how to enhance vfm in procurement...
TRANSCRIPT
HOW TO ENHANCE VFM IN PROCUREMENT PROCESS
ENG. DR. LAURENT M. SHIRIMA SCE – DEPT.
COLLEGE OF ENGINEERING AND TECHNOLOGY UNIVERSITY OF DAR ES SALAAM, TANZANIA
[email protected]; +255 754 466014
CONTENT
• Public Procurement Principles
• Value for money concepts & principles
• Fit-for-purpose procurement process & VFM opportunities in procurement stages
• Concluding remarks
PUBLIC PROCUREMENT PRINCIPLES
• Other Principles:
– Promotion of objectives of the Government/PE
• Sustainable procurement
• Socio economic policies
• Protecting classified information
Source: World Bank – New Procurement Framework
VFM CONCEPTS & PRINCIPLES
• When the best results or returns possible are obtained from the money spent
• Obtaining maximum benefit from the resources available
• A measure of economy, efficiency and effectiveness with which the financial resources are converted (3Es or 4Es)
• The optimum combination of the WLC/TCO/LCC and quality
VFM CONCEPTS & PRINCIPLES
• Total Cost of Ownership 𝑇𝐶𝑂 = 𝐴 + 𝑂 + 𝑇 +𝑀 +𝑊 + 𝐸 − 𝑆
Where: A = Acquisition cost [25-40%]
O = Operating cost
T = Training cost
M = Maintenance cost 60-75%
W = Warehousing cost
E = Environmental cost
S = Salvage value
FIT-FOR-PURPOSE PROCUREMENT PROCESS (1)
Defining Requirements
• Clear statement of needs and objectives
• Procurement objectives
• Statement of requirements drawn from procurement objectives
• Specifications/TOR/SOW - Specification banks
Procurement Planning
• Budget and funding (Cost estimation)
• Aggregating requirements
• Procurement approaches – that is appropriate to the value and complexity of the requirement
• Scheduling (e.g. APP)
PQ or IS
• To test the capability of applicants
• Evaluation criteria are drawn from the requirements
• PQ (All substantially qualified applications); IS (Only the best/highest score qualified applications)
FIT-FOR-PURPOSE PROCUREMENT PROCESS (2)
RFB or RFP
• The complexity and risk of the procurement and time to undertake the procurement
• Ease of defining outcome(s) and structuring financing & commercial deal
• Evaluation criteria drawn from the requirements (testing the ability to perform the requirements)
Evaluation
• Evaluation criteria may consider factors such as cost, quality, risk, sustainability and innovation in order to achieve VFM
• Lowest responsive/compliant/acceptable tender or Lowest total cost of ownership/life cycle costing
• RFB approach uses monetarily quantifiable criteria if the factors to be considered can be monetized.
• RFP approach uses points-based criteria (Weighted scoring system )
FIT-FOR-PURPOSE PROCUREMENT PROCESS (3)
Contract Award
• Award is the formal decision and approval to establish a contract
• To ensure that the procurement process was fairly conducted and followed the appropriate policies and procedures
• To confirm the necessary budget for the contractual commitment is available
• To confirm that the recommendation for award and terms of contract represent best VFM
Contract Management
• Relationship Mgt; Delivery Mgt; & Contract Administration
• Requires systematic and efficient planning, execution, monitoring, and evaluation
• CMP with KPIs & Milestone events (budget & payments)
PRE-QUALIFICATION VS. INITIAL SELECTION
Source: World Bank – New Procurement Framework: SPDs
Fit-for-purpose by design
Getting the best fit-for-purpose procurement process can sometimes be a combination of the:
right selection method e.g. RFB or RFP and
right market approach options e.g. single-stage or two envelope, or negotiation
EASY DIFFICULT
CO
MP
LEX
ITY
AN
D R
ISK
LO
W
HIG
H
RFB
RFP CD
RFP
1 envelope
prequalification
2 envelope
closed opening
BAFO or Negotiation
EASE IN DEFINING OUTCOME/S + COMMERCIAL DEAL
FIT-FOR-PURPOSE PROCUREMENT PROCESS SUMMARY
Source: World Bank (2016) Procurement Framework Selection Methods and Approaches (GWNcS)
CONCLUDING REMARKS • Consider the complexity, risks, market capability and
capacity of those involved in the process • Procurement approach = F(nature & value of
requirement, market knowledge) • Consider establishing specification banks • Develop & properly apply the appropriate evaluation
criteria (fit-for-purpose) • Effective contract management:
– A constructive and non-adversarial relationship with the supply market
– Robust contract administration – Monitor delivery, quality and cost – Enable savings opportunity & further benefits – Reduce contractual risks (e.g. delivery)
THANK YOU FOR YOUR ATTENTION