Public Procurement Planning slides finalized · reconstruction, demolition, repair or renovation of a building, structure or works, such as site preparation, excavation, erection,

Public Procurement Planning in Lagos State

August 2014

Nigel Shipman and Kingsley Udeh

Objectives• To help procurement officials and others with duties

related to procurement in complying with the Public Procurement Law, Regulations, the Procedures Manual, Standard Bidding Documents and the procurement plan template.

• To focus on the important theme of procurement planning and address key practical issues related to it.

• To review the year’s procurement plans for the purpose of assessing compliance with the LSPPA approved template, and filling identified gaps.

• To assess whether the procurement plan is being used as a practical working tool to guide the procurement process over the financial year.

2

Learning outcome

At the end of this session you will be able to:• Identify key procurement planning strategies;• Apply these strategies in conducting your

procurement functions.

3

General

Introduction to Procurement Planning

4

Introduction• Procurement planning is the process of deciding what, when and

how to acquire, and from what source.• It is not only a good practice, but also required by law- section 26

LSPPA Law.– Specific requirements stated in Section 9 of Procurement Regulations– Guidance to good planning practice in Section 4 of Procurement

Manual• During the procurement planning process the procurement method

is assigned and the expectations for fulfilment of procurement requirements are determined.

• The outcome of procurement planning is a procurement plan.• Procurement planning is a stage in the public procurement cycle.

5

Stages of the Procurement Cycle• Stage 1: Procurement planning• Stage 2: Qualification of bidders• Stage 3: Preparation of tender documents and

specifications• Stage 4: Issue of invitations to tender and tender

documentation• Stage 5: Receipt of offers• Stage 6: Tender evaluation• Stage 7: Approval of contract award• Stage 8: Contract formation• Stage 9: Contract Management

6

The Stage of Procurement Planning• Procurement planning is identified as the first

stage in the above slide on procurement cycle• However, procurement planning is dynamic in

nature; meaning that procurement plans are to be periodically updated, because-– budget may be supplemented or revised within a

financial year (FY)– other supervening events may alter what was planned

• In essence, procurement planning is revisited throughout the procurement cycle as the need arises.

7

Scope of procurement planning

• Procurement planning should cover all the stages of procurement implementation: – needs assessment, – appropriation, – Preparation of tender documents,– Prequalification,– bid advertisement, – Receipt of bids, – bid opening, – bid examination and evaluation, – necessary approvals, – contract execution and administration.

• Disposal also to be planned. 8

Nature of Procurement Planning

• Dynamic– Procurement plans are to be periodically reviewed and

updated to respond to changes in budget, procurement process and execution of projects within a FY.

– Quarterly procurement plan may be developed. • Data based

– Information on the actual cost of goods, works and services are to be derived from appropriate market and statistical data.

– Plans are to be based on applicable budget and policy documents, such as budget call circulars, medium term expenditure frameworks (MTEF).

9

Nature of Procurement Planning• Time sensitive

– Procurements are time-bound owing to budget and contract duration.

– Procurement plans should identify appropriate time for each procurement activity.

– Note consequences of improper timing: delayed completion, extra cost, inadequate funds.

• All encompassing– All the stages of the procurement cycle ought to be

planned for and captured in the procurement plan.– Procurement plans should not only spell out the timing for

the various procurement actions, but should also allocate responsibilities and identify funding requirements for activities

10

Nature of Procurement Planning

• Authority for procurement decisions– Procurement plans provide basis for procurement

decisions• If item is not in plan, procurement should not be

approved unless approval obtained to adjust plan, so as to keep planned procurements within budget.

11

What procurement planning involvesProcurement Planning involves: • setting up a Procurement Planning Committee each FY;• assessing the needs of the organization;• identifying the goods, works or services required to

meet the needs;• analyzing the cost implications of the proposed

procurement; • integrating the proposed procurement expenditure

into the annual budget; • determining what procurement strategies or methods

to be used for effecting the procurement;• and setting the time frames and the responsibilities for

the full procurement process.12

Exercise

• The Accounting Officer of your MDA wishes that certain projects be executed by your MDA in the year 2015. He wants to know the first step that ought to be taken towards realizing his intention. – Advise him.– Also, point out to him what the first step may entail, using

your organization as an reference.

13

Stage one

Setting up the Procurement Planning Committee

14

Procurement Planning Committee• The Accounting Officer (AO) of the MDA is responsible for

setting up the Procurement Planning Committee of his MDA- s 29(2)(b) LSPPAL.

• Accounting Officer (AO)– Ministries: the Permanent Secretary– Extra-ministerial Departments or agencies: Director General or

his equivalent (Managing Directors, etc.) • The Committee is to be constituted in each FY and

dissolved after that FY by the AO- s 27(1) LSPPAL.• The membership of the Committee is made up of

representatives of functions or departments/units in the MDA (not ex-officio).

• The membership may therefore vary from year to year; thus the need for relevant officers of the MDA to be skilled in procurement planning.

15

Membership of the Committee

• Permanent Secretary/Director General (i.e., the Accounting Officer) or his representative (Chairperson)

• Other members include representatives of– The Unit directly in need of the procurement;– The Financial Unit/Department of the MDA;– Planning Research and Statistics Unit/Department of the

MDA;– Technical personnel with expertise in the subject matter

for each particular procurement;– The Legal Unit/Department of the MDA;– The Procurement Office of the MDA (Secretary).

16

Notes on membership of the Committee

• Since the membership of the Committee consists of representative of the units/departments concerned the heads or Directors in charge of these units/departments need not be in the Committee.

