1.5.3.2 Definition of Procurement Needs

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It is useful to enquire, already during the design phase of a project, to what extent procurement will be necessary during the implementation phase of the project, because there might be components in the project that the implementing agency can execute with own capacities. This will influence the technical solutions, staffing, and the project budget.

The implementing agency of a project is responsible for the timely, cost-efficient, and good-quality delivery of the entire project.  Depending on its in-house capacity - in terms of know-how, available equipment, and workload - it will decide what share of the project outputs it will implement with own forces and what share will have to be implemented through procurement.

In-house production is the method to implement certain tasks using internal “technical” resources. This approach requires holding ready capacities in terms of equipment, qualified staff, and other resources. It may be justified if there is a stable amount of work that can be carried out in a cost-efficient manner.

The appeal of this approach is that it takes just in-house management decisions to mobilise these resources. These capacities can operate like a “fire brigade”. There is no need to go through the preparatory work of procurement. No specification writing, no request for offers, no evaluation, no contract, no loss of time. This is the option to choose for time-critical or mission-critical tasks. IT help desks are a typical example. In certain circumstances it can be reasonable to establish own capacities in order to be flexible and “independent”.

However, this scenario can be expensive, if the workload is not stable and part of the capacity would be idle. These days, almost any delivery can be made available from external providers at short notice.

Implementation though procurement uses external (technical) resources to implement part or the entire delivery, i.e. project execution under one or several contracts.

It is necessary to understand and to accept that by purchasing goods, services and/or works, part of the control on the execution is given away to an outside entity (an economic operator) that is not under the project managements immediate control.

The only controls left to an implementing agency that lets execution to external resources are the clauses of the respective contracts. In this case, exact and complex planning, professional procurement and close monitoring become the key functions of project implementation. Flexibility and “independence” are limited, because necessary changes can only be made by negotiating modifications in existing contracts or by establishing new ones which can be time consuming, expensive, or simply impossible for one or the other reason.

When implementing projects through procurement, the professional profile of the implementing agency shifts from “execution” to “organising the execution” (through planning purchasing, monitoring, administering).

If unfamiliar with procurement, project designers may, in the projects setting-up phase, seek advice from procurement experts on questions such as:

procedures to be followed and related delays for procurement exercises they envisage
market situation (competition, sources, shortages, etc)
logistic issues
cost implications

In case it is decided to proceed with the procurement exercise, project designers should also investigate whether there is the opportunity to benefit from existing Framework Agreements provided that they are entitled to do so (or to consider using the tool of Framework Agreements for the implementation phase).

 

Example 1-6: Defining the procurement needs of a project

PPD designs to implement the following project: “Measures to develop the implementing capacity of the Cyprus Authorities in applying the European Public Procurement legislative package”.

As it has been presented above, the project breakdown has lead to the following three components:

Component 1: Improving the implementing capacity of the Cypriot Authorities

Component 2: Harmonization of legislation

Component 3: eprocurement study.

The first component include three basic activities, each of which deals with different kind of services: Compilation of Action Plan, Compilation of a Best Practice Guide, Formulation of training strategy and implementation of training programmes. The diversity of specialization needed for the implementation of these activities, the expertise needed by countries which have been formerly members of the EU and thus are more familiarised with the acquis communitaire, in conjunction with the limited number of human resources available by PPD, lead the Public Procurement Directorate to decide to take advantage of the Technical Assistance Funds and to outsource the implementation of the component to consulting companies.

The second component includes the drafting of Laws and thus demands legal expertise. Taking into consideration that from the 18 employees of PPD, no one is lawyer, PPD decided to hire legal advisor to implement this component.

The third component includes compilation of a study concerning the application of e-procurement in Cyprus as well as the preparation of relative Tender Documents. The implementation of this component requires expertise in e-procurement systems of other EU countries, as well as IT specialisation and expertise. Therefore, PPD decided to take advantage of the Technical Assistance Funds and to procure the implementation of the component.


© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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