Procurement best practices

1

Welcome to

Best Procurement Practices Workshop

3-7 March 2008, Istanbul

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Project Procurement Management: Best Practices

Krishan BatraPrincipal Advisor

UNDP/PSO

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Learning Objectives 3-4 March 2008

• Overview of Procurement Facts• Understanding Procurement Chain • Procurement Plan• Supply Positioning/ LTAs• Risk Management• Procurement Oversight• Ethics, Probity and Accountability• Contract Management• Engaging and Managing Consultants.• Procurement and Law“ We will walk you through simple and exciting journey

of procurement management”

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Learning Objectives:5-7 March 2008

• Developing Specifications/SOW/TOR• Supplier Sourcing• Procurement Methodology• Tendering Process• Selection of Consultants: SSA• Shipping, Insurance & Shipping Terms• Contract Types• Strategic Sourcing (e-tendering)• e-Procurement

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BEST PRACTICES

• Best Practices are defined as techniques that business units may use to help detect and avoid problems in the acquisition, management, and administration of contracts. Best practices are practical techniques gained from practical experience that may be used to improve the procurement process

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Procurement Defined

The term “procurement” refers to the process of acquiring goods, works and services. The process spans the whole cycle from identification of needs through to the end of a services contract or the useful life of an asset.[1]

[1] UNDP Fin. Reg. 21.01(a) (March 2005).

http://acp-reports.undp.org/


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Changing Business Scene

• Purchasing is a professional activity in transition.• The function that used to be called purchasing

or procurement has expanded to become Supply Management.

• Pivotal role brings procurement closer to strategic planning.

• Emerging role is proactive and more strategically oriented.

• Move from reactive procurement to Strategic Supply Management

• From a tactical focus to strategic focus.

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Strategic Plans & Procurement

• Strategic Plans sets the overall direction for support to programme countries to achieve national development objectives.

• UNDP mission is to help countries accelerate progress on human development. Hence aim of UNDP advocacy, policy advice and technical support should be real improvements in people’s lives.

• Dual Roles of UNDP: First pillar upholds the UNDP Role to coordinate and enhance efficiency and second pillar to provide advocacy, policy and technical support in poverty reduction, democratic governance, crisis prevention and recovery, and environment and sustainable development.

9

BUSINESS MODEL

• There will be stronger emphasis on providing knowledge, policy advisory.

• Focus efforts on areas where it has mandate and comparative advantage.

• Will seek to build more extensive partnerships with CSOs to scale up the scope and impact of its work.

• Bring advisory support closer to ground.• Expand Knowledge networks

10

Guiding Criteria

• Contribution to acceleration of MDG• Creation of effective institutions.• Expansion of national and local capacities• Promotion of sustainable development• Support to UN partnerships• Provision of ‘last resort” in case of national

capacity or crisis.• Withdrawal from specialized sectoral activity,

infrastructure with no capacity building, stand-alone procurement, small-scale projects without country wide impact.

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Integrating Procurement Strategy(Into Corporate Strategic Plan)

• What to procure?

• Promoting transparent & competitive procurement.

• Substantial reduction in frequency of audit observations on procurement transparency

• Professional Development.

• Regionalization

1212

UNDP Global Procurement Trends (million USD)

13

Procurement & Delivery:

• Delivery comprises mainly of following components: Goods, Services, Individual Consultants, Travel, etc. These fall under procurement.

• Procurement is the key pillar of delivery. • Procurement is presently treated as a mechanical

process. • One needs different type of skill sets to manage different

type of goods and services.• One need market and product knowledge. It is not about

3 quotations.

• It is about partnering with supply sources

• Move from tactical to strategic mode ( Presently we spend 100% of our time on fire fighting)

1414

UNDP Procurement Trends (million USD)

377 379541 431

866 826

1755

21682359 2431

309 3310

500

1000

1500

2000

2500

3000

2002 2003 2004 2005 2006 2007

RBEC

Total

Prog. Delivery

1515

Procurement Breakdown

Consultants (SSA) ----- 9%

Travel ------ 7%

UNV ------- less than 1%

Fellowships ------- less than 1%

Project Personnel (SC) – 8%

Goods

Service----------- 76 % 85%

16

Average Contract Amount (1000 USD)

1,5631,894

* Overall $672,000

$814

$1,563

$463$549

$249$380

$1,894

$0$200$400$600$800

$1,000$1,200$1,400$1,600$1,800$2,000

HQ RBA RBAP RBAS RBEC RBLAC OTHER(PAPP)

1717

0 - 2.5 k 2.5 k -30 k 30 k -100 k 100 k -1 m >1 m Total

PO Amount (million USD) 89 526 271 435 205 1,526

PO Count 98,509 64,475 5,186 1,738 87 169,995

1818

Average Contract Amount (1000 USD)

* Includes PAPP data

1919

ACP Review CycleRequestor submits the case to ACP Secretariat by Friday, 3pm EST

ACP Secretary prepares the review notes (case summary) and sends it to the ACP Members by Monday

REQUESTOR

SECRETARIAT

ACP MEMBERS

ACP MEETING

ACP MEMBERSACP CHAIR

CPO

ACP Members review the notes and prepare for the ACP Meeting on Wednesday.ACP Meeting takes place every Wednesday at 1pm.

ACP Secretary uploads the ACP recommendations on ACP online by Thursday.Notification sent to ACP Members.

ACP Members review the recommendations and they can add their comments by Friday.

Based on the ACP recommendations, the Chair forwards the case to the CPO for Approval/ Withholding/ Rejection.The Chair forwards the case to the CPO by Monday.

CPO reviews the ACP recommendations and Approves/Withholds/ Rejects the case.The CPO action is done by Wednesday.

1 Day

1 Day

1 Day

1 Day

1 Day

1 Day

2 Days

ACP Review Cycle = 8 Working Days * Based on the assumption that the Requestor has provided all the relevant information to facilitate ACP Review

2020

Regional Bureau for Europe and CIS

2121

Procurement Fact Sheet: RBEC (‘000s

USD)

Goods S e rvic e s Tot a l De live ry P roc ure me nt a s % of De live ry# of P O's > 100k# of ACP S ubmissions

Tot a l Goods S e rvic e s

Albania 520 5,767 6,287 8,248 76% 6% 70% 4 8

Armenia 882 3,492 4,374 5,955 73% 15% 59% 2 5

Azerbaijan 6,259 5,296 11,555 13,209 87% 47% 40% 0 0

Belarus 9,515 4,212 13,727 17,336 79% 55% 24% 11 21

Bosnia 3,162 11,932 15,094 19,893 76% 16% 60% 33 34

Bulgaria 799 7,561 8,360 10,681 78% 7% 71% 6 7

Croat ia 978 6,697 7,675 9,427 81% 10% 71% 3 14

Cyprus 179 3,169 3,348 17,498 19% 1% 18% 9 5

Georgia 1,991 4,631 6,622 8,822 75% 23% 52% 1 3

Kazakhst an 966 3,190 4,156 6,527 64% 15% 49% 0 3

Kosovo 744 12,874 13,618 14,894 91% 5% 86% 12 5

Kyrgyst an 4,550 6,302 10,852 16,322 66% 28% 39% 16 8

2222

Procurement Fact Sheet: RBEC (‘000s

USD)