• Instead, the deputy head or Deputy Director (or any knowledgeable & reliable senior officers in the unit/dept) may be the representative for the unit/departments concerned.

• This may enable the Committee’s work to receive the required time and attention, which the heads may not have.

• The heads can always make their inputs through the representative of the unit/department in the Committee.

• However, where a head of the Unit/Department feels obliged to be in the Committee and has the time and attention required, he can act as the rep of his unit/dept.

17

Functions of the Procurement Planning Committee

• Directs the Procurement Office in carrying out the following functions and makes necessary approvals– Preparing the needs assessment– Carrying out market and statistical surveys in conjunction with

the Department of Planning Research and Statistics – Preparing an analysis of cost implications– Aggregating requirements to obtain economy of scale and

reduce procurement cost• Ensure no splitting or reduction of values to evade the use of the

appropriate procurement method– Consolidating departmental procurement plans into the PE’s

plan– Integrating procurement expenditure into the yearly budget

• Ensure adequate appropriation for procurement in State budget– Prescribing appropriate methods for effecting the procurement

and securing necessary approval for its implementation18

Who approves the procurement plan?

• Regulation 9 (i)• “The Procuring Entity shall prepare an Annual

Procurement Plan to be approved by the Accounting Officer.”

• If Accounting Officer does not personally chair the Procurement Planning Committee, the Committee should submit the plan for his/her approval.

19

Stage two

Assessing procurement needs of the MDA

20

Assessing needs• Needs assessment involves determining the value, significance, or extent

of the needs of an MDA that can be met by acquisition of goods, works and services.

• The procurement needs of MDAs arise as a result of their corporate mandate or functions towards itself and towards the public.

• For example, the Ministry of Education, may need:– transportation for its management – Improvement of girl-child enrolment in the State– Computer education for its primary and secondary schools

• The Ministry would have to propose programmes or projects that will address these needs.– Role of Procurement Office to identify goods, services and works that are

needed to bring these programmes into effect• In assessing procurement needs, MDAs are enjoined to ensure that

projects and programmes are, as much as possible, evenly distributed among the Forty (40) Constituencies in the State- to achieve even development of the State.

21

Assessing needs according to budget• At this stage of procurement planning there would not yet be

an approved or even a proposed annual budget for the year for which the proposed procurement is intended.

• However, there are budget-related documents that ought to be relied upon in assessing the procurement needs of the MDA, such as the current or most recent Medium Term Expenditure Framework (MTEF).

• Needs that procurement will be undertaken to meet must be those that align with Lagos State policy planning &budgeting focus contained in documents such as the MTEF.

• Owing to budget ceilings and unlimited needs, there has to be prioritization of needs and opportunity costs in assessing needs.

• Prioritization of needs should be based on knowledge of what is urgent, important, feasible and affordable at the time, according to available of resources and environment.

22

Other things that needs assessment entails• MDAs are enjoined to clearly define their goals and

objectives and identify the desired output and outcome of proposed procurement.– This may involve feasibility study of the proposed

project or programme to ascertain that it will meet the need in issue and at the time it ought to be met

• For example, to address a continuous need for computer education in the State secondary schools, proposing the purchase and distribution of laptops to students in the State may only tackle the need temporary, whereas proposing the setting up of well-equipped tutor-assisted computer rooms in the schools may meet the continuous need better.

– Impact assessment of the proposed procurement on the need in issue. 23

Stage three

Identifying the goods, works or services to meet needs

24

Goods, works and services to be procured• Goods, works and services are to meet the needs of the MDAs

and form the project and programmes to be undertaken by the MDAs in the FY. – “Services” means the rendering by a contractor or supplier of his

time and effort and includes any object of procurement other than goods, works or construction;

– “Goods” means objects of every kind and description including raw materials, products and equipment and objects in solid, liquid or gaseous form and electricity as well as services incidental to the supply of the goods

– “Works” means all works associated with the construction, reconstruction, demolition, repair or renovation of a building, structure or works, such as site preparation, excavation, erection, building, installation of equipment or materials, decoration and finishing, as well as services incidental to construction such as drilling, mapping, satellite photography, seismic investigation and similar services provided pursuant to the procurement of contract, where the value of those services does not exceed that of the construction itself.

25

Identifying items to be procured• Important to know whether good, works or services, as it

determines the method and the SBD to use.• Goods, works and services are to meet the needs of the MDAs

and form the project and programmes to be undertaken by the MDAs in the FY.

• In some cases, the Committee must be open to receive ideas from or consult with the end-users of the goods, works and services to ascertain what may best serve the purpose.

• End-users may include: community, the public, clients, customers, staff.

• For example, if there is a need to provide public latrine for a rural community, the Committee may have to ascertain from the community (to be taken into consideration by Committee):– An acceptable location to site the latrine – The security of the project– The type of latrine that may be sustainable in the community

26

Contract packages

• Similar items required by different end-users should be grouped into contract packages

• Regularly-purchased common user items should be considered for framework contracts

27

Stage five

Analyzing cost of procurement

28

Analyzing the cost• Cost analysis is the element-by-element (e.g., labour,

materials, etc.) examination of the estimated or actual cost of contract performance to determine the probable cost to the MDA.

• MDAs can attempt to aggregate requirements to obtain economy of scale and reduce procurement cost.

• The first thing that one will look at is the actual cost of acquiring the good, works or services.

