MODULE 9 PROCUREMENT PLANNING Prepared by GIMPA Consultancy

MODULE 9 PROCUREMENT PLANNING Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

MODULE OBJECTIVES q By the end of this module, participants will be able to: • Apply the principles of procurement planning to practical situations • Make decisions on appropriate methods of procurement for varying lot sizes • Explain the relationships between packaging, leadtime and stockholding Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

BENEFITS OF PLANNING q. Generally, planning enables organizations to: • Establish overall direction • Determine/develop performance standards • Anticipate and avoid future problems • Reduce the risks of uncertainty • Identify and commit resources towards the achievement of goals, determine • Effectively coordinate various activities in the organization. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

PLANNING PROCUREMENT q. In the area of procurement, the Public Procurement Act, 2003 (Act 663) as amended provides for the activity of planning. Section 21 of Act 663 as amended stipulates as follows: (1) A procurement entity shall prepare a procurement plan to support its approved programme. (2) The plan shall indicate: (a) (b) (c) (d) Prepared by GIMPA Consultancy contract packages description or lots, estimated cost for each package, the procurement method approvals needed, and processing steps and times MODULE 9 Public Procurement Authority (PPA), Ghana

PLANNING PROCUREMENT (Cont’d) (3) A procurement entity shall submit to its Entity Tender Committee not later than one month to the end of the financial year the procurement plan for the following year for approval and shall post the procurement plan on the website of the Authority. (4) After budget approval and at quarterly intervals after that, a procurement entity shall submit an update of the Procurement Plan to the Entity Tender Committee and shall post the update of the procurement plan on the website of the Authority. (5) A procurement entity shall not divide a procurement order into parts or lower the value of a procurement order to avoid the application of the procedures for public procurement in this Act. ” q It is imperative that procurement entities plan their procurement for the coming year by the 30 th of November of the current year. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

PACKAGING AND RELATED COSTS q. The activity of packaging involves putting together similar items that could constitute a homogenous whole (package), determining the lead time for each package and scheduling of target dates for each event in the procurement process related to the packages. q. A procurement package is a tender item or collection of tender items that can be given out on contract. q The package can be a homogenous whole item or can consist of components or various items, termed lots or slices. q Each lot or slice can be given out as a separate contract or all as a single contract. q Factors to consider in Packaging Procurement Contracts include: • • Prepared by GIMPA Consultancy Like or similar items of nature Source or origin of supply Timing/Date of delivery Place of delivery (Location) Specialized nature of the item Sources of financing (co-financing: parallel or joint-financing) Institutional aspects (in-house capacity or turnkey approach) MODULE 9 Public Procurement Authority (PPA), Ghana

Examples of Procurement Packages for Goods q Package A: Stationery 100 Reams of A 4 Paper 50 Packets of Pens 20 Packets of Envelopes 10 Packets of Pencils q Package B: Computers Item 1: 50 Desktop computers Item 2: 5 Printers Item 3: 50 UPS q Package C: Vehicles LOT 1: 20 -Saloon cars LOT 2: 10 -4 X 4 Pickups LOT 3 : 5 -Tipper Trucks LOT 4 : 2 - Luxury Buses Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

PACKAGING PROCESS q. Packaging requires the consideration of the following: • The procurement of similar items from a single source • The source of funding especially if from different sources • The size of the package should be large enough to encourage competition amongst qualified tenderers and to buy economically • Aggregation of similar items to be used for sub-components in order to achieve economies of scale • Decision on the most appropriate procurement method to be used for each package in order to attain the objectives of economy and efficiency Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

PACKAGING PROCESS (Con’d) q. Packaging requires the consideration of the following: • Linked to the procurement method is the issue of the thresholds (refer to module six) as set out in the Fifth Schedule of Act 663 as amended • Ensure that the assortment of goods and works needed for different dates are packaged and delivered separately • Examination of the market forces related to particular items • Deliberation of the transportation costs associated with the selected packages in order to achieve lower rates • Consideration of storage capacities as well as costs of inventory holding capacity Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

TYPES OF PROCUREMENT METHOD q Depending on the value of the package, an appropriate procurement method could be selected to acquire the items q The thresholds as indicated in the Fifth Schedule of Act 663 as amended should be considered during the selection of the procurement method q The procurement method to be selected should be able to achieve the objectives of public procurement Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

