PROCUREMENT
METHODS
UNIT 4
JOSEPHINE CHITI
KWAME NKRUMAH UNIVERSITY
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Learning outcomes
At the end of the lesson, students must be able
• To evaluate different types of procurement methods.
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Introduction
• Procurement is everything related to sourcing and obtaining goods and
services for a company's business operations, while purchasing is act of
buying the said goods and services. The scope of procurement includes
sourcing, negotiating, purchasing, receiving, and recording keeping.
• Procurement focuses on getting the best value from goods and services
for business profitability while purchasing focuses on getting the best
price.
• For anyone responsible for procurement in a company, choosing the best
procurement method and finding the right supplier is a huge responsibility.
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A procuring entity shall use one of the procurement methods specified in Act.
Subject to section 38(4), the procurement method used by a procuring entity shall be
determined in accordance with the conditions specified in this Part, taking into account
a. The estimated value of the procurement
b. Whether the procurement is of goods, works, no consulting or consulting services
c. Any special circumstances, such as a limited number of potential sources or an
emergency requirement.
d. Whether national or international competition is required.
e. Determination of procurement method
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• A procuring entity shall not split procurement requirements with the intention
of avoiding a particular method of procurement where that requirement could
be procured as a single contract.
• As company projects get more complex, it becomes more important than
ever to use a procurement method to optimize this budget and source
suppliers best suitable to provide the necessary goods and service.
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A procuring entity shall prepare a statement of procurement
requirements relating to the goods, works or services being
procured that:
• Gives a correct and complete description of what is to be procured
• Allows for fair and open competition among persons who may wish
to participate in the procurement proceedings
• Ensures that the goods, works or services are fit for the purpose for
which they are being purchased and are of appropriate quality .
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PROCUREMENT METHODS
• Definition
A method is a manner or mode of procedure conducted an
orderly, logical, or systematic way of instruction, inquiry,
investigation, experiment or presentation.
There are eight procurement methods used by the procurement
team in a company.
The actual names could vary depending on your company and
industry but the process remains the same.
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Procurement Methods
• The procurement method is used by the procurement team of a
company to streamline the acquisition of goods.
• The names of each method may vary depending on the
company but its process remains the same.
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TYPES OF PROCUREMENT METHODS
• There are different types of procurement methods used by a
procurement team or department of an organization.
• The type of procurement method you will use is dependent on
the conditions of your procurement.
• Procurement methods should be carefully utilized about the
type of goods or services that you will acquire.
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[Link] bidding/selection
• Used for low value (up to K1 million) off the shelf purchases
• At least three (3) competitive quotations are obtained by use of
a written Request for Quotations document.
• The Request for Quotations should give clear instructions on
the conduct of the procurement process, including the
preparation and submission of quotations and information on
the evaluation of quotations and award of contract
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• Suppliers requested to submit quotations supported by
certificate of registration, ZRA Tax Clearance Certificate and
relevant certification e.g. National Council for Construction.
• There is no need to advertise and/or gazette
• The evaluation is based on the request for quotations that was
issued
• The purchase is confirmed by the Local Purchase Order
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Advantages of simplified bidding
• The process is not time consuming
• Less value (threshold)
• Suitable for emergency purchases. Three quotations and the purchase can be
made.
Disadvantages
• Limitation on the value of the purchase
• Evaluation is only conducted on three suppliers
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[Link] bidding/Tendering
Open tendering is also called competitive bidding. It
allows companies to bid on goods in an open solicitation or
open competition
Preferred procurement method
• For high value procurements (above K1 million)
• Invitations to bid are gazetted and advertised in
newspapers
• The invitation to bid is open to the public
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Open Bidding procedures
• The bidding document is obtainable upon payment of non-
refundable fee
• The invitation to bid has a minimum floatation period of four
weeks for National tenders and six weeks for International
tenders
• Sealed bids are deposited in a tender box
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Open tendering entails the company the following:
• Locally advertise
• Be unbiased and consistent with technical specifications
• Be objective with the evaluation measures
• Open to all qualified bidders
• Be granted to the least-cost provider
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Advertising for Open Bidding
Advertisements should be done through the following
• Local media
• International media / magazines / journals
• Embassies
• Minimum - 4 weeks, National Open Bidding
- 6 weeks, International Open Bidding
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Open Tendering procedure
• The public is invited to attend the tender closing and bid
opening ceremony.
• Evaluation is based on the criteria given in the bidding
document.
• Authorization for award of contract is either by the Procurement
Committee or the Central Tender Committee depending on the
level of authority of a procuring entity during the interim period
only.
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• The open tendering method encourages an effective
competition to acquire goods that emphasize value for money.
• Nonetheless, many procurement experts think that this is not
suitable for the large or complex acquisition of goods or
services.
• This is due to the great focus it requires on the output process
rather than following the standards strictly.
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• There is a requirement for publication of the best evaluated
bidder before contract award.
• A formal contract document is signed.
• After commencement of a contract with the successful bidder a
procuring entity shall inform all other bidders that their bids have
been unsuccessful and shall give reasons for that decision.
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Advantages of Open bidding
• Obtain value for money
• Invitation reaches widest possible market
• Affords all firms equal opportunity to participate in tender.
• Ensures transparency.
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Disadvantages of Open Bidding
• Slow and formal stages to follow
• Not suited for emergency situations
• Expensive to conduct
• Resource implications of a potentially lengthy tender
evaluation (due to a high volume of responses)
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[Link]/Limited bidding
• Restricted tendering is the opposite of open tendering. Restrict tendering limits the number of
requests for tenders that will be sent to suppliers or service providers. It is also called
selective bidding because of its selective process nature.
• Restricted tendering is a competitive method but it is limited to suppliers or service providers
the procurement team invited. The procurement team should establish guidelines to
effectively select the suppliers or service providers on the invitation list.
• Having a random selection will not work for restricted tendering. It is selective to get the best
and most qualified entities for the acquisition of needed supplies or service
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Circumstances to use restricted bidding
• Used where the circumstances do not justify or permit the use of open
bidding
• The goods, works or services are only available from a limited numbers of
suppliers or firms and there is an urgent need for the goods, works and
services and engaging in open bidding would therefore be impractical
• The invitation to bid is not gazetted nor advertised in newspapers
• The invitation to bid is restricted to nominated firms only
• A solicitation/bidding document is prepared and obtainable upon payment of
a non-refundable fee
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Restricted bidding process
• The estimated value of the goods, works or services does not exceed
the threshold prescribed in the Public Procurement Regulations.
• The invitation to bid is not gazetted nor advertised in newspapers.
• The invitation to bid is restricted to the nominated firm only. The
solicitation/bidding document is prepared and obtainable upon
payment of a non-refundable fee.
• The invitation to bid has a minimum floatation period of four (4) weeks
for national tenders and six (6) weeks for International tenders.
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Advantages
• Less time consuming in the selection process.
• Less costly in terms of advertisement.
• Restricts the number of organizations invited to tender (making the tender
evaluation more manageable)
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Disadvantages
• This method is best-suited and most qualified agencies to procure goods
and services from.
• Competition is limited to only agencies invited by the Procuring team.
• No opportunity to discuss / refine bids.
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4. Direct bidding/Single sourcing
• It is used where the goods, works or services are only available from a single
source and no reasonable alternative or substitute exists e.g Zesco
• Due to an emergency, there is urgent need for the goods, works or services
making it impractical to use other methods of procurement because of the time
involved in using those methods.
• Additional goods, works or services must be procured from the same source
because of the need for compatibility, standardisation or continuityexisting
contract could be extended for additional goods, works or services of a similar
nature and no advantage could be obtained by further competition.
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• Single source procurement is a non-competitive method that
should only be used under specific circumstances.
• Single source procurement occurs when the procuring entity
intends to acquire goods or services from a sole provider.
• This method should undergo a strict approval process from
management before being used.
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The circumstances which call for this single sourcing method are:
• Emergencies
• If only one supplier is available and qualified to fulfill the requirements
• If the advantages of using a specific supplier are abundantly clear
• If the procurer requires a particular product or service that is only available
from one supplier
• For the continuation of work that cannot be reproduced by another supplier
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Advantages of Direct /Single Bidding
• Less time consuming
• Less paperwork
• Saves cost of advertisement ,printing of bids etc
Disadvantages of Direct /Single Bidding
• No competition
• No price negotiation
• High risk of a supplier underperforming
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[Link] account
Force account is the construction by the use of the procuring entity’s own
personnel and equipment. Force account is used where:
• The quantities of work involved cannot be defined in advance.
• The works are small and scattered or in remote locations for which qualified
construction firms are unlikely to bid at reasonable prices.
• Work is required to be carried out without disrupting ongoing operations.
• Risks of unavoidable work interruption are better borne by the procuring
entity than by a bidder or supplier.
• There is an emergency needing prompt attention.
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[Link] participation
This is used when the community is considered to participate in the
delivery of services (mostly projects).
A procurement entity may involve the community in participating in the
delivery of works or services if the procurement provides value for money
and giving a better assurance for the project sustainability and enhance
the socio –economic objectives of the government .
Community participation methods helps to put the greater good above the
issue of competition unlike other procurement methods.
It is desirable in selected project components to call for participation of
local communities and non governmental organizations.
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Community participation can be used if the procurement entity shall
benefit from the following
• The economy
• Value for money
• Project sustainability
• Socio- economic objectives such as creation of employment for the
community.
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[Link] from other Procuring
Entities
This a method of where a procuring entity may purchase directly from
another Government agency without the application of any other method of
procurement.
This method can be used when:
• There would be no benefit in purchasing from a supplier.
• The Government agency is able to meet all the procuring entity’s
requirement as specified in the statement of requirement for a particular
procurement need.
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[Link] of infrastructure through Private
Financing and Award of Concessions
Concessions involve contractual arrangement between the public and private
individual or company to carry out works.
Public Private Partnership are agreements where the government defines and
grants specific rights to an entity ( private entity) to build operate a facility for a
fixed period of time.
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Use of the private sector to carry out certain projects such as
construction, rehabilitation or operation of public infrastructure and
other public goods on the basis of private investment.
• The Government agency is able to meet all the procuring entity’s
requirement as specified in the statement of requirement for a
particular procurement need.
• The legal framework in the implementation of privately financed
infrastructure is provided in the Public-Private Partnership Act No. 14 of
2009
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Use of alternative procurement
methods
• A procuring entity wishing to use an alternative procurement
method from the ones mentioned, shall make an application
from the Zambia Public Procurement Authority.
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Note
• In the end, the type of procurement method you choose to use
is highly relative to the conditions of the procurement effort and
the kind of good or service being acquired. All procurement
methods follow tight legal frameworks to ensure all standards
are being met and quality in the selection process exists.
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References
Bailey et al. Procurement Principals and Management (10th edition).
London. Prentice Hall
Website .www [Link]
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