• Costs do not stop there unfortunately, there are also the costs incurred for installation, delivery, handling and storage or maintenance.

• A full procurement cost analysis will identify the total cost of purchasing or acquiring from a particular supplier.

29

Analyzing the cost: illustration

• There may be suppliers that require advanced payments or mobilization fee.

• For e.g., if one is ordering large items that take several people to move and one have to pay for them to be delivered, the actual costs are far higher than just the costs of the goods.

• If one also have an overstock of these goods, holding costs also have to be added to the total cost.

30

Estimating Contract Costs• Estimated value of goods, works

or services should be realistic and based on up-to-date information on economic and market conditions

• Well-researched contract cost estimate– Makes budgetary process more

accurate– Establishes whether tendered prices

are fair and reasonable– Enables cost trends to be monitored

over time– Part of safeguards against collusion

and malpractice

313131

How Should Contract Cost Estimate be Obtained?

• For regularly-purchased items– Maintain records of past contract prices– Plot price trends

• Are prices stable or subject to wide variations?

– Share information with other public organisations making similar purchases

– LASPPA will monitor prices of tendered items and provide price database advisory services

323232


• For items not purchased recently– Opinion of internal expert (e.g. Project Engineer)– Enquire about prices paid by other public

organisations– Look for cost information on Internet– Market research

333333 33


• Apart from those mentioned above also note instances where:– Prices Set by Law or Regulation

• For e.g., fuel or diesel prices– Price List or Index is published

• This should only be used for items that are sufficiently similar to items or services available in the market and whose price appear in a up-to-date published price list.

– Regulated professional fee rates• For consultants

343434 34

Competitive tendering should obtain best market price

• Danger of over-relying on Engineer’s estimate– Estimate made at time of preparation of procurement plan

may be out-of-date by time of procurement, particularly if costs fluctuate

• If tendering is truly competitive, should provide best market price

• Truly competitive means– At least 5 unconnected bidders– No collusion

• Contractors’ associations sometimes facilitate informal collusion– Bidders well informed about requirements of project

35

Stage six

Integrating proposed procurement into annual budget

36

Integrating procurement into the annual budget

• Procurement planning should be integrated within the budgeting process of the MDA.

• As part of the annual budget process, the Procurement Planning Committee will meet to set up spending plans for the forthcoming budget period.

• This information shall be consolidated in the annual procurement plans using the standard template issued.

• The Committee should start preparing the Annual Procurement Plan prior to the start of the annual budget process, since the identification of needs and estimating the related cost might be time consuming.

37

Procurement vis-à-vis the annual budget

• The annual procurement plan is then relied upon as part of the estimates in preparing the MDA’s budget proposal

• Since procurement planning is part of the annual budget process, it has to be done in conformity with the applicable budget call circular

• In the course of procurement planning, MDAs should be guided by the considerations provided in the call circular.

38

Complying with budgeting guidelines

• Examples of budget-related considerations to guide procurement planning may include (from Lagos State 2013 Call Circular): – Sustained Internal Revenue Drive – Settlement of Outstanding Liabilities – Planned and Systematic Maintenance of existing/new

infrastructural facilities – Completion of On-going Projects – Promotion of Public Private Partnership as a strategy in

the delivery of infrastructure/services. – Implementation of Committee’s recommendation on

doing Business in Lagos State – Sustainability of Programmes/Projects

39

Aligning procurement with the annual budget

• This involves updating or reviewing an MDA prepared annual procurement plan in response to differences between the proposed budget and approved budget.

• This aspect of procurement planning occurs when the annual budget has been passed.

• Variation may have been made by the SHA to the budget proposal submitted to it, which may affect or deviate from what was planned and integrated into the proposed budget by specific MDAs

• MDAs would have to adjust aspects of their procurement plan affected by the variation in the approved budget so that the plan and the approved budget will align.

• This is because procurement plans must be supported by prior budgetary appropriations- S 22(1)(g) LSPPAL

40

Stage seven

Determining procurement strategies or methods to use

41

Determining procurement methods• Having identified the needs and the procurement item to meet

the needs, and also assessed the cost and ascertained that it is supported by budgetary appropriation, the Committee should then decide on procurement strategies or methods to use for procuring the required items.

• This aspect of procurement planning may wait until annual budget is approved as the monetary value of contract or project is part of what will determine the strategy or method of procurement to adopt.

• For e.g., where a proposed project contained in the budget submitted for approval is allocated N120 Million; however, the SHA only appropriates N98 Million to the project (or to execute only part of it); this will affect the procurement method that will be used in executing the project.

• This demonstrates that procurement planning is not a one-off process; instead starts before budgeting period, and continues after that.

42

Plan Method of Procurement• Committee must be guided by the Law and Regulation in

choosing the method to use.• Consider whether prequalification is apt for the procurement• Open tendering is preferred method of procurement

– However, it is costlier (because of advertising)– Time consumingProvision for the cost and length of time ought to be made– Used for high-value procurement (₦ 100 million +)

• Alternative methods require the existence of specific conditions– Lower value thresholds– Available from a limited number of suppliers– Direct procurement for

• Exceptional circumstances, e.g. emergencies• Compatibility

• Consultancies have different selection methods from goods and works

43

Framework contracting

• Framework contracts are indefinite quantity contracts made with one or more suppliers/providers under which specific items will be supplied or services provided at the contract price for the term of the contract, with actual call-offs from the contract depending on end-users’ requirements

• Term of contract may be one year or longer• Must be commitment to minimum call-off to be a

binding contract

44

Features of framework contracts

• Tender invitation is issued for right to supply the item over the contract term