G oods S er v i c es T ot al D el i ver y

# of P O's > 100k

# of AC P S ubmi s s i ons

Tot a l Goods S e rvic e s

Lat via- Republic of 43 1,101 1,144 1,398 82% 3% 79% 0 1

Lit huania- Republic of 87 850 937 1,108 85% 8% 77% 0 0

Macedonia 482 3,616 4,098 5,321 77% 9% 68% 8 4

Moldova 3,422 4,254 7,676 11,647 66% 29% 37% 9 17

Poland 235 5,604 5,839 10,650 55% 2% 53% 16 0

Romania 341 2,502 2,843 6,257 45% 5% 40% 2 6

Russian Federat ion 2,220 9,596 11,816 13,270 89% 17% 72% 1 6

Serbia and Mont enegro 335 1,496 1,831 24,875 7% 1% 6% 0 15

Tajikist an 4,298 9,738 14,036 18,796 75% 23% 52% 0 22

Turkey 1,223 11,589 12,812 21,138 61% 6% 55% 0 6

Turkmenist an 899 892 1,791 2,689 67% 33% 33% 0 1

Ukraine 7,467 11,331 18,798 25,788 73% 29% 44% 0 17

Uzbekist an 3,506 9,174 12,680 15,309 83% 23% 60% 3 6

P r oc ur ement as % of D el i ver y

2323

Atlas Transaction Statistics 2007

Requsition HQ RBA RBAP RBAS RBEC RBLAC Grand TotalTotal Count 1,933 19,259 21,671 6,777 11,996 6,485 68,121Percentage 3% 28% 32% 10% 18% 10% 110%PO HQ RBA RBAP RBAS RBEC RBLAC Grand Total

Total Count 7,630 42,324 36,652 15,319 36,454 31,600 169,979Percentage 4% 25% 22% 9% 21% 19% 100%# of Req /# of PO ( %) 25% 46% 59% 44% 33% 21% 40%Voucher HQ RBA RBAP RBAS RBEC RBLAC Grand Total

Total Count 26,183 243,149 189,562 95,676 182,782 302,202 1,039,554Percentage 3% 23% 18% 9% 18% 29% 100%Vendor HQ RBA RBAP RBAS RBEC RBLAC Grand TotalTotal Count 13,783 139,700 88,708 51,270 106,804 248,036 648,301Percentage 2% 22% 14% 8% 16% 38% 100%Active Vendors 4,907 32,795 15,543 12,861 27,162 45,739 139,007Active Vendor % 36% 23% 18% 25% 25% 18% 21%Buyers HQ RBA RBAP RBAS RBEC RBLAC Grand TotalTotal Count 370 394 260 192 322 306 1,844Percentage 20% 21% 14% 10% 17% 17% 100%

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AUDIT ISSUES

• Delegation framework• List of all contracts that required a waiver of the competition process.• Procurement plan.• Procedures in place for those country offices that did not submit plans. How many

of them submitted these plans?• Code of conduct for all staff in the procurement office.• Evidence of supplier review to prevent trade with terrorist suppliers.• Minutes of meetings of ACP.• Records of all fraud reported on the fraud system as well as processes in place to

address fraud.• Procedures in place to address green procurement.• Controls implemented to prevent splitting of orders.• Post Facto contracts – goods purchased without orders and delivered, Retroactive

– purchases without orders of contracts and the supplier has not delivered the goods/services.

• Results of training of program staff/statistics.• Expenditure reports for HQ (excluding personnel expenses).• Access to ATLAS.

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HQ15%

RBA22%

RBAP20%

RBAS7%

RBEC18%

RBLAC18%

HQ

RBA

RBAP

RBAS

RBEC

RBLAC

95

144130

43

116 114

0

20

40

60

80

100

120

140

160

HQ RBA RBAP RBAS RBEC RBLAC

Certified Procurement Staff

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Confusion of Buying vs. Contracting

• What is “Buying”? What is Purchasing? What is Procurement? What is Contracting?

• When one party is prepared to pay another party for supply of goods or services, then subject to conditions, the party enter into a “contract”.

• If the risks involved are low, then contract can be in the form of PO. However in case of complex or high value contract, one require detailed documentation covering rights and obligations of both parties of the contract.

• Thought procedure for both purchasing and contracting is same.

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Procurement Authority:• The Administrator has delegated oversight and

approval authority to CPO • The CPO delegates the authority to RR,

Directors and Heads of Bureaus for award of contract valued at less than $100,000

• Increase of procurement authority can be delegated by the CPO based on needs and capacity.

• RR and Directors can sub-delegate the authority in writing.

• Oversight mechanism is CAP and ACP.• Accountability

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Procurement Dashboard

http://dashboards.undp.org/procurement_dashboard/index.cfm?cur_group_id=1&cur_cty_id=AFG

http://dashboards.undp.org/procurement_dashboard/index.cfm?cur_group_id=1&cur_cty_id=AFG

2929

Procurement CertificationCO/ Offices Certified Buyers

•PAPP 42

•Bolivia 24

•Panama 22

•PSO 9

•Liberia 9

•Turkmenistan 8

•UNV 8

•BDP 7

•Iran 7

•Mali 7

•Rwanda 7

Total - 937

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Indicators for Delegation:

• Procurement Volume• Procurement Capacity

– Number of certified procurement persons

– Head of Procurement

– Roving Procurement Officers

• Quality of Submissions to CAP/ACP• Effective use of Atlas• Procurement Plan• Audit Rating (Procurement)

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Procurement ChainWrite

SpecificationsTOR and SOW

Evaluate Offers

Prepare SolicitationDocuments

Seek, Clarify and Close

OffersAward Contract

Manage the Contract

Choose a Procurement Method

Identify Needs

Negotiate the Contract

Evaluate the Procurement

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Procurement Chain:

REQ Sourcing (Potential Suppliers) Receipt and Opening

VendorAward Contract/POApproval by CPO Create Vendor

Evaluation of OffersReview By Contracts

Committee

Bidding

33

ICF Control Points

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Requisition Process Flow

Requisition creation:

- In UNDP any Atlas user can create an approved requisition. Therefore, the documentation of the project manager’s approval must take place outside Atlas. This documentation could take different forms depending on the circumstances – for example, the procurement plan attached to the project document or a signed copy of the purchase requisition.

Budget check:

- In UNDP, commitment control is implemented in the PO level. Hence although a pre-encumbrance is created once the budget check is performed, the actual budget line will not be impacted.

Buyers receives duly approved and budget checked requisition through workflow and proceeds with the procurement activities.

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PO Process Flow

PO creation:

-Once all procurement and contracting process are completed in accordance with UNDP regulations and rules buyers will then create a PO in Atlas.

-Enter AM profile information for procurement of goods

-If the vendor does not already exist in the system, users would have to enter the vendor information and submit for approval before creating a PO

PO approval:

- once the PO is completed, it would be routed for the budget owner’s approval

Budget check:

- once the PO is approved by the budget owner, Buyer would need to perform budget check to create encumbrance in the system before dispatching to vendor.

Dispatch PO

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Payment Process Flow

Receipt creation:

-Once the goods or services is received, the requisitioner will then create a receipt in the system.

-Asset Creation:-Once the receipt is created back ground processes will then pick up any transaction which has an AM profile and bring it over to the AM module.

Matching:

-The matching process is scheduled and performed automatically in the backend.-The matching process validates information between PO, receipt and voucher.

