ZHRC/HTI Financial
Management Training
Session 8: Annual Procurement
Plans, Procurement Contracts, and
Contract Management
Learning Objectives (1)
• By the end of the session, participants
will be able to:
•
Describe an Annual Procurement Plan (APP)
•
Describe the APP for Goods, Works and
Non-consultancy Services
•
Describe the APP for Consultancy Services
•
Define the term “procurement contract”
Learning Objectives (2)
•
Explain the importance of a procurement
contract
•
List key obligations of the purchaser and
provider of service or goods
•
Describe major issues in contract
management
What is an Annual Procurement
Plan?
• Procurement plan describes which products
will be acquired by the procuring entity, as
well as when and how they will be acquired
• Procurement planning is the process of
determining what is needed, how much is
needed, where and when
• Notes:
• Proper planning is an essential element of good
procurement
• The Ministry must plan their procurements each
year
Forecasting and Budgeting
Procurement Requirements
Ministry uses two methods to forecast
requirements:
• Bills of Materials
Used where bills of materials are available
• Past Consumption Analysis
Used for items that have an independent demand
which are consumed on a continuous basis, for
which no bills of material are possible
• The approach is to analyze past consumption and
use that data to project future consumption
Formats of Annual Procurement Plan (1)
• Public Procurement Regulatory Authority
(PPRA) has issued two formats for the
Annual Procurement Plan (APP), these are:
1. Template for Procurement of Goods,
Works and Non-Consultancy Services in
accordance with GN. 97
2. Template for Procurement of
Consultancy Services in accordance
with GN. 98
Formats of Annual Procurement Plan (2)
• In both formats, there are three kinds of
information that should be kept by a procurement
entity (PE)
1. For internal use in the PEs for planning
purposes
2. For external use- notifying potential bidders
of procurement opportunities in the PEs
3. For submission to PPRA- for notification and
monitoring purposes
Information Included in Annual
Procurement Plan (APP)
• Information for internal use in the APP:
• Subject matter of each procurement including
tender lots and their estimated value
• Procurement method
• Date of posting GPN
Important Notes
• Aggregate requirements of different user
departments within the procuring entity to
achieve economies of scale and thus lower
costs
• This is subject to considerations like storage
facilities, available cash flow and the like
• Procurement plan may be reviewed every
six months to take into account new
procurement
Group Work:
Procurement Planning
Procurement Contracts and
Contract Management
What is a Procurement Contract?
Definition of Procurement Contract
• A procurement contract is a legal
document usually written, between two or
more parties that governs the purchase of
goods, works or services
• The procurement contract enters into
force when it is signed by the supplier, or
service provider and the procuring entity
Supplier’s Obligations
• Supplier’s obligations include but are not limited to:
• Deliver the goods, service or works in the way, at
the time, and in the location specified by the
parties
• Deliver the documents related to the goods or
service
• Transfer title of ownership for the product
• In general, to act in good faith and deal fairly
• Civil liability for manufactured goods in case of
injury to people or objects
Procuring Entity’s Obligations
• Procuring entity’s obligations include but
are not limited to:
• Accept the goods or services provided that
meet the contract terms
• Pay the agreed price
• In general, act in good faith and deal fairly
• Accept civil liability in the case of injury to
persons or objects
Preparation of Contracts
• A contract document is prepared by
Procurement Management Unit (PMU) in
consultation with the chief executive
officer (Legal secretary)
• Contents of a contract are determined by
contents of tender documents and nature
of tender
Major Issues in Preparing Contracts
• Major issues related to preparing the
contract are:
• What the procuring entity wants to obtain
• What the procuring entity wants to avoid
• The options that are available, (if all goes
wrong), to protect the procuring entity so the
impact on business is as minimal as possible
Challenges in Contracts Management
• Numerous difficulties may arise in
purchasing and supply contracts. Some
of these are:
•
•
•
•
•
•
•
Change of ownership/management
Change of circumstances
Currency fluctuations
Delays in performance
Different business cultures
Dominance
Lack of specificity
Types of Contracts
• Lump sum contracts
• Schedule of rates contracts
• Contracts with special features
Awarding Contracts
• In case of low value and low risk items,
once the supplier has been selected, the
Purchasing Officer raises the Local
Purchase Order
Local Purchase Orders
• Local Purchase Orders (LPO) are raised in
the name of the supplier based on the
tender award
• LPO should indicate the date, time and
place of delivery of goods
• In all cases, the MTB minutes are quoted
as reference to source of authority
• LPO may be raised for all procurements
below the threshold by the Chief Executive
Officer
Contract Management
• Contracts have to be supervised and monitored
properly to ensure good performance
• In many procuring entities, there is a tendency to
put a lot of effort into selecting the supplier and
awarding of contract, but very little effort towards
managing the contract
• Proper management of contracts helps ensure that
suppliers will fulfill their contractual requirements
• If a contract is well managed, many potential
problems can be avoided or solved before they
become serious
Supervision of Contracts
• The MTB Secretary, in collaboration with Procuring
Entity’s engineer, are responsible for continuous
supervision and evaluation of services and works
contracts
• Contract supervision starts immediately upon
signing of contract, and ends with issue of a
certificate of performance and final payment to
contractor
• Contract supervision may require crosschecking
actual progress/performance against contracted
outputs in the bills of quantities
Delivery of Goods (1)
• Goods delivered to procuring entity’s
stores should be accompanied with the
following:
• A copy of LPO that authorized the purchase
• Delivery note
• Receiving and inspection committee/
technical officer or storekeeper on receipt of
the goods should count them and check their
conformity with the contract agreement and
LPO
Delivery of Goods (2)
• Goods Received Note for
acknowledgement should be raised if the
goods delivered are in conformity with the
contract agreement/LPO (Reg. 126 and
127 of PPR, 2005, G. N 98).
Completion of Works or Service
• A certificate shall be made by the technical officer
indicating the level of work completed
• Before producing certificate, procuring entity’s
engineer should:
• Examine the actual performance
• Examine defects, if any
• Confirm whether payment to the contractor should be
made, withhold, or reduced according to quality and
defects of work as provided for in the contract
agreement (Reg. 121 and 123 of PPR, 2005, G. N 97)
Termination of Contract (1)
• It is sometimes necessary to terminate due to
breach of contract
• It is important for the contract to define the
circumstances under which a party may
terminate and right of each party if it occurs
• A contract may be terminated if supplier’s
performance is not as stipulated in the contract
and there is no indication for such performance
to be improved
Termination of Contract (2)
• Termination should be last resort after
exhausting other means to amicably
resolve the problems
• Termination may also be necessary due to
changes in the procuring entity’s needs
Use of PPRA Auditing Tool
• Your ZHRC/HTI may be audited
• The PPRA tool shows the compliance and
performance indicators used for auditing
Group Discussion:
Review Procurement Plan Template
for GN.97
Key Points (1)
• Procurement plans describe which
products will be acquired and when and
how they will be acquired
• Key obligations of the supplier in a
procurement contract include:
• Deliver the goods or services in the way, at
the time and in the location specified
• Transfer title of ownership
• Act in good faith and deal fairly
Key Points (2)
• Challenges of contract management
include:
•
•
•
•
•
Change of ownership/ management
Change of circumstances
Currency fluctuations
Delays in performance
different business cultures and lack of
specificity