STRATEGIC PROCUREMENT

THEORY AND PRACTICE

MSCSCM 628

LESSON 3 – PROCUREMENT
OBJECTIVE
 INTRODUCTION
• Access to services has become a key determinant of human welfare and a
measure of economic productivity in every nation whether developed or
developing.
• In view of the foregoing, it is the responsibility of every government or entity to
provide services to its stakeholders.
• These public services may range although not limited to food, education, health,
water supply, education, transport, and infrastructure.
• In most cases, such services may be lacking due to incapacitation of the private
sector, hence it becomes the responsibility of the government (Farzana, 2017, p.
1).
 INTRODUCTION
• The government through its various arms or public entities (such as government
ministries and parastatals) ensures that services are delivered to the citizenry.
• This entails that, it is the responsibilities of entities or governments to ensure
services delivery.
• However, accessing such services has remained a major challenge in most
developing economies.
 DEFINITION OF SERVICE DELIVERY
• Service delivery is a difficult term to define as it varies in the context and tradition
of a given country and organization.
• In defining the term, first it was disintegrated with components (service, and
delivery) defined separately and later reintegrated.
• Disintegration was meant to identify and generate common definitions of the
terms service and the act of delivery.
 DEFINITION OF SERVICE DELIVERY
Service
• Over the years, a well standing definition of the term service was provided by The
Universal Dictionary (1961, p 1394-1395).
• A service was defined as the performance of work or duty by an official or an act
of helping others, or power to control or make use of resources, or an
organisation or system of providing the public with something useful or
necessary.
 DEFINITION OF SERVICE DELIVERY
Delivery
• The act of delivery was also well defined by The Universal dictionary (1961, p.
413) as the act producing or performing, handing over, taking goods to the
intended recipient, or producing results as promised or expected.
 DEFINITION OF SERVICE DELIVERY
• In light of the above definitions Martins & Ledimo, (2015, p. 575) relate service
delivery as the actual delivery of a service which could be a good, service or
works to the clients.
• Service delivery was conceptualised as the process concerned with the provision
of a good, service or works acquired through a procurement process by a
procurement professional to serve the organisation’s mandate.
 MEASURES OF SERVICE DELIVERY
• The rise in the spread and seamless flow of information due technological
advancements in the global village in-turn led to citizens exerting more and more
pressure on their governments and entities for effective service delivery (Mudalige,
Indeelinie, & Shahzadah, 2020, p. 2 and Khalil, 2012, p. 86).
• For governments/entities to execute their functions in a way to realize their goals
and objectives, they are bound to supply and deliver public goods, services and
works to their stakeholders.
• According to Khan, (2018, p. 2) and Komakech, (2016, p. 20) if the procurement
function fails to deliver quality goods, services and works in a timely fashion and at
an economical price, then performance of a government/entity obviously suffer.
• This entails that, a good procurement system is the vehicle towards effective service
delivery.
 MEASURES OF SERVICE DELIVERY

• However, measurement of service delivery through the procurement function has

been a difficult area in the past for management to gauge considering the
complexity of the activities and the function (OECD, 2019, p 9; McConnell, 2009,
p. 20).
• Similar sentiments were also echoed by The world bank (2017, p. 13) and
Anuradha, (2010, p. 1) that, international literature on measurement of
procurement service delivery fall short in the body of knowledge in capturing a
number of important dimensions including the costs, quality, transparency,
competition and efficiency.
• Therefore, it was of great interest in this module to address the existing gap.
 MEASURES OF SERVICE DELIVERY

• Taking cognisance of the identified aforementioned existing gap on measures of

service delivery as well also being guided by the Zimbabwean public procurement
Act – Public Procurement and Disposal of Public Asset Act [Chapter22:23] in
terms of operational transaction measure, this module adopted value for money,
transparency, cost, competitive, quality and time as operational measures of
service delivery.
• This is in agreement with the ADB, (2018, p. 7) and International Finance
Corporation, (2015, p. 4-5) who also provides that, features which should be
borne in mind when designing an effective service delivery should include: high
quality, competitive, cost-efficient, transparent, value for money and time.
 KEY MEASURE OF SERVICE DELIVERY

• Though there maybe a number of measures, Komakech, (2016, p. 22) argued

that, the overall objective of a procurement system is to provide value for money
to all entities.
• Henceforth, other measures or objectives therefore, supplement the value for
money by ensuring that funds are spent in a transparent, cost effective, timely
and with the procurements being fit for purpose.
 MEASURES OF SERVICE DELIVERY
Value for money (VFM)
• Although procurements are oftenly assessed based on the cost of procuring the
core elements, however the process should aim at acquiring the right items, at
the right time, in the right quantities and at the right price to support
government/entities’ actions effectively.
• In view of such, Khan, (2018, p. 5) also shared the same opinion and argued that,
although price is essential, however, price alone may not necessarily give a true
reflection hence the need to consider other essential elements.
 MEASURES OF SERVICE DELIVERY
• Value for money (VFM)
• Value for money has become the main objective of every procurement especially in this 21st
century.
• It is an essential test against which a procuring entity must justify a procurement outcome.
• The World Bank, (2016, p. 15) defined value for money as an effective, efficient, and economic
use of resources, which requires an evaluation of relevant costs and benefits, along with an
assessment of risks, and non-price attributes and/or life cycle costs, as appropriate.
• Thus, value for money is a concept associated with deployment of resources viz-a-vis realization
of some expected output values.
• So, it is the best combination of price and quality to meet the particular need in the shortest
possible time.
• However, its achievement demands a lot of attention as it also demands a lot of issues both
financial and non-financial parameters.
 MEASURES OF SERVICE DELIVERY
Transparency
• For procurement to be acceptable to all stakeholders it serves, it should be seen to be public,
transparent, and objective (EBRD, 2018, p. 18).
• Of the aforementioned attributes, EBRD, (2018, p. 18) emphasised more on transparency as key.
• Transparency refers to the principle that is central to a modern procurement system (Komakech, 2016,
p. 22).
• It is a measure which ensures that procurement in organizations is executed in an open and
transparent manner.
• The purpose of transparency is to consistently make relevant and complete information easily and
readily available to interested parties, preferably at no or reasonable cost (The World Bank, 2016, p.
12).
• In light to the aforementioned, the objective of transparency is achieved by ensuring that all
procurement is duly communicated to members of the public, with clear guidelines on how the
process will be conducted.
 MEASURES OF SERVICE DELIVERY

Transparency
Thus, a transparent procurement system is one that has:
• Relevant procurement information be made publicly available to all interested parties,
consistently and in a timely manner, through readily accessible and widely available sources at
reasonable or no cost.
• Appropriate reporting of procurement activities
• The use of confidentiality provisions in contracts only where justified.
• Procurement records are public and should be available for inspection by auditors.
• Clear regulations and procedures
• Standardized tender documents
• Standardized tender contracts
• Fair process
 MEASURES OF SERVICE DELIVERY

Cost
• The main thrust is on containment. An adopted understanding is that, most
organizations are wasteful in their spending. In view of the foregoing, the
objective seeks to ensure that the organization acquires the goods, services and
works in a cost effective manner. The objective is achieved by buying from the
lowest possible qualified bidder who in most cases arrived at after they have
passed the technical qualifications. According EBRD, (2018, p. 18) cost objective
emphasise where:
• Participation costs should be kept low
• There should be reasonable enforcement costs
• Aggregation of lots should be possible
• Whole life cycle costing should be used, where appropriate
• Increased competition from potential bidders should be allowed
 MEASURES OF SERVICE DELIVERY

Competitive
• Competitive is a term derived from the aspect of competition. Komakech, (2016, p. 23) defined
competition as a situation where bidders compete with one another for a procurement contract
under the same terms and conditions for the provision of goods, services, or works.
• So, competitiveness is premised on the idea of alternatives.
• This entails that, procurement should be carried out through competition by giving room to
attract high quality bidders capable of meeting entities’ needs unless there are convincing
reasons contrary (Komakech, 2016, p. 23).
• Professionals should be able to choose among potential providers the best supplier to deliver
goods, services or works (International Finance Corporation, 2015, p. 5).
• Through competition prospective contractors are pressured to put forward their best offers in
order to win contracts (International Trade Centre, 2014, p. 11).
 MEASURES OF SERVICE DELIVERY

Competitive
• According to the International Trade Centre, (2014, p. 11) competitiveness mainly
emphasize on whether:
•  Procurement opportunities are accessible to all interested providers.
• Sufficient time is offered to the bidders or contractors or suppliers.
• All bidders are evaluated under the same criteria stipulated in the bidding
documents.
• Clear and non restrictive specifications, scope of works or terms of reference.
• Use of Standard Bidding Documents (SBDs).
 MEASURES OF SERVICE DELIVERY

Time
• The need to minimize waste in the supply chain has led to the recognition and
increased degree of attention towards time as a concern in recent years (Baily, Farmer,
Crocker, Jessop, & Jones, 2015, p. 237).
• While price is still an important variable however, a major determinant of choice of
supplier or brand in nowadays is the cost of time.
• Time is now an important element of supply chain management.
• Demetris, (2014, p.1) defined time as a dimension and measure in which events can be
ordered from the past through the present into the future with a concern of duration of
each event and intervals between them.
• In light of the foregoing, time requires that procurement processes be time sensitive
and strive to avoid delays.
 MEASURES OF SERVICE DELIVERY
Time
• If goods, or services arrive late or work is not completed at the right time, losses
of significant value may be recorded where sales may be lost, production may
halted, and damages clauses may be invoked by dissatisfied customers.
• In view of the foregoing, when a project is delivered promptly or when a process
is completed rapidly, greater value is created for all stakeholders (ADB, 2018, p.
7).
• Therefore, procurement authorities especially in government entities are
required to have a good understanding of the value of time in supply chain.
 MEASURES OF SERVICE DELIVERY

Fit for Purpose (Quality)

• Quality is increasingly being seen as a ‘qualifier’ which must be demonstrably
attainable before a bidder can merit consideration in any procurement proceeding.
• Only unless quality or technical specifications can be clearly understood and
consistently met, a potential bidder is unlikely to award a contract from a procuring
entity.
• However, there are several ways in which quality can be defined as the word has
attracted several meanings and connotations.
• Despite several definitions in the body of knowledge, an idea that has gained
widespread support is that by Baily, Farmer, Crocker, Jessop, & Jones, (2015, p. 162)
who described quality as as simply ‘fitness for purpose’, or ‘suitability’.