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Create better society with public procurement

Public procurement can make a major impact on national economy.

Public procurement can make a major impact on national economy.

Purchasing and Supply with Nyasha Chizu

The 2013 National Budget of $4 billion had an estimated $1,08 billion set aside for activities under the remits of procurement given the fact that 73% of it was wages.

Thus, if Zimbabwe can save a small portion of the public procurement expenditure, the resources can be reallocated to other critical and valuable areas. If 10% of the estimated $1,08 billion was to be saved from the budget, $108 million could be allocated other sectors without the need for an additional budget.

Among activities that are under procurement that were allocated resources in the National Budget, capital development had $800 million, $226 million was for agriculture, $60 million was for border infrastructure development, $7 million was for rural electrification development, $39,5 million was for water and sanitation, $41,5 million was for road infrastructure,

$5 million was for fibre optic backbone and $18 million was for Zimra automation. A saving on these expenditures will inevitably facilitate an increase in funding for other critical sectors.

The requirement to save on expenditure is not a public procurement concern alone, even in the private sector, cost savings and reductions of procurement materials and services have been considered to be one of the most important activities to make a company successful and this apply equally to the public sector. There are many ways of achieving this; to start with, the fundamentals must be right.

Public procurement officials must understand cost structure, cost behaviour and the supply market to maximise the opportunity.

Traditionally, value engineering and value analysis, market forecasting, consolidation of requirements, standardisation of materials, buying consortium, power negotiation, competitive bidding, long-term contract and supply base optimisation are the most famous methods to reduce the cost of procurement.

Some current public procurement systems may need to be changed to allow collaboration and harmonisation on similar procurement to take place.

In addition to cost saving measures discussed above, public procurement should also manage uncertainties in the market and take proactive actions to ensure continuity of supply. Therefore, risk management of material shortages or scarcity becomes extremely important to the national economy. Public procurement must therefore recognise, evaluate and measure the risk of supply.

Sourcing strategies in the public sector should address such anticipated risks and such strategies must be current and relevant.

In order to get value and at the same time managing costs, public procurement needs to seriously consider joint purchasing services as a sourcing strategy. Joint purchasing service is a strategy if employed that will revitalise the local manufacturing industry. It is an arrangement between public procurement authorities and small and medium enterprises whereby the authority compiles related purchases from public enterprises; the spooled demand is then directed to the small and medium enterprises (SMEs).

The public procurement agent can also play a dual role of sourcing material on behalf of the SMEs to take advantage of economies of scale for the combined demand to the benefit of the public sector.

All these strategies at the end of the day are to ensure that savings in procurement activities are achieved to make available additional resources for critical sectors using the same budget. Public procurement will, therefore, make better societies.

Nyasha Chizu is a Fellow of The Chartered Institute of Purchasing and Supply writing in his personal capacity. Feedback: [email protected]