ANNUAL GENERAL MEETING AND THE

SEMINAR NOVEMBER, 24-25 2015

Presented by:

PRESENTED BY:

Nyelu P. Mwamwaja (MCIPS)

Procurement and Supply Chain

Management Consultant

PRACTICE BEHIND PROCUREMENT SYSTEMS:

CHALLENGES &PROSPECTS

Tanzania Institute of Quantity

Surveyors

The Presentation will cover:

❑ Introduction and Overview

❑ Procurement

❑ Importance of Procurement

❑ Procurement Systems ● As defined in Tanzania Laws

● As by Donors Procurement Guidelines

The Presentation will cover……...

❑ Basic Principles

❑ Benefits of effective Procurement System

❑ Implications of ineffective Procurement

system

The Presentation will cover……….:

❑ Better Value for Money Procurement

❑Challenges and Prospects

❑Role of Quantity Surveying Function in

Procurement & Supply Chain Management

(SCM)?

❑Conclusion

Introduction and Overview

❑ Procurement has important economic and

political implications, in ensuring that the

process is economical and efficient.

❑ This requires in part that the whole

procurement process should be well

understood by the actors: ▪ Government, PEs and the business community/suppliers

and other stakeholders, including professional associations,

academic entities and the general public (Odhiambo &

Kamau, 2003: 10).

Introduction and Overview

❑ Any procurement system normally intends to

govern the conduct and administration of the

Procurement of GOODS, WORKS AND

SERVICES.

❑ These GOODS, WORKS AND SERVICES

are needed to implement the projects or to

support the operations of various

organizations to fulfill their vision and

missions obligations.

Introduction and Overview……

❑ Procuring Entities (PEs) be public or private

are held accountable to make sure, among

other things, that applicable Principles, Rules

and Procedures as set forth in the applicable

Procurement Systems/guidelines are

adhered to by every procurement

practitioners to obtain better Value For

Money(VFM)

Introduction and Overview ………

❑ The procurement systems are guided legal

provisions and guidelines such as:

❑ Public Procurement systems refer Acts and

Regulations, (PPA, 2011)

❑ Procurement Guidelines (refer Donor Fund

such as WB, AfDB, EU, MCC, USAID, SIDA,

JICA Etc.

❑UN Missions Guidelines such as UNDP,

UNFPA

❑ And many more.

Introduction and Overview……..

❑ Procurement systems have and will always

face many challenges due to the fact that

each Country/organization has its own

Economic, Social, Cultural and Political

Environment

❑Country’s procurement practitioners face

different types of challenges or the same

types of challenges but at different levels from

their organizations

Procurement

❑ Procurement is an organization system

aimed at specifying and acquiring Goods,

Works and Services (Consultant and Non

Consultant) of the required Quality, of the

right Quantity, on the right Delivery (Date &

Place), at reasonable Price, and from the

right third party considering the whole life

cost of the procured------

Procurement…….

Goods, Works and Services while focusing on

getting better Value For Money invested in the

Procurement.

Importance of Procurement

❑Why Procurement became important

Function in our Organization now days?

❑ PEs spend more than 70% their budget a

year on Procuring Goods, Works and

Services to deliver their core business

❑ Failure to procure them cost effectively can

put the achievement of key objectives at Risk

❑Direct influence on profit margin and sales

volume HOW?????

Procurement System

● The Procurement System is a function of

business that involves using organization’s

resources to obtain goods, works and

services to meet the needs of the

organization as it carries out its

responsibilities.

● A procurement system manages the entire

acquisition process from the initiation of the

needs to the Contract Management stage.

Procurement System…….

❑ The common objectives of procurement

systems include:-

Ensuring that the allocated fund is used to buy

only those goods, works and Services needed by

the Organization

Ensuring fair competition for all qualified bidders

Promoting transparency or integrity

Encourage development of Local Contractors

and manufacturers

Procurement System---

In Tanzania Public procurement Act No. 7

of 2011 and its Regulations GN No.446 of

2013 govern the processes and Procedures

of obtaining goods, works and services to

meet the needs of the government

(Government Funded)

Procurement System-------

❑What are other applicable procurement

systems in Tanzania?

❑What are common and emerging project

delivery modes (Traditional or Modern)

❑What are major differences and similarities?

