coffee to businesses such as airlines, supermarkets, department stores, and ice-cream
makers. Sales are also done through direct mail, including the Internet. Starbucks is successfully
integrating all sources of demand and matching it with the supply by using Oracle’s automated
information system for manufacturing (called GEMMS). The system does distribution planning,
manufacturing scheduling, and inventory control (using MRP). The coordination of supply with
multiple distribution channels requires timely and accurate information flow about demand,
inventories, storage capacity, transportation scheduling, and more. The information systems are
critical in doing all the above with maximum effectiveness and reasonable cost. Finally, Starbucks
must work closely with hundreds of business partners.
BUILD-TO-ORDER MODEL
Dell Computer is best known for its application of the build-to-order model. In this model the
company begins assembly of the customer’s order almost immediately upon receipt of the order.
This model requires careful management of the component inventories and delivery of needed
supplies along the supply chain. A solution to this potential inventory problem is to utilize many
common components across several production lines and in several locations.
One of the primary benefits of this type of supply chain model is the perception that each customer
is receiving a personalized product. In addition, the customer is receiving it rapidly.
This type of supply chain model supports the concept of mass customization.

57
CONTINUOUS REPLENISHMENT MODEL
The idea of the continuous replenishment supply chain model is to constantly replenish the
inventory by working closely with suppliers and/or intermediaries. However, if the replenishment
process involves many shipments, the cost may be too high, causing the supply chain to collapse.
Therefore very tight integration is needed between the order-fulfillment process and the production
process. Real-time information about demand changes is required in order for the production
process to maintain the desired replenishment schedules and levels.
This model is most applicable to environments with stable demand patterns, as is usually the case
with distribution of prescription medicine. The model requires intermediaries when large systems
are involved. Such a distribution channel is shown in Figure W7.1.1 for McKesson Co.
CHANNEL ASSEMBLY MODEL
A slight modification to the build-to-order model is the channel assembly supply chain model. In
this model, the parts of the product are gathered and assembled as the product moves through the
distribution channel. This is accomplished through strategic alliances with third-party logistics (3
PL) firms. These services sometimes involve either physical assembly of a product at a 3PL facility
or the collection of finished components for delivery to the customer.
For example, a computer company would have items such as the monitor shipped directly from its
vendor to a 3PL facility, such as at Federal Express and UPS. The customer’s computer order
would therefore come together only when all items were placed on a vehicle for delivery. A
channel assembly may have low or zero inventories, and it is popular in the computer technology
industry. An example is shown in Figure W7.1.2 with a large distributor, Ingram Micro, at the
center of the supply chain.

58
Supply chain performance metrics
If you think of the supply chain as the circulatory system of your business, it’s critical for it to
flow unimpeded and deliver what you need, where you need, as quickly as possible. Aligning your
procurement, production, transportation, and customer service departments can be just as complex
as coordinating the body’s many dependent organs.
So how can you pinpoint opportunities for improvement, and balance customer demands with your
needs for lower costs and higher efficiency? Metrics or key performance indicators (KPIs) are the
obvious solution, but there’s more to it. Monitoring a set of unified metrics improves your
organizational alignment and enables agility, ultimately leading to greater customer satisfaction.
These are the five key metrics you should track to optimize your supply chain operation:
1. Perfect Order Index
The perfect order index measures the error-free rate of the entire supply chain process. It’s a
composite metric; perfect orders from every stage are multiplied to give an overall performance
indicator. This can be misleading. Even if four stages are performing at 99%, when multiplied
together the entire process will attain only a 96% error-free rate.
Still, the perfect order index is an excellent benchmark for overall supply chain performance. And
when you drill down you can investigate, pinpoint and correct issues. The index can then be
assessed over time to measure process improvement progress.
2. Cash-to-Cash Time
The cash-to-cash (C2C) cycle, also known as cash conversion, measures the time between when a
company sends cash to suppliers and when it receives cash from customers. The C2C cycle is
another compound metric, made up of three supply chain measurements: days of inventory, days
of payables, and days of receivables.

59
C2C benchmarks vary greatly; however, one study showed the best-in-class companies tend to
have a cash conversion cycle of less than a month regardless of industry. With a shorter cycle,
money is spending less time in the hands of others instead of being applied to your core operations.
A study of more than 22,000 publicly-traded companies showed a direct correlation between
shorter C2C cycles and greater profitability in 75% of cases.
3. Supply Chain Cycle Time
Supply chain cycle time is an all-encompassing metric measuring how long it would take to
complete a customer’s order if all inventory levels were zero at the time the order was placed. This
metric is the sum of the longest possible lead times for every stage of the supply chain cycle.
This metric is an excellent indicator of the overall efficiency of your supply chain. A shorter cycle
means the process is flexible, agile and responsive to environmental changes. Tracking supply
chain cycle time identifies existing or potential problems, so your business can take corrective
action.
4. Fill Rate
The fill rate, also known as the demand satisfaction rate, is the amount of customer demand that
is met through stock availability, without backorders or lost sales. Knowing your fill rate is
important because it represents the sales you can recover or service better if you improve inventory
performance.
One method for improvement is access to inventory data. The better you and your sales team
understand available inventory, the better able you are to ship accurate, complete, and timely
orders, improving customer satisfaction along the way.
Research found that improving the relationship between a supplier and a retailer resulted in an
80% improvement in fill rate. Changes included accelerating price-change negotiations,

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