Procurement guideline of Horn Africa trading company

 Weldeyohannes legese July 2020

 Presentation Outline

1 3 4 5 6 7
1 42 Introduction

2
Introduction Procurement
Principles
Procurement plan
Objectives
Procurement
Bid documents
Procurement
policies and
Contract
administration

3
methods, procedures
Methodology

Results and Discussions

5 Conclusions and Recommendations

Introduction
 1. Introduction

 procurement obtain the right goods, works or services at the right quantity,
delivered to the right place including the right quality, and at the right price
 Purchasing is essential to all organization.
 Purchasing must cooperate closely with other management functions such as
engineering, marketing, quality assurance, finance, manufacturing as well as
important contact with suppliers of goods, works and service.
 Good communication with these various groups is essential.
 Purchased , costs could be among the largest capital expenditures in an
organization
1.2. Scope of Application
This guideline shall apply to Horn Africa trading and construction
industry S.C is applicable.
 Definitions of terms This guideline requires:-
a) “Technical Specification’’ means document describing the quality, type and standard
with which the required goods, services, works or consultancy services.
b) “Bid” means a stage in the procurement process extending from advertisement of or
invitation to bid up to signing of contract.
C “Standard Bidding Document” means the document prepared by the Agency to
serve as a point of reference in the preparation of bidding documents by Public Bodies.
d) “Procurement Unit” means a body responsible for procurement within company.
e) “Total Price” payment made by companies in respect of a particular procurement
which includes taxes and all other incidental costs.
Procurement Objectives

02
 Procurement Objectives
rocurement Objectives
is to obtain the right goods works or services at the right
quantity, delivered to the right place including the right
service and at the right total cost (caring cost, stock out
cost and capital tide up cost).
 Minimize total cost

• To minimize total goods, works or service costs, purchasing must work with
other management activates
• Purchasing can appear economical when buying large quantities of materials
at appropriate quantity discounts,
• To avoid the unnecessary tying up of working capital should by one of the
objective of procurements that the construction and trade industry’s cash flow
is not negatively affected.
 Provide consistent quality purchase, goods, works and services

• procurement should endeavor to obtain the best required quality goods, works and
services at the lowest cost
• procurement should consider the three important factors in procurement decisions
– quality, service, and price
• Quality is generally the most important. Buying items at lowest price is not always
less expensive reduce quality may result unhappy customers
• Therefore, procurement should work closely with individual who are responsible
for quality specification.
 Provide an uninterrupted flow of goods, Works and services

• most common causes of complaints material shortage.

• due to machine down time, personnel down time.
• Decrease productivity and lost customers,
• therefore procurement should provide an uninterrupted flow of materials and service
to the company without incurring additional cost .
• Besides, it is important to ensure the maintenance of sufficient stock of materials in
periods of short supply and anticipated price change.
• Good planning and good communication with all suppliers are vital in
accomplishing this objective.
Procurement Principles

03
when buying goods, work and services. Takes the following
principles in the account
a) Achieve maximum value for money in procurement. By accomplish
the FIVE ’ R’
b) No Candidate shall be discriminated
c) Support the country’s economic development by ensuring economy,
efficiency and effectiveness in the execution of company procurement.
d) made transparent to all concerned parties.
e) Ensure accountability for decisions made of company procurement.
 1. Be fair to all suppliers
encourage capable suppliers to respond
•Treat all suppliers equally, avoid discrimination
•Give all suppliers a full and fair opportunity to
complete
•Be open to sub contracting opportunities in big
project
•Take to un successful suppliers so they can learn and
know how to improve next time
 2. Get the right suppliers
Be clear about what you need
•Choose the right supplier who can deliver at a fair price and on time
•encourage and reward them to deliver great result
•Identify relevant risks and get the right person to manage them

3. Effectiveness:
to achieve its procurement processes as cost effectively
4. Efficiency:
appropriate to procurement processes as cost effectively and efficiently as
possible.
5. Competitiveness
The construction and trade industry will satisfy its requirements through
competition unless
Duties and Responsibilities of general manager of the company,
•Ensure that the procurement staff have the required educational
qualification and experience in the fields relevant to procurement.
• Ensure that the procurement staff and head of the procurement
unit meet high ethical standards.
• Ensure that the unit responsible for procurement in the company
and internal system
• Establish a Procurement Endorsing Committee no less than 3
persons which serve for a maximum period of one year.
Responsibility of the department head: responsible for the following
•Plan, organize, coordinate and monitor the activities of all stores.
1.Prepares the annual plan and budget of the division.
•Checks and controls inputs, all other purchased items are to the specifications
•Confirms the items type and amount that are available in the stores.
•Checks the Store requisitions from each department is budgeted or approved.
•Ensures that raw materials, finished products& other materials are received by GRN or/FPTRV/
(SIV) or/DON/.
2.2. Responsibility of Purchase Committee:
•The purchase committee is responsible to report to the general manager.
•The committee conducts meetings with the presence of at least two thirds of the total numbers
including the chair person
•shall carefully perform the process of analyzing evaluation and recommendation
•The committee participates in opening bid/preformed and signs on all quotations
•The committee should signs on minute
the purchase committee ascertain the legibility of documents and goods
Purchase Committee Composition