Voucher creation:

- Once an invoice is received, the finance users will then create a voucher to process the payment

Budget check:

-In UNDP no additional approval is need for PO-vouchers.

-Users need to perform budget checks to liquidate the encumbrance and create an expense in the commitment control.

Payment

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Specifications for Goods:

• Functional Specification: What?• Performance Specification: How much?• Reference to product standards• Inspection and testing: Pre-shipment

testing• Incidental Services: Supervision during

installation, Training, Operation Manual• Final Acceptance: Criteria for final

acceptance

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Terms of Reference (TOR)

• TOR may be compared to technical specifications for the purchase of goods or works.

• Areas to be covered are:• Objective: What is the anticipated result of services.• Background: What is the history of assignment. Any

constraints.• Scope of Work: What is the consultant expected to do?

Degree of details. Are there any specific decision points during the performance of work?

• Purchases: Are any hardware requirements connected with the assignment? When should such deliveries to the client be made and on what terms?

• Reports: How and when will the report be presented?• Contributions: What is the client going to provide in the

way of facilities, professional support and physical facilities?

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Specifications for Civil Works:

• Introduction: General Description• Scope of Works: List of activities to be performed.• Time Schedule: Starting date and completion date• Detailed Design and Drawing:• Bill of Quantity: Estimated quantity of each item• Site investigation report: Soil conditions, Ground

Conditions.• Specifications and Standards: Set of instructions• Inspection and Testing: Specification of tests.• Commissioning: Final Inspection.

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Tips on writing an effective SOW

• Be clear-use simple, direct language.• Use active, not passive tenses ( The seller shall

conduct the test as opposed to a test should be conducted---, language is the dress of thoughts)

• Spell the buyer’s obligation carefully• Provide a ceiling on the extent of services• Identify all constraints and limitations• Include standards that will make performance

measurement possible and meaningful• In case of goods, focus should be in providing

functional and performance specifications

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Supply Market Analysis

• This is technique used to identify market characteristics for specific goods and services that assist in planning.

• It assists the unit to understand as to how the market operates and where it is heading.

• Is advertising for information good enough?• Market Structure: How many suppliers? How are they

geographically placed?• Horizontal and vertical integration.• Monopoly (cartel like), Oligopoly (2-10), monopolistic

competition and perfect competition.

42

Quality Assurance Systems

• Quality System Standards.

• Product Certification Programme

• Industry Association standards.

• Professional Association Accredidation

• GMP, GDP

• CE/ISO/DIN/BS/ASTM

• Building Code of Construction

43

Engaging and Managing Consultants

• Consultant may be individual or an organization to provide expert advise.

• Characteristics of a Consultant:– Engagement for a fixed period at agreed rate– Does not require day to day supervision.

• Consultancy services, operational consultants-professional or non-professional services

• When a consultant is not a consultant?• Steps: Identify the need, what is required from them?

Select the consultant, Engage and manage the consultant, evaluate the result and record and report

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Procurement Strategy

This is the way forward to implement an overall change programme designed to place procurement process at the heart of UNDP activities so that it is able to contribute effectively to the UNDP’s mission.

This is the foundation stone of strategic procurement.

45

Procurement Strategy: Objectives

To ensure that procurement supports UNDP’s principles. To achieve best value for money on all procured goods,

works and services. To provide a corporate focus to procurement. To detail the way forward on reforming and improving the

procurement function. To encourage long-term thinking and a commitment to

strategic procurement. To reduce the cost of the procurement process and ensure

continuous improvement To give due consideration to environmental concerns

(Green Procurement).

46

Objectives

To ensure that risk is appropriately managed. To promote cooperative arrangements. To promote the development and use of performance

measures. To ensure that procurement is undertaken in accordance

with high professional standards and probity. To develop the scope for doing business electronically (e-

Procurement) To develop management information system To ensure a structured approach to procurement training

and development for staff.

47

Organization

A Center-Led Action Network (CLAN) approach is suited for an organization with widespread activities taking place with a high level of local autonomy. In CLAN, purchasing action stays at the local level but buyers do not act in isolation.

LocalConnection

Center

48

Procurement Blueprint: Building Blocks

The key factors which form a procurement strategy include

Contribution and Influence

Oversight Tools and Policy

Organization

Relationships

Systems

Staffing and Training

High Performance Standards

Promote best procurement practices/mitigate risks

CLAN approach; High level of networking

Vendor management (LTAs, UNGM, Supply Positioning)

Promote e-procurement

High Quality Professionals

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Relationships• Procurement can no longer be considered

an isolated function, working at arm’s length

• it focuses on: - the relationship with suppliers- developing Long Term Agreements- the United Nations Global Market (UNGM)- Procurement Marketing (presenting UNDP as preferred customer)

50

Project Procurement: Key Activities

Project Procurement Activities

Planning ProcurementPerformance

(Contract Administration)

51

Public Procurement Life Cycle

Procurement Plan

Procurement Implementation

Procurement Evaluation

Procurement Formalization

5252

Procurement Plan• Gateway to strategic approach• Two levels of Procurement Plan

– Annual Procurement Plan– Planning for Significant Purchases

• Addresses all key aspects of the function• Align the outcomes with strategic plans• Steps required for developing procurement plan

– Procurement profile (Past & Projected Procurement)– Supply positioning (Level of Risk Associated with each category)– Key supply markets (Market Research)– Impact of Purchasing activities on its key supply markets– Assessment of Procurement structure & capacity

• Procurement Plans are mandatory for Country Offices seeking higher delegation of Procurement Authority

In short, procurement planning is about getting smart about procurement by focusing on strategic management

53

Procurement Planning:

• This should take place well before taking any purchasing action.

• It should not be limited to specific requisition but part of positioning the procurement unit to best advantage

• The first task is to establish the significance to the buying organization of the purchased items and then to gain an understanding of the market conditions.

• This require the use of following three techniques– Supply Positioning

– Supplier Preferences

– Vulnerability management

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Procurement Plan:

• A procurement plan describes which product will be acquired from vendor as well as when and how they will be acquired. What, When, How

• Template– Items to be procured– Evaluation criteria– Procurement Method

– Schedule/ Date of delivery

– Ownership rights of the source code– Ownership rights of the production

• One of the major initiative to improve procurement system

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Procurement PlanningProcurement planning, prior to any action taken in Atlas, is essential for the timely solicitation of quotations, bids or proposals; the award of contracts; and the delivery of inputs. Procurement planning entails more than the selection of a procurement method for various goods, works and services and when to schedule activities, but combines the legal and institutional frameworks in which procurement must be carried out. Business Units should consider the following:

Types of goods, works or services required;Method of procurement;potential sources;Estimated costs;Source of funds;

Requisitions;Delivery time and place;Evaluation criteria;Justification for non-competitive procurement; andReview of CAP and ACP.

56

Procurement Planning

WHAT?WHEN?

HOW?

57

False Assumptions

• Any one can Buy• Price is always related to cost• Price is always related to volume• Buyer power increases with the size of the

organization• Price list are set in stone• Negotiations downwards endangers service and

quality• Sealed bidding is the most secure method

58

Supply Positioning (Portfolio Analysis):

Supply Positioning provides a mechanism for discriminating between the components of the total purchasing requirements whether goods, works or services, and a tool for developing specific strategies to meet the needs of the organization with respect to each group of purchases.

