ICT Procurement

Introduction
The most projects can be complex, time consuming and expensive. Without a good understanding of the ICT procurement, the business objectives, the technical requirements and the impact on existing operations, a project will not properly assess its risks. Thus, the project must deal with critical aspects of the procurement and its implementation that will have significant adverse effects on the business.

Within the ICT procurement, the project must take in consideration each of these steps:

Defining the Solution,
Identification of the options,
Buying the right solution for the best value money,
Implementation of the solution.

1- Procurement management[1,2]

In general, the procurement procedures are used in:

centralised systems,
indirect centralized systems
and decentralised systems with:

ex-ante approval,
or ex-post controls.

2- The Procurement Landscap

Procurement activities can be segmented in many ways. We can divide procurement (and e-Procurement technologies) into three primary categories:

Indirect procurement — which involves the selection, purchase, and management of a wide range of non-production goods and services — from basic office supplies to complex business services, such as printing, advertising, and temporary labor,
Direct procurement/supply chain management — which involves the organization, planning, and management of procurement and supply chain activities associated with acquiring the raw materials, parts, and assemblies necessary to manufacture finished products,
Sourcing — which involves the identification, evaluation, negotiation, and configuration of products, services, and suppliers for both indirect and direct materials supply chains.

3- Procurement procedures

There are several different procurement procedures, each allowing for a different degree of
competition. The basic principle governing the award of contracts is competitive tendering.
The purpose is twofold:

to ensure the transparency of operations; and
to obtain the desired quality of services, supplies or works at the best possible price.

3.1. Which procurement procedure to apply?

In general, the project deals with the following activities, respectively with standard procurement procedures:

services (e.g., technical assistance, studies, provision of know-how and training),
supplies (i.e., equipment and materials),
works (i.e., infrastructure and other engineering works),
or mixed

Once approval for an activity has been granted by the organization within a financing agreement, the Contracting Authority can proceed with tendering and contracting following these standard procedures.

3.2. Open procedure
Calls for tender are open where all interested economic operators may submit a tender. The contract is given maximum publicity through the publication of a notice in the Official Journal, website and in any other appropriate media. Under the open procedure, any natural or legal person wishing to tender receives upon request the tender dossier (which may have to be paid for), in accordance with the procedures laid down in the procurement notice. When the tenders received are examined, the contract is awarded by conducting the selection procedure (i.e., verification of the eligibility and of the financial, economic, technical and professional capacity of tenderers) and the procurement procedure (i.e., comparison of tenders). No negotiation is allowed.

3.3. Restricted procedure
Calls for tender are restricted where all economic operators may ask to take part but only
candidates satisfying the selection criteria may submit a tender. Under the restricted procedure, the Contracting Authority invites a limited number of candidates to tender. Before launching a tender procedure, it will draw up a shortlist of candidates selected as a result of their qualifications. The selection procedure, by which the long list (all candidates responding to the published notice) is cut down to a shortlist, involves examining responses to a procurement notice, in which the selection criteria and a general description of the tasks to be undertaken are set out.

In the second stage of the procedure, the Contracting Authority invites the shortlisted candidates and sends them the tender dossier. In order to ensure fair competition, tenders must be submitted by the same service provider or consortium which has submitted the application form on the basis of which it was short-listed and to which the letter of the invitation to tender is addressed.

No change whatsoever in the identity or composition of the tenderer is permitted unless the Contracting Authority has given its prior approval in writing. A situation where such approval could be given is e.g. where a merger has taken place between a shortlisted candidate/member of a consortium with another company and where the new company is found to meet the eligibility and exclusion criteria and does not give raise to any conflict of interest or unfair competition. The successful tenderer is chosen by the procurement procedure once the tenders have been analysed . No negotiation is allowed.

3.4 Simplified procedure

3.5 Negotiated procedure

4- Terms of reference and technical specifications

The Terms of Reference document is for service contracts;
and Technical Specifications Document is for supply and works contracts.

The both documents is to give instructions and guidance to contractors at the tendering stage about the nature of the tender they will need to submit and to serve as the contractor's mandate during project implementation. The Terms of Reference or Technical Specifications will be included in the Tender Dossier and will become an annex of the eventual contract awarded as a result of the tender.

The thorough preparation of the Terms of Reference or Technical Specifications is extremely important for the ultimate success of the project. It is important to ensure that the project has been properly conceived, that the work is carried out on schedule and that resources will not be wasted. Therefore greater effort during project preparation will save time and money in the later stages of the project cycle.

The provisions must correspond to the requirements of the Terms of Reference and must be carefully estimated. Terms of Reference, Technical specifications and budget must afford equal access for candidates and tenderers and not have the effect of creating unjustified obstacles to competitive tendering. They define the characteristics required of a product, service or material or work with regard to the purpose for which they are intended by the Contracting Authority.
Those characteristics include:
- the quality levels;
- environmental performance;
- design for all requirements (including accessibility for disabled people);
- the levels and procedures of conformity assessment;
- fitness for use;
- safety or dimensions, including, for supplies, the sales name and user instructions, and, for all contracts, terminology, symbols, testing and test methods, packaging, marking and labeling, production procedures and methods.

The Terms of Reference or Technical Specifications are prepared by the Contracting Authority. It
is helpful to consult all parties involved in the proposed project in preparing Terms of Reference or Technical Specifications. This should improve both the quality of the project as well as the commitment of the Contracting Authority and beneficiaries.
Given the technical complexity of many contracts, the preparation of the tender dossier - particularly the Technical Specifications/Terms of Reference - may require the assistance of one or more external technical specialist(s).
Each such specialist must sign a Declaration of Objectivity and Confidentiality.