1 Procurement department head Chairman

2 Finance department head Member
3 marketing department head or other assigned Member
by GM
4 Any other department head (Assign by GM) Member
5 Purchasing officer ( nonvoting) Secretary
Local Purchase Delegation of Authority
Foreign Purchase Delegation of Authority
Delegate authority to approve the purchase
•For purchase amounting to less than USD 5000 direct purchase ,
approved by procurement department head;
•For purchases worth between USD 5,000 and USD 300,000 at least
three know suppliers will be invited and analyzed and recommended
by purchasing committee. For approval by the general manager
•Purchase more than USD 300,001 should be made through open or
restricted bid, and is analyzed and recommended by purchase
committee for approval by the general manager
 Relationships in the process
Intra-Relationship
Some of the important relationships are:
1. Inventory planning and control
•should work together to optimize inventory levels and minimize total cost
•supplier delays, production schedule changes, and quality problems .
•Deliveries of purchase material will be delayed if inventory control is lat
in requisitioning.
2. Physical distribution
•is responsible for making on time deliveries to the customer,
•Late supplier delivery can delay customer’s shipments.
•Physical destruction can contribute to good purchasing but minimizing
incoming transportation cost,
Receiving store and materials handling
•Obtaining accurate counts and detecting damage can be difficult. Receiving
and stores must provide accurate information regarding the quantity and
condition of all materials.
Marketing
•Marketing depends up on purchasing for many inputs.
•buying at the lowest total cost to aid in competitive selling. Purchasing
must also prepare accurate material cost estimates for sales quotations.
•Purchasing can help to determine the degree of quality that can be ‘built
into’ a product related to cost.
Finance
•Finance is responsible for various aspects of financial planning such as budget. Cashflow,
• and working capital .the purchasing function provides accurate procurement plans to finance.
Operation
•The purchasing function is vital to efficient operations. Which require a smooth uninterrupted
flow of purchased materials.
Engineering
•providing information and services such as alternative design costs new produce/process
availability,.
Quality Control/Assurance
•Procurement must relate quality assurance’s complaints and recommendation to the supplier
•if materials are rejected on incoming inspection.
•because of an immediate need for rejected materials and a lack of inspection personnel quality
assurance
Relations with Suppliers
•Reliable suppliers are important resource, contributing directly to the company
• purchasing should develop good rapport with suppliers
Procurement plan

04
Procurement plan
• is the process of assessing and projecting the procurement needs of the
organization in order to determine its procurement strategy.
•. procurement planning is a key element for successful acquisitions of
goods. Services and works.

Procurement plan includes the following .

