NATIONAL INSTITUTE OF TRANSPORT (NIT)

Higher Diploma in Procurement and Logistics Management

(HDPLM - First Year)
Module Name: PROCUREMENT TECHNIQUES
Module Code: BPU 07315
By
MABINA B.K
Mob. 0655/0755 02 97 80
E-mail: bahatimabina@[Link]

Handout No. 01
November 6, 2022 Prepared by B.K. MABINA 1
 Meaning of key Terms
 Procurement is the acquisition of goods, services or
works from an external source.
 Purchasing refers to a business or organization attempting to
acquire goods or services to accomplish its goals. Although
there are several organizations that attempt to set standards
in the purchasing process, processes can vary greatly
between organizations. Typically the word “purchasing” is not
used interchangeably with the word “procurement”, since
procurement typically includes expediting, supplier quality,
and transportation and logistics (T&L) in addition to
purchasing

November 6, 