59

Supply Positioning

Few major sourcesFew alternativesQ/S/R criticalLow value

Few sources/monopolyHigh costQ/S/R criticalNo alternatives

Many sourcesMany alternativesLow value

Many sourcesMany alternativesHigh cost

STRATEGIC SECURITY STRATEGIC CRITICAL

TACTICAL ACQUISITION TACTICAL PROFIT

60

Purchasing Goals

Ensure suppliesCost insensitivityFrequent review

Ensure suppliesClose price managementContinuous review

AutomateDelegateGive low attention

Profit contributionTake risksSeek opportunitiesWheel & deal



61

Purchasing Action Scenarios

Long term contractsBuffer stocksPrice indexationFind alternativesContingency planning

Medium or long-term contractSupplier informationSupplier developmentPrice managementContinuous review

Simple purchasing proceduresSystems contractingStockless purchaseCash purchases

Short-term contractsActive sourcingMarket knowledgePrice determination



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Long Term Arrangement: – LTA offer a number of advantages:– they offer the value for money advantages of

centralized procurement without the commonly associated level of bureaucracy

– a single tendering exercise over the life of the arrangement reduces administrative effort and cost for the Department

– the initial tendering process will have identified competitive suppliers, who should then offer more competitive prices on the basis of the expected value of business

– quality assurance and legal requirements will have been dealt with at the outset

– Completion Report

63

Long Term Arrangements:

– call-offs are covered by UNDP Standard Terms and Conditions combined with special terms and conditions appropriate to the items being procured and will, in general, provide better protection than individual small purchases under the supplier's standard conditions

– the agreed range of items or services should be at short notice thus reducing or avoiding stock holding for goods and reducing down-time on equipment maintenance and repairs

– the supplier benefits in terms of planning stock levels and continuity of supply

– a mutually beneficial longer-term working relationship can be established with suppliers

– Call-off create legal obligation and not LTA

64

Scope of ACP ReviewObjective: Mitigate Risk

•Procurement Process: Transparency, Method

•Specification/TOR/Quality

•Availability of Funds

•Value for Money/Cost Details/Consulting Fee

•Evaluation Modality

•Performance Security/Warranty

•Shipping/Insurance

•Licensing/Copyrights

•Use of LTA

•Type of Contract

•Payment Terms

•Environmental Impact

65

Regional Distribution of ACP Cases

(By Number)

* Total 1052 cases

HQ12%

RBA20%

RBAP15%RBAS

10%

RBEC21%

RBLAC22%

66

Regional Distribution of ACP Cases (By Amount)

HQ21%

RBA28%

RBAP15%

RBAS9%

RBLAC17%

RBEC10%

67

% of Cases Approved after First Round of Review

78%

67% 66%57%

78%87%

80%

0%10%20%30%40%50%60%70%80%90%

100%

HQ RBA RBAP RBAS RBEC RBLAC OTHER(PAPP)

* Overall 73 %

68

ACP Reports - summary

* http:// acp-reports.undp.org


69

Common Reasons for Rejection Failure to undertake a competitive exercise TOR or Statement of Works or Specifications

incomplete TOR or Statement of Works or Specifications

too restrictive or biased Incorrect evaluation methodology or criteria Failure to submit requested documentation for

ACP review Conflict of interest Value for money not obtained Incorrect procurement method used Incorrect shipping terms cited Cost Matrix not provided No information about the software, as to

number of licenses, who will maintain etc.

70

Action Plan• Translation of all documents to Spanish• Implementation of e-Procurement• Use of Reverse Auction• Ensure the implementation of Specification Templates• Implementation of CAP Online• More interaction among procurement practitioners on the region• Training of CAP and RACP members• Increased certification• Develop Long Term Arrangements• Work closely with Government to develop LTAs.• Use each other country office if others are better in some field of

procurement.• Strengthen Contract management • Profiling of office in line with practice areas• Requisition is a must.

71

Oversight Tools:

• Review by CAP & ACP

• Review of CAP reports

• Procurement Audit

• Documentation submitted for increased procurement authority

• Roving Procurement Officers

72

Procurement Oversight:

• Key purpose is to mitigate risks

• Compliance with FRR and Procurement Manual• Scope of oversight covers mainly following

– Requirements/SOW/TOR/Specifications– Quality Requirements

– Procurement Process: Transparency, Method, Evaluation Criteria, Conflict of interest if any

– Payment Schedules– Shipping Terms and insurance– IP, Type of Contract, Availability of funds, CAP report

73










•Use of LTA

•Type of Contract

•Payment Terms


74










•Use of LTA

•Type of Contract

•Payment Terms


75

Common Reasons for Rejection Failure to undertake a competitive exercise TOR or Statement of Works or Specifications

incomplete TOR or Statement of Works or Specifications

too restrictive or biased Incorrect evaluation methodology or criteria Failure to submit requested documentation for

ACP review Conflict of interest Value for money not obtained Incorrect procurement method used Incorrect shipping terms cited Cost Matrix not provided No information about the software, as to

number of licenses, who will maintain etc.

76

Supplier Sourcing: Best Practice

• Decide:

• Select:

• Monitor:

• Supply Intelligence: Researching suppliers is time consuming job. D&B has largest database. It has 100 millions suppliers of the world. D&B rating

77

Procurement Methods

• Request for Quotation (RFQ) most flexible and least formal contract amount exceeds USD $2,500 but less than USD $100,000.

• Invitation to Bid (ITB) normally used when entity is not required to propose technical approaches to a

project activity (i.e., goods and civil works) contract amount is USD $100,000 or more.

• Request for Proposal (RFP) used in the procurement of complex goods (e.g., functional specifications cannot

be expressed) and services recommended for all contracts exceeding USD $100,000.

• Direct Contracting value of procurement is less than USD $2,500 there is no competitive marketplace for the requirement There is a Long Term Agreement (LTA) there is genuine exigency for the requirement.

Purchasing Card

78

Ten Commandments of Bidding

• Suitable Package• Early Warning• Non-discrimination• Accessibility• Neutrality• Formality• Confidentiality• Consistency• Objectivity• No Negotiation before award

79

Purchasing a service:

• Services are more difficult to evaluate than goods. Goods have objective standards

• Supplier of services are often reluctant to provide benchmark

• Excellent services are easy to monitor but mediocre or poor services are difficult to evaluate.

• Goods can be returned whereas services cannot• Poor quality services may continue undetected and

cause greater problems

• Because of above differences the reputation and the experience of supplier is more important

• Key purchasing criteria: Reputation, References, Experience, Current Clients, Equipment, price etc.

80

Purchasing Services:• Many services such as secretarial and cleaning are often

bought as generics. Other services such as application software development , advertising are bought as professional.

• Purchasing is not involved fully in procurement of services

• Word of mouth is the one of the key ways in which buyers of services exchange information.

• There are five roles, Users, Buyers, Influencers, Deciders, gatekeepers

• Market Research, pre-qualification of suppliers

• Interviewing the companies and asking them to make presentation for better clarification before technical evaluation.

81

Why an RFP?

• In competitive contracting, there are two methods : ITB or a RFP.

• ITB is used when goods or service is well defined and can be specified in detail. Selection solely on the basis of cost.

