Modern business, whether in the public, private or non-government sector, relies on good financial controls, efficient and effective services and achieving value for money both for the organisation and its customers. The latter can of course be ‘customers’ in the traditional sense or citizens for whom a public body provides services such as transport, education, utilities etc.
The procurement process and the use of competitive bidding are major contributors to achieving value for money.
Competition to support the selection of suppliers, service providers or works contractors has been around for many years but has not generally been widely acknowledged as playing a significant role in the overall financial management process for organisations, whether large or small.
Procurement and the use of competition should sit at the heart of an organisation’s strategic planning process. The use of competitive tenders to procure goods and services or award significant contracts can help the organisation in maintaining a competitive edge and driving a better commercial deal.
Modern procurement teams are required to support the effective use and provision of resources for both organisations as a whole and individual divisions and operational teams. Service managers have accountability for resources and will also need to have an appreciation of the procurement process, especially if they are to award and/or manage contracts.
The process to be followed in the public sector is regulated by national governments and is sometimes also regulated by international sponsoring and donor organisations. People involved in procurement and contracting should have a working understanding of these essential requirements, together with an appreciation of the role of audit in procurement.
Competitive tendering has been widely used in the UK public sector for service delivery and support activities since the 1980s and has led to a more professional approach to procurement and contracting, as well as a more healthy and vibrant market place for bidding organisations.
Whilst the private and voluntary sectors are usually less rigidly regulated in comparison with the public sector, they still rely on efficiency, value for money and commercial principles. Thus, competition and procurement appreciation are equally important considerations for those staff who procure goods, services and works.
An effective procurement process will ensure that the buyer obtains goods, services and works at the best possible price, taking account of requirements for the item or service specification, and other factors including quality, quantity, timeliness and location. In simple terms this equates to:
What, when, where, how and, maybe, who?
Unfortunately, many contracts fail or are unsatisfactory because of poor selection processes or lack of contract management techniques.
When an organisation decides to conduct a competitive process before awarding a contract, the procedure followed must be operated even-handedly and fairly applied to all of the potential participants. Key considerations for buying organisations are:
• Defining requirements
• Contract terms and conditions
• Establishing and following the procedural ground rules
• Deciding the award criteria
• Obtaining value for money
• Encouraging competition
• Managing the contract
Everyone involved also needs to be aware that the whole process can be the subject of auditing, whether by internal auditors or through external scrutiny.
Once again, accountability for the whole or part of the procurement is essential and evidence of control processes to support the overall management is also a vital piece of the procurement and contracting jigsaw.