A Conceptual Model
In my previous article, I talked about how procurement is generally understood and how important it is for catching the attention of both government and non-government officials. It also offered suggestions on how to reduce procurement costs while maximising benefits. Various procurement factors are provided in this article. In this regard, I’ve tried to present a conceptual model of the various elements of successful procurement. A successful procurement is influenced by both internal and external factors. The following includes an explanation and an example of the schematic model of procurement factors for both public and private organisations:
Inter-agency Coordination: In order for a procurement to be successful, coordination between different agencies and stakeholders must be maintained. There are many agencies involved in the procurement process. First, there should be a procurement plan, which should be supported and included in the annual procurement plan. The procurement plan must be supported by the required budget to materialise the procurement.
Technical specifications are an important aspect of procurement. Coordination is required for preparation of the technical specification. After approval of the procurement, coordination is required with the news agencies for publishing the procurement in the newspaper and on the website. On receipt of the tenders from the bidders, coordination is required among the procuring entity, the Tender Evaluation Committee, and also the Technical Evaluation Committee. Since there will be members involved in those evaluations from different organisations, coordination amongst them will make the procurement easier and faster.
After the contract has been concluded, more coordination and supervision are required during the implementation and monitoring of the contract. At that time, coordination among the procurement entity, suppliers, financial organisations, shipping organisations, port authority, customs authority, and different watchdogs will make the procurement credible, transparent and accountable. Coordination between the reviewing authority and procuring entity will resolve any dispute that might arise during the tendering process if needed.
Professionalism: Procurement is a very specialised job that requires knowledge of different rules and regulations and also working experience. Although theoretical knowledge is important for procurement, it largely depends on practical experience and organisational memory. Efforts should be made by all organisations to develop the expertise of their procurement personnel. Institutional training is necessary to develop expertise in procurement. Ethical behaviour is imperative in procurement as it encompasses the expenditure of money and is subject to audit.
Ethical behaviour ensures transparency and accountability in the procurement process and gives suppliers and all stakeholders confidence. Training for employees, sound organisational culture, and ensuring best practices are implemented in the organisation are the most effective tools for ensuring ethical behaviour. Training, workshop and seminars can be provided, along with training in more specific areas such as procurement rules, regulations, and procedures, as well as transparency and accountability. Regular reviews and audits of procurement processes can be done to ensure fairness is being considered and achieved.
Organisational Structure: Successful procurement depends on a competent organisational structure. Effective command and control for procurement, especially through exercising command and control by a central body, is essential. The central procurement organisation may receive advice from important ministries responsible for allocating budgets and planning and approving the procurement. Command and control within the organisation is also very important for smooth procurement.
Market Environment: Amongst other external factors, the market environment should be deliberately studied before embarking on any kind of procurement. The market environment should also include the local market and international market environment. Efforts should be made to purchase the goods and services from the local market as this would promote local entrepreneurs. However, it may not always be possible to procure the goods and services from the local market. At times, the goods may be expensive due to labour costs or due to the high cost of the raw materials. In the local law and order situation, strikes by the labour organisation might cause a price hike of goods and services. Furthermore, supplier syndication may result in a price increase for the goods and services.
Aside from high raw material costs, law and order situations, strikes, and syndication, non-availability of goods and services in the local market may lead to procurement from the international market or sources. However, obtaining it from the international market is not always simple. If the price is lower in the international market, it will always be preferable. But, it also requires adherence to international rules and regulations. Customs duties, freight charges, and other fees can sometimes increase the cost of procurement. Moreover, transportation risk factors and delays in delivery at times make the procurement from international sources very difficult. Therefore, the market environment should be studied and the right decision should be made before procurement.
Local and International Environments: Besides the market situation, the local and international environments also play an important role in the overall procurement system. At times, the tender might be influenced and obstructed due to local law and order situation. Disturbed international environments, such as pandemic, war situations and international conflicts, will always limit procurement sources and cause delays in delivery of goods, including price increases.
Socioeconomic and Cultural Environment: The socioeconomic and cultural environment will also have an impact on procurement. The socio-cultural environment will reduce the malpractices of the procurement staff. Good economic conditions will make them less susceptible to corruption.
Md Abu Sayed Siddique, PhD is serving as Major General in Bangladesh Army. He is an expert on procurement, contract management, contract negotiation, and supply chain management.