Supply Chain Management risk analysis, procurement strategies development and planning are essential tools to ensure that procurement activities support project outcomes, are conducted in a timely manner and at a reasonable cost. Early and accurate planning is critical to avoid last minute procurement, which is contrary to open, efficient and effective procurement. When does (1) procurement risk analysis (2) procurement strategies and (3) procurement planning start? SCM cycle is an integrated part of the project cycle, and therefore needs to be aligned and synchronized with other project activities in order to contribute to achieving identified outcomes. To this end, the SCM cycle cannot run in isolation. On the contrary, it must be integrated into the overall project cycle. This implies by definition the need for a constant interaction between operations and programming. In the project context, SCM risk assessment and procurement strategies development and planning should start as early as the project definition stage. At this point, important questions will need to be addressed, including: What will be the implementing modality? Who will be responsible for procuring and managing inputs? What are the existing risks? Are there risks associated with the nature of the products or services to be acquired? Are risks associated with the markets, the environment or the political context? What is the best procurement strategy for achieving the programme/project goals and to mitigate risk? What is the Procurement Plan and what are the associated resources? What are the main acquisition activities to be conducted that will contribute to the identification of project outputs? Among these activities, will there be acquisition of goods, services (professional or individual) or works? What is the procurement and product expertise required to successfully conduct the identified procurement activities? Does it exist in house or do we need to outsource it? Does UNDP or the implementing partner have the capacity to develop specifications/TOR/SOW, or do we need to hire specialized experts? What about the evaluation? What is the budget required to achieve the identified outcomes? All required activities, either goods to be procured (i.e., ballot boxes for an electoral project) or services (i.e., individual consultants to develop specifications) must be budgeted. What are the benefits of this approach?
Planning Lack of planning Delay in project implementation Inadequate supplier response Procurement process shortcuts Higher prices Early involvement of procurement officers in project planning Develop and communicate an accurate Requisition Plan Insufficient lead-time Inadequate supplier response Procurement process shortcuts Higher prices Involve procurement officers in the project planning phase Delay requisitions to create false emergencies Claims of unethical or unfair dealings Delay of project implementation Higher total cost of acquisition Not achieving Best Value for Money Early involvement of procurement officers in project implementation Seek proper justification of emergencies Training of requisitioners Requirements definition Restrictive specifications/TOR/SOW Claims of unethical or unfair dealings Inadequate suppliers response Limits competition Unfair treatment of suppliers Lack of transparency Developed market and product understanding Include generic functional and performance specifications Apply relevant international standards where applicable Inadequate specifications/TOR/SOW Significant variety in offers received Insufficient responses Offer of goods/services that do not meet needs Difficulty in evaluating competing offers Become familiar with requirements of the specification/TOR/SOW Developed market and product understanding External support (consultant) to developed specifications/TOR/ SOW linked to clear deliverables and target time Do not include quality requirements in specifications/TOR/SOW Impossibility to achieve best value for money Difficulty in comparison and overall evaluation Poor quality of the procured items, which may lead to a waste of funds Include quality in the specifications/TOR/SOW, using international and national standards If quality is a critical issue, extra due diligence must be used (i.e., check manufacturing process and standards, factory visits, sampling and independent laboratory analysis, inspection, etc.)
Sourcing Wrong approach to market Inadequate or inappropriate supplier response Higher prices Selection of inappropriate approach Analyze supply market Develop sourcing strategies Identify wrong sourcing strategy or do not have sourcing strategy Inadequate or inappropriate supplier response Limit competition Proper application of the or post-qualification, depending on the identified complexity and risk Misrepresentation of facts by potential suppliers Contract with unsuitable companies Claims of unethical or unfair dealing Breach of contract Independently verify suppliers’ qualifications Conduct supplier reference check and due diligences Outdated information on potential suppliers Inadequate suppliers response Limit competition Maintain suppliers roster Advertisement of procurement notices in inappropriate media Lack of sourcing strategy Limit competition Contract with unsuitable companies Identify relevant media to post procurement notices Preparation and issuance of solicitation documents Use of inappropriate evaluation criteria Inadequate or inappropriate results Not achieving best value for money Re-tendering (time/ cost) Have clear goal to be achieved as a result of the procurement process Consider implications of evaluation criteria Unacceptable requirements to suppliers Loading the cost in offers Limits competition Too few bids Re-tendering (time/cost) Develop strong understanding of market and industry practices Develop commercially acceptable terms Check that responsibility for risks is not allocated to suppliers for factors outside their control Provisions of inadequate information Loading cost in offers Great variation in offers Create confusion among potential suppliers Re-tendering (time/cost) Review documents before issue Know the market Receipt and Evaluation