Procurement Planning as a Tools for Effective Budget Implementation and Service Delivery U Z O C H UK W U A M A K O M DEPARTMENT OF ECONOMICS NNAMDI AZIKIWE UNIVERSITY, AWKA NIGERIA Introduction The purpose of this is two fold. The role of the Procurement Planning Committee in an MDA's procurement process. This includes a discussion on conduct, ethics and good business practices during and after the procurement process. The second is to describe the preliminary considerations and activities that ensure the success of any procurement effort. What is Procurement? Procurement is the acquisition of goods, civil works or services at the best possible total cost of ownership, in the right quantity and quality at the right time, in the right place for the direct benefit or use of Government, Corporation or individuals, generally via a contract. What is a project? “A planned undertaking of related activities to reach an objective that has a beginning and an end.” “A unique venture with a beginning and an end, undertaken by people to meet established goals within defined constraints of time, resources, and quality.” What is a project? (2) “A project is a temporary endeavour undertaken to create a unique product or service. Temporary means that the project has an end date.” http://en.wikipedia.org/wiki/Project Characteristics of projects Focused activity delivering predetermined output Closely bounded and scoped deliverables that can be relatively well defined Realises benefits following end of the project, after implementation of the project‟s outputs Characteristics of projects 2 Normally closely timebound, typically short term (e.g.24 months). Tangible „Deliverables‟ – a building, an IT system, a new process Emphasis on production of the deliverable rather than realisation of the „benefits‟ PROJECT CHARACTERISTICS Unique Product UNIQUENESS Unique Context Unique Process Temporary DURATION Limited Timeframe Performance NUMEROUS Quality CONSTRIANTS Delays Costs “…as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know.” Donald Rumsfeld Procurement Planning Planning is listing in details all the requirements to complete the project, given the triple constraints of time, cost and quality The initial step in procurement planning is the determination of what is needed, how much, where and when. Procurement Planning 2 Specifications (what you are procuring) Tender process (how you are procuring) Selection (who you are procuring from) Contract definition (the responsibilities of the parties to the contract) Award (providing best value for money – often not the cheapest bidder) Why Procurement Planning To precisely define the results To reduce uncertainty (Risk) To realize economies of scale and scope To maintain effective control To facilitate decision making ADVANTAGES OF PLANNING No one plans to fail, just fail to plan Better control of delivery Better control of costs Better control of resources Smarter delivery THE FIRST RULE OF PROJECT MANAGEMENT: CLEARLY DEFINE THE PROJECT SCOPE, AND ENSURE ALL STAKE HOLDERS ACCEPT THE DEFINITION Procurement Plan Steps Establish the project objective & choose a basic strategy for achieving the objective Determine what goods, works and services are to be procured Break the project down into sub units or steps Determine the performance standards for each sub unit - Determine agency capacity to implement procurement- institutional, staffing, competence, training (Make or Buy) Decide how much time is required to complete each sub unit. PROCUREMENT PLANT STEPS contd. Decide the proper sequence for completing the sub units and aggregate this information into a timetable for the total project. Choose the type of contract for each package Choose procurement method – OCB, TST, RB, RfQ, DP, etc Determine lead time for each contract package Schedule the procurement process Develop a critical path/bar chart WORK BREAKDOWN STRUCTURE (WBS) Scope Definition is the process of subdividing the major project deliverables into smaller, more manageable components (tasks) WBS : The basis of answering the following questions: How long will each task take? Who will do each task? What materials, supplies and equipment are required? How much will each task cost. WBS It provides a graphic representation of the scope of the job, and this makes it easy to have a full grasp of all the work elements that will have to be completed, to successfully complete the project. Because all the tasks and subtasks are graphically displayed, it becomes easy to identify material, capital equipment, etc, associated with each activity. Thus the WBS helps us to make a “Make” or “Buy” choice. THE MAKE OR BUY DECISION A decision must be made on what tasks will be done in- house, as contrasted against those that will be sent to other companies for performance. The WBS is the tool that aids in this decision making process. As soon as the items and works to be bought are determined, the sellers of such items must be identified, and the time required to procure the items must be accommodated in the project master schedule. The WBS may be presented in outline form: Level 1 Level 2 Level 3 Task 1 Subtask 1.1 Work Package 1.1.1 Work Package 1.1.2 Work Package 1.1.3 Subtask 1.2 Work Package 1.2.1 Work Package 1.2.2 Work Package 1.2.3 Subtask 1.3 Work Package 1.3.1 Work Package 1.3.2 Work Package 1.3.3 Task 2 Subtask 2.1 Work Package 2.1.1 Work Package 2.1.2 Work Package 2.1.3 Example • Procurement Planning for a Computerization project The main objective: Process Computerization Objectives to be achieved in order to achieve the main objective: Manual Operation, Prepare process