HomeNewsOverlook small value purchases at your own peril!

Overlook small value purchases at your own peril!

-

Leakages in procurement are prevalent at all levels in institutions. In the public sector, issues of fraud and corruption are even reported at ministerial levels.

The publicity of corruption cases does not imply that leakages at lower levels and in smaller and frequent proportions are ineffective.

There is a phrase is our vernacular loosely translated — “A sack of sugar was emptied with the use of a tea-spoon” that elaborate effects of marginal leakages.

The phrase has two dimensions relevant to procurement. Minute leakages of resources retard operations; and the overall effect of minute leakages have the same implication of huge corruption cases cumulatively.

This category of purchases is termed “competitive bidding” in public sector and “the three quotation system” in private sector.

Procurement Regulations described the procurement process as single purchases below $10 000. These types of purchases include purchases of stationery that most institutions in both public and private sector have relegated to secretaries without providing adequate guidance.

In the public sector, the law allows for sourcing of at least three quotations to make a procurement decision.

The category allows use of verbal quotes. The Regulations provide that the quotes must be competitive; however the limitation in reality is the subjective measure of competitiveness.

Selection of suppliers to compete in tendering is critical if the purchase is to be competitive.

Most public institutions are not good debtors and as a result, they fail to attract competitive suppliers.

Established, reputable and competitive companies are not motivated to register with SPB and Ministry of Finance as public sector suppliers.

It is apparent that most public institutions recognise that small purchases are a means of resource leakage if uncontrolled.

They have even reduced the “three quotation system” threshold from the value prescribed at law to as low as between $1 000 and $4 000.

The bottom line is that they are failing to source competitively. Many reputable suppliers since stopped soliciting for business from buyers in the public sector.

The process of selecting competitive suppliers is not that competitive and transparent. As a result, the three quotations are mainly from fly-by-nights and briefcase businesses that charge a premium.

In the end, the actual source of supply is that same reputable supplier, who the fly-by-nights pays cash to acquire goods to satisfy to the public sector obligations.

Suggestions to improve competiveness with the three-quotation system include:

  • Development of clear guidelines for managing small purchases.
  • Building competitive supplier base: inviting suppliers to register on company-approved suppliers’ list and engaging directly critical suppliers.

  • Open advertisement of Request for Quotations (RFQ): use of notice board to open up for competition.
  • Consider efficient and transparent communication channels: use of company web pages and Internet to publish RFQs.

  • Use of blanket orders and consignment stock arrangements for small value purchases.
  • Use of baseline and market prices to verify competitiveness of purchases.

    It is important to note that the problem of failure to measure competitiveness of suppliers when selecting tender participants is not in the public sector alone.

    Private sector buyers also collude with suppliers the same way as the public sector buyers. The end result is devastating.

    Organisational competitiveness is affected when the costs of inputs are not properly managed.

    Government tax revenue base declines when organisations fail to be profitable due to uncontrolled input costs. The consumer is the one that ultimately suffers most if such practice is not tamed.
    Consideration of competitiveness of small purchases must achieve minimisation of loopholes that promote corruption.

    Nyasha Chizu is the chairman of the Harare chapter of the Chartered Institute of Purchasing and Supply. Email: chizunyasha@yahoo.com

    Recent Posts

    Stories you will enjoy

    Recommended reading