ACCOUNTING activities are benchmarked with international accounting standards thereby providing a well structured cycle. Column by Nyasha Chizu
The procurement cycle audit assesses the best practices from various procurement systems that include the World Bank, EU and other UN groups.
Procurement cycle activities start from need identification to need approval. This is followed by the development of a procurement strategy that includes setting the evaluation criteria, defining contractual terms and research.
Supplier appraisal and selection of bidders follows, then quotations are invited. When quotations have been received, they are analysed, clarified and contracts and orders are awarded. What follows is performance monitoring, relationship management and payments. Lastly, the performance of the contract is reviewed.
Need identification involves deciding on the list of wants, extracting the needs and prioritising. The audit will consider whether authorisation was received for specifications to determine the required level of quality, quantity and delivery time. Appropriate budget must be available supported by appropriate project appraisal and a clear implementation plan.
When developing the contract strategy, the procuring entity considers realistic values of goods to be procured and selects the appropriate procurement method. Procurement method normally defines the systems that shall be used to invite quotations and is normally governed by value threshold.
Some methods allow for unsealed quotations and others require sealed bids. The audit, therefore, establishes whether the method was capable of selecting the best supplier after considering all circumstances. Consideration of market price must be available in a procurement file.
Requirements must be specified. The specifications must be clear and comprehensive, based on the need. Above all, specifications must be SMART, specific, measurable, achievable, realistic, and time bound. Specifications are important since they form the core of the contract.
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A procurement audit, therefore, establishes whether appropriate specifications were selected. A proper audit reviews the wording of the specification to flush out ambiguity that could be deliberate to mislead participants in order to reduce competition.
To ensure accountability of personnel responsible for development of specifications, the developer, reviewer and authoriser of the specification must sign them off.
Contractual terms normally form part of the RFP document. When developing RFPs, standard contract terms must be used where possible. When non-standard terms are going to be used, please engage legal experts.
A procurement audit reviews standard contractual terms to check for deviations from standards. Key issues such as the form of agreement, letter of acceptance, contractor’s bid, performance guarantees, general conditions of the contract, specifications, the bill of quantities and prices, and specific conditions of the contract must not be left out.
A procuring entity must employ mechanisms to establish the relationship of differing order size to unit price taking into account the need to balance liquidity and profitability with economies of scale. Supplier survey establishes whether they are capable of solving the organisation’s sourcing challenges.
The procedure of receipt and comparison of quotations need proper review. Different thresholds call for specific methods of receiving the quotation. The notice must be adequate to provide time for a comprehensive response. In case of accelerated procedures, proper justification must be available.
Quotations are then assessed for responsiveness and the price offered. An audit verifies if all attributes of the specifications were considered and whether the decision was objective.
When clarifications are necessary, appropriate approvals must be sought and clarifications must not change materially the requirements and be used to improve one’s bid against competition.
Contract award must be consistent with the specifications and the offer from a bidder. Appropriate approvals are necessary and the decision must reflect the lowest acquisition costs or the most economically advantageous option. The performance of the contract would need to be monitored in relation to the signed contract on obligations of both parties.
A procurement audit cannot be effective without the right tools. Training on the tools and the process is critical.
- Nyasha Chizu is a Fellow of Chartered Institute of Purchasing and Supply writing in his personal capacity. Feedback: [email protected]
