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Checklist-of-Potential-Risks---goods-and-services-procurement-process

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CHECKLIST OF POTENTIAL RISKS - GOODS AND SERVICES
PROCUREMENT PROCESS
(Version 3.1 – April 2017)
1.
Identifying the need and planning the purchase
2.
Developing the specification
3.
Selecting the purchasing method
4.
Purchasing documentation
5.
Inviting, clarifying and closing offers
6.
Evaluating offers
7.
Selecting the successful tenderer
8.
Negotiations
9.
Contract management
10.
Evaluating the procurement process
11.
Disposals
1.
Identifying the need and planning the purchase
Risk
Likely consequences
Action
Understatement of the need
Purchase of unsuitable
product or service
Analyse need accurately
Money wasted
Need not satisfied
Overstatement of the need
Misinterpretation of user
needs
Greater expense
Analyse need accurately
Poor competition
Use functional and
performance requirements
Totally unacceptable purchase
or not most suitable product
or service
Improve consultation with
users
Time lost
Obtain clear statement of
work and definition of need
Increased costs
Possible downtime
Insufficient funding
Delay in making the purchase
Additional costs for re-tender
Obtain appropriate approvals
before undertaking process
Improve planning
Impractical timeframe
Inadequate responses from
tenderers
Improve forecasting, planning
and consultation with users
Reduced competition
Improve communication with
potential tenderers
Delivery schedule not met
Probity issues
Increased procurement costs
Misuse of resources
Implement best practice
policies, guidelines and
Risk
Likely consequences
Action
Most suitable product not
obtained
practices
Unethical conduct
Improve training of personnel
Maintain ethical environment
Put suitable controls and
reviews in place
Consider using a probity
adviser
Improve communication with
potential tenderers
2.
Developing the specification
Risk
Likely consequences
Action
Narrow definition or
commercial specification (eg.
use of brand name)
Fewer alternatives
Define the specification in
terms of required outputs
Most suitable product or
service may not be obtained
Increased costs
Definition of inappropriate
product or service
Need not satisfied
Time lost
Increased costs
Biased specification
Inadequate statement of
requirements
Ensure specification is
consistent with needs analysis
Improve market knowledge
Possible downtime
Use functional and
performance specifications
Inadequate responses from
tenderers
Use functional and
performance specifications
Claims of unfair dealings
Implement a control
mechanism to review
specification before release
Variety of offers
Be familiar with requirements
Insufficient responses
Use functional and
performance specifications
Products offered not meeting
needs
Difficult to evaluate
3.
Use functional and
performance specifications
Use an Expression of Interest
or Request for Information to
clarify requirements (be
careful not to infringe
intellectual property rights or
copyright)
Selecting the purchasing method
Risk
Likely consequences
Action
Failure to identify potential
sources
Lack of offers from suitable
tenderers
Improve procurement
planning processes
Risk
Likely consequences
Action
Improve market knowledge
Seek industry participation
Selecting inappropriate
method
Need to seek offers again
Possible cost variations
Failure to obtain value for
money
Improve implementation of
procurement policies,
guidelines and practices
Improve tender
documentation and clearly
identify the evaluation criteria
in Request for Tenders
Provide staff with appropriate
training and experience
4.
Purchasing documentation
Risk
Likely consequences
Action
Terms and conditions
unacceptable to tenderers
Loading of costs in offers
Use standard documentation
prepared by Crown Law
Having to modify tender
terms and conditions
Disruption
Low response
Select appropriate
documentation for purchase
type (ie. goods, services,
goods and services, or
information technology
related)
Improve tender planning
Assess and allocate risks
appropriately
Consult with Crown Law
Use commercially acceptable
terms
Provide staff with appropriate
tender planning and
procurement skills
Providing inadequate
information
Loading of costs in offers
Variations in offers
Having to provide clarifying
information, causing delays in
tender closing
Additional costs
Ensure staff have appropriate
tender planning and
documentation training and
experience
Improve tender planning and
preparation
Review tender documents
before issuing them and
ensure evaluation criteria
contain the critical factors on
which assessment of tenders
will be based
5.
Inviting, clarifying and closing offers
Risk
Likely consequences
Action
Failure to adequately address
enquiries from tenderers
Claims of unfair practices
Implement standardised
procedures for responding to
enquiries
Offers with qualifications by
tenderers
Withdrawal of offers
Provide staff with appropriate
tender management training
and experience
Respond in a timely manner
to enquiries
Allow adequate time for
tenderers to respond
Actual or perceived
favouritism in providing
information
Complaints from tenderers
As above
Withdrawal of offers
Answer queries in writing and
provide copies to all potential
tenderers
Ensure that all potential
tenderers are provided with
any addenda
Actual or perceived breach of
confidentiality
Complaints from tenderers
Mistrust by tenderers
Establish formal security
procedures
Train staff in their obligations
Perform regular audits and
reviews of security processes
Advise tenderers of security
measures
Insufficient number of
responses
Need to undertake process
again
Increased costs
Delayed delivery to the client
Poor value for money due to
limited competition
Use appropriate tender
advertisement strategy to
increase competition (eg.
consider advertising tenders
in other publications as well
as the local paper)
Provide potential tenderers
with advance notice of tender
requests
Improve tender
documentation and
specifications
Allow sufficient time for
tenderers to respond
No response from known
quality suppliers
Reduced competition
Increased costs of products
or services
Actions as above for
insufficient number of
responses
Improve your market
Risk
Likely consequences
Action
knowledge
Review specifications or
conditions
Seek feedback from known
suppliers on their nonresponse
6.
Evaluating offers
Risk
Likely consequences
Action
Failure to follow effective
evaluation procedures
Inconsistent evaluations
Provide staff with appropriate
tender assessment and
evaluation training and
experience
Possible complaints from
tenderers
Subjective not objective
evaluation of offers
Improve tender assessment
and evaluation processes
Maintain, audit and review
evaluation procedures
Ensure that Evaluation
Committee members declare
any conflicts of interest
Breaches of security
Claims of unethical or unfair
practices
Maintain, audit and review
security procedures
Loss of faith with tenderers
Provide staff with appropriate
training and experience and
monitor performance
Ensure that Evaluation
Committee members
understand and sign
Confidentiality Agreements
Offers fail to meet needs
Need to call tenders again
Improve market knowledge
Additional costs
Improve tender
documentation
Delay in delivery
Conduct market research
Develop functional and
performance specifications
Failure to identify a clear
winner
Claims of unethical and unfair
behaviour
Decision made on subjective
grounds
Complaints from tenderers
Ensure evaluation criteria
contain the critical factors on
which the assessment of
tenders will be based and that
they are clearly identifiable to
tenderers in tender
documents
Risk
Likely consequences
Action
Ensure evaluation criteria are
appropriate and measurable
Ensure that Evaluation
Committee members sign
Declaration of Conflict and
Confidentiality Agreements
7.
Selecting the successful tenderer
Risk
Likely consequences
Action
Selecting an inappropriate
supplier
Failure to fulfil the contract
Provide staff with appropriate
tender evaluation, financial
and technical skills training
and commercial expertise
Improve evaluation
procedures
Improve evaluation criteria
and clearly identify them to
tenderers in tender
documents
Reject unacceptable offers
Perform financial, technical
and company evaluations
before awarding contract
Procurement Review
Committee to review tender
and selection process prior to
awarding contract
Selecting inappropriate
product
Failure to meet the client’s
need
Ensure users are involved in
the evaluation/selection
process
Improve technical evaluation
procedures and train staff as
appropriate
Procurement Review
Committee to review tender
and selection process prior to
awarding contract
8.
Negotiations
Risk
Likely consequences
Action
Not matching the
expectations of buyer and
tenderer
Contract disputes
Improve communication,
including ensuring that
Conditions of Contract form
Delivery delays
Risk
Likely consequences
Action
Cost variations
part of the Request for
Tender
Reduction in value for money
Purchase of less suitable
product
Provide staff with training in
contract planning and
management
Inefficient use of resources
Define terms carefully
Record each party’s
obligations
Clarify all ambiguities before
signing the contract
Deadlock on details of
agreement
Delays in delivery
Need to restart procurement
Possible cost of legal action
Failure to secure mandatory
conditions
Inability to finalise contract
Delays in delivery
Variations in cost
Inefficient use of resources
Look at alternatives to share
risk
Distinguish between essential
and non-essential goals and
requirements
Establish baseline before
negotiations
Distinguish essential goals
from others
Consider variations to
contract
Provide negotiators with
adequate training
Failure to secure agreement
in relation to Crown
Contracts Confidentiality
Policy
Inability to finalise contract
Delays in delivery
Inefficient use of resources
Requirement to negotiate
with other ranked suppliers
Unfair or onerous
requirements on the tenderer
in the contract conditions
Contract disputes
Invalidity of contract
Legal action
Poor supplier/customer
relationship
Failure to reflect the terms
offered and agreed in the
contract
Contract disputes
Legal action
Poor supplier/customer
relationship
Inadvertently creating a
contract without the
delegate’s prior approval
Ensure potential suppliers
aware of Policy requirements
before submitting responses
Seek exemption from Crown
Contracts Confidentiality
Standing Committee
Provide negotiators with
adequate training and support
Negotiate commercial terms
Terms should be fair and
reasonable
Check final draft of contract
with successful tenderer
Keep records of all
negotiations and agreements
Expense of negotiating out of
the contract and paying
damages
Procedure in place to ensure
delegate’s approval obtained
first
Committing to other
associated work prior to main
Provide negotiators with
adequate training
Risk
Likely consequences
Action
contract existing
9.