• The tendered price (when accepted) is binding on the supplier

45

Framework contracting as a method of procurement

• Many regularly purchased items should be procured through open tendering as framework contracts

• Items to be obtained through framework contracts should be identified in procurement plan

• Draw-downs (call offs) from contract to meet users’ actual needs

46

• Common-user items– Stationery and office supplies– Standard office furniture– Cleaning materials– Electrical fittings

• Other items in continuous demand but where quantity of demand varies at different times– Pharmaceuticals– Medical consumables

• Contracts for regular services– Road and building maintenance– Cleaning– Security– Catering

47

Procurements suitable for framework contracting

• Achieve aggregation– Ensures procurements not split to avoid competitive

tendering– Facilitates multi-year contracting

• Larger value contracts may achieve better prices through competitive tendering

• Reduced administrative costs of procurement• Contract in place to meet requirements at any

time– Reduced need for stock– Less need for emergency procurements

48

Advantages of framework contracting

Selection methods for consultancies

• QCBS– Best combined evaluation of quality and price according to

weightings given• E.g. if weighting is 80% quality and 20% price, bidders marked (quality

score x 80%) + (price score x 20%)• LCS

– Lowest price among proposals above technical benchmark• FBS

– Highest ranked technical proposal within budget• QBS

– Price negotiated after best rated technical proposal determined• CQS

49

Plan Size and Type of Contract Package

• Aggregation– Different user needs for each category of item over

defined period combined to produce contract of greater value

• Splitting– Contracts artificially broken up into smaller units to

avoid threshold for tendering

• Seek optimum size and type of contract to attract greatest and most responsive competition

505050

Stage eight

Setting time frames for the full procurement process

51

Setting the time frames• One of the most important aspect of planning is assigning time

for activities to be undertaken in actualizing a project.• This helps to monitor whether targets are being are being met

and where published it can help interested parties to plan toward participating in specific activities

• Time (length of time and dates) must be assigned to every activity that forms part of the whole procurement exercise, such as:– Preparation of bid documents– Prequalification Bid adverts– Receipt of bids– Bid opening– Bid examination– Bid evaluation– Contract signing– Certification– Contract administration 52

Total acquisition time

• Depends on– Procurement method used– Whether pre-qualification undertaken– Purchasing organisation’s time to prepare the bid

documents – Time to be allowed for bids to be submitted– Time for tender evaluation– Whether challenge or appeal – Time required for the supplier to produce, deliver,

install and test the goods

535353

Estimating time required

• Work backwards from the desired date of delivery

• Calculate time required at each stage of procurement process

• Determine time at which procurement process must start if goods are to be available at time required

• Identify critical path for completion of each action

54

Estimating time required

� If deadline is essential, allow time for contingencies◦ Administrative review and

other appeals against award

�Remember that contractor has own demands on time

55

Indicative time requirements

ProcurementMethod

Suitable ApplicationsApproximate/Indicative Range ofTimes for eachMethod

InternationalCompetitiveBidding (ICB)

1. Preferred method of Procurement, forlarge contracts for goods, works andrelated services

2. There is an interest by foreign suppliers orcontractors in supplying the requiredgoods or works.

3. The requirements for procurement arewidely available, and

• Although efficiency is important, there isno specific urgency in processing theprocurement.

• ICB for works withprequalificationneeds: 9-12 months

• ICB for workswithoutprequalificationneeds: 5-7 months

• ICB for goods: 5-7months

56


ProcurementMethod

Suitable ApplicationsApproximate/ IndicativeRange of Times for eachMethod

LimitedInternationalBidding

1. There are only a few known suppliers. Bestpractice is for all eligible suppliers to beinvited to bid.

2. Small amounts of money are involved e.g.in procurement of a small number ofvehicles or machine tools; or

3. Exceptional reasons such as emergencyactions related to a major natural disaster,which may justify the waiving ofadvertising of competitive bids.

1. LIB goods: 4-6months

57


ProcurementMethod

Suitable ApplicationsApproximate/ Indicative Range of Times for each Method

NationalCompetitiveBidding(NCB)

1. The capability and competitiveness oflocal bidders make it unattractive forforeign bidders to compete forcontracts below a certain value;

2. In the case of works, they are spreadgeographically over time in a mannerthat upsets the economies of scale; and

3. The goods or works are availablelocally at prices significantly belowthose in the international markets.

NCB goods: 4-6months

58

Indicative time requirementsProcurementMethod


Direct Contracting 1. Extension of an existing contract where works are alreadyunderway

2. Similar goods as those purchased under an existing contractare required (subject to reasonableness of price and where nobenefit can be gained from competition)

3. Standardization of equipment and spare parts of compatibilitywith existing equipment

4. Equipment required is proprietary and there is only onesource and no alternative equipment or products withequivalent performance characteristics are available

5. Critical components or materials from a particular supplierare required by the contractor responsible for a processdesign as a condition for the guarantee for performance

6. Emergency operations

Direct contracting: 1-3 months

59


Procurement Method


Shopping 1. Goods required are readily available off-the-shelf goods or standard commoditiesin quantities of small value;

2. In some cases, small simple works for e.g.for essential repairs to restore a basicindustry or service, or other reconstructionwork after natural disasters where delaysmay result in greater damage and loss oflife or property; desired goods areordinarily available from more than onesource in the country.