Once the Tender Dossiers have been finalized, the tender procedure should be launched as soon as possible. The Terms of Reference or Technical Specifications contained in a tender dossier – the basis for the project work-plan - must reflect the situation at the time of project start-up so as to avoid considerable effort having to be spent re-designing the project during the inception period. The general structure of Terms of Reference for services has been drawn up in accordance with the principles of project cycle management. The aim is to ensure that all issues are covered
systematically and that key factors related to clarity of objectives and sustainability are thoroughly examined.

5- The E-Procurement

5.1 What is E-procurement (or E-Purchazing, or E-Sourcing, etc…)
5.1.1 Some Definitions
E-Procurement is the term used to describe the use of electronic methods in every stage of the purchasing process from identification of requirement through to payment, and potentially to contract management.
Electronic enablement of the purchasing process can be more specifically identified as:

E-Sourcing: for contractual processes. Tools include E-Tendering, E-RFQs (Request for Quotations/evaluations) and E-Auctions.
E-Procurement: for transactional processes. Tools include marketplaces using techniques such as E-Catalogues and punch-out.
E-Payment: Tools include virtual or embedded GPC (Government Procurement Card), E- Invoicing and self-billing.

5.1.2 Difference between E-commerce and E-Procurement

What is electronic commerce?

First, it is as “a merchant transaction involving goods and/or services using the Internet or private intranet as the vehicle for effecting the transaction”. More narrowly, it should include specific technologies such as electronic data interchange (EDI), electronic funds transfer (EFT), fax, and e-mail.

What is E-Procurement/Purchasing?

Although it is intuitive that it is “50% of E-Commerce”, it may not be obvious how procurement/purchasing professionals view it. We define it simply as the “acquisition of goods and/or services using purchase as the method of acquisition effected using electronic media.” The ultimate goal of E-Procurement/Purchasing is “paperless purchasing”, which contemplates elimination of paperwork for all the important documents used in procurement/purchasing, including the specification/statement of work, requisition, solicitation, purchase order/contract, delivery/task order, invoice, and payment.

Electronic procurement is simply the automation of the aspects of the procurement function supported by various forms of electronic communication (Knudsen 2002) and its use in both the public and private sectors takes many forms including electronic data interchange, e-sourcing, e-tendering, e-reverse auctioning, e-auction for disposals, enterprise resource planning, e-collaboration, e-MRO, and web based resource planning etc. Tenders are run electronically so that the maximum number of suppliers can compete. This will make it easier for enterprises to identify contract opportunities and to supply their goods and services across Europe’s Internal Market.

Nevertheless, e-procurement is still at an experimental stage and under development. In many Entreprises, e-procurement refers to the availability of web pages directed at both potential buyers and suppliers, e.g. providing information about tender notices. In some other countries, it refers to the use of the Internet and other information technologies to find suppliers of both products and services and includes electronic purchase card/electronic payment schemes, prequalification systems, e-catalogues and electronic market places, among others.

By implementing an e-business solution to handle the e-procurement process, the business can increase efficiencies and maximize savings on purchases and internal purchasing processes, and making better use of resources and capital. The use of information technology can make purchasing easier, cheaper, and more accountable through electronic procurement, at every level of the transaction, but government agencies have been slow to implement technology to improve the procurement process.

For the most part, governments have not yet grasped this phenomenon. Many government purchases still use traditional purchase order. The European Union has been quick to recognize the importance of information technology for public procurement. Electronic procurement, after all, is one area where governments can reduce inefficiencies in their service provision and make government procurement more transparent.

5.2 Benefis of E-Procurement
At the highest level, Internet-based procurement (e-Procurement) creates private, Web-based procurement markets that automate communications, transactions, and collaboration between supply chain partners. Most e-Procurement solutions have been developed to address one of the three primary areas of procurement operations: indirect procurement, direct procurement/SCM, and sourcing.

Ongoing research of enterprises’ experiences with Internet-based procurement automation technologies indicates that companies have been able to achieve significant cost and process benefits by automating key procurement activities.
Specifically, e-Procurement solutions addressing indirect procurement operations have resulted in reduced prices paid for indirect goods and services; improved contract compliance; shortened procurement and fulfillment cycles; reduced administration costs; and enhanced inventory management.

E-Procurement solutions targeting direct procurement activities have resulted in improved visibility of customer demand and supply chain capacity; increased accuracy of production plans and forecasts; reduced inventory and operations costs; shortened procurement cycles; and enhanced responsiveness. Enterprises utilizing Internet-based sourcing (e-Sourcing) technologies have been able to negotiate significant unit cost (i.e., “price”) reductions; shorten sourcing cycles; enhance decision-making capabilities; and gather improved product, market, and supplier intelligence.

In conclusion, the benefits of E-Procurement include:

Delivering of rapid and real results on real time,
Modernization,
Efficiency improvements (the way people work) ,
Improved commercial relationships with suppliers,
Reduce costs for suppliers dealing with government ,
Opens up the government marketplace ,
Improve departments’ ability to manage their supply chain more efficiently

5.3 The Procurement processes and the Flowchart
5.4 The Tendering processes and the Flowchart

Conclusion

E-Procurement useful links

References

Glossaire
Annexes
Annexe 1: The Term of Reference Template
Annexe 2: The Technical Specifications Template
Annexe 3: The Tender Dossier

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