INTERNATIONAL COMPETITIVE TENDERING (SECTION 45 ACT 663 AS AMENDED) q It is generally believed that public procurement objectives of economy and efficiency (value for money) would be achieved by the use of International Competitive Tendering(ICT). q Procuring through ICT procedures requires advertising internationally as well as in local newspapers with wide circulation and on the website of the PPA. q For large specialized contracts, invitations should be advertised in well- known technical magazines, newspapers and trade publications of wide international circulation. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

INTERNATIONAL COMPETITIVE TENDERING (CONT’D) q Notices of procurement opportunities provide information: • regarding a description of the goods or works needed • how and where the tender documents could be obtained • the closing date for submission of the tenders • the address to which the tenders should be submitted q In the case of contracts which require pre-qualification, a similar procedure could be used regarding advertisement of the opportunities and related requirements. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

NATIONAL COMPETITIVE TENDERING (SECTIONS 44 OF ACT 663 AS AMENDED) q NCT is appropriate when foreign tenderers are not likely to be interested, contract sums are small, etc. q. Procurement opportunities under NCT are advertised nationally and in accordance with the provisions of the Public Procurement Acts 663 as amended. q. Advertising is usually limited to local newspapers of national circulation and on the website of the PPA. q. Tender documents may be in the national language and the currency and payment of the tender may be in national currency. q. Tenders are normally compared on delivered basis which includes customs duty and import taxes. q No domestic preference may be used in tender evaluation. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

RESTRICTED TENDERING (SECTIONS 38 -39 OF ACT 663 AS AMENDED) q. This is a procurement method with limited competition. This method of procurement allows for competition amongst the tenderers who have been invited. This means that a tenderer who has not been invited to participate in the procurement proceedings cannot seek to be part. q. A formal procedure, with detailed invitation to tender documents are issued to short-listed suppliers, contractors, or service providers who have been selected in accordance with the provisions of Act 663 as amended. q. The procedure for short-listing suppliers, contractors, or service providers should be transparent and non-discriminatory to ensure effective competition in the selection of suppliers, contractors, or service providers. q. A maximum of six and a minimum of three shot-listed suppliers, contractors, or service providers are required to establish effective competition for the Restricted Tendering process. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

RESTRICTED TENDERING (Cont’d) q. Section 38 of Act 663 as amended specifies the conditions under which Restricted Tendering may be used as follows: “(1) A procurement entity may for reasons of economy and efficiency and subject to the approval of the Board engage in procurement by means of restricted tendering (a)if by reason of the highly complex and specialized nature goods, works or services are available only from a limited number of suppliers or contractors; (b)if the time and cost required to examine and evaluate a large number of tenders is disproportionate to the value of the goods, works or services to be procured. (c)if an offer for competitive tendering fails to receive any response after publication. ” “(2) The Authority may charge a processing fee as determined by the Board for single source and restricted tendering applications. ” Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

RESTRICTED TENDERING (Cont’d) q. Procurement Entity requires specific approval from the Public Procurement Authority (PPA) to use the Restricted Tendering method. q. The PPA shall charge a fee for the grant of approvals for the use of Restricted Tendering method of procurement. q. Where a procurement entity shall cause a notice of the award of contract to be published in the Public Procurement Bulletin and the PPA website (www. ppaghana. org). q. Note that the standard tender documents for NCT are also applicable for use under Restricted Tendering method of procurement. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

TWO-STAGE TENDERING (SECTIONS 36 -37 OF ACT 663 AS AMENDED) q. This method is recommended where it is not feasible for the procurement entity to formulate detailed specification for goods or works to be acquired. q. In the case of services, it is used to obtain proposals or offers on various means to meet its procurement requirements. q. A procurement entity shall also engage in a two-stage tendering process where it seeks to enter a contract for research, experiment, study and development purposes. q. The purpose is to invite tenderers at the initial stage to contribute to the development of detailed specifications so that the right specifications can be prepared and issued to selected tenderers at the second stage. q. A normal tendering process then 9 follows. Public Procurement Authority (PPA), Ghana MODULE Prepared by GIMPA Consultancy