Shopping goods: 1-2 months

60

Indicative time requirementsProcurementMethod


Force Account 1. The procuring entity has ascertained that a schedule ofrates, cost - plus or target contract would not befeasible, as quantities of work to be carried out cannotbe defined in advance;

2. Works are small and scattered or in remote locationswith no local contractors and demobilization costs foroutside contractors would be too high;

3. Works must be carried out without disrupting existingoperations;

4. The risk of unavoidable work interruptions is betterborne by procuring entity than by a contractor;

5. No contractor is interested in conducting the work at areasonable price;

6. It has been demonstrated that Force Account is theonly practical method for constructing andmaintaining works under special circumstances; or

7. Where national security would be compromised if anyother method was used.

Force account: 1-3 months

61

Standard procurement processing time in Federal Government Regulations

Activity NCB ICB NRB IRB

Preparation of pre-qualification documents 7 7

Advertise and issue pre-qualification documents 14 14

Applicants’ response 21 30

Evaluation of pre-qualification documents and compilation and approval of short-list

14 14

Preparation of tender documents 14 14 14 14

Advertise and issue tender documents 14 14 14 14

Bidders’ response 30 45 21 30

Evaluation of tenders, notification of award and approvals 30 30 30 30

Award of contract 7 7 7 7

Total days 151 175 86 95

62

Stage eight

Assigning responsibilities for the full procurement process

63

Assigning responsibilities• It is important that responsibility for each activity in the

procurement process is assigned to a designated officer or office.

• This would have to be done in consultation with the officers/offices that are proposed to bear the responsibility and with the approval of the administrative head or Accounting Officer of the MDA (where he is only represented in the Procurement Planning Committee).

• This helps in ensuring that:– there is no activity within the procurement process that is left

unattended to, – specific officers/offices are held accountable for specific

activities, and – the officer/office involved will plan ahead and schedule to

discharge the responsibility.

64

Committee matters

Synergies, Committee report

65

Committee synergies • Each unit may identify its own procurement needs and

present through its representative in the Committee.• Memos may be submitted to the Committee by each of the

unit of the MDA in need of procurement items• Synergizing with the different departments, units or offices

in the MDA to source information, clarifications, ideas and other inputs.– The Legal Unit or Department should be consulted on legal

implications of related activities, especially where members are in doubt as to the validity of some actions;

– The Procurement Office of the MDA should be carried along as the Committee is planning, as implementation would mostly be undertaken by the Office.

• It could also synergize with the LSPPA on specific issues; e.g. on timing of certification or reviews

66

Committee’s report

• The Committee has to produce reports of their assignment at various stages.

• This is in addition to producing the “Annual Procurement Plan” of the MDA.

• There could be a committee report before budget preparation period, there could also be reports on review of procurement plan following the budget process and after annual budget approval.

• Committee’s report(s) is to be submit to: Accounting Officer (if he is only represented in the Committee); political head of the MDA (e.g. the Commissioner).

67

Content of Committee’s report• The Committee’s report may contain the following:

– Objectives of the MDA’s various proposed procurements– The level of priority of each proposed procurement to the

MDA mandate and to the public where applicable– How the proposed procurements are linked to the State’s

current MTEF and budget call circular, – Indication of how the proposed procurements are in

consonance with the ministerial mandates, within the policy thrust of the State Government and reflect the focus of the budget.

– Narrative on aspects of the MDAs Annual Procurement Plan

– Endorsements by the Chairman and Secretary of the Committee (All Committee members could also endorse the report where the Chairman deems necessary)

68

Purpose of Committee’s report

• Purpose of the report includes:– The report(s) could be relied upon in preparing the

MDA’s budget proposal; – the procurement plan template is more of data and

figures without narratives, hence the report provides a brief narratives on the procurement plan and activities leading to that;

– it may form part of the supporting documents accompanying MDAs budget proposal (which could be relied upon in an MDA’s defence of budget proposals)

69

Exercise • Lagos State Government wishes to initiate a programme to

enhance computer education in its state-owned primary and secondary schools. It has decided to include the programme in the proposed annual budget for FY 2015. your MDA has been given the mandate to plan the procurement for the programme. Your group has been constituted into the Procurement Planning Committee of the MDA. In respect of the computer education programme, carry out the following functions– Identify goods, works or services to implement the

programme and outline how these items shall be used in the programme.

– Assess the cost of the project.– Identify the procurement method to use.

70

Exercise • A new Permanent Secretary or Director General has been

appointed for your MDA. Seeing that the financial year 2015 is fast approaching, he thinks it may be appropriate to immediately start planning for procurement for the FY 2015. To save time, he has undertaken to plan the procurement alone. He picks up a sheet of paper and pen, then starts jotting down the projects he thinks the MDA will want to execute in the coming year, which he intends to present as the procurement plan of the MDA.– Advise him by identifying any of his actions that are valid or

invalid. Give reasons for your answer– If any of his action is invalid, advise him on the proper things to

do.– Point out to him how procurement planning may be integrated

with the budget processes of the MDA for the 2015 FY.

71

General issues of procurement planning

Types, importance and challenges of procurement planning

72

Types of procurement planning

• Types of procurement planning relates to whether the procurement planning of an MDA covers the procurement needs of the MDA as a whole or whether each department will undertaken its planning or each project will be planned separately.

• The types of procurement planning include:– Consolidated planning – Individual planning

73

Consolidated planning • Procurement plans or some aspects of the procurement plans of a

ministry and the various parastatals within the ministry are combined into one single plan.

• The procurement plans or aspects of the procurement plans of various ministries may also be combined.

