2.3.2 When is the Procurement Process Outsourced?

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Normally, a contracting authority will undertake the procurement process in-house; however, there may be a valid reason to outsource one or several parts of the procurement process. An example could be to reduce fixed personnel costs or engage technical and /or professional expertise.

It is important to note that even if some parts of the procurement process are outsourced, the decision-making still remains with the contracting authorities.

The following table outlines the strengths and weaknesses of the two options (in house procurement and procurement through a third party procurement agent), as well as the actions contracting authorities can take to reduce weaknesses of both options.

Table 2-3: Strengths and Weakness of different approaches to procurement

Option

Strengths

Weaknesses

Actions to Reduce Weaknesses

In-house procurement

-Greater control on technical & commercial procurement decisions
-Greater control on priorities,
-Flexibility
-Expertise developed & maintained within the team
-Reduced lead time necessary to prepare contracts to   outsource procurement
-Procurement of  deliverables unspecific to the usual specialisation
-Unsteady workload for procurement staff (perhaps temporarily under-worked)
-Lack of expertise to deal with specialised aspects of procurement or the contract (particularly in small contracting authorities)
-Lack of resources to deal with demands on procurement staff
-Ensure that in-house personnel are an integral part of the procurement team
-Develop “sectoral” expertise within the in-house procurement team.
-Manage the expectations of contracting authorities on the time required for the procurement process

Procurement through a Third Party procurement agent

-Specialised technical know how necessary (health, science, etc.)
-Specialised commercial know how necessary (e.g. PPP/PFI arrangements)
-Flexibility on staff levels within the contracting authority.
-Possibility for reduced confidentiality on forthcoming projects.
-Additional cost
-Reduced operational control on the procurement process
-Lack of development of know-how and expertise within the contracting authority.
-Ensure strict confidentiality agreements are signed with any Third Party Organisation.
-Assign a member of the contracting authority team to lead the procurement process
-Incorporate staff training and development into the procurement process

One of the main disadvantages of contracting outside experts in the procurement process is the potential to create a situation in which the contracting authoritys key staff predominantly comprises outside individuals possessing the required expertise but having no experience working as a team.

It is important that all staff employed within any contracting authority are properly inducted at the start of their employment and fully adheres to all aspects of the Code of Ethics and Best Practice Guide.

In case that a contracting authority does not have the necessary resources or expertise to carry out the procurement process, it can assign the whole process to another public contracting authority which has the relevant capacity and capabilities.

 


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