•Identification and packaging of procurements.
•Selection of procurement Method
•Setting time table for procurement
•Approval and amendment of procurement plan
Procurement methods
when activating the procuring process,
a) Open bidding
b) Restricted bidding
c) Request for quotations
d) Single source
e) Request for proposal, and
f) Two stage bidding
 Direct procurement
should practice as follows;
•Verbal quotations: is a quotation that collected either through telephone, face to
face or email based on the verbal request.
•the threshold appliers for goods works or services with a monetary value of
between ETB 2,000 and ETB 5,000 inclusive of VAT;
Request for quotation ( proforma )
1.The threshold applies for goods , service and works with a monetary value of
between ETB 10,001 and ETB 300,000 inclusive of VAT;
2.The request for quotation will contain a detailed specification compiled by the
user unit;
3.A request for quotations must be compiled by the procurement personnel and
forwarded to the potential providers;
4.the request for quotations may indicate the closing date, validity period and
the address where the suppliers will be delivered or the service will be rendered
 Limited (Restricted) tendering
is a method of procurement of goods services and work that involves the
issuance of a direct invitation to bid by the concerned procuring entity to a
set of preselected suppliers with known experience
Open tendering:
•the requirement is advertised for all prospective candidates to participate:
Two stage tenders:
•two stage tender procedure will be used, under which first un-priced technical
proposals are invited, and financial analysis ,priced tenders in the second stage
.
Direct negotiation
•Direct negotiations will only take place under the following circumstances
a)In cases of urgency due to unforeseen circumstance where lack of
planning
b)Due to the technical nature of the goods works or services
Sourcing and Evaluation of suppliers
 some of the Sources for Obtaining
Competent Suppliers are
Sales men contact:
Purchasing contacts:
Trade directories
Catalogs
Trade shows and conventions:
Other source : like embassies ,
(WTO) , chamber of commerce ,trade
shows ,websites
Criteria to evaluate potential suppliers
To obtaining an uninterrupted flow of materials and developing reliable supplier.
a)Financial condition: The best suppliers are financially strong./One source of financial
information is credit repowers/ Additional information the income statement and balance
sheet/.
b)Quality: /specification/. can consistently deliver good quality.
c)Capacity: success or failure of suppliers depends upon their capacity/. Which can affect
their ability to perform required services and or production/. late delivery/,.
d)Service suppliers can interpret the term ‘service related’ in various ways when evaluating
service, a buyer would certainly want to consider a supplier’s ability to comply with
scheduled delivery dates.
e)Plant visits: the buyer may visit a supplier’s facility to determine the supplier’s
capability. This visit can be conducted by a respective team ,the visit could include a review
of equipment, processes, quality control procedures, the material/logistics management
organization and systems,
f)Supplier certification: one effective means for controlling the quality of incoming
materials and services is to develop, use, and maintain a supplier certification program.
Shipments of materials from suppliers who are certified may incoming inspection,
Bid documents

05
Bid documents
Are essential to consider in any purchasing process through
tender
•The date of bid submission is an essential element
•The final date of bid submission the bid in public midia for
open bid:
•The extension of bid closing date cloud be initiated either from
the suppliers or buyer
•The general manager approves the extension of bid.
•The change of bid extension should be transmitted to all
concerned
Elements of bid documents
Should include at least the following important
information:
•Required technical specification
•Delivery
•Payment and delivery terms
•The validity date of the price offered
•The type of bid guarantee
•The closing date of bid and opening date etc
Presentation of bid documents
Should be followed in the presentation of bid documents
•bids must be in sealed envelopes
•bids offered must indicate name and be signed and sealed
•Bid documents offered should be clearly written without cancellation
•If bids are to be presented through agent , agency agreement
•Bidder cannot change prices after the bids are opened .
•Price should being birr or in the currency acceptable to the national band
of Ethiopia
The language used in a bid document should be in Tigrigna , Amharic or
English
 Pre-condition for opening bids
Opening bids
•The purchasing committee will look into the procedures of purchasing of the
organization are strictly followed;
•The committee will invite bidders to attend the bid opening ceremony, if
necessary:
•the start of the bid opening shall not be delayed, even if every bidder is not
represented.
•All persons attending the bid opening shall sign
•no bid shall be rejected at bid opening except for late bids
•all members of the purchasing committee will sign on each page
•The bid analysis will be kept secret unit approved by the general manager
•Any bid that was not opened at the bid opening shall not be considered and
shall be returned unopened.
Evaluation factors of bid
important factors they should be followed in bid or
purchase evaluation are the following
•Price:
•Quality:
•Delivery time:
•Reliability:
Bid analysis
If purchase requires independent analysis of technical and
financial:
•Technical analysis will be done by user or the technical team
•Financial analysis will be done by the procurement department
Deciding winner of the bid
.

•The purchasing committee shall check the bid analysis

•When two or more bidders are at a comparable level in their offer, the
committee may request price reduction .if price reduction not offered the
purchase committee will recommended the winner and shall be approved
by general manager
•Minutes of the purchasing committee will be prepared
•The general manager may accept or reject the recommendation of the
purchasing committee. If rejected the general manager may instruct the
committee to reconsider or to cancel the bid or tender. But the GM is
responsible for genuine explanation for the basis of rejection
Cancellation of the bid or bidder
•Conditions for bid rejection should be explicitly
mentioned in the bid document
•the general manager may cancel or accept a bid or a
bidder
Procurement policies and procedures

