Procurement Plan Er Satya Narayan Shah B Sc

Procurement Plan Er. Satya Narayan Shah B. Sc. In Mechanical Engineering (India) MS in Manufacturing Engineering & Management (UK) May, 2018 Email: er. snshah@gmail. com Cell : 9851004366 1

Definition • Procurement planning is the process of identifying and consolidating requirements and determining the timeframes for their procurement with the aim of having them as and when they are required. • A good procurement plan will describe the process in the identification and selection of suppliers/contractors/consultants. Er. Satya Narayan Shah 2

Sourcing: The Terms – Identification and vetting of suppliers, is a function that occurs prior to procurement. – Put reliable, affordable suppliers in place for the procurement. – tasked with assessing purchasing needs, building sourcing plans, conducting market research, identifying and evaluating suppliers, and selecting the most suitable supplier or suppliers for the need. 3

The Terms Procurement: • the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts. • Procurement is concerned with acquiring (procuring) all of the goods, services, and works. • Procurement is, essentially, the overarching or umbrella term within which purchasing can be found. Er. Satya Narayan Shah 4

The Terms Purchasing: • as the transactional function of procurement with the following activities a) b) c) d) e) Purchase Order Acknowledgement Advance Shipment Notice Goods Receipt Invoice Recording 3 Way Match-matching three documents - the invoice, the purchase order, and the receiving report • Payment to Supplier • Purchasing rely on the judgment of procurement • Purchasing is concerned with budget and cost control. 5

The Typical Procure to Pay Cycle • Steps usually involved: – – – – Identification of Requirement Authorization of Purchase Request Final Approval of Purchase Request Procurement Identification of Suppliers Inquiries Receipt of the Quotation Negotiation Selection of the Vendor Purchase Order Acknowledgement Advance Shipment Notice Goods Receipt Invoice Recording 3 Way Match Payment to Supplier 6

Planning Process includes three major components: 1. Information: A collection of facts from which conclusions may be drawn 2. Deliberation: Discussion of all sides of a question, Careful consideration 3. Instruction: A message describing how something is to be done

Legal Backing Er. Satya Narayan Shah 8

Procurement Procedure • Formation procuring Unit -PPA -7(3) • Formation Evaluation Committee-PPA -71 • Preparation of procurement Plan/strategy PPA -6; PPR- 7, 8 • Preparation of Estimate (Rs. 100, 000. 00 excluding works)-PPA (5) • Preparation of Bid document • Opening of Bids • Evaluation of bids • Award of the contract 9 • Completion/Termination of the contract

Procurement Plan § Master Procurement Plan to be Prepared- PPA (clause 6), PPR (clause 7) – for a period of more than one year or in making a procurement of an amount exceeding one hundred million Rupees annually (Ten Crores). • The master procurement plan to be approved by the secretary of the Public Entity. • To be up dated each fiscal year.

Importance of Procurement Planning (1) • It helps to decide what to buy, when and from what sources. • Allows planners to determine if expectations are realistic; particularly the expectations of the requesting entities, which usually expect their requirements met on short notice and over a shorter period than the application of the corresponding procurement method allows. • An opportunity for all stakeholders involved in the processes to discuss about procurement requirements. Stakeholders- the requesting entity, end users, procurement department, technical experts, and even vendors to give relevant inputs on specific requirements. Er. Satya Narayan Shah 11

Importance of Procurement Planning (2) • It permits the creation of a procurement strategy for procuring each requirement that will be included in the procurement plan. Such strategy includes a market survey and determining the applicable procurement method given the requirement and the circumstances. • Planners can estimate the time required to complete the procurement process and award contract for each requirement. This is valuable information as it serves to confirm if the requirement can be fulfilled within the period expected, or required, by the requesting entity. Er. Satya Narayan Shah 12

Importance of Procurement Planning (3) • The need for technical expertise to develop technical specifications and/or scope of work for certain requirements can be assessed, especially where inhouse technical capacity is not available or is nonexistent. • Planners can assess feasibility of combining or dividing procurement requirements into different contract packages. • The Procurement Plan is the product of the procurement planning process. It can be developed for a particular requirement, a specific project, or for a number of requirements for one or many entities in 13 the public or private sectors.

