Public Sector Procurement Asia 201017-18 August 2010g

Yoong Ee Chuan, CIA, CPA, CISA, CISM

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Evolution of public sector procurement Evolution of public sector procurement Procurement risks

Managing procurement risks Managing procurement risks Control and compliance issues

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Paper to Digital Paper to Digital Centralisation to de-centralisation

IM3B to IM on procurement IM3B to IM on procurement Snapshot of procurement ecosystem

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Principles remain similar i e open and fair Principles remain similar i.e. open and fair competition, transparency and value-for-money (or previously “lowest cost meeting

ifi i ”)specifications”) Procurement processes were very manual

IM3B Government Instruction Manual on IM3B – Government Instruction Manual on Procurement prescriptive rules for manual handling of procurement exercisesg p

Rules for quotations vs tenders Estimated procurement value (EPV)◦ >=$3,000 < $30,000 – quotations◦ > $70,000- tenders

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Quotations Quotations◦ Less onerous compliance wise to tenders◦ Confidentiality of quotations

l d◦ Fax quotations vs mailed quotations◦ Dedicated fax, officer opening etc.◦ Posting of quotations on notice boardg q

◦ Finance Circular No 3/2010 [11 August 2010] Changes to the Quotation Processto the Quotation Process Minimum Conditions of Contract for Quotation Publication of Quotation Schedule and Corrigendum Changes

P bli i f R f Q i h “C ll d” Publication of Reasons for Quotations that are “Cancelled” or “No Award”

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Tenders Tenders◦ Offer by vendors – more legal documentation as it

is bindingis binding◦ Confidentiality and integrity important Tender boxes system with dual key Tender opening committee Tender witnessing officers

E l i b i Evaluation by committee Award by approving authorities based on value◦ Posting of bids on notice boards◦ Posting of bids on notice boards

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Centralisation to de-centralisation Centralisation to de-centralisation◦ THEN Central procurement office (CPO)Central procurement office (CPO) Stationeries e.g. pens obtained via CPO Savings from bulk purchases but spoilage from stock

obsolescence, matching demand/supply◦ NOW

Decentralised Decentralised E.g. e-Catalogue buy, bulk tender, GeBIZ You buy what you need, block budget aproachYou buy what you need, block budget aproach

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IM3B to IM on procurement IM3B to IM on procurement◦ THEN Instruction manuals came in paper filesInstruction manuals came in paper files Updating was a pain, manually cross out super-ceded

paras, paste over new paras etc. People were more controls & rules conscious◦ NOW

Web based Web-based Ease of reference and ease of forgetting (in some

cases))

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Inherent Risks Inherent Risks◦ Procurement is susceptible to corruption (in

general)general)◦ E.g. vendors gifts, ang-pows, free samples◦ Non-compliances can threaten openness, fairness

and transparency occur◦ Laxity in contract management can result in loss of

al e for monevalue-for-money◦ Report of the Auditor-General highlights cases of

non-compliancenon compliance

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In the past: In the past:◦ AG’s Report 1994/1995 Audit of Purchases under United States Foreign MilitaryAudit of Purchases under United States Foreign Military

Sales Programme Review of Financial Systems of Singapore Armed Forces

S A i iSports Association Compliance with Government Procurement Procedures

by Statutory Boardsby Statutory Boards

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Recently – Report of the Auditor-General Recently – Report of the Auditor-General FY2008/09, Auditor-General’s Overview

Areas of concern Areas of concern◦ Laxity in procurement and contract management◦ Lack of financial prudence in procurement and poorLack of financial prudence in procurement and poor

management of contracts and agreements◦ Resulting in higher expenditure for goods and g g g

services

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Areas of concern (cont’d) Areas of concern (cont d)◦ Under-performance not detected◦ Penalties for non-performance not imposedPenalties for non performance not imposed◦ Revenues due not collected◦ Little or no assurance of value-for-money in y

projects carried out

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People People◦ Clear from AGO report that lapses are due to the

way people interpret and enforce the rules as wellway people interpret and enforce the rules as well as implementing the procedures◦ IM3B now more principles-based, i.e. more room

for people to interpret hence critical to educate staff handling procedure about how to apply the principlesprinciples◦ IM3B now provides case studies to help us◦ But still need to inculcate controls consciousnessBut still need to inculcate controls consciousness

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People People◦ Segregation of responsibilities Not one person do everythingNot one person do everything GeBIZ – different roles, e.g. goods received and goods

inspection must be different officers, purchasing ffi l b iofficer also cannot be approving etc.

Previously can circumvent if manual, now with GeBIZ roles, more difficultroles, more difficult

Evaluation team for tenders shouldn’t all be from the same dept/team

◦ Education and awareness of IM 3B (and 3G)◦ Trade-off between controls and efficiency

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System of procurement System of procurement◦ Implement systems and processes that adhere to

IM3◦ But public agencies do vary in implementation E.g. of SBs that had dubious quotations◦ Get internal audit to review◦ Get internal audit to review◦ Perhaps external audit may review However, does not focus too much on internal controls

over procurement, i.e. more concerned about validity and authorisation, completeness of recording of purchasing and payment transactions then procurement principles: openness, fairness and transparency

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GeBIZ: A game changer GeBIZ: A game changer◦ Controls are built into the procurement process◦ More difficult (but not impossible!) to circumvent

relative to manual processes◦ Examples Openness of web invitations to quotes and invitations Openness of web invitations to quotes and invitations

to tenders and request for proposals (global) Routing for approvals

f Publication of awards◦ Make full use of GeBIZ Because you HAVE to (SBs MUST follow IM3)Because you HAVE to (SBs MUST follow IM3) Because it’s good for your agency

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Some issues for procurement managers to Some issues for procurement managers to consider:◦ To what extent does your agency adhere to IM3B/G?◦ To what extent does your agency adhere to IM3B/G?◦ To what extent is your standard operating

procedures for procurement in line with IM3B/G?p p◦ How familiar are your people with IM3B/G principles

and procedures (i.e. GeBIZ use)d d f◦ Have you set-up assurance and audit of

procurement Get your internal audit to look into it Get your internal audit to look into it Ask your external auditor to look into it

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Understand your own control and compliance Understand your own control and compliance issues first

Auditor General’s Office will carry out audits Auditor-General s Office will carry out audits on a rotational basis◦ Your turn for procurement or contracts audit by◦ Your turn for procurement or contracts audit by

AGO will (eventually!) come ◦ At least minimise or reduce number of findings by g y

AGO (or your agency will be featured in Report of the Auditor-General FY 20XX/XX

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Questions? Questions? Contact◦ Yoong Ee Chuan Director/Internal Audit Office◦ Yoong Ee Chuan, Director/Internal Audit Office◦ 535 Clementi Road, Singapore 599489◦ Ngee Ann Polytechnic (www np edu sg)Ngee Ann Polytechnic (www.np.edu.sg) yec2@np.edu.sg DID: 6460-6275 Twitter: @eechuan LinkedIn: http://sg.linkedin.com/in/eechuan

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