Module 10 Session 10.1 Visual 1

Module 10

Organizing Procurement

Session 10.1 Introduction to Procurement: Works, Consulting Services, and Goods

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Instructional Objectives for Module

At the end of this session, learners will be able to

1. In relation to procurement, define each of the following terms:

Works

Consulting services

Goods

Transparency in the procurement process

Accountability in procurement

Effectiveness

BOT (build-operate-transfer)

Monetarized characteristics

Nonmonetarized characteristics

Specifications

Economy in procurement

Qualitative characteristics

Quantitative characteristics

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Instructional Objectives for Module (continued)

2. Give examples of works, consulting services, and goods.

3. List at least three generalizations about procurement, that is, those that apply equally to the procurement of works, consulting services, and goods.

4. Describe the role of the project manager in the procurement process.

5. List at least two common mistakes related to procurement in projects.

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6. Explain the differences between (a) international competitive bidding (ICB), (b) national competitive bidding (NCB), (c) shopping, and (d) direct purchase.

7. Characterize the differences in procurement method(s) recommended for procuring (a) works, (b) consulting services, and (c) goods.

8. Use the spectrum of procurement to classify works, consulting services, and goods in terms of their quantitative and qualitative characteristics.

Instructional Objectives for Module (continued)

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9. Explain the importance of having a procurement strategy and schedule.

10. Develop a procurement strategy and schedule given a situation requiring procurement of works.

Instructional Objectives for Module (continued)

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Instructional Objectives for Session 1

Session 1

At the end of the session, the learner will be able to Describe three generalizations that apply to all types

of procurement.

Describe the role of the project manager in the procurement process.

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Procurement

Militaryworks

Works

Civil works GoodsConsulting

services

Usual areas of procurement

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Options for Financing Works

From public funds By private financing

Increasingly used in infrastructure sectors:

Transport Power Telecommunication

Where demand is great and projects are large and expensive

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Options for Financing Works (continued)

Publicfunds

Privatefinancing

Projectsin the public

sectors

Privateprojects

BOT

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Generalizations

Privatefunds

Publicfunds

Private spending decisions (may entail buying the best, not necessarily the cheapest, in first cost)

Must be spent economically (value)

No “outside” explanations or accountability

Processes must be Transparent Accountable

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Generalizations (continued)

Risk perceived

by bidders

General level of bidding

High High

Low Low

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Above ground components;quantities knownwith certainty atbidding

Subsurface conditions; quantitiesknown only approximatelyat bidding

Works

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When we procure consulting services, we buy

Consulting Services

Skill

Experience

Maturity

Leadership

Knowledge

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GOODS

Custom made From suppliers’ standard line of products

(“off-the-shelf”)

Cheaper than “purpose-made,” but the variations in goods offered pose evaluation problems for the client

Very expensive option but may be justified for specific projects

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Manufacturers of GoodsLong Established Newly Established

Manufacturers Manufacturers

Products Products Tried and tested and Unproven

proven in the field No reputation, Good resale value therefore probably

low resale value

Established Minimal (or nonexistent) dealer service dealer service

For service and spares (Lower spares inven-

tories for the clients)

Possibly higher first cost, but cheaper

in the long run

Cheaper initially, but more expensive in the long run

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Cost Comparison

More expensive in first cost, but may be cheaper in the long run.

Cheap in first cost

“Quality” product

bought infirst instance

Frequent replacement;

poor levelof service

Fewer problems in operation;fewer replacements;good resale value

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Characteristics of Goods

For example: Toughness of design Reputation of manufacturer Reputation of local agent

A. CHARACTERISTICS

That can be expressed in monetary terms

B. CHARACTERISTICS

That cannot be expressed in monetary terms

For example: Ex works price Freight Insurance

The problem in evaluating bids for goods is how to

combine A + B.

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Works and Consulting Services

Works

Definable

Measurable

Generally procured on the basis of competitive bidding

Consulting Services What is procured is

not normally definable in measurable terms

Procured desirably on the basis of quality

Contracts generally negotiated

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The Procurement Spectrum

Judgmental

Quantifiable

Goods

100% 100%

00

Works ConsultingServices

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Procurement of Works and Goods

COMPETITIVE

BIDDING

SHOPPING DIRECT

CONTRACTING

INTERNATIONAL NATIONAL

LIMITED INTERNATIONAL

INTERNATIONAL NATIONAL

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Project Manager’s Role

Shape strategy

Monitor execution

Establish and maintain good relationships with procurement officers

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Procurement Summary Generalizations: Transparency Value/economy Accountability

Types of Financing Public Private

Types of Procurement Works Goods Consulting services

Spectrum of Procurement Quantifiable characteristics Judgmental (qualitative) characteristics

Project Manager’s Role Shape strategy Monitor execution Manage relationship