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19.06.2005 Feature Article

The Principle Of Value For Money In Procurement

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Public Sector Aspects It is common knowledge that 'procurement' encompasses the whole process of acquiring property or services. It begins when an agency or Ministry has identified a need and decided on its procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, contract award, delivery of and payment for the property or services and, where relevant, the ongoing management of a contract and consideration of options related to the contract. Procurement also extends to the ultimate disposal of property at the end of its useful life.

In addition to the acquisition of property or services by an agency for its own use, 'procurement' also covers a situation where an agency is responsible for the procurement of property or services for other agencies, or for third parties.

An integral part of the procurement cycle is the ongoing monitoring and assessment of the procurement, including the property or services procured and the tasks related to procurement.

Within the Australian Public Service (APS), the Commonwealth Government has developed and promulgated what is called Commonwealth Procurement Guidelines (CPGs). The CPGs apply to procurement conducted by all officials in agencies or Departments (Ministries) and in relevant government bodies. The procurement policy framework outlined in the CPGs applies to all matters related to the procurement of property or services, irrespective of whether those matters are specifically mentioned in the CPGs.

It is presumed that all developed countries and forward-looking developing nations have in place such procurement framework that guides them through the procurement process. Ghana should be recommended for the Procurement Act which was recently legislated and passed through the parliament. The next step would be its application in the field for efficiency and effectiveness supported by pragmatic, transparent and accountable audit methodology.

A very important ingredient in the 'procurement' cycle is 'value for money' as emphasised by the CPGs and religiously applied by all the relevant public servants placed in positions to acquire goods and services on behalf of the Government.

'Value for money' is the core principle underpinning Government procurement. In a procurement process this principle requires a comparative analysis of all relevant costs and benefits of each proposal throughout the whole procurement cycle (whole-of-life costing).

Value for money is enhanced in Government procurement by: encouraging competition by ensuring non-discrimination in procurement and using competitive procurement processes; promoting the use of resources in an efficient, effective and ethical manner; and making decisions in an accountable and transparent manner.

In order to be in the best position to determine 'value for money' when conducting a procurement process, request documentation needs to specify logical, clearly articulated, comprehensive and relevant conditions for participation and evaluation criteria which will enable the proper identification, assessment and comparison of the costs and benefits of all submissions on a fair and common basis over the whole procurement cycle.

In line with the CPGs, cost is not the only determining factor in assessing 'value for money.' Rather, when assessing alternative procurement processes or solutions, a whole-of-life assessment would include consideration of factors such as: the maturity of the market for the property or service sought; the performance history of each prospective supplier; the relative risk of each proposal; the flexibility to adapt to possible change over the lifecycle of the property or service; financial considerations including all relevant direct and indirect benefits and costs over the whole procurement cycle; the anticipated price that could be obtained, or cost that may be incurred, at the point of disposal; and the evaluation of contract options (for example, contract extension options). All potential suppliers should have the same opportunities to compete for Government business and must, subject to the prescribed guidelines in the Procurement Act, be treated equitably based on their legal, commercial, technical, and financial abilities, and not on their degree of political affiliation or ownership, location, ethnicity or size. The property or services on offer must be considered on the basis of their suitability for their intended purpose, and not on the basis of their origin. In conclusion, it can be summarised that the procurement process itself is an important consideration in achieving value for money. Participation in a procurement process imposes costs on government agencies and potential suppliers and these costs should be considered when determining a process commensurate with the scale, scope and relative risk of the proposed procurement. Last but not least, the bane of any nation stems from the corrupt and fraudulent procurement practices by unscrupulous officials at all levels of the management hierarchy (strategic, operational and tactical) that have been entrusted to execute such tasks. They are very capable by swindling the whole nation out of a deal by sheer shrewdness via dubious scheming and manipulation of the system. For the Procurement Act to work to achieve positive outcomes, appropriate performance measurement of such officials need to be instituted by applying transparent and accountable audits (by honest external private bodies) with short periodicities (quarterly) where applicable. Charles Agyeman Manu MEng, MAppSc, MBA. Assistant Director, Professional Development, Australian Public Service. Member, National Institute for Governance, Australia Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.

Charles Agyeman Manu
Charles Agyeman Manu, © 2005

The author has 14 publications published on Modern Ghana. Column Page: CharlesAgyemanManu

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