• RFP is a negotiated procurement process and provides flexibility to the contractor and the company.

82

Designing an Effective RFP:

“Never tell people how to do

things. Tell them what you want

to achieve and they will surprise

you with their Ingenuity”

83

RFP: Introduction

• Tool to promote competition for procurement of services.• A vehicle that allows both buyer and supplier to establish

a dialogue and to work from same set of rules.• RFP should encourage creative thinking by suppliers• A successful RFP process require that it has clear

technical requirements, project budget, implementation and project management details.

• Use RFI if you wish to validate technology and requirements.

• If you don’t know where you are going, any road will get you there.

• Allow time for an independent review of the RFP.• Only qualified suppliers should participate in the RFP

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Basic Elements of an RFP:

• Statement of Purpose: the nature of the services to be provided and the overall objectives of the contract.

• Background Information: Overview of the program, statistics, existing facilities, an honest accounting of current problems and strengths.

• Service Specification: Sets out in specific and measurable terms the services required,

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How they are to be delivered and the duration they are required.

• Performance Standards: Minimum performance standards and method of monitoring

• Instructions to the Offerors

• General Terms and Conditions

• Special Terms and Conditions

• Evaluation and award process

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How they are to be delivered and the duration they are required.

• Performance Standards: Minimum performance standards and method of monitoring

• Instructions to the Offerors

• General Terms and Conditions

• Special Terms and Conditions

• Evaluation and award process

87

Anatomy of an RFP:

• Project overview and administrative information• Technical Requirements (Requirements are the

heart of this)• Management Requirements.(Project Plan)• Supplier Qualifications and references• Pricing Section• Contracts and licenses• Appendices

88

Value Tree:

• Overall Value– Technical Factors

• Reliability

• Quality

– Management Factors• Personnel (Education, Performance, Exp.)

– Price Factors• Cost and Fee

• Realism• Reasonableness

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Evaluation Factors:

• Key Considerations: Management, Technical and Financial

• Analysis: – What things should be evaluated– What are their attributes– Which attributes are relevent– What is their relative importance

Best Value: Value of a proposal is the sum of the weighted values of the applicable evaluation factors for award.

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BEST PRACTICES: RFP

• Pre-proposal conference.• RFI (If technical requirements are not

clear)• Product Demonstration particularly for

software• References and site visits• Word “must” is used to designate the

mandatory requirements. • Debriefing the unsuccessful suppliers

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Best Practices: RFP

• A Requirement states a need and is measurable.• Requirements must be meaningful• Requirements must not include the solution• Requirements shall not be combined that may restrict

competition. • Pricing should be broken down into individual

components and tasks.• “ Shall” indicates a requirement and hence no exception.

“Will” is used to denote the statements of intent. “Should” is used to describe project goals

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Best Value for Money:

To get the best value for money, you must consider costs that the buyer will incur in addition to the Offeror’s price, including:

• Cost to administer the contract

• Life-cycle cost of the product

• Quality of the product

• Past performance of the supplier

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Evaluation Team: RFP

• Evaluation team shall be of 3-5 persons and a Chairperson

• Evaluation team is normally the one who wrote RFP. The specialists may be used to evaluate particular section.

• Attention to details to grasp the difference between proposals

• Should not be handled as a consensus method.

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RFP: Decisional Rules

• Lowest Priced technically acceptable– Technical factors are used to qualify offerors– An offer is either acceptable or not– Price is the only factor for decision

• Best Value:– Define the factors that contribute to value– Relative Importance of each– How to measure the value of individual factor

performances

95

Contracting Do’s & Don’ts

• SOW

– Incorporate the SOW as an addendum– It should state expectation in terms of quality,

performance, delivery and so on– This is accurate representation of deliverables

• Keep it Simple: Should stay away from attempts to draft legalese. Leave it to legal department

• Post Contract Processes

• Online Contracting– Take advantage of online contracting for low value

procurement– Don’t forget to check T&C

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Global Fund Procurement:• Procurement forms nearly 80% of the project amount.• Focus is on HIV/AIDS, Malaria and TB• UNDP is involved in 28 countries as PR and for support services in

5 countries• Total project amount is nearly $650 m but annual delivery is nearly

$200 m. • OLPS has one full time Procurement Advisor working very closely

with the country offices and major suppliers. • Major suppliers are IDA, Mission Pharma, CIPLA, UNICEF, UNFPA,

IAPSO etc. UNDP has LTA with them.• OLPS Procurement Advisor is focusing on assisting the country

office to improve delivery, help them in transferring knowledge to the counterpart, help them build supply chain.

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Purchasing Card:

• Tool for procurement of low value contracts i.e. less than $2,500.

• Aims to reduce petty cash and number of payment transactions.

• Monthly limit set at $10,000

• Can’t be used for procurement of assets.

• Facilitate P2P.

• No transaction fee

• Payment cycle 30 days.

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Execution Modality:

• DEX: Under this we treat all vendors and NGOS as contractors

• NEX: Ensure that procurement rules complies with the best international practices.

• Country Office Support to NEX. (Follow UNDP Guidelines)

• NGO Execution

• UN Agency Execution

– Implementer-

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Asset Management:

• What is asset?• Types of assets: Capital and non-capital• Profiles of assets• Who can add/ retire assets?• Theft and loss of assets• Tracking of assets• Assets for management and development

project• Major concerns of external auditors• Disposal: Clearance by CAP/ACP

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Contracting Do’s & Don’ts:

• Risk Assessment

– Be aware that each contract has a finite amount of risks that is acceptable

– Focus should be shift as much risk to supplier – Don’t use the supplier terms and conditions

• Contract Methodology

– Determine the contract type that mitigates risks

– Don’t overlook the importance of TOR• Contract Execution

– Include your T&C in RFQ, ITB & RFP– Have the supplier sign and return the RFP as a pre-

requisite for being awarded business.

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Practical Tips:

• Procurement must be framed with clear and accurate clients requirements and appropriate evaluation process.

• If there is one thing you have to get right, it is evaluation methodology. Once its is put out, you have crossed the rubicon.

• Purchasers must be scrupulous in ensuring fairness of the process, even if it means issuing an addendum or clarification to all vendors.

• Bid closing time is the closing time-being late means automatic disqualification.

• Vendor must be legal and viable business entity

• Evaluation team should comprise of multidepartment team –no conflict of interest

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Practical Tips:

• Hard work at the start pays off for both buyer and seller• While developing specifications, determine if the requirement is a

mandatory requirement i.e. must meet for consideration of offer.• Benchmark the each specific requirement. Suppose you give 10

marks to a point, what benchmark the vendor will have to meet.• Purchaser should act as a non-voting member to give guidance on

procedural matters.• Purchaser will invite end users and other knowledgeable persons to

participate• Evaluation panel should comprise of either 3 or 5 members.• Best value concept (Combined Scoring Concept)

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Contracting Modality:

• 100, 200 and 300 series Contracts

• Service Contracts (SC)

• SSA

• Reimbursable Loan Agreement (RLA)• Non-Reimbursable Loan Agreement

• Professional Services Contract

• Institutional Services Contract

• Long Term Arrangement (LTA)

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Contract Types:

• Fixed Price Contract (Lump Sum)

– Requirements are well defined• Time and Materials Contract ( Fixed Unit Price)

– Major cost elements are known but quantities not defined, Ceiling Price, per-hour labor rate, terms for reimbursing direct material costs

• Percentage Contract

• Cost Reimbursement

– Requirements are too vague – Ceiling Price

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Selection of Contract Types

Time & Materials

Project Life Cycle

RequirementsP

rocur ement R

isks

Techno logical Challe nge

Fixed Price

Cost

(Implementation) (Conceptual)

(Specific) (Vague)

(High)

(Low)

(Low)

(High)

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Performance Security• Required to ensure compliance with contract requirements• Buyer require some form of performance guarantee• Performance Bond: Irrevocable and unconditional type. A

performance bond is issued by a surety or bonding company. Legal terms of bond are more complicated but have the same effect as a bank guarantee.