Manuals, Reporting. Take each of the above sub-objectives, and determine the tasks that will be carried out to achieve it. • Example: Manual Operation: Accounting, Auditing, Stores Stock Keeping, Salary Administration. • - Each of the sub objectives may be further broken down into sub-sub tasks (packages), until an adequate level of detail is reached. • Decide Make or Buy • Decide Procurement Method PROJECT PLANNING 4. Activity Sequencing 6. Schedule Development 2. Activity Definition 5. Activity Duration 9. Project 1. Scope and Estimating Plan Definition 3. Resource Planning 8. Cost 7. Cost Budgeting Estimating Procurement Plan A Procurement Plan is a project management strategy that provides a framework for major procurement. Procurement Plans are prepared prior to commencing any procurement action. TIME DELAYS THAT MUST BE TAKEN INTO CONSIDERATION Administrative Lead Time. The period of time from initiation of the requirement by the user to issuance of an award. Order Ship Time Time after award required by suppliers to fill an order and ship by designated means (truck, rail or air) to the delivery point. Determination of lead time Listevery activity of the procurement process Estimate time required for each activity Allow for slippages Lead Time for Goods, Equipment Plant Administrative Delivery/Execution Install/warranty advertise manufacture Ocean transit Prepare specs inspection port clearance Prepare bid docs packaging Inland transit Submit bids Inland transport assembly Evaluate bids shipment Installation Check post qualifi commissioning Notify award Testing Receive p.g acceptance Sign contract warranty Lead Time for Works Administrative Execution Execution Advertise for pq mobilise Maintenance period Evaluate PQ Claims applications Prepare BOQ and Construct, inspect Final acceptance specifications Prepare bid docs Provisional Issue BD acceptance Hold pre bid meeting Submit bids Evaluate bids Check post qualification Notify award Sign contract Lead Time for Consultants Administrative performance Prepare TOR Mobilize staff Prepare cost Perform contract estimate Prepare short list Submit interim reports Prepare RFP Submit final report Receipt of proposals Evaluate technical proposals Evaluate price proposals Combine tech and price evaluations Negotiate award Management Structure for Effective Procurement Planning must be given to appointing Consideration a Committee with responsibility for overseeing the procurement planning phase. Consideration should also be given to establishing a procurement department with a skill mix. Procurement Planning Procurement planning is a process where MDA‟s review current/existing procurement processes, identify future needs and direction for procurement management. Procurement Planning (Cont‟d) The Delta State Government Public Procurement Law establishes a comprehensive procurement framework, which assists MDA‟s in the efficient delivery of services and ensures procurement strategies are consistent with the Government's wider policy objectives. Procurement Plan (Cont‟d) A Procurement Plan identifies procurement opportunities, options for achieving outcomes, potential partnerships and alliances, market capability, performance measures, stakeholders, internal organisational requirements, preliminary costs, risk management issues. IMPLICATIONS OF THE PUBLIC PROCUREMENT LAW FOR PUBLIC SECTOR EXPENDITURE The attainment of transparency, cost effectiveness, competitiveness and professionalism; Ensuring probity, accountability, fair and value-for-money standards and practices for the procurement and disposal of public assets and services. IMPLICATIONS OF THE PUBLIC PROCUREMENT LAW FOR PUBLIC SECTOR EXPENDITURE Procurement Officers involved in procurement activities are either directly or indirectly spending public funds and subject to public scrutiny and as such are reminded to: a. Act responsibly. b. Conduct procurement process honestly. c. Avoid wasteful and impractical procurement practices. IMPLICATIONS OF THE PUBLIC PROCUREMENT LAW FOR PUBLIC SECTOR EXPENDITURE d. Avoid real or perceived conflicts when conducting procurement process on the MDA's behalf. e. Advise stakeholders of acceptable business practices, conflicts of interest and respected standards of ethical and moral behaviour during any procurement activities involving their participation. IMPLICATIONS OF THE PUBLIC PROCUREMENT LAW FOR PUBLIC SECTOR EXPENDITURE f. Seek to maintain and continuously improve their professional knowledge, skills and abilities. What has Procurement Planning Contribute to Budget Implementation Process Planning aggregates needs [ensuring that only the needed is procured] Market Survey Planning reduces costs Planning reduces wastages Procurement Planning and Effective Service Delivery Analytical procurement planning ensures that the right procurement method or mix of methods is chosen to implement procurement. Procurement planning ensures that budgetary allocations are made for projects How can service delivery benefit from a good procurement plan? Assurance and availability of funds to execute public project and provide services. Selection of the best qualified in technical and professional terms to provide services and works. Conclusion The Public Procurement Law provides the legal and institutional framework for the enthronement of Transparency, Accountability, Value for Money and Efficiency in the procurement of works, goods and services within the State Ministries and Extra- Ministerial Depts. With this, the Objectives of the State Government shall be delivered for DIRECT BENEFITS OF DELTANS AND NIGERIANS! Thank You!