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The Contribution of mainstreamed Procurement Practice towards the attainment of transformation agenda of Government : the Private Sector perspective.

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Presentation on theme: "The Contribution of mainstreamed Procurement Practice towards the attainment of transformation agenda of Government : the Private Sector perspective."— Presentation transcript:

1 The Contribution of mainstreamed Procurement Practice towards the attainment of transformation agenda of Government : the Private Sector perspective. By Niyi Fadipe, FCIPSMN, MCIPS (Lond), MNIM Chairman, CIPSMN Board of Fellows.

2 Transformation: During , the policies and programmes of Federal Government of Nigeria are directed at addressing governance and will focus especially on the public services, security, law and order, the legislature, anti- corruption measures and institutions, the judiciary, economic co-ordination, and support for private investment.

3 Federal Government Transformation economic agenda
Creation of 3 million new jobs in the economy. Increasing Foreign Direct Investment (FDI) inflow by at least 300 percent by year 2015. Improving Ease of doing Business ranking by a minimum of 103 points. Enhancing the corruption perception ranking by a minimum89 points by Year 2015. Improving Nigeria Global Competitiveness ranking by 75 points and growing the country's enabling trade ranking by 77 points by Year 2015.

4 Transformation: This can be defined as a thorough and dramatic change in form or appearance. If one keeps on doing the same thing while expecting different results is a sign of madness, according to the genius, Albert Einstein.

5 Transformation plan: Develop partnership and secure expertise, forge links with the World Bank and international financial agencies, monitor key reform indicators, identify and implement high – impact quick wins, strengthen and publicize ongoing reforms and build momentum across the board.

6 Transformation: Transformation is a strong word that portends a radical, structural and fundamental reappraisal of the basic assumptions that underlie our reforms and developmental efforts. The challenge before government is how to move the nation away from an oil-dominated economy, institute the basics for a private –sector driven economy, build the local economy on international best practices, transform a passive oil industry to a more pro- active one, and restructure the country along the lines of more decentralized federalism.

7 Transformation: But beyond this, there are management and leadership challenges to contend with building an efficient and effective polity, inspiring a shared vision, remodeling a corrupt polity, building character and integrity in our leaders , redefining the imperatives of transformation leadership, and creating the Nigerian dram that will inspire patriotism and commitment in the citizenry. ( Prof. Benjamin C. Osisioma)

8 Comment on PHCN 18 companies emerged from the privatized PHCN.
6 Generating , 11 Distribution companies and 1 TCN. Dayo Salami , Economist and Faculty member at Lagos Business School stated that we need $3.5 billion to achieve 40,000 megawatts by Year 2020. Currently, we generate at peak period 3,849 megawatts. South Africa generates 41,000 megawatts. Federal Ministry of Power stated that 6,000 mws are generated through diesel and petrol generators.

9 Comment on PHCN Global Business Integrity stated that the country spent $455 million (N705 billion naira ) on generators in Year 2011.

10 Procurement practice- private sector:
Risk Management. Vendor managed Inventory. Supplier base Development. Procurement Ethics.

11 Procurement risk management:
The ultimate goal of risk management is to protect and enhance what the enterprise is primarily there to do. In the private sector the aim is profitable survival. The public sector equivalent is to deliver maximum service and organizational effectiveness within the constraints of the resources provided to do it. This includes money. But is the risk – catching net being cast wide enough? Focusing on risks external to the company tells only half the story. What is less well known is that risks exposures also exist inside the company and can just as damaging.

12 The “Risk Catcher” External dependencies ( e.g. supply chain robustness, supplier viability; Market conditions and behaviours ( e.g. competitive or not; supply availability); Procurement process; Management controls;

13 Risk Management: CIPS, UK defined risk as “the probability of an unwanted outcome happening”. Risk management involves three key activities: risk analysis, risk assessment and risk mitigation all of which facilitate the taking of decisions and actions to control risk appropriately by providing a disciplined and objective approach

14 Risk Analysis This is the process of identifying all the potential things that can go wrong with an activity, and then estimating the probability of each happening. Risk analysis is part of the strategy development process. Risk management is a process including the identification and analysis of risk, and the decision to either accept or mitigate the exposure to such risk when compared to the potential impact on the achievement of the organization's objectives.

15 Risk Assessment: This is the process of assessing the likely impact of a risk on the organization.

16 Risk mitigation: Having assessed all the risks and identified those that require action, plans need to be drawn up and responsibilities assigned to control and mitigate these risks. Risks then should be allocated an owner, who is responsible for managing them, and possibly with help of other team members.