Importance of Procurement Planning (4) • From it the procurement schedule is developed, which establishes the timelines for carrying out each step in the procurement process up to contract award and the fulfilment of the requirement. • It allows for the consolidation of similar requirements under one contract or the division of a requirement into several contract packages for economies of scale. • From the number of requirements on the procurement plan, the procuring entity can determine beforehand any need for additional staffing, including external assistance for the purpose of completing all procurement requirements listed on the procurement plan. 14

Importance of Procurement Planning (5) • It allows for the monitoring of the procuring process to determine how actual performance compares with planned activities, and thus to alert the pertinent departments and adjust the procurement plan accordingly. • It enhances the transparency and predictability of the procurement process. Er. Satya Narayan Shah 15

Factors Affecting Procurement Planning • Market Analysis – strong understanding of the market dynamics, availability etc • Spend Analysis – visibility of spend data-accurately analyse the goods and services that have been historically procured. – analysis will disclose issues concerning spend visibility, contract compliance and control. • Needs Analysis – It is important to identify the ‘need’ and not the 16 ‘want’.

Procurement Plan (need analysis) The following questions should be answered • what is the procurement aiming to achieve? • Do we really need to purchase, or can the need be met in another way? • Can the quantity or scale of the goods, works or services be reduced whilst achieving the same service delivery? • Can alternative goods or service be used to meet this need? • Can the works, goods, service be specified to have improved sustainability outcomes, including being able to serve a useful purpose after its initial use? • What information is available regarding sustainably-preferable options for this purchasing requirement? Where can more information be obtained about suitable alternatives? • what happens to the product at the end-of-life? • how does this procurement impact upon our (environmental/ social) objectives and policies?

Content of Procurement Plan (1) 1. Key project information • objectives and plan to achieve them • an outline of what's being procured and the costs involved • planned approach to meet the Principles of Public Procurement (eg transparent, fair to all, get the right supplier or provider and the best outcome) and the Government Rules of Sourcing • governance arrangements and approvals processes • key stakeholders and your plan for engaging with them • links to agency's procurement strategy. 19

Content of Procurement Plan (2) 2. Sourcing plan • the type of procurement approach (eg open process or direct sourcing) • how suppliers or providers and their proposals will be evaluated and what due diligence will be conducted • a written document detailing your strategy for approaching the supplier or provider community. Er. Satya Narayan Shah 20

Content of Procurement Plan (3) 3. Exclusions and exceptions • a record of any exclusions or exemptions to the Government Rules of Sourcing, giving specific justification for the approach • evidence of an approved formal exemption from an independent senior manager if your proposed approach proposes a departure from your agency’s own procurement policy. Er. Satya Narayan Shah 21

Content of Procurement Plan (4) 4. Contract information • a description of the contract that will be used • how the contract will be delivered and its completion date • how the contract will be managed during delivery. 5. Risks and Integrity • the risks associated with the project and how they will be managed. • how the probity process will be managed. 6. Timetable • a realistic step-by-step timetable for the procurement 22 process

Procurement Plan • Annual Procurement Plan to be Prepared. PPR (clause 8)– In the cases where a Public Entity requires to make procurement of an amount exceeding one million Rupees annually. • Annual procurement plan to be attached with the annual program and budget of the next fiscal. • The annual procurement plan to be revised and sent to its superior office, Treasury/ Controller Office and PPMO. 23

Procurement Planning and Budget Linkage: Legal Reference {PPR 8 (5)} The chief of the Public Entity shall, after receiving the approved program and budget of the current fiscal year, have to revise accordingly the annual procurement plan prepared pursuant to this Rule and approve it and send one copy each of such plan to – its superior office, – Treasury and Controller Office, and – Public Procurement Monitoring Office.