• May require the combination of the Procurement Planning Committees of the MDAs involved or the setting up of a distinct Procurement Planning Committee made up of representatives of the various MDAs.

• For e.g., where the State Government mandates its MDAs to install broadband internet facilities in government establishments/premises (including government secretariat, schools, hospitals, etc.) within each MDAs jurisdiction, the procurement plans of the MDAs in respect of this project may be combined into a consolidated plan.

• Analysis of the consolidated Procurement Plan provides an opportunity to identify economies of scale and better uses of resources, providing an overview of the scale of the procurement activities.

74

Individual planning• Procurement planning takes place at single organization,

department or project levels.• This is apt where it is only a single organization that is in

need of the procurement.• Where the value of procurement is within the

awarding/monetary threshold of the individual MDAs.• Also where combining the procurement requirements of

the various organizations into one whole may make the project complex and difficult to manage. E.g. where the procurement involves items that are not similar in kind or component; or where the items to be procured are required at considerably different times by various organizations .

• Where there are localized issues relating to the procurement that are better handled at each MDA level. For e.g. items that require storage by the organization

75

Plan should be comprehensive• Proposed procurement of

– Goods– Works– Consultancies– Other services

– Cleaning– Security– Transport, etc.

• Disposals should also be planned– Acquisition of new items provides opportunity to

dispose of old stock

76

Planning is a dynamic process

• Results must be reviewed and updated throughout the financial year

• Changing priorities and estimates of time requirements, institutional capacity and resources will require adjustments to the plan

• Actual prices obtained may be different from those set out in the plan

• Estimates of time requirements in the plan may be wrong

• Budget may be cut requiring some items to be deleted– Prioritization shows which items must be protected

• Plot actual events against the plan for each item7777

Key Requirements for successful planning

• Well-researched contract cost estimates based on lifetime costs of ownership

• Starting the procurement process in good time, with due allowance for contingencies

• Focus on longer-term (multi-year) needs• A clear agreed order of priorities• Regular updating of the plan

7878

Aids to procurement Planning

• Existing statistical data• Existing market surveys• Recommendations on doing Business in Lagos

State• Procurement plan templates• Procurement plan software• Current MTEF Reports• Medium Term Sector Strategies (MTSS) Reports• The Annual Budget

7979

Challenges to Procurement Planning

• Scarcity of reliable statistical and market data; • Delay in preparing and passing of annual

budget;• Change or variation in annual budget proposal

submitted to SHA;• Variation of Financial Year period;• Lack of or delay in appropriating the funds

budgeted for procurement projects.

8080

Surmounting the challenges

• Reasonable intuition or projections.• Prioritizing of needs and requirements.• Flexibility in scheduling of activities.• Adaptability to changing circumstances.• Early start of procurement planning and

implementation of proposed projects and programmes.

8181

Why Bother with Planning?• Planning is important

in many aspects of life– Business plan– Tactical plan

82

Benefits of Procurement Planning With planning Without planning

Check-list to ensure thatprocurements do notcommence unless funds havebeen approved

Procurements proceed withoutbudgetary approval→ Delayed payment orsuppliers left unpaid→ Orders cancelled

83

Benefits of Procurement Planning

84

With planning Without planning

Indicates priorities incase of cuts in budget

No agreement withinpurchasing entity on keyacquisition needs


With planning Without planningEnables most suitablemethod of procurementto be identified

Excessive use ofrestricted and directtendering

85


With planning Without planningEnables understanding oftotal acquisition time→ Procurement processbegun in time to avoidemergency acquisitions

Regular resort toemergency procurements→ Stock-outs andshortfalls

86


With planning Without planningAggregation asrequirements of differentend users brought togetherwithin single contract

Different users acquiresame items throughseparate contracts→ Higher prices→ Higher administrativecosts of procurement

87

Exercise • The Chairman of your MDA’s Procurement Planning

Committee has requested your advice on documents that the Committee can rely on to carry out its functions. He requests also to know some of the challenges that the Committee may encounter in the discharge of its functions and the steps that may be taken to tackle the challenges. Advise him.

• The Accounting Officer of your MDA wishes to set up a Procurement Planning Committee for the FY 2015. To enable him ascertain the person that can competently discharge the functions of the Committee, he has called on you to write him a memo prescribing the job description for those to be appointed as members of the Committee.

Respond by highlighting the required job description.

88

The Procurement Plan

Features and preparation of procurement plans

89

Procurement plan

• In the course of planning procurement, a procurement plan is developed.

• It covers and reflects when all the stages of a procurement cycle will take place.

• To facilitate the preparation of a procurement plan, it is useful to use a procurement plan template issues or approved by the regulatory agency: the LSPPA.

90

Features of a procurement plan

• Procurement plans need to be clear and succinct so that any reader should be able to understand:– the MDA’s procurement objectives, – how these link to its service delivery outcomes,– what projects are planned for, and – how the agency will measure the achievement of

these projects.

91

Annual procurement plan

• The Annual Procurement Plans may indicate how procurement items indentified are to be:– combined or divided into different contract

packages; – what method of procurement/selection shall be

used for each one;– the scheduling for procurement activities;– how the responsibilities shall be cascaded during

the implementation of the procurement activities;– Financial implication of the procurement items.

92

Preparation of a procurement plan• To be undertaken before start of each financial

year as part of annual budget preparation process

• To be integrated with applicable budget processes and based on indicative budgets.

• To be reviewed after the annual budget is approved.