– This is a discussion question: Participants are

expected to discuss based on their experiences

in implementation of Private, Donor and

Government funded projects

Procurement System…….. The Principles

❑ Efficiency/Effectiveness

❑ Fairness

❑Openness

❑Competition

❑ Transparency

❑Accountability

Benefits of an Effective Procurement System

❑ Enhances the efficiency use of financial

resources;

❑ Improves the availability, quality, reliability

and cost of services;

❑ Encourages accountability and responsibility

in the supply management process;

❑ Improves participation and growth of the

private sector;

The implications of ineffective Procurement System

❑ Encourages corruption and malpractice;

❑ Inefficiency can lead to delays in delivery of

essential services;

❑Demotivation of private sector suppliers

leading to lack of competition; and

❑ An increase in the cost of items.

Better VFM Procurement

❑ Procurement should be based on:

❑Better Value For Money(VFM)=Optimum(Whole

Life Cost + Quality)

❑ It is concerned about how customers value

the offering of goods, works and services

procured in an organization (Reliability,

Durability, dependability) and NOT about the

lowest price

Better VFM Procurement

● Understanding customer order of priorities

and perception of relative value rather than

cost

● It is a commitment to “Total cost of ownership

concept” by Public or Private sector

procurement officials

● Ensuring good corporate governance,

efficiency and effectiveness when acquiring

Goods, works and Services

Why VFM Procurement?

❑Corporate sector is the engine for growth of

National economies. It underpins the

foundation for sustained performance of

countries and businesses

❑ VFM Procurement encourages market

discipline

❑ Essential tool for economic prosperity and

social progress

How to Achieve VFM Procurement?

❑Getting an increased level or quality at the

same cost

❑ Avoiding unnecessary Procurements

❑ Ensuring that user needs are met not

exceeded

❑ Specifying the procurement requirements in

output terms( so that suppliers can recommend cost-

effective and innovative solutions to meet the needs)

How to Achieve VFM Procurement?

❑ Sharpen your approach to negotiations to get

a good deal from business community

❑ Aggregating transactions to obtain volume

discounts

❑Developing a more effective working

relationships with key Suppliers

❑Reducing the cost of buying goods or

Services by streamlining procurement and

Finance process

Six Key principles to follow:-

❑ Adopt strategic approach to Procurement

❑Make appropriate use of technology

❑Manage procurement risks

❑Development Contract strategies and

manage supplier relationships

❑ Ensure there is reliable procurement financial

management information

❑Measure and evaluate procurement

performance

Challenges &Prospects

❑ In Tanzania, the national procurement law and

international financing institutions procurement

guidelines are applicable and ARE critical to the

timely achievement of projects procurement

objectives (CPAR, 2003)

❑ There are enormous predicaments to effective

procurement systems, here are summarized to

include:

Challenges & Prospects

● Lack of proper knowledge, skills and Capacity

● Non compliance with SCM Policies and

regulations/Guidelines

● Unethical behavior/conduct

● Inadequate measures for monitoring and

evaluation of SCM

● Accountability fraud and corruption

● Inadequate planning and linking demand to

budget

Challenges &Prospects

● Types of goods, services and capital assets

required by Pes

● Procurement organizational structure such

as the issue of centralization vs.

decentralization;

● Procurement regulations, rules and

guidance; and

● Internal controls and legislative oversight

The role of QS in the P+SCM

❑ Strategic role: they ensure projects are

planned and completed at cost, quality and

time(VFM).

❑ The quantity surveying function is among

key function in implementation of projects

because it is involved in each one of these

stages of Procurement:

Typical Stages of a competitive procurement Process

Assessing the

Needs for the goods

or services

Specifications

of Equipment

or TOR

Agreeing the list of

potential suppliers

or Service

Providers

Invitation to

Tender

Evaluation of

Bids

Award

Agreeing

form of

contract

Formal

Appointment

Evaluation of

Contract

Performance

Key information on

supplier’s performance

and price

PMU’s advice to user

depts on procurement

methods and contracts

User depts identify demand

for goods and service and

manage and evaluate

supplier’s performance

INTERFACE

Suppliers provide goods

or services

The role of Quantity Surveying

The participants to discuss and share

experience on the strategic role in each of the

following stages of competitive Tendering:-

❑During the design stage

❑Tendering documents

❑Tender selection and appraisal

❑Construction/implementation and

❑Post contract

Conclusion

❑Regard Procurement as a System rather

than a Dept.

❑Consider the whole life cost (WLC) in

Procurement process rather than the initial

price.

❑Get better Value For Money in Procurements

Conclusion

PROCUREMENT:

❑System

❑WLC

❑VFM

Thank you for Listening

THE END