• Letter of Credit: A confirmed, Irrevocable standby letter of credit may be used as an alternative.

• Performance security are limited to percentage of the value of the contract.

• Performance Security should not be the only remedies for breach• The remedies may be cancellation, Liquidated Damages ( To cover

late delivery)• Retention Clause

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Shipping Terms: INCOTERMS

• “ E” Term: EXW

• “F” Terms: FCA, FAS (Free alongside Ship), FOB

• “C” Terms: CIF, CFR, CIP (Carriage and insurance Paid To), CPT

• “D” Terms: DAF (Delivered at Frontier), DEF (Delivered Ex Ship), DEQ (Delivered Ex Quay, DDU, DDP

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Bill of Lading:• This can be likened to transferable cloakroom tickets• They acknowledge receipt of goods in a certain conditions• This is a document of title• A clean bill of lading states that goods are received in good

conditions• The document covering the carriage of goods by sea is called B/L• It covers:

– Beneficiary– Port of shipment and destination– Marking and number of boxes– Weight and dimensions– Whether freight is pre-paid“Receiving of Goods-Received but contents unchecked”

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Third Party Inspection

• Carried out to ensure that goods conform to standards and specifications of the purchase contract.

• Inspection can be carried out during manufacture, at the pre-shipment and post shipment stage and/or after arrival/installation at the site.

• Cost of inspection varies from 1-2% depending on scope• Legal liability is very limited• Inspection before shipment is suitable for

– Where goods are procured from a distant source– Where transportation costs are significant factor– Where the return of rejected goods would be impracticable.– Where inspection at the point of destination would be

unsatisfactory.

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Freight Forwarding

• Shipping term determine the involvement of buyer in arranging transportation, and their port and custom clearance.

• To arrange transportation, it is necessary to know:– What modes of transport techniques are available– What services are available and are appropriate– What are the current and prospective freight rates– What documentation is involved– What are the risks and to what extent carriers will

indemnify for loss and under what circumstances.• Buyers often this knowledge and turn to freight

forwarders• They have knowledge of port, custom rules• They work on commission basis. They also receive

commission from the carrier.

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Cargo Insurance:

• Protection against financial losses resulting from damages, fire, war, strikes, pilferage and theft, breakage, non-receipt of entire or part of consignment and damage suffered by goods during transit and declared general average.

• Coverage should cover cost of goods+ Freight+ 10% to cover admin cost.

• Duration of coverage (Pre-shipment and post shipment)• Insurance during storage• Blanket Policy of UNDP ( Rate 0.24%)• Claim Procedure• Does it cover when goods are in transit over land or on

its own wheel

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Cargo Insurance:

• Institute Cargo Clauses: A, B and C Type• CIF/CIP only require C cover without war and

strikes• C Type does not cover Drop Damage, Loss

Overboard.• A Type covers all risks except war and strikes• C Type cover GA, Fire, Explosion, Perils of the

sea, overturning• Damage due to Improper packing and Delay are

not covered by any type.

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Risk Management

• Risk is part of the procurement environment

• It involves systematic identification, analysis, treatment and where appropriate accepting the risks

• Agreements to limit a supplier’s liability to UNDP and third party (Indemnity. Guarantee, warranty)

114

Write Specifications

TOR and SOW

Evaluate Offers

Risk ManagementPrepare

SolicitationDocuments

Seek, Clarify and Close

OffersAward Contract

Manage the Contract

Choose a Procurement Method

Identify Needs

Negotiate the Contract Evaluate the Procurement

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Risk Management:

• Key to effective and efficient delivery

• This should be integrated in day to day management• More important when we are moving from “arms length”

to “partnering”• Typical Risk factors: Buyer risk factors, Supplier Risk

Factors, Contractual relationship risk factors, External risk factors

• Tools and techniques for managing risks: (Risks, Likely consequences, what to do)

– Identifying the need

– Developing the specifications– Contract documents

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Risk Management:

• Selecting a procurement method

• Seeking, clarifying and closing offers• Identifying the preferred supplier• Evaluating Offers• Negotiating the contract• Managing the contract• Evaluating the procurement process• Disposals• Impact of each of the above on cost, timetable,

user acceptability, integrity and competence

117

Risk Cost Delivery Ethics

Overstatement of Needs.

V V N

Understatement of Needs.

V V N

Insufficient Funding. V V N

Impractical Timeframe for Supply.

V V N

No Available Solution.

V V N

Fraud. V V M

Risk: Identifying Needs

118

Risk: Writing Requisitions

Areas of Consequence


Narrow/ Biased Specifications

V V M

Definition of Inappropriate Product.

V V N

119

Risk: Solicitation DocumentsRisk Cost Delivery Ethics

Terms and Conditions Unacceptable to Suppliers.

V V V

Uncertainty amongst Contracts due to Conditions of Contract.

V V V

Provision of Inadequate Information.

V V V

Biased Requirements. V V V

Inadequate Requirements. V V V

120


Failure to Identify Potential Sources.

M V V

Lack of Market Research.

M V V

Supplier Monopoly. M V V

Selection of Inappropriate Method.

M V V

Risk: Procurement Method

121


Failure to Adequately Address Suppliers’ Inquiries.

N M V

Actual or Perceived Favoritism in Providing Information.

N M V

Breach of Confidentiality.

N M V

Risk: Seek, Clarify and Close Offers

122


Failure to Observe Effective Evaluation Procedures.

V V V

Breach of Confidentiality.

V V V

Failure of Offers to meet Needs.

V V V

Failure of Evaluation to Identify a Clear Winner.

V V V

Risk: Evaluation of Offers

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Selection of Inappropriate Supplier.

V V V

Selection on Inappropriate Product.

V V V

Insufficient Number of Responses.

V V V

No Response from Known High-Quality Suppliers.

V V V

Risk: Award of Contract

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Unmatched Expectations of Buyer and Supplier.

V V V

Deadlock on Agreement. V V V

Undue Concession to Suppliers. V V V

Failure to Accommodate Standard Conditions.

V V V

Grossly Unfair or Onerous Requirements.

V V V

Failure to Reflect the Terms Offered and Agreed in the Contract.

V V V

Inadvertently Creating a Contract without Proper Approvals.

V V V

Risk: Negotiate the Contract

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Failure to Assess Supplier’s Performance.

N N V

Failure to Assess the Process.

N N V

Loss or Damage of Goods in Transit.

N N V

Fraud. N N V

Risk: Evaluate the Procurement

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Variations in Price and Currency Fluctuation.

V V V

Unwillingness of Supplier to Accept the Contract.

V V V

Failure of Either Party to Fulfill the Contract.

V V V

Inadequate Administration of Contract.

