Transcript Membership

VALUE FOR MONEY
KENYAN PERSPECTIVES
PSPTB ANNUAL CONFERENCE
AT AICC, ARUSHA
PRESENTATION BY:
HEDWIG NYALWAL
HEAD OF SECRETARIAT – KENYA INSTITUTE OF SUPPLIES
MANAGEMENT
Printing of
election
materials for
2010 elections
in Kenya
WHEN CONDUCTING PROCUREMENT ……….. BEWARE!
.
EXAMPLE OF EQUIPMENT PURCHASE (RFX)
•FOR THE SAME PIECE OF EQUIPMENT
•SUPPLIER A OFFERS $1203
•SUPPLIER B OFFERS $1257
•We issued specifications
•We received a price
•To ESTABLISH VALUE examine the COST
BREAKDOWN….
COST DRIVER ANALYSIS
COST DRIVER ANALYSIS
Supplier B has $26 more in MATERIAL VALUE
COST DRIVER ANALYSIS
OVERHEADS (No-value add = Waste)
Supplier A has $90 more waste
COST DRIVER ANALYSIS
But,
Supplier B has $118 more in PROFIT
Is profit value?
VALUE FOR MONEY
•WE SELECT PRODUCTS THAT ARE
THE RESULT OF THEIR SUPPLY
CHAIN
•To realize VfM: Scope of procurement
must extend beyond MANAGING
SUPPLY to MANAGING THE
SUPPLY CHAIN
VfM
Value for money (VfM) is economy,
efficiency, effectiveness……
•ECONOMY – optimal allocation/application
of available resources to CLEARLY
DEFINED and GENUINE
USES/PRIORITIES …. which are aligned to
the STRATEGIC NEEDS AND GOALS of
an organization, community, country etc
VfM
•EFFICIENCY – no/minimal waste with
regards to quality/time/cost
•
•EFFECTIVENESS – what was INTENDED
= ACHIEVED | NEEDS = ADDRESSED
VfM
VfM approach to public procurement
demands professionalism:
•Professionals are responsible/accountable
for their use of RESOURCES
•Professionals are responsible/accountable
for the OUTCOMES attained
•Money is spent not only in the RIGHT WAY
but also in the BEST WAY
THE BALANCING ACT
THE BALANCING ACT
•Where on this triangle does procurement give best
VfM?
•Can procurement function optimize all three
elements of this triangle to give best VfM?
•Need identification ……QUALITY
•Specification……..COST
•Contract
management………DELIVERY/PERFORMANCE
•Legalistic/Regulatory approach = trade off = No VfM
•Professional approach = Eliminate waste = VfM
VfM – PILLERS IN PROCUREMENT
PLANNING
EVALUATION: 67 out of 125 APPEAL CASES
……..in one case the applicant an insurance broker
charged that it had exceeded the minimum score of 75% in
the technical evaluation and was the lowest priced bidder
and, further that the PE had introduced new criteria (choice
of underwriters and past performance) in order to exclude it
from the contract….the PE charged that the applicant was a
current provider of insurance services to the PE and had a
record of poor performance ….interestingly the applicant
was still rated highly in the technical evaluation stage
enough to allow it to proceed to financial evaluation! The
PE was ordered to re-evaluate all tenders using criteria set
out in its original tender documents……..
……….will the PE get VfM in this procurement?
PROFESSIONAL’S DILEMA
…….efficiency and effectiveness appear to have
been sacrificed at the alter of modern-day
integrity oriented public contracting system …by
removing the public official’s discretion over
choice of contractor, competitive bidding
eliminates the officials ability to obtain superior
goods and services ….in effect the PE does not
choose the contractors, rather the contractors
choose themselves by their bids ….not
surprisingly, quality of goods and services
suffer…(Steven Kelman, 1990)
FOCUS FOR PROMOTION OF VfM
Demand management
•Detailed specifications
•Lower cost specification
•Optimal service level
•Quantify spend volumes
•Common specification
•Collaboration with other public sector bodies
•Implement framework agreements
FOCUS FOR PROMOTION OF VfM
Supply base management
•Supplier development programmes
•Review / establish service level agreements
•PPP contracts where appropriate
•Performance benchmarking
•Cost breakdown analysis
Total cost management
THE VfM FUNCTION
VfM = ʄ [Professionalism (+); Legal
framework (-); Regulatory framework (-);
Procurement-Organization (+)]
………..Radical proposal to promote professionalism in
Kenya seeks to recognize the opinion of the procurement
professional by making him the professional adviser to the
accounting officer and abolishing the Tender
Committee……(Public Procurement and Disposal Bill
2014) ……..will this make a difference?
----THANK YOU---