presentation

presented by WILLY Niyonteze

MEASURING PROCUREMENT PERFORMANCE IN RWANDA

CASE STUDY: SOCIAL SECURITY FUND OF RWANDA: YEAR JULY 2010-JUNE 2011

INTRODUCTION

Importance of procurement: public sector procurement at 8% (US$3.2

trillion) of the worldwide GDP of US$40 trillion Rwanda: more than 40 % of all public

expenses. but still organizations face delays, poor

deliveries, fund misuses and other losses Some studies suggest that in developing

countries, the procurement function is transitioning from a clerical non strategic unit to an effective socio-economic unit

How about Social Security Fund of Rwanda

Objectives

Two objectives:showing the areas of improvement

by measuring procurement performance

highlight challenges faced by the procurement function specifically in those weak areas.

PROBLEM STATEMENT

Efforts improve performance of the procurement function

public procurement is still a theater of poor works, poor quality goods and services, poor deliveries even corruption

procurement performance measurement had been attracting attention from long ago

1931, the National Association of Purchasing Agents (NAPA), USA organized a contest on the topic.

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In 1945, guidelines on procurement performance in USA

2004, the European Institute of Purchasing Management (EIPM) organized a conference “Measuring Purchasing Performance”

We know about audits generalizing that the procurement function

is not performing without indicating the criteria used to reach that conclusion or just basing it on financial statements is not reasonable (Muhwezi, 2006).

RESEARCH QUESTIONS

Questions can be asked: how to judge the performance if it

measured against irrelevant criteria or if it is not measured at all

do public institutions have a framework for measuring procurement performance?

Etc.

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For the purpose of this research two questions will be asked:

What are the areas of improvement in the SSFR procurement performance?

What are the challenges faced by the procurement function specifically in those areas of weak performance?

METHODOLOGY

Techniques of data collection:Documentary technique Interview technique Methods of data analysis:Analytical methodDeductive method Sample: 30 OCB tenders out 122; 41

are OCB

WHAT TO KNOW ABOUT P.P PERFORMANCE MESUREMENT

Definition: Many different definitions meaning of purchasing performance still

difficult. covers broader areas of procurement, for instance (Knudsen, 1999)

Van Weele (2006) performance= effectiveness + efficiency

Sabine Adotévi(2004): performance= how well the process+ how good the outcome.

We keep performance= effectiveness + efficiency

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WHY MEASURING PURCHASING PERFORMANCE?

• From different authors:• Identify areas for improvement• Ensure that procurement directly contributes to

fulfillment of corporate objectives • provides information for analysis and decision

making• enhanced profitability• cost reduction, • Etc

CHARACTERISTICS

Many from different authors:SMART: Specific, Measurable,

Agreed, Realistic, Timed.Easy to measure Contributing directly to the delivery

of one or more corporate objectivesLinked to corrective actions and

outcomes, so that people could see the value that the Procurement function was delivering

MEASURING PERFORMANCE

SSFR has no P.P measurement framework

Proposed one aligned with SSFR corporate objectives:Corporate objective Procurement

indicator

PROVIDE QUALITY SERVICE TO CUSTOMERS

QUALITY

PREPARE AND IMPLEMENT ORGANIZATIONAL PLANS

DELIVERY

EFFECTIVE FUND MANAGEMENT

COST

DEVELOP A CAPABLE AND RESPONSIVE ORGANIZATION

RESPONSIVENESS

MEASURING PERFORMANCE…..

Procurement performance indicator

Targets

QUALITY The number of request for repair should zero during its guaranty period

Durability: product purchased should last the for the whole warranty period

DELIVERY All deliveries should be done in the time stipulated in the contract

The level of defects should be zero defects.

COST All contracts should be below or equal the estimated budget

Cost avoidance: the number of request modified should reach 20% of all received requests

MEASURING PERFORMANCE…..

Procurement Performance indicator

Procurement Objectives

COST………. A price market research should be conducted for each tender

RESPONSIVENESS Each customer’s query should be have a response within 48 hours after receipt

The renewal of fixed time contract should be done before the expiration date

Upon request information should be available within 3 days to the public.

MEASURING PERFORMANCE…..

Scoring: The scoring method proposed

assumes that under a certain frequency (like below or above half repetition), the indicator under reasonable performance will be considered as unrated or the score will be zero. For instance as the sample is 30, the scoring will be 100 points at maximum (30) and 0 points at the frequency of 15.

MEASURING PERFORMANCE…..

Balanced score card:General Indicator

Specific indicator Score

QUALITY NUMBER OF REPAIRS 86,6%

DURABILITY(warranty period) 66,7 %

DELIVERY DELIVERY TIME 33,3 %

DEFECTS REJECTION RATE 66,7%

COST COST AVOIDANCE 73,3%

PRICE MARKET RESEARCH 33,3%

PAYMENT VS BUDGET 80%

RESPONSIVENESS

QUICKNESS OF SATISFYING CUSTOMER REQUEST

33,3%

CONTRACT RENEWAL 75%

ACCESSIBILITY TO INFORMATION

73,3%

AREAS OF IMPROVEMENT

Areas where score is below 70%:DurabilityDelivery time Defect rejection rateMarket researchQuickness of customer

satisfaction

CHALLENGES

Durability:Testing Carelessness of users Fear of retendering delivery timeSuppliers accept penalties(1/1000

per day)Land locked country: dependence on

external factors(transport, fuel price, ……)

CHALLENGES………..

Defect rejection rate Tenders awarded to lowest price

bidders Transport Market researchAwareness quickness of customer query

satisfactionStructure Nature of some tenders(investment

projects)

RECOMMENDATIONS

Introduction of a procurement policyDraft a framework for procurement

performance measurementTo place public procurement unit

directly under the Director General’s office

Allocate more time to market research

Advocate foe the inclusion of investment project under special procurement (law)

ENDING NOTE

It is a human being work Not perfect Critics, suggestions, advices and

corrections are more than welcome.

Thanks.