See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/319003837

Overview of Procurement Process Strategic Role of Procurement

Presentation · August 2017

DOI: 10.13140/RG.2.2.16060.54400

CITATIONS READS

0 1,357

1 author:

Samir K. Srivastava
Indian Institute of Management, Lucknow
103 PUBLICATIONS 4,120 CITATIONS

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Comprehensive Review to Understand Best Practices in Public Procurement - A Seed Money Project from IIM Lucknow View project

Sustainable Supply Chain Coordination View project

All content following this page was uploaded by Samir K. Srivastava on 09 August 2017.

The user has requested enhancement of the downloaded file.

Overview of Procurement Process
Strategic Role of Procurement
Prof. Samir K Srivastava
Web Page: http://www.procurementobservatoryup.com

Indian Institute of Management

Lucknow
 About the Observatory

 Established at IIM Lucknow

with the World Bank’s support
in 2013

 Objective : Advocate best  Activities

practices and enhance public  Funded Research

procurement performance in the  Consulting Assignments

state of Uttar Pradesh  Training and Advocacy

August 08, 2017 Strategic Role of Procurement 2

 What is Procurement?

Securing the products, raw materials, and services

needed by production, distribution and service
organizations at the right time, the right price, the right
place, the right quality and in the right quantity.

Characteristics

• A decision area to be integrated with overall materials

management and logistics
• An area to be used to the procurer’s strategic advantage

August 08, 2017 Strategic Role of Procurement 3

 Strategic Role of Procurement

Source: Chen and Paulraj, 2004

August 08, 2017 Strategic Role of Procurement 4
 Eight-Step Sourcing Process
Sourcing Analysis Develop Generate Develop
and Profiling
Sourcing Supplier Solicitation and
Sourcing Group
Strategy Portfolio Visit Vendors

Manage Negotiate and Select Evaluate

Implementation
Approve Competitive Vendor
Plan for Goods,
Works & Services Contracts Vendors Proposals

August 08, 2017 Strategic Role of Procurement 5

 What is Public Procurement?

 Public procurement refers

to procurement of external
resources needed by the
central or state
governments as well as
entities under their control

 Books/ Rules/ Manuals/

Laws to consider while
procuring for PSEs

August 08, 2017 Strategic Role of Procurement 6

 Process of Public Procurement also involves…

Source: MOOC, The World Bank

August 08, 2017 Strategic Role of Procurement 7
 Gentlemen, considering the overwhelming response,
we are now restricting the bid to the firms whose
name starts with letters F, O, Q, X, Y & Z only.

August 08, 2017 Strategic Role of Procurement 8

 Public Procurement Objectives
 Process Objectives
 Pre-Contract
Bid Protest/ Challenges
 Integrity
Uniformity
 Competition
 Transparency The Integrity Envelope
 Uniformity
 Post-Contract
 Integrity Transparency
Choice of
 Uniformity Contracting
 Transparency Method

 End Objectives
 User Satisfaction Competition

 Best Value for Money

 Socio-Economic Objectives
 Efficiency
Procurement Outcomes
 Accountability

August 08, 2017 Strategic Role of Procurement 9

 Public Procurement Objectives in India
Articles 298 and 299 of the Constitution of India lay the basic
foundation for public procurement.
Rule 144 of General Finance Rules (GFR) 2017 states
Fundamental principles of public buying (for all procurements
including procurement of works) wherein every authority
delegated with the financial powers of procuring goods in public
interest shall have the responsibility and accountability to bring:
1. Efficiency, economy, transparency
2. Fair and equitable treatment of bidders and promotion of
competition
August 08, 2017 Strategic Role of Procurement 10
August 08, 2017 Strategic Role of Procurement 11
 Selection Methods

August 08, 2017 Strategic Role of Procurement 12

 Two-bid Tendering Process
Tender evaluation
Publication of Bidders prepare committee opens
notice inviting techno-commercial technical bid
tenders (NIT) bids and submit documents

Evaluation of technical
bids and selection of
bidders for commercial
evaluation

Evaluation of
Tender evaluation
Award of commercial bids
committee opens
contract and identification of
commercial bids
L1 bid

August 08, 2017 Strategic Role of Procurement 13

 The Three-Stage Reverse Auction Process
Pre-Bid Process
Collect Supply  Collect Third-Party  Select the Third Party  Prepare
Requirements Expertise Data or Develop own Web-site RFQ
and Suppliers’ Data

Train Potential  Select Potential  Define Pre-Bid  Invite

Suppliers Suppliers Qualifications Suppliers

On-Line Bidding Process

Inform Date &  Give alias Names to  Carry out  Reveal Pre-agreed
Time of Bidding Prevent Cartelisation On-line Bidding Selective Information

Post-Bid Process
Communicate  Carry out Detailed Documentation  Continuously Monitor
Bid Award(s) (as in Normal Bidding Process) Supplier(s) Performance

August 08, 2017 Strategic Role of Procurement 14

 Sourcing Matrix (by Value and Criticality)

High
Critical Items Strategic Items
Criticality

General Items Bulk Purchase

Items
Low
Low High
Value/Cost

August 08, 2017 Strategic Role of Procurement 15

 TCO and VFM

Source: MOOC, The World Bank

August 08, 2017 Strategic Role of Procurement 16
 Various Procurement Strategies in Corporate

Negotiating with many suppliers

Long-term partnering with few suppliers

Vertical integration

Keiretsu

Using suppliers on an as needed basis

August 08, 2017 Strategic Role of Procurement 17

 The Supply Chain Framework

August 08, 2017 Strategic Role of Procurement 18

 Major Trends in Procurement
 Fewer sources of supply
 Outsourcing/ LSP/ 3PL / 4PL
 Global sourcing increasing Alliances and Contracts
 e-procurement/ e-Markets
 buying exchanges
 auction sites
 Design Collaboration
 CRP/ VMI/ CPFR
August 08, 2017 Strategic Role of Procurement 19
 Roadblocks to Strategic Procurement
 Organization and people
 Not “strategic”
 Limited skill to align with objectives

 Processes
 Adversarial relationships
 Obsolete and outdated
 Need end-to-end processes

 Information systems
 Need total cost of ownership approach

 Knowledge of the new possibilities

August 08, 2017 Strategic Role of Procurement 20
 Data Driven Approach
Compliance
Good Financial
Public procurement Governance Viability

processes can be
transformed if :
1. Data such as RFP, Process cycle time

responses, evaluation Sharing of bid evaluation and

tendering results
sheet, user requirements Average number of
bids per tender
are analysed % of tenders cancelled
or modified
2. The entire “procure to Average saving per
tender
pay” process is analysed

August 08, 2017 Strategic Role of Procurement 21

 Procurement Data Visualization
Using states’ e-Tendering
portals, data is extracted
for successfully awarded
tenders

Source: www.procurementobservatoryup.com
August 08, 2017 Strategic Role of Procurement 22
 Data Visualization Tool

Source: www.procurementobservatoryup.com
August 08, 2017 Strategic Role of Procurement 23
 Cost Estimation Tool

Source: www.procurementobservatoryup.com
August 08, 2017 Strategic Role of Procurement 24
 Making Procurement Decisions in Practice
 Public Procurement has a Strategic Role
 Update/ Upgrade
 Rules/ Guidelines/ Manuals

 Processes

 ICT Tools

 Ensure appropriate coordination across departments

and units
 Always evaluate the total cost of ownership
 Get into long-term contracts with key suppliers

August 08, 2017 Strategic Role of Procurement 25

 For additional information, kindly visit:
http://www.procurementobservatoryup.com/

August 08, 2017

View publication stats
Strategic Role of Procurement 26