Contract management
Risk
Likely consequences
Action
Variations in price and foreign
exchange
Cost overruns
Agree on prices and the basis
of prices
Agree on a formula for
calculating variations
Unwillingness of the supplier
to accept the contract
Delays in delivery
Need to restart procurement
Seek legal redress if nonacceptance causes loss
Negotiate but retain integrity
of the contract
Failure of either party to fulfil
the conditions of the contract
Contract disputes
Failure to satisfy needs
Delays in delivery
Downtime
Legal action
Ensure good contract
administration and
performance management
Hold regular inspections /
meetings and ensure progress
reports
Ensure all staff know
responsibilities and conditions
Ensure good record keeping
and documentation
Inadequately administering
the contract
Cost increases
Failure of contract
Full benefits not achieved
Delivery of unsatisfactory
product
Maintain up-to-date agency
procedures and practices
Ensure all staff are suitably
trained and experienced in
contract planning and
management
Contract/supply disputes
Commencement of work by
the supplier before contract
is exchanged or letter of
acceptance issued
Unauthorised increase in
scope of work
Potential liability to pay for
unauthorised work
Confirm verbal acceptance of
contract with written advice
Possibility of legal action for
perceived breach of contract
Accept all contracts in writing
Unanticipated cost increases
Ensure all contract
amendments are issued in
writing
Contract disputes
Ensure approvals are received
before allowing work to start
Record all discussions and
negotiations
Confirm instructions in
writing
Loss of intellectual property
Loss of commercial
Ensure suitable clauses are
Risk
Likely consequences
Action
opportunity
included in the contract
Unwarranted reliance on
supplier for product support
Failure to meet liabilities of
third parties (eg. royalties or
third party property
insurance)
Legal action
Damage to the agency’s
professional reputation
Check that all obligations are
covered in the contract
Agree on responsibilities
Implement appropriate safety
standards and programs
Loss or damage to goods in
transit
Delays in delivery
Downtime
Liability disputes
Include appropriate packaging
instructions in specification
Agree on insurance cover for
supplier to provide
Accept delivery only after
inspection
Know when title of goods is
transferred to buyer
Fraud
Misuse of resources
Legal action
Disruption to procurement
activities
Key personnel not available
Progress on project disrupted
Less expertise
Maintain an ethical
environment
Follow and maintain fraud
control procedures
Include requirement in
specification and ensure
compliance in post-tender
negotiation
Know the market
Accept risk and manage
possible delay
10. Evaluating the procurement process
Risk
Likely consequences
Action
Failure to evaluate
procurement and
management processes
Failure to improve
procurement and
management processes
Develop systematic evaluation
methods, techniques and
evaluation criteria
Failure to identify and address
problems
Procurement objectives not
achieved
Agree on performance
criteria (with supplier and
customer)
Possible failure in the future
Develop good relationships
with suppliers
Include evaluation clause in
the contract
Implement performance
Risk
Likely consequences
Action
management strategies
11. Disposals
Risk
Likely consequences
Action
Collusive bidding at auction
Not achieving best return
Set reserve prices
Claims of unethical and unfair
practices
Deal with reputable firms
Include disposal clause in
initial contract
Maintain ethical environment
Inadequate tender
management
Claims of bias and favouritism
to organisations or individuals
Reduction in value for money
Sell by open tender
Document reasons for
decision
Provide staff with appropriate
training
Acknowledgment: This checklist is based on a checklist developed by, and has been reproduced with the
permission of, the NSW Department of Public Works and Services.
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