The Cost Effects of Framework Agreements: the Case of Public Procurement and Property Disposal Service (PPPDS)
Creators: name: Moges, Bewketu
Publisher: name: National Academic Digital Repository of Ethiopia
Year: 2016

description: is paper deals with the cost effect assessment of framework agreements for the Federal government of Ethiopia, Public procurement and property administration agency (PPPDS). The savings were assessed in terms of the three synergy benefits of economies of volume/scale, process and information &amp; learning. T he descriptive research method is considered most appropriate and chosen as the study is about d emonstrating the cost effects of centralized framework procurements. The questionnaire prepared to assess the PPPDS status in achieving the economies of learning and information is administered to all procurement and contract administration processes staffs. Judgmental sampling is used in selecting the category and type of items in assessing the economies of volume. Items from the two categories, stationery and sanitary items are selected for price comparison. The potential price savings are estimated by comparing the agreement prices to market prices. The average estimated volume savings of stationary and sanitary items is found to be 5 and 19 percent respectively. The results evidenced that there is significant cost savings as a result of consolidated/pooled procurement. The PPPDS volume saving assessment report was also reviewed and found out that CSA price index was used for price comparison and the reported savings differs substantially from the results found in this study. However, it is concluded that moving to the framework agreement arrangement brought a volume saving for the government. The administrative/process cost savings also assessed by comparing the structural changes happened on the public bodies before and after the introduction of the framework agreements. The assessment shows that there is no structural change on the procurement functions of the public bodies after the introduction of the framework procurement arrangement. Although the framework arrangement frees and reduces the public bodies' workload, it doesn't fully free them in a predictable. Achievement of the economies of information and learning benefit is reflected through the improvement of the systems, accumulation of process knowledge, and usage of standardized applications/software and sharing of the available knowledge and experience. It was found out that PPPDS has qualified staffs with mixed of experiences but has not started the journey to reap the benefit of economies of information and learning. PPPDS is recommended not to return some procurement back to the public bodies as a reason of higher tender prices, it is unrealistic to expect lower prices in lower volume which is not attained by the consolidated/higher volume through the framework arrangement. The PPPDS is also recommended to increase its scope of contract administration part from order placement to order receipt &amp; distribution to free the public bodies' procurement in a predictable manner and bring the reduction of administration cost. Since CSA price index doesn't ensure the comparison was made between similar products in reporting volume savings, it is recommended that PPPDS to use market price data for making volume saving assessments. It is also the researcher's recommendation to PPPDS to start the journey of the achievement of the economies of information and learning. Key Words: Frame Work Agreement; Centralization; Hybrid Procurement; Economies of Volume; Prices; Process economies; Savings; Tendering