• Further review to be made on the plan as events or circumstances warrant in the course of carrying out the activities related to the procurement.

93

Publishing the procurement plan• It is necessary to publish MDAs approved procurement plan

for the purpose of:– Indicates transparency, – Enabling interested parties (suppliers, stakeholders, relevant

regulatory bodies) to plan and schedule towards participating in the procurement activities relevant to them,

– Interested parties can track the activities that have or may have been completed and those that remain.

• MDAs may only publish aspects of the procurement plan that are for public consumption.

• MDAs may leave out information that ought not be in the public domain, such as responsibilities for activities, cost of activities.

94

Publishing the procurement plan• Where to publish procurement plans of MDAs

include: official website of the specific MDA; official websites of LSPPA and/or Lagos State Government, notice boards of the MDA.

• To publish electronically, it is advisable that it be un-editable version (PDF), easy to read and downloadable.

• It is advisable to publish an annual procurement plan when it has been finalized and approved and/or after it has been reviewed or updated following the approved annual budget

95

The Procurement Plan Template

Using the template

96

General points• The procurement plan template is issued by the LSPPA and

available at its website.• It is important to identify and use the updated version, as

the LSPPA may review the template from time to time to reflect best practices.

• It is an easy-to-use template (an excel document) which MDAs are required to use in preparing their respective annual procurement plans.

• It is adapted or used by filling information or data on the cells (columns and rows) as required which are indicated in the headings to the cells.

• it is preferable to fill the template in an electronic format, to enable the adjustment of the cells.

• Not all information requested on the template may be necessary or applicable to a particular procurement (to be skipped in such cases).

9797

Using the procurement plan template• Information or data required are stated or displayed on the

template as headings.• Most of the headings are positioned at the head of each

column; however a few sub-headings appear in rows under the main heading (e.g. “plan” “actual”).

• For each heading, the information or data required is supplied or filled in the cell (column) under the heading.

• Each contract or lot of contract takes a particular row and information or data required on that specific contract or lot of contract are filled as indicated in the heading on each column.

• There may be need to add into the template and ultimately the procurement plan, these additional requirements for information:– Responsibilities– Cost of activities

9898

The Procurement Plan Template

The various parts

99

Package Number • Package number indicates that the number allocated where

the proposed contract involves procurement packaging.• Procurement packaging is the grouping (or bulking) of

procurement requirements within a procurement category for the purpose of acquiring them under a single contract.

• For e.g. the following proposed procurement may be packaged as one contract.– procurement of coppens feed for SAP aquaculture– procurement pelletized feed for SAP aquaculture– procurement of poultry feeds for 3 selected schools under SAP

• Where the proposed procurement is not to be undertaken as a package there may be no data to be filled under this cell in respect of that procurement (or “NA” may be inputted) .

100

100

Lot Number• A “lot” is defined quantity of a thing used as a unit of output,

purchase, sampling, or contract. • Items in a lot are of a single class, composition, type, or version,

and are supplied or delivered under essentially the same conditions, and are intended to have uniform quality and characteristics within specified limits.

• The difference between a “package” and a “lot” is that a package lumps two or more similar but separate requirements together as a single contract; whereas, lot divides a single requirement into several parts that can be contracted for separately.

• 20 boreholes for an LGA may be divided into 5 Lots of 4 boreholes each.

• Where proposed procurement is divided into lots, bidders can submit bids for one, several or all lots (as the solicitation documents stipulate), and a contract could be awarded for each lot.

• Where the proposed procurement is not divided into lots “NA” may be inputted in the relevant cell. 101

101

Description

• This requires that the proposed procurement be described in a succinct manner.

• What the description should capture include:– The type of the item to be procured: solar

powered borehole– The number of items to be procured: 4

units/numbers of solar-powered boreholes– Location (for works and service contracts): 4 units

of solar-powered boreholes at Araga, Epe.

102

102

Budget Available

• This indicates the budgeted sum available for the proposed procurement.

• The figure would have to be sourced from the approved annual budget where the project is captured or from the relevant development partnership document.

• The exact sum budgeted for is to be inputted into the cell provided.

• This will guide the MDA to know whether the lowest bid price submitted for the proposed procurement could be accepted, as it must not be more than the available budgeted sum.

• This portion of the procurement plan could be deleted from the copy that may be published.

103

103

Source of Funding • This requires information on where the funding for the

proposed procurement is to be sourced from.• Source of funding could be from:

– the annual budget of Lagos state Government– Special fund of the State Government– Donor partners– Federal Government grants or funding

• This portion is particularly of interest to suppliers, as it may determine whether they may bid for the contract or not.

• It is also for PFM M&E.

104

104

Procurement Method • This is where the procurement method to be used in

awarding the proposed contract is reflected.• The method to be filled here would certainly be guided by

the provisions of the State Procurement Law and Regulations.

• Part of what determines which procurement method to use is the value or sum of money that shall be involved in the proposed procurement.

• Abbreviations such as the following may be used:– NCB: National Competitive Bidding– ICB: International Competitive Bidding– NS: National Shopping– RfP: Request for Proposal

105

105

Pre-or Post Qualification• This is where the Committee indicates whether there

shall be pre-qualification or post-qualification in the award of the proposed procurement contract.

• The Committee should be guided by the Procurement Law and Regulation is deciding where a pre-qualification or a post-qualification should be used, or where both may be used.

• Which ever one that is intended to be used for the proposed procurement is to be indicated.

