1. PSPTB ANNUAL CONFERENCE AT AICC, ARUSHA
VALUE FOR MONEY
KENYAN PERSPECTIVES
PSPTB ANNUAL CONFERENCE
AT AICC, ARUSHA
PRESENTATION BY:
HEDWIG NYALWAL
HEAD OF SECRETARIAT – KENYA INSTITUTE OF SUPPLIES MANAGEMENT

2. Printing of election materials for 2010 elections in Kenya

3. WHEN CONDUCTING PROCUREMENT ……….. BEWARE!
PRICE = VALUE + WASTE +

4. EXAMPLE OF EQUIPMENT PURCHASE (RFX)
FOR THE SAME PIECE OF EQUIPMENT
SUPPLIER A OFFERS $1203
SUPPLIER B OFFERS $1257
We issued specifications
We received a price
To ESTABLISH VALUE examine the COST BREAKDOWN….

5. COST DRIVER ANALYSIS

6. Supplier B has $26 more in MATERIAL VALUE
COST DRIVER ANALYSIS
Supplier B has $26 more in MATERIAL VALUE

7. OVERHEADS (No-value add = Waste) Supplier A has $90 more waste
COST DRIVER ANALYSIS
OVERHEADS (No-value add = Waste)
Supplier A has $90 more waste

8. But, Supplier B has $118 more in PROFIT Is profit value?
COST DRIVER ANALYSIS
But,
Supplier B has $118 more in PROFIT
Is profit value?

9. WE SELECT PRODUCTS THAT ARE THE RESULT OF THEIR SUPPLY CHAIN
VALUE FOR MONEY
WE SELECT PRODUCTS THAT ARE THE RESULT OF THEIR SUPPLY CHAIN
To realize VfM: Scope of procurement must extend beyond MANAGING SUPPLY to MANAGING THE SUPPLY CHAIN

10. VfM
Value for money (VfM) is economy, efficiency, effectiveness……
ECONOMY – optimal allocation/application of available resources to CLEARLY DEFINED and GENUINE USES/PRIORITIES …. which are aligned to the STRATEGIC NEEDS AND GOALS of an organization, community, country etc

11. VfM
EFFICIENCY – no/minimal waste with regards to quality/time/cost
EFFECTIVENESS – what was INTENDED = ACHIEVED | NEEDS = ADDRESSED

12. VfM
VfM approach to public procurement demands professionalism:
Professionals are responsible/accountable for their use of RESOURCES
Professionals are responsible/accountable for the OUTCOMES attained
Money is spent not only in the RIGHT WAY but also in the BEST WAY

13. THE BALANCING ACT

14. THE BALANCING ACT
Where on this triangle does procurement give best VfM?
Can procurement function optimize all three elements of this triangle to give best VfM?
Need identification ……QUALITY
Specification……..COST
Contract management………DELIVERY/PERFORMANCE
Legalistic/Regulatory approach = trade off = No VfM
Professional approach = Eliminate waste = VfM

15. VfM – PILLERS IN PROCUREMENT
PLANNING

16. EVALUATION: 67 out of 125 APPEAL CASES
……..in one case the applicant an insurance broker charged that it had exceeded the minimum score of 75% in the technical evaluation and was the lowest priced bidder and, further that the PE had introduced new criteria (choice of underwriters and past performance) in order to exclude it from the contract….the PE charged that the applicant was a current provider of insurance services to the PE and had a record of poor performance ….interestingly the applicant was still rated highly in the technical evaluation stage enough to allow it to proceed to financial evaluation! The PE was ordered to re-evaluate all tenders using criteria set out in its original tender documents……..
……….will the PE get VfM in this procurement?

17. PROFESSIONAL’S DILEMA
…….efficiency and effectiveness appear to have been sacrificed at the alter of modern-day integrity oriented public contracting system …by removing the public official’s discretion over choice of contractor, competitive bidding eliminates the officials ability to obtain superior goods and services ….in effect the PE does not choose the contractors, rather the contractors choose themselves by their bids ….not surprisingly, quality of goods and services suffer…(Steven Kelman, 1990)

18. FOCUS FOR PROMOTION OF VfM
Demand management
Detailed specifications
Lower cost specification
Optimal service level
Quantify spend volumes
Common specification
Collaboration with other public sector bodies
Implement framework agreements

19. FOCUS FOR PROMOTION OF VfM
Supply base management
Supplier development programmes
Review / establish service level agreements
PPP contracts where appropriate
Performance benchmarking
Cost breakdown analysis
Total cost management

20. THE VfM FUNCTION
VfM = ʄ [Professionalism (+); Legal framework (-); Regulatory framework (-); Procurement-Organization (+)]
………..Radical proposal to promote professionalism in Kenya seeks to recognize the opinion of the procurement professional by making him the professional adviser to the accounting officer and abolishing the Tender Committee……(Public Procurement and Disposal Bill 2014) ……..will this make a difference?

21. ----THANK YOU---