V V V

Acceptance Before Completion. V V V

Increase in Scope of Work. V V V

Intellectual Property. V V V

Third Party Liability.

Risk: Managing the Contract

127

Ethics, Probity & Accountability

• Public funds and hence require more than usual public scrutiny.

• Probity means integrity, uprightness and honesty.• Transparency and accountability gives confidence to

suppliers to participate.• Ethics are moral values that guide the procurement

persons in their tasks.• Ethical behavior cover the concept of honesty, integrity,

probity, fairness. Avoiding conflict of interest etc.• Check list:

– Is the action legal?– Can I justify it?– What would happen if action is publicly scrutinized?– Do I think that it is right thing to do?

128

Procurement Accountability:• Definition: The accountability in procurement

means that staff is responsible for actions and decisions that they take in relation to procurement and for the resulting outcomes. The staff is accountable through established lines of accountability.

• How does accountability help? The accountability encourages the efficient, effective and ethical use of the organizational resources. This is the main watchword for UNDP procurement process.

• Fundamental elements of Accountability:

129

Accountability:

– Procurement Policy:

– Documentation: It is important and provides record of procurement activities. This need to be strengthened.

– Disclosure: Annual procurement plan must be published to provide confidence.

– Notification: The revised procurement plan calls for publishing all major procurement notices and award of the contract. This is being followed to a limited scale.

– Dealing with complaints: The procurement protest procedures

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Why focus on Ethics?

• Increased business volume=>higher pressure

• Added Scrutiny (Due to recent cases of misconduct)

• A breach of ethics affects credibility, which is difficult to recuperate.

• Impropriety can harm the reputation of the organization

131

Definition of Ethics

• Ethics is the discipline related to the issue of right and wrong, moral duty and obligation, moral principles and values, and to moral character.

• Ethics: Greek word “ethos’…implies character and customary behaviour.

• Morality: Latin word “mores’…refers to social customs.

132

Common Ethical Risks

• Conflict of interest• Fraud• Corruption• Coercion• Collusion

– Ethics encourages responsible conduct, while compliance prevent misconduct.

– Ethics is self imposed while compliance is externally imposed

– Ethics is personal responsibility while moral compliance is legally driven

133

Procurement Ethics:

• Conflict of interest: A conflict of interest may exist when a staff is involved in an activity or has a personal interest that might interfere the objectivity in performing the function. (Code to guide relationship) It can arise:– When an staff takes outside employment or has financial interest– When personal relationship with staff of other business entity

could influence the decision.• Gifts and Gratuities:

– May not accept gifts or gratuities from any supplier for themselves or for their family

– May not take advantage of their position to seek discounts on procurement for personal use. This is construed as a gratuity

– May accept advertising novelties.

134

Procurement Ethics:

• Integrity:

– Open and effective competition– Environmental sustainability

• Ethics vs. Compliance ( Ethics encourages responsible conduct and compliance prevent misconduct; Ethics is self imposed)

• Code of conduct (Established in the new CAP User Guidelines)

• Ethical belief is a personal choice, however ethical conduct can be mandated by an organization.

• Ethics are moral boundary or values within we work

135

Procurement Ethics:

• Integrity:

– Open and effective competition– Environmental sustainability

• Ethics vs. Compliance ( Ethics encourages responsible conduct and compliance prevent misconduct; Ethics is self imposed)

• Code of conduct (Established in the new CAP User Guidelines)

• Ethical belief is a personal choice, however ethical conduct can be mandated by an organization.

• Ethics are moral boundary or values within we work

136

Fraud vs. Corruption

• Fraud is defined as “dishonestly obtaining a benefit by deception or other means” and includes both tangible and intangible benefits.

• Fraud means the intentional , false representation or concealment of facts for the purpose of inducing another.

• Corruption means the practice of offering, giving, receiving directly or indirectly of value to influence the action of procurement staff.

137

Contract Management

• It is post-award phase– Compliance with contract requirements

• Time and quality control• Dealing with performance problems• Management of bid/performance security

– Measurement of performance and reporting• Certification of reporting• Contract Close –out

– Management of contract changes• Variation orders• Contract amendments

– Resolution of claims and disputes• Settlement of claims• Contract termination

138

Contract Administration:• Def.: Those activities and actions taken by the buyer and

supplier during the time from contract award to contract closeout. They may include follow up, expediting and supplier management function.

• Issues to be addressed: Inspection procedures, penalties for non-conformance, Payments, rejection, termination, debriefing, procurement protests, PO closing in Atlas, claims for losses, consultants charging billable hours without measurement of progress, new person being assigned, substitution of products etc.

• Step One: Ensure that there is a designated contract administrator

• Step 2: Define the duties of the contract administrator and assist in developing contract administration plan

139

Contract Administration:

• Step 3: Perform random checks. Non-compliant situations must be identified.

• Step 4: Ensure good communication

• Step5: Participate in the contract renewal or rebid decision. Enter the vendor rating and close the PO in Atlas.

140










•Use of LTA

•Type of Contracts

•Payment Terms

141

Advisory Committee on Procurement

• Established by CPO to oversee major contracts

• Review contracts which involve commitments to a supplier with respect to a single requisition or series of req in a calendar year valued at $100,000 or more

• Proposed contracts which generate income of $10,000• Any amendment of a contract previously reviewed by

ACP where the contract amendment or a series of amendments either increases the total amount by 20% or $100,000 whichever is less.

• Any amendment not previously submitted to the ACP where the revised total contract amount exceeds $100,000.

142

ACP:

• Proposed contract that leads to series of contracts amounting more than $100,000.

• Disposal, Write-off or transfer of goods with asset value $30,000 or more

• All vehicle accidents or losses when gross negligence is the cause.

• Procurement of services related to individual consultants with contract amount exceeding $100,000.

143

ACP Submissions 05

11%

20%

20%12%

15%

22%

HQ

A

AP

AS

EC

LACHQ A AP AS EC LAC Total99 175 181 107 132 198 89240 m 154 m 158 m 119 m 32 m 96 m 599 m

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Common Reasons for Rejection Failure to undertake a competitive exercise Impermissible justification for waiver TOR or Statement of Works or Specifications

incomplete TOR or Statement of Works or Specifications too

restrictive or biased Incorrect evaluation methodology or criteria Failure to submit requested documentation for ACP

review Conflict of interest Value for money not obtained Incorrect procurement method used Incorrect shipping terms cited

145

Key Observations:

• SOW/TOR not clear, Biased/ Inadequate specification or specific requirements or brand names

• Evaluation Criteria does not cover all the deliverables and do not provide sufficient weight as per their importance

• Wrong Procurement Methodology• Use of NGOs for procurement• Advance Payment on the very high side

• Process too mechanical, Market research missing

• Insufficient number of responses• Evaluation of Offers not done well

146

Oversight at a Glance:

• Number of cases from RBLAC: 265• Number of cases from RBAP: 236• Number of cases from RBA: 205• Number of cases from RBEC: 75• Number of cases from RBAS: 89• Number of cases from HQ units: 138• Number of cases withheld for approval: 31%• Number of cases if “subject to” is included:

Nearly 55%

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Procurement certification

• Course has been designed in-house by OLPS• Addresses basic procurement policy and standard Atlas

Procedures.• Objective: 1.Enhance learners’ comprehension of UNDP

procurement policy and processes 2. Increase the level of competence utilizing the Atlas Applications.