Procurement Plan Deliverables The Procurement Plan should include five key Steps. The Procurement Steps are • • • Requirement Step Requisition Step Solicitation - Selection Step Contract Administration Step Contract Closeout Step Er. Satya Narayan Shah 25

Requirement Step • Conduct market analysis to gain awareness of the products / services that are available for purchase. • Perform a make vs. buy analysis. • Estimate investment costs of the Procurement. • Based on the Procurement Plan, obtain authorization to proceed from appropriate agency/ departments. • Create a Project Procurement Teams (Procurement Unit, Bid evaluation Committee, etc. ) 26

Requisition Step • Verify that necessary specifications have been provided. • Prepare solicitation package (e. g. Bill of quantity, IFB, Bid document, RFP etc. ) • Review by procurement team and, with final approval of the IFB, RFP by Agency Procurement Officer, send for publication to news papers /e-procurement system. 27

Solicitation - Selection Step • Issue the solicitation document (Bid, RFP). • Answer questions received from vendors in a public forum (Pre-bid meeting based on instructions published in IFB, RFP). • If necessary, prepare for vendor product demonstrations, or oral presentations. • Receive and Evaluate Proposals (by Project Procurement Team) 28

Contract Administration Step • Interpret specifications. • Ensure that quality of the product or service is maintained. • Manage product warranties. • Manage sub-contractors (if required by the contract). • Direct change management; • Resolve contract disputes; • Completion of the project; • Terminate the contract; • Manage contract risk associated with the project 29

Contract Closeout Step • Verify product and services meet acceptance criteria. • Complete fiscal activities: – Approve final payment (notify appropriate accounts payable office), – Update project and activity records, – Close purchase order (notify appropriate procurement office), – Update contract file. • Notify all the stakeholders, if required. • Archive contract files/documents. 30

Procurement Plan § Master Procurement Plan § shall contain, the following matters: - • • Type, quantity and tentative estimated cost, Procurement method, Slice or package for maximizing competition, Tentative numbers of contracts, Pre-qualification proceedings (if required), Tentative time-table of proceedings, Any other matter as directed by PPMO

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Procurement Plan • Annual Procurement Plan to be Prepared- PPR (clause 8)– the following matters shall have to be stated • The types of procurement, • Possible package of procurement, • Time table of procurement proceedings, – such as Preparation of specification, cost estimate, bidding documents, notice for invitation, evaluation, Acceptance, contract, commencement, and completion. • Procurement method, • Types of contracts, and • Any other matter as directed by PPMO 34

Procurement Planning Contents • Time table of procurement proceedings should include the following: – Specifications preparation (for the procurement of goods), – Cost estimation of procurement, – Preparation of sealed quotation form, bidding documents or documents relating to proposal for pre-qualification or request for proposal (RFP) for consultancy service, – Publication of a notice for invitation to sealed quotation, pre-qualification proposal, bid or request for the proposal of consultancy services,

Procurement Planning Contents • Time table of procurement proceedings should include the following: – Evaluation of sealed quotation, prequalification proposal, bid or proposal for consultancy service, – Approval of sealed quotation, pre-qualification proposal, bid or request for proposal for consultancy service, – Endorsement of Contract, – Commencement of the job, and – Accomplishment of the job

Procurement Plan Contents Project Details Title: Procurement Plan (PP) for Civil Works [Period between September 2010 -February 2012] Project Name & ID: Road Sector Development Project Additional Financing RSDP, AF Loan/Credit/Grant No. : Executing Agency: Department of Roads, MOPPW Implementing Agency: Department of Roads, Babarmahal, Kathmandu 37

Procurement Plan Contents Activities Details 1. S No 3. Prior/ Post Review 2. Description of Works & Contract ID No. 4. PP Status 5. Cost Estimate (NRs Million) 6. Method of Procurement 7. Proc. procedure: Go. N or WB? 8. Bid document to WB 9. WB’s NOL to Bid Doc 10. Bid Invitation 11. Public Opening of Bids 12. BER & Award Recommendation to WB 14. Contract Signing 13. WB’s NOL to Award Recommendation 15. Completion date of the contract 17. Remarks 16. Procurement at center/ district 38

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Consequences of Lack of Procurement Planning • Delays in project implementation • Inappropriate procurements • Use of inappropriate procurement methods and procedures • Increased packaging costs Er. Satya Narayan Shah 40

Good planning is 80% of the task completed Poor or no planning manifests in inefficiencies in the procurement function Failing to plan is planning to fail