• However, note instances where pre-qualification or post-qualification may not be necessary. In those cases, NA is to be inputted in the relevant cells.

106

106

Plan vs. Actual

• “Plan ” indicates the time (days or week) scheduled for the activities in issue.

• Whereas “Actual” indicates the time that the activities were actually carried out.

• Of course “Actual” cannot be inputted until the implementation of the proposed procurement has reached the point of the activity in issue.

107

107

Prior or Post Review

• This is where the Committee indicates whether it is prior review or post review of the procurement by the LSPPA that will be involved in the contract concerned.

• Thresholds for prior or post reviews of contracts are to be set by the LSPPA from time to time.

• This should guide the Committee in determining whether it is prior or post review that will be involved in the proposed procurement.

• That would then be inputted accordingly.

108

108

Bid Preparation & Submissionby MDA

• This is to indicate the latest or maximum time (in days or weeks) that it will take the MDA to complete the preparation of bid documents for the proposed procurement and the submission of the document to LSPPA for verification or vetting.

• Time for this activity would be considerably reduced where the MDAs properly use standard bidding documents (SBDs).

109

109

Certificate of Compliance• This is to indicate the latest or maximum time (in days or weeks)

that the Committee anticipates that it will take the LSPPA to issue a Certificate of Compliance to enable the MDA to initiate bidding processes in respect of the proposed procurement.

• To reduce risk of delay, make sure information submitted with application for Certificate of Compliance is complete by using Pre-requisite Form for Certificate of Compliance and following requirements in Schedule 1 (paras. 11 and 12) of Procurement Regulations

• Note that there is another heading “Cert of Compliance” further in the template. This is where post review by LSPPA is involved, which will have to be done, where required, before contract is awarded.

• The time is to be determined by relying on past experience with the length of time that it takes LSPPA to complete similar tasks.

110

110

Bid Invitation Date

• This is the date stipulated for issuing a bid invitation or bid advert in respect of the proposed procurement to interested or potential bidders.

• this date would have to be noted as it will determine the date to stipulate as bid date of bid closing/opening, as the law provides for certain minimum time that suppliers have to be permitted to respond to the bid advert before deadline for submission of bids or date of bid closing/opening.

111

111

Bid Closing-Opening

• This is the date stipulated as deadline for submission of bids.

• There should actually be a specific time indicated in the plan (it is usually 12 pm) under this activity.

• The date and time would also have to directlycorrespond with or be the same for bid opening, as both occur simultaneously.

112

112

Submission ofBid Evaluation Report

• This is to indicate the anticipate time at which the MDA would have examined the bids submitted following bid opening, evaluated the bids, made recommendation on the winning bidder and writing a report of the bid evaluation.

• Thus, the time or date indicated must take into consideration the timeframe that may be required for all the aforementioned activities to be covered.

113

113

Contract sum

• This is to indicate the amount of money for which the contract is awarded to the supplier for the execution of the procurement contract.

• The sum may be lower than the sum or figure indicate in “Budget Avail”, but must not be higher than that.

114

114

Contract signing

• This is to indicate the anticipated date for the signing of the contract document between the contractor and the MDA.

• The Committee is to take into consideration the interval between delivery of notice of award, acceptance of the award, and possible transit time for the purpose of signing the contract.

115

115

Complete Delivery/Install • This is the anticipate time that the supplier shall complete

the delivery of all the items of procurement contracted to him or installation or completion of the works or services awarded to him.

• The time stipulated should reflect (at least during updating of plan) the time contained in the contract agreement.

• When purchasing advanced technology goods from overseas sources remember that– Many such goods are manufactured after contract signed, not

off-the-shelf– Allow time for shipping to Lagos, customs clearance, delivery to

site, installation, testing and acceptance

116

116

Comments on the template

• There may be need to indicate time for examination and evaluation of bid not just submission of bid evaluation report

• It would be worthwhile to include requirement for indication of responsibilities (office or officer) for each activity and where available the proposed cost for carrying out each activity, such as cost of bid advert.

• Some of the cells (especially, the headings) are not properly formatted.

• The template is could be reviewed as the need arises from experience in the use of the current template.

117

117

Exercise: Completing a procurement plan

• A new wing to a public hospital in Lagos is scheduled to open on 30 December 2014. The main items needed to be procured at the commissioning stage are radiology equipment (CAT scanners, ultrasonography equipment, echocardiography machine, MRI scanner, linear accelerator). It is proposed to buy these items as part of a single package at a total estimated cost of ₦ 500m. It is important that this package of equipment should be delivered, installed and tested so that it is ready for use at the time the wing is opened

• The Ministry of Finance has agreed in principle to meet the cost of these items but has requested that you submit a procurement plan using the LASPPA template. (As you are still at the planning stage, only the “planned” rows should be completed.)

118

Using the procurement plan

Key issues

119

Issues for discussion• We will look at a selection of procurement plans prepared by

various MDAs for 2014.• Issues for discussion

1. Are the plans complete?2. How are they being used?3. Have similar items been grouped into contract packages?4. Is use being made of framework contracting?5. Have the procurement plans been found to be accurate in

estimating1. Costs?2. Time required for each stage of the procurement cycle?

6. What are the arrangements for keeping the plans up-to-date?7. Has procurement planning improved procurement?

1. In which ways?2. What are the shortcomings/challenges of the planning process?

120

Conclusion

Remarks

121

Conclusion

• Good planning is 50% of the task completed• Poor or no planning manifests in inefficiencies

in the procurement function• Failing to plan is planning to fail

122

122