• Target group is “Buyer”• Online programme ( 6 hrs for online course and 2 hours for the

exam.)• Course managed by LRC• Status:

– Number of people enrolled:731– Number of people who have passed simulated assessment: 345 – Number who took official assessment: 321– Number who passed: 220

148

General Rating

Procurement Volume 30,000,000Purchase Order Raised Count 1345

Total value 20,000,000non-PO Vouchers above 2,500 (USD) Count 400

Total value 980,000NEX Procurement 20,000,000DEX Procurement 10,000,000Agency Procurement 0

Count 6Total value 180,000Count 3Total value 300,000

+ Overall 35%

+ Management of Direct Payment (non-PO) 6 days+ Management of Payment (PO) 14 days+ Lead Time 10/7

Submission of Plan YesApproval of Plan Yes

Quality of Submissions + Total 6Delegated Procurement authority 50,000 (USD)POs issues between 100,000 and Delegated Authority

Count 3

Total value 170,000POs issued above delegated authority Count 6

Total value 600,000

Number of staff with buyer profile 8Number of staff Certified 5

Procurement Volume

High value transactions (PO)30,000 ~100,000

Advisory Committee on Procurement

Procurement Capacity

> 100,000

Low value transactions (PO)

Process Time

Procurement Plan

Procurement Dashboard Indicators

149

Procurement Process:

• Planning is not an analysis but identifying the activities and direction of activities

• Formalization phase determine the sourcing approach, evaluation criteria and solicitation documents. It formalizes the requirement based on budget

• Implementation covers all functions that pertain to the acquisition, including description of requirements, selection and solicitation of sources, preparation and award of contracts, and all phases of contract administration. It may also include logistics.

• Final phase consists of audit, evaluation and feedback

150

Outline of SOW/TOR:

• Background

• Outputs/ deliverables desired

• Inputs to be provided

• Schedule of completion

• Standards by which to measure performanceOther Issues:

1) Use active Verbs (2) Avoid “Should” or”May

(3) Use “Shall” for contractor and “will” for UNDP

151

Procurement and the Law:

• Why Have conditions of contract: Goodwill

• Formation of Contract– Offer, Acceptance and Consideration ( battle of

Forms)– Oral Contract

• Contract Performance ( Fulfillment of according to its terms)

– Delay in supplier’s performance– Liquidated Damages– Termination of Contract– Force Majeure (French Term: Unexpected event)

• Rights and Obligations of buyer and seller

152

Procurement & the Law:

• Securing Contract Performance– Warranties– Performance Guarantees– Inspection

• Termination and Remedies:

• Settlement of Disputes;– Negotiation– Arbitration (UNCITRAL)– Litigation (Judicial Contest)

153

Procurement & Law:• How is contract discharged?

– By performance, Substituted contract, Time, Termination, Bankrupcy

• Intellectual Property• Letter of Intent;

• Payment Terms; Performance Security

• Remedies for lateness or failure to perform to specification– Liquidated Damages– Time is of the Essence( Time of performance shall be

essence of this contract) Any delay converts into breach of contract

– Force Majeure

154

Procurement Certification:

• The course entails 6 hours of learning

• Passing marks: 80% Minimum

• Test comprises of 100 questions

• Programme will be managed by LRC through LMS

• Site is http://learning.undp.org

155

E-Procurement Solution Overview:

• Electronic Attachment (TOR, Specifications, Evaluation Matrix etc.)

• Catalogue Procurement (Direct Connect and local Catalogue): B2B

• Access to external users (NEX and NGOs)• Cover procurement through Purchasing Card: P2P• Link to UN WEBBUY as a Direct Connect vendor

• Business Services Procurement ( Concept of Commoditizing services- It was alien to many)

• Move from tactical to strategic function• We live in “e” world• Track the procurement cycle

156

157

158

SSA Guidelines

• Tool to hire individual contractors• SSA shall not be used for staff function.• As for LTA with companies, individual contractor can be

hired up to 3 years( Max.)• Sourcing of individual contractor will be based on

competitive process.• Selection is based on firstly evaluating technically and

then financially.• Payment is based on number of days/ hours worked. • Procurement process and not a HR process.• SSA contractor is covered for Appendix D in defined

terms • There are indicators to decide the consulting fee.

159

Procuring Services:

• Contract Companies:– When companies are contracted, they provide

individuals as agreed.– The company is responsible fpr performance– There are defined deliverables and the time frame– There is defined price

• Contract Individuals: – UNDP takes the responsibility of completion.– There are defined deliverables.– Contractor is paid based on T&M basis. – Should not be used for staff functions

160

Individual Contractors:

• When to Hire: Assignments that don’t require teams of personnel and no professional support of the office is required. In addition the experience and qualifications of the individual are of paramount importance.

• When coordination, administration or collective responsibility become difficult due to high number, it is advisable to go for contracting the firm.

• The overall responsibility is with the hiring organization i.e.UNDP.

161

Typical Country Office:

• Maldives• Initial Scenario:

– Number of staff: 11– Annual Programme Delivery : $2.5 Millions

• Scenario after Tsunami: – Programme Delivery: $50 millions (Time Bound)– Types of programmes (Livelihoods, Port

reconstruction, environment, Malaria eradication..)

• Types of Contracts to be used:

162

What is e-Procurement?

• e-Procurement is trade of goods and services through the internet using a secured ecommerce platform. It brings together buyers and suppliers electronically, enabling both parties to reduce costs through improved processes.

163

Requisition Purchase Order

Accounts Payable

Current Procurement Process

ATLAS eProcurement Module

Number of Vendors – 406,065Number of Requisitions – 34,907Number of Purchase Orders – 135,000Total Procurement – 1,350 million (USD)Total Expenses – 2.8 billion (USD)Total PO Expense – 950 million (USD)Procurement Analysis by Category – 25% could be procured through LTA.

164

Existing Limitation:

• Requisition is not very intuitive and user friendly. • Detailed specifications and TOR can’t be

attached at the REQ level.• It does not encourage the use of catalogues

developed based on competitive process.• Procurement through purchasing card is not part

of the existing PO module.• It is difficult to assess the status of the REQ.

165

How will I purchase?• After being given access to the e-procurement module, you will

create online requisition• You will be directed to approved supplier catalogue if available. If

not you will still complete online request as a special request. • After you enter and submit a REQ, you can route it for approval via

workflow• Approved REQ are then sourced to a PO and dispatched

electronically to the vendor.• Vendor fulfills the order by shipping the requested items to the

delivery address. • The requester will verify the receipt of goods and services• Vendor electronically forwards the invoice including the GRN which

is validated within the system.• Once matched, payment will be automatically made.

166


eProcurement

(Requisition)

Purchase

Order

Accounts Payable

Procurement Process with eProcurement

167

Objectives:

• Strategic procurement through Long Term Arrangements (LTA)

• Single Point for entering all requisitions & ease of use

• Electronic Attachments (Specifications, TOR, etc.)

• Access to external users (NEX and NGO execution)

• Global Fund Procurement• Ability to Share catalogs with Country Offices• Procurement through Purchasing Cards


168

169

Requisition CycleATLAS eProcurement Module

170

171

Thank you!

Date post:	15-Jul-2015
Category:	Business
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