SINGLE SOURCE PROCUREMENT (SECTIONS 40 -41 OF ACT 663 AS AMENDED) q. Single source procurement is a procurement method where a supplier, contractor, consultant or service provider is engaged without competition (direct contracting). q. It is subject to a specific approval being granted by the Public Procurement Authority as prescribed under Sections 40 -41 of Act 663 as amended. q PPA may charge a processing fee before an approval is granted. q. Procurement entities are required to refer to the Guidelines for the use of Single Source Procurement to ensure compliance with the requirements of the Act 663 as amended. q. Particular attention should be given to environmental and social criteria during the design of evaluation criteria and their application during the evaluation process. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

SINGLE SOURCE PROCUREMENT (Cont’d) q. The use of single source procurement is appropriate under the following conditions: • Where the supplier of a particular product has proprietary right over the sale of the product and no suitable alternative exists (sole source-because of monopoly); • Where there is an urgent requirement by the procurement entity; • Where the requirement for a product is occasioned by catastrophic event leading to an emergency; • Where additional quantities of a product is required • Where the procurement of that product is aimed at ensuring compatibility with existing systems in place; • Where the procurement entity seeks to carry out an experiment for research purposes; and • If the procurement is of national security interest. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

REQUEST FOR QUOTATIONS (SECTIONS 42 -43 OF ACT 663 AS AMENDED) q. The use of RFQ shall be in accordance with the thresholds applicable to this method of procurement as provided for in the Fifth Schedule of Act 663 as amended. q. Specifically, Section 42 (1) and (2) of Act 663 as amended states: “(1) A Procurement Entity may engage in procurement by requesting quotations in accordance with Section 43, (a) for readily available goods, works or technical services that are not specially produced or provided to the particular specifications of the procurement entity; and (b) for goods where there is an established market if the estimated value of the procurement contract is less than the amount in the Fifth Schedule of Act 663 as amended. (2) The successful quotation shall be the lowest evaluated responsive quotation that meets the needs of the procurement entity in the request for quotations. ” Prepared by GIMPA Public Procurement Authority (PPA), Ghana MODULE 9 Consultancy

REQUEST FOR QUOTATIONS (Cont’d) q. Procurement entity shall request for quotations from as many suppliers or contractors as practicable but shall compare quotations from at least three different sources. q. The firms should not be related in terms of ownership, shareholding or directorship and the principles of conflict of interest shall apply q. Suppliers or contractors from whom quotations are requested should be informed of any additional costs apart from the cost of the goods or services q. These additional costs may include: transportation, insurance, custom duties and taxes q. Each supplier or contractor is required to give only one price quotation and shall not change its quotation. q. No negotiation is allowed to take place between procurement entity and supplier/contractor prior to the evaluation of quotations. q. A period of up to two (2) weeks should be allowed for the submission of quotations. Prepared by GIMPA Public Procurement Authority (PPA), Ghana MODULE 9 Consultancy

LEAD TIME AND STOCKHOLDING FACTORS q. Issues related to how long it takes to go through the procurement process, (depending on which method is used) beginning from when a need is identified until the goods or equipment are delivered and ready to be used usually influence the quantities of stock that can be held at any given time. q. They need to be taken into consideration when planning the timing of deliveries as well as the quantities that would be stocked at any point in time by the organization. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

LEAD TIME q. Lead time is the period of time from when a need for an item is identified through order processing, production/manufacture, shipment to the delivery of the item for use. q. In the case of procurement of works the lead time is made of the period for engagement of the contractor and the construction period. q. It is necessary to consider lead times when planning the critical dates for each package, tabulating and preparing bar charts, periodic updates as well as monitoring activities. Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

STOCKHOLDING FACTORS q Stockholding factors will be crucial to planning the replenishment of recurrent items of stock. q The average cost of stockholding as a percentage of the value of the goods themselves for any given period can be calculated by relating the total sum of money to the average value of stock held during the period. q The extent of stockholding is influenced by: • operational needs • lead time • availability of capital • cost of storage Prepared by GIMPA Consultancy MODULE 9 Public Procurement Authority (PPA), Ghana

q. QUESTIONS & DISCUSSIONS q. MODULE 9 – EXERCISE: