The central focus of public procurement is on the compliance with approved process.
In addition to the process and corporate control responsibilities and to playing a support role in risk mitigation, the four key elements of systematic purchasing management are as follows:
- Quantity: the number of units of each item of purchase that are required to meet the municipality’s needs. Conceptually, such needs can be defined in two ways: discrete need at any particular time, or anticipated need over a defined period of time.
- Quality: buying goods that conform to the design, manufacture and performance specifications set by the client department.
- Price: securing the best full-life cost for the quantity and quality of goods or services ordered.
- Time: securing timely delivery and installation, as and when needed.
The purchasing function requires a proper balance to each of these considerations. All of them are interrelated. It is self-evident the purchasing function is most effectively discharged when the proper quantity of the optimal quality of the right goods and services are purchased at the best possible price for delivery at the most opportune time.
Yet, while the need for a proper balance is clear, finding the balance requires a consideration of client departmental needs and goals, available funds, the range of procurement options available and the prevailing conditions of the market.
Since each of these considerations will vary from one municipality to another, the “proper” balance is not some hypothetical ideal, but rather a subjective result tied to the circumstances of each municipality concerned.
Much as no politician ever campaigns on a platform of high unemployment and environmental degradation, no politician would ever argue a municipality should buy poor quality goods and pay a high price for them.
The critical question to resolve is how much extra should a municipality be prepared to pay in order to obtain:
- higher quality goods;
- greater security in relation to timely supply; and
- the number of units of a good or service required to perform the municipal services to which they relate.
It is within this context that trade-offs must often be made. Underlying that question is the assumption it is always possible to assess quality (and the relative benefit that it affords) accurately, so that an informed pricing decision can be made.
In fact, such a balancing act can occur only if the municipality has detailed information regarding the circumstances in which the goods it is proposing to buy will be used, and the extent to which they will be put to use.
What is sometimes less understood is that each of these individual considerations involves balancing competing lower order choices. They are implicit within each of the four major elements of systematic purchasing.
For instance, the “quality” of goods obviously involves the original design and manufacturing process of the goods concerned.
However, it must also take into account the following additional factors:
- warranty and other service support;
- vendor and manufacturer reliability and stability; and
- security of supply.
Concerns relating to service support reflect the fact that very often the integration of new equipment into older systems involves a complex process of calibration and adjustment.
The concern of warranty support reflects the fact that even the best made goods may fail under normal operating conditions and may require repair or replacement.
The stability and reliability of both the vendor and manufacture are often pivotal to obtaining both effective service and warranty support.
Security of supply becomes of serious concern when all deliveries are not expected to be received simultaneously.
As I have mentioned in previous articles, the procurement structure is compiled of many rules and regulations as well as policies and procedures that need to be followed in order to create a fair, open and transparent procurement process.