17 Role of procurement personnel in risk management
Identify and promote the business need for risk management in procurement. Identify who in their organization is / should be responsible for this. Work with them in analyzing and assessing the risks. How is the supplier managing its risks.

18 Role of procurement personnel:
Make a value – added input to commercial risk assessment Be fully conversant with a range of contract strategies that can be applied when setting up contracts to achieve best value in meeting organizational objectives.

19 Identifying where risk is located: strategic
Political. Economic Social Technological Legislative / Regulatory competitive

20 Operational risk: Professional. Financial Legal Physical Contractual
Technological Environment

21 Types of Risk Factors: Escalating costs of fuel, energy, and raw materials. General lack of internal risk management capability on the part of the supplier. Exchange rate fluctuations. Financial instability of the suppliers leading to suppliers failure. Conflicts in supply chain caused by cost cutting and survival activities.

22 Types of risk factors: The amount of emphasis on cost cutting over quality improvement. Supplier failure to deliver on contracted obligations. Sole sourcing arrangements. Changes in environment or legislation that affect the supply base. Product with no available alternatives. Changes that result in obsolete technology and / or products, or new unproven technology or products.

23 Methods and Tools to Identify Risk:
Brainstorming sessions to identify risks. Establishment of cross- functional teams. Risk registers. Total Risk Profiling. SWOT Analysis. Balance sheet analysis. Site observation. Close collaborative working with suppliers.

24 Vendor Managed Inventory, Purpose:
A way to reduce inventory. Integration of suppliers by giving them a good visibility. When a company implements a VMI, then the company transfers stock /inventory management and associate risks to suppliers.

25 VMI requirements Supplier mature enough to accept a supply chain project. Supplier integrity. Distance with the supplier plant. Flexibility of the supplier. Lead time. Determination of stock levels. Define a VMI contract.

26 VMI Implementation: select the supplier. Select a product.
Define the mini/ maximum stock levels. Agree on the information flows. Define the storage areas. Agree on a VMI contract. Define a test period for the VMI Define other products to go to VMI if needed.

27 Procurement Ethics: Ethics is concerned with the moral principles and values which govern our beliefs, actions and decisions. Ethics is important in supplies chain management since: Supplies staff are the representative of their organisations in its dealing with suppliers. Sound ethical conduct in dealing with suppliers is essential to the creation of long – term relationships and the establishment of supplier goodwill. Supplies staff are probably more exposed to the temptation to act unethically than most employees. It is impossible to claim professional status without reference to a consideration of its ethical aspects.

28 Procurement Ethics: Ethics is primarily concerned with such issues as bribery and confidentiality. However, ethics is also concerned with values. Values are concerned with questions relating to what is right, good and just, and the basis on which make ethical decisions. Thus individual behaviour will defer according to whether we base our ethical decisions on : The utilitarian view – conduct is good which secures the greatest number.

29 Ethics: The individualistic view – conduct is good which promotes my personal interests or my organisation irrespective or my organisation irrespective of how this affects the interests of other people or organisations. The human rights view – conduct is good which respects fundamental human rights shared by all human beings. The justice view. Justice is standard for judging legal and moral questions. Conduct is just which is impartial, equal and fair.

30 Ethics: They remind staff of aspects of their work where they may experience conflicts of interest between their self interests and duties to their employers. They highlight practices which may compromise the professional objectivity and integrity of staff. They provide standards for the staff to attain.

31 Ethics: Be open as possible within commercial and legal constraints.
Do not disclose suppliers confidential information to third parties. Do not withhold important bidding information. Unsuccessful suppliers should be told why they have failed. Suppliers should not be asked to incur costs if there is little chance of obtaining the business.

32 Ethics: Supplies staff are forbidden to accept gifts of any kind and those received must be returned. Staff may retain gifts that are clearly of an advertising nature, e.g calendars, diaries etc Staff are allowed to decide for themselves whether a proffered gift of hospitality is an appreciation of cordial business relationships or an attempt at commercial bribery.

33 Equity: Fairness and impartiality towards all concerned, based on the principles of evenhanded dealing. Equity implies giving as much advantage, consideration, or latitude to one party as it is given to another.

34 References: Nexans, France, VMI with a Supplier.
Public Procurement Practice, Risk Management . A Short Guide to Procurement Risk by Richard Russil, Gower publication. Managing Risk in the Procurement Process, by Kenneth E. Barden. Supplier Risk Management, Presentation to CIPS Harrow branch, May 2011, Ernst & Young. CIPS, UK Knowledge Summary, “Risk management in Purchasing and Supply Management. NIM publication; Nigeria's transformation Agenda, The Management and Leadership Challenges, by Prof. Benjamin C. Osisioma

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