05
 Local Procurement Polices
The following are basic policies that should be adhered to our companies
•Whenever it is technically feasible, local purchase should be encouraged
•be budgeted made on a planned basis in order to promote efficiency and
effectiveness.
•The company shall have a purchase committee.
•For all purchases between birr 2,000 and 10,000 verbal quotation will be used
•For all purchases of goods,works or services birr 10,001 a purchase order filled out
•purchases between birr 10,001 and 300,000 at least three preforma invoices
•shall be evaluated based on quality, price, delivery and quantity
• All procurement personnel should adhere to the ethical conducts of procurement
•All purchase information should be kept properly and available for easy reference
•Purchase amounting to more than birr 300,001 will be processed either through
restricted or open tender shall be approved by general manager
 . Local Procurement Procedures
The following purchase procedures in all local purchases
•user fills material request form and forwards it to the inventory control /store. If
materials are not available in stock or the reorder stock level is reached, purchase
requisition will be prepared and sent to procurement function to initiate purchases.
•Budget availability and approval should be checked before sending request to purcha
•The procurement function will verify the type of purchase
•The procurement function will plan depending on the urgency of the matter.
•Depending on the level of authorization and amount indicated in the purchase policy
either preforma is collected or tender is issued or direct purchase is exercised
•The bid or preforma is analyzed in accordance with the supplier’s selection criteria an
the selection of a supplier’s will be approved by the delegated person,
•The delegated person should approve purchase order prepared
•The purchaser should report regularly to the management
 Foreign Procurement Policy
Some times, goods, services and works required by user department may not be available
in the local market. Purchase from foreign market. Considering the following basic
policies.
•The economic and technical advantages should be clearly stated before a foreign purchase is
initiated
•All foreign purchases should be insured locally and the insurance coverage will be up to final
designation
•All purchases must be budgeted and should be made on a planned
•All foreign purchases activities should be centralized and have purchase committee
•All purchases shall be evaluated based on quality price, delivery and quality
•All procurement personnel should ethical conduct of procurement as stipulated in this
guidline
•All purchase information should be kept properly and available for easy reference by the
procurement department
 Foreign Procurement Procedures
Selection of a foreign supplier is more complicated and costly. Therefore, the management of the
the company must analyze the need for foreign purchase. The following are procedures.
•The ultimate user fills material request form and forwards it to the store or inventory control. if
materials are not available in stock purchase requisition will be prepared and sent to procurement
function to initiate purchases
•Budget availability and approval should be checked before sending request to purchase
•The procurement function will verify the type of purchase;
•The procurement function will plan. Depending on the urgency of the matter.
•Depending on the level of authorization and amount indicated in the purchase policy either
proforma is collected or tender is issued or direct purchase is exercised
•The bid or proforma is analyzed in accordance to supplier’s evaluation criteria and approved by
the authorized body purchase order will be prepared
•Upon receipt of the proforma invoice, procurement function should clearly understand
particularly the terms and conditions of opening L/C.etc.
•Purchasing will apply to appropriate authority for foreign exchange permit .once permit is
obtained letter of credit (L/C) ,
 Purchase Exceptions
Urgent procurement
•when urgency is identified by the user until , the urgent case is to be certified by the manager of
the user unit as urgent and submitted to the procurement function for processing.
Emergency procurement
•user unit should communicate with general manager the user unit will take an action and report
in writing within twenty-four hours of such an emergency to the general manager
•The procurement department will record such incidents. In times of such events when getting
formal approval from the general manager is not possible, the next level of management should
approve.
Repeat Order
When is repeat order allowed?
•The original contract must have been procured through bidding
• prices of the repeat order must be the same as or lower than those in the original contract,
•The repeat order will not result in splitting of contract requisitions or purchase orders;
•Except in case duly approved by the general, the repeat order shall be availed with in:
Contract administration

05
 Purchase contract
After bid process completed may enter into a contract for not more than
a year for the supply of goods, works or services on the following
conditions
•When items are believed to require exceptional attention.
•When the procurement of goods, works or services for a longer period
is believed to be beneficial to the company( i.e. maintenance service etc)
• The need for continuous supply is necessary and cost effective and the
supplier is believed to be reliable (i.e. such as fuel and rent car)
Dispute Resolution
•In case the contract defaulted a maximum the company has to be
exerted to solve the dispute through negotiating, if not be resolved
litigating, final option.
Appointment of Consultants
•The term consultant includes policy engineering services financial services ,
procurement services and preparation and implementation of project to complement
the firm’s capabilities in these areas.
Consultants will be engaged principally for the following reasons
•To provide specialized services for limited periods without permanent employment
•To benefit from superior knowledge and transfer of skills
•To provide independent advice on the most suitable methodologies and solution
11.2. Minimum requirements for appointing consultants
11.3. Applicability of policy
The procedures outlined here in apply to all contracts for consulting services. in procuring consulting services,
the firm will be satisfied that
•The procedures to be used in the selection of consultants who have the necessary professional qualifications,
experience and ability
11.4. Conflict of interest
Consultants are required to provide professional, objective, will not be hired for an assignment that will be in
conflict with their prior or current obligation to other client
•Meeting the highest standards of qualit,delivery and efficiency in term of cost ;
 Selection procedure
Identify the approach be followed in selection consultants. in most instance,
quality and cost based selection (QCBS ) is recommended.
•Quality based selection;
•Selection under affixed budget;
•Least cost selection; and
 A. Inviting proposals
•The following steps will be followed in appointing consultants where a clear ‘Teams Of
Reference’ (TOR) has been compiled and the objectives and scope are clearly defined
B. Drafting the TOR;
Consultants will be expected to execute their tasks according to the TOR.the TOR will clearly
define the objectives goals and scope of the assignment and provide back ground information. :
•Consultant’s experience;
•Qualification of key personnel;
•Transfer of knowledge (where applicable);.
C. Evaluation
The evaluation of the proposals will be carried out in two stages the functionality (quality) and
then the price .
When the two envelope system (separate envelop for the technical and financial proposal) is used
The procurement committee will evaluate each technical proposal in term of the specified
evaluation criteria or TOR, that will include the following
•The consultant’s relevant experience for the assignment;
•The quality of the methodology proposed;
•The qualification of the key staff proposed;
 Documentation
12.1. Shipping documents
.the main shipping documents include:
A. Bill of lading
Check whether the bill of lading correctly contains the following
•Name of vessel
•Port of loading
•Port of discharge
•Name of the firm shipping the goods
•Name of consignee
•Description of goods
•Number and type of package
•Weight and measurement
•Identification marks
•Storage on deck or in deck
•Transshipment
•Payment of freight.
•Clean or dirty, bill of lading. the statement Whether the bill of loading is of other carrier
 Commercial invoice
It describes the goods which are the subjects of contact. include:
•Name and address of both parties
•The unit price where applicable
•Total price
•Shipping terms such as Ex-works, FAS ,FOB,CF and CIF
•Shipping marks
•Weight or quantity of goods
•specific requirements
•number of invoices
•name of vessel
•port of dispatch and destination
•freight ( prepaid or payable at destination )
•insurance ( local or foreign )
•origin of the goods
•certified invoice if required
•invoice endorsed by chamber of commerce of the exporting country
•health certificate if required
•certificate of quality analysis by appointed agent
Packing list
•This document indicates contents of each package and markings it facilitates customs clearance and the receiving of
goods in store management
 Insurance document
The insurance document should normally specify
•Name of insurance
•Name of construction and trade industry to whose name the insurance
is effected
•The nature of goods insured
The period of insurance
Responsibilities of the procurement function in handling documents
the purchasing unit relating to foreign purchases should do the following specific activities
•Check that shipping documents are received on time
•Check that the required shipping documents are delivered on time, in the payment
request of transistor are correct.
•Ensure preliminary insurance survey is made when goods are unloaded from
vessels
•Ensure that the goods are properly cleared from ports are received .
•Ensure that the required clearance is obtained from national bank of Ethiopia by
presenting the required documents evidencing the receipt of goods,
 Ethical Standards
13.1.Basic principle of ethics
Horn Africa Construction, Trade And Industry S.C do not, and
shall not; Tolerate any fraudulent, corrupt and/or collusive
practices in the course of operation.
1. Prevent fraudulent, corrupt and/or collusive practices;
2. Employees adhere to the highest standard of integrity;
3. Corrupt are promptly detected and reported,to independent
investigations;
Measure to prevent any fraudulent, corrupt practice
•Identifying areas of operations that are more vulnerable to the risks
of fraudulent, corrupt, practices
•Implementing and monitoring risks that are easily accessible by
internal and external auditors
•Maintaining on file records of transactions in accordance with the
company Requirements;
•Conducting employee training on internal control system to prevent,
detect and report fraudulent , corrupt, particles
•Conducting periodic call audit by internal auditor and checking that
systems guidline policies and procedures are adhered
•The company shall audited by external auditor every year in
reasonable time after closing of budget year.
Training and disclosure program
•Increasing awareness of the risk of fraudulent, corrupt and/or collusive practice; and
•Developing skills for understanding, detecting preventing and reporting such ractice.
Reporting procedures
As stated about, all persons to whom this policy applies shall report promptly any
action or practices that is or may be in breach of this policy, or any attempts there , to
the CEO and/or to the general managers as appropriate
Cont…