Public Procurement: Basic principles
What is Public Procurement?
What is Public Procurement?
Public procurement is the acquisition of goods, services, and works by a public “authority” or “body”. Transactions of this nature are public undertakings and, therefore, they are governed by Civil, Community, or International Law.
Public procurement is the process of acquiring goods and services for the operation of government and to provide public services.
It is carried out within a specific legal framework based on certain principles aimed at making the fulfillment of public procurement requirements competitively available to qualified firms and individuals in a transparent and nondiscriminatory manner based on pre-established selection criteria.
The Goal of Public Procurement
Public procurement is the process of acquiring goods and services for the operation of government and to provide public services.
It is carried out within a specific legal framework based on certain principles aimed at making the fulfillment of public procurement requirements competitively available to qualified firms and individuals in a transparent and nondiscriminatory manner based on pre-established selection criteria.
The Goal of Public Procurement
The goal of public procurement is to award timely and cost-effective contracts to qualified contractors, suppliers and service providers for the provision of goods, work and services to support government and public services operations, in accordance with principles and procedures established in the public procurement rules.
Actors, Stakeholders and Beneficiaries of Public Procurement
Actors, Stakeholders and Beneficiaries of Public Procurement
Procurement practitioners are the principal actors in the public procurement process. They are responsible for ensuring the goal of public procurement is achieved. They must gain stakeholder’s trust and ensure they fully understand the procurement process and principles.
Procurement practitioners are directly and indirectly engaged in the procurement process, from need assessment to contract close-out. Although, they are more directly involved in the public procurement process, they also provide advice and support during contract execution.
Stakeholders of Public Procurement
Stakeholders of Public Procurement
Stakeholders are those who stand to benefit from the results of public procurement, including those interested in the process and who might be affected, directly or indirectly, by a particular procurement action.
The difference between actors and stakeholders is primarily participation. Actors play an active role in the procurement process, while stakeholders a more passive role. Actors are also stakeholders because of the benefits they derive from the use of public goods and services.
Beneficiaries of Public Procurement
Beneficiaries of Public Procurement
All inhabitants of a country are beneficiaries of the public procurement system through public goods and services available and provided in the form of transportation systems, public utilities, educational systems, and medical services and facilities, among others.
Similarities and Differences between Public and Private Sector Procurement
Similarities and Differences between Public and Private Sector Procurement
Public sector and private sector procurement organizations are designed to acquire goods and services. The main difference between these two types of organizations is the purpose for acquiring those goods and services. One is focused primarily on a social benefit, the other is profit centric.
Private sector procurement activities are for supporting the principal business objective of a company, which is to make a profit. This does not rule out the fact that private entities may also seek social benefit; however, it is not their primary business objective. In the public sector, the two main reasons for acquiring goods and services are:
(i) for supporting government operations, and
(ii) to provide public services.
(i) for supporting government operations, and
(ii) to provide public services.
Source of funding is another fundamental difference between private sector and public sector procurement. While private sector procurement is funded by owners or shareholders of the company, funds used in public procurement are primarily from taxes and/or grants and loans obtained by the government on behalf of the country.
Concerning governing rules, private sector procurement complies primarily with contract or commercial law with respect to the formation of contracts, but their methods of procurement are governed by company policy. The entire public sector procurement process, however, is governed by the public procurement legal and institutional frameworks (procurement rules), and practitioners are obliged to adhere to them. Private sector procurement is also governed by company policy. Such policies are not necessarily dictated by law, but by the objectives of the company. A private company can engage in a contract with another private company or individual, and the procurement method is dictated entirely by the internal policies of the company.
Public sector procurement is governed by the public procurement rules. In most countries, there is a law that governs the procurement of goods, services and works with public funds. These rules set the basis for managing procurement and the various methods permitted under different circumstances. Public procurement must also adhere to certain principles. The process should be open to public scrutiny, depending on the procurement method used, and any confidentiality agreement stemming from the particular procurement method used. Sometimes, the procurement law is comprehensive, with high level of detail; sometimes it covers only the fundamentals, leaving the details for further development in procurement regulations, guidelines and manuals (institutional frameworks), which should expand on but not contravene the public procurement law.
With respect to oversight, the private sector procurement process is mostly closed to public scrutiny, Shareholders may, however, require reviews of the procurement process. Public sector procurement, in contrast, is open to public scrutiny, and public procurement practitioners are accountable for their actions, and need to ensure public procurement is managed in accordance with the objectives, principles and procedures defined in the public procurement rules.
Public procurement management, requirement identification and budget allocation, procurement planning and strategy development, procurement method selection, solicitation documents preparation and advertisement, bid and proposal submission, evaluation and selection, and contract award to closeout, are all addressed in the procurement rules. Public procurement practitioners are not at liberty to use a procurement method not stipulated in the procurement rules or not identified for a specific type of procurement requirement. Any deviation from public procurement rules requires justification and clearance from a designated approving authority, sometimes a Tender Board, before the action is carried out.
Under private sector procurement, procurement practitioners answer only to management, and are responsible for their actions; public sector procurement practitioners are public servants and are accountable for what they do or fail to do when managing public funds.
The ultimate aim of public sector procurement is to provide public services and support government operations at all levels within a country.
Basic Principles of Public Procurement
Public procurement principles are the foundation of public procurement and should be addressed in the public procurement rules. They govern the management of public procurement, and also set the framework for a code of conduct for public procurement practitioners and all other officials directly or indirectly associated with the public procurement process.
As a practitioner you must have a clear understanding of public procurement principles, and know how to apply them to guide your day-to-day decision-making process. By integrating these principles into your work ethic, the outcome of your decisions will always be in line with the goal of public procurement v
Public procurement principles are the foundation of public procurement and should be addressed in the public procurement rules. They govern the management of public procurement, and also set the framework for a code of conduct for public procurement practitioners and all other officials directly or indirectly associated with the public procurement process.
As a practitioner you must have a clear understanding of public procurement principles, and know how to apply them to guide your day-to-day decision-making process. By integrating these principles into your work ethic, the outcome of your decisions will always be in line with the goal of public procurement v
Transparency
integrity
economy,
openness,
fairness,
competition
accountability
integrity
economy,
openness,
fairness,
competition
accountability
are some of the fundamental principles of public procurement.
Transparency:
Transparency means that laws, regulations, institutions, processes, plans and decisions are made accessible to the public at large or at least to public “representatives” so that processes and decisions can be monitored, reviewed, commented upon and influenced by the stakeholders, and decision makers can be held accountable for them.
Transparency in public procurement is important.Information on the public procurement process must be made available to all public procurement stakeholders: contractors, suppliers, service providers, and the public at large, unless there are valid and legal reasons for keeping certain information confidential
Integrity:
Integrity means that the procurement processes are honest and in compliance with the respective laws, that the best available, most suitable technical expertise is employed in a non-discriminatory manner.
Economy
Synonymous with efficiency, value for money, and commercially reasonable price, the principle of economy emphasizes the need to manage public funds with care and due diligence so that prices paid for goods, services and works are acceptable and represent good value for the public funds expended on them.
Openness
Public procurement requirements should be open to all qualified organizations and individuals. The public should also have access to information pertaining to public procurement requirements. Access to public procurement information is not absolute. Confidential and proprietary information belonging to organizations and individuals participating in process should not be available publicly, and the extent of their disclosure should be detailed in the procurement rules or other relevant regulation.
Fairness
There are different interpretations of fairness in public procurement, so rather than define fairness as treating all bidders equally, better to mention how fairness is achieved in public procurement.
To achieve fairness in the public procurement process:
Decision–making and actions must be unbiased, and no preferential treatment should be extended to individuals or organizations given that public procurement activities are undertaken with public funds.
All offers must be considered on the basis of their compliance with the stipulations of the solicitation documents, and offers should not be rejected for reasons other than those specifically stated in the solicitation documents and the procurement rules.
A contract should only be signed with the supplier, contractor or service provider whose offer is compliant and best responds to the objectives of the requirement in terms of technical capability and price.
Suppliers, contractors or service providers should have the right to challenge the procurement process whenever they feel they were unfairly treated or that the procuring entity failed to carry out the procurement process in accordance with the public procurement rules. Such challenges must be based on the solicitation documents and/or the public procurement rules.
Accountability:
Accountability means that governments, public and various other agencies acting on their behalf must be accountable for the correct and complete execution of their tasks and duties and for the decisions and actions being made in their area of responsibility.
Public Procurement Categories
In Public Procurement there are generally three procurement categories: goods, works and services.
Goods are physical products purchased or manufactured on request. There is usually an element of service involved, such as when the agreement is for the purchase of goods to be assembled and/or installed. However, the extent of the service provided is directly related to acceptance of the goods purchased. Typical examples of goods are: office supplies and equipment, furniture, IT equipment, books, vehicles, medical supplies and other commodities.
Works are related to civil works; this includes new construction of structures of all kinds (buildings, highways, bridges, etc), renovations, extensions, and repairs. This category can also include, water and sanitation, transportation and electrical plant infrastructure.
Services are classified as consulting services and non-consulting services. In some cases, they are simply classified as services because of the difficulty, at times, in clearly determining the difference. The distinguishing factor between the two, however, is the degree of importance of the measurable physical output of the requirement.
Consulting services are usually intellectual in nature and are considered technical services the output of which is not equipment intensive. Advisory and project related services are typical consulting services; which includes: feasibility studies, project management, engineering services, finance and accounting services, training and development, to mention a few.
Non-consulting services, on the other hand, usually involve the used of equipment and specific methodologies to achieve their objectives. Some typical examples of non-consulting services are: equipment maintenance and repair, operation and maintenance services, utility management, installation and maintenance services, surveys and field investigations, and similar.
Goods and works are usually provided by firms, but consulting and non-consulting services are generally provided by firms as well as individuals.
In Public Procurement there are generally three procurement categories: goods, works and services.
Goods are physical products purchased or manufactured on request. There is usually an element of service involved, such as when the agreement is for the purchase of goods to be assembled and/or installed. However, the extent of the service provided is directly related to acceptance of the goods purchased. Typical examples of goods are: office supplies and equipment, furniture, IT equipment, books, vehicles, medical supplies and other commodities.
Works are related to civil works; this includes new construction of structures of all kinds (buildings, highways, bridges, etc), renovations, extensions, and repairs. This category can also include, water and sanitation, transportation and electrical plant infrastructure.
Services are classified as consulting services and non-consulting services. In some cases, they are simply classified as services because of the difficulty, at times, in clearly determining the difference. The distinguishing factor between the two, however, is the degree of importance of the measurable physical output of the requirement.
Consulting services are usually intellectual in nature and are considered technical services the output of which is not equipment intensive. Advisory and project related services are typical consulting services; which includes: feasibility studies, project management, engineering services, finance and accounting services, training and development, to mention a few.
Non-consulting services, on the other hand, usually involve the used of equipment and specific methodologies to achieve their objectives. Some typical examples of non-consulting services are: equipment maintenance and repair, operation and maintenance services, utility management, installation and maintenance services, surveys and field investigations, and similar.
Goods and works are usually provided by firms, but consulting and non-consulting services are generally provided by firms as well as individuals.
Procurement Methods
Procurement methods are the procedures used by the procuring entity to acquire goods, services and works. These methods can be competitive and non competitive. There’s a preference for using competitive methods of procurement given that they tend to promote transparency, economy and efficiency, and limit favoritism.
Procurement methods are the procedures used by the procuring entity to acquire goods, services and works. These methods can be competitive and non competitive. There’s a preference for using competitive methods of procurement given that they tend to promote transparency, economy and efficiency, and limit favoritism.
Types of procurement methods
Procurement methods are many, and they go by different names depending on the procurement category. Most, with few exceptions, generally fall into the following types as defined in the UNCITRAL Model Law on Public Procurement.
Procurement methods are many, and they go by different names depending on the procurement category. Most, with few exceptions, generally fall into the following types as defined in the UNCITRAL Model Law on Public Procurement.
These are:
Open Tendering,
Restricted Tendering,
Request for Proposals,
Two-stage Tendering,
Request for Quotations, and
Single-source Procurement.
Of the above-mentioned procurement methods, tendering, request for proposals, and two-stage tendering are considered competitive procurement methods because the solicitation documents are advertised and open to any qualified firm interested in competing for the assignment. In contrast, request for quotations and single-source procurement are considered non-competitive procurement methods because the invitation to submit offers is not advertised, and it is sent only to firms or individuals specifically invited by the procuring entity.
With respect to restricted tendering, there’s debate as to whether it is a competitive or non competitive procurement method. I consider it a non competitive procurement method because the solicitation documents are sent to a limited number of suppliers, contractors, or service providers.
Deciding which procurement method to use
A decision to use a particular procurement method must be based primarily on the stipulations of the procurement guidelines, manuals and procedures; which necessarily stem from the procurement legal framework. It’s also important to consider (among others):
the value and complexity of the requirement
the degree to which the procuring entity is able to clearly define the requirement
if there is a need for prospective bidders to participate in finalizing the specifications of the requirement
the urgency of need
market availability
A decision to use a particular procurement method must be based primarily on the stipulations of the procurement guidelines, manuals and procedures; which necessarily stem from the procurement legal framework. It’s also important to consider (among others):
the value and complexity of the requirement
the degree to which the procuring entity is able to clearly define the requirement
if there is a need for prospective bidders to participate in finalizing the specifications of the requirement
the urgency of need
market availability
Procurement methods and procurement categories
In most procurement guidelines and manuals, procurement methods are identified by different names for groups of procurement categories. Generally, procurement of goods and works, sometimes including non-consultant services, are grouped separately from consultant services procurement. There are also specific procurement methods identified for each group. But, in spite of the differences in the names of the procurement methods identified for each group, they all fall under the general types of procurement methods mentioned above.
In most procurement guidelines and manuals, procurement methods are identified by different names for groups of procurement categories. Generally, procurement of goods and works, sometimes including non-consultant services, are grouped separately from consultant services procurement. There are also specific procurement methods identified for each group. But, in spite of the differences in the names of the procurement methods identified for each group, they all fall under the general types of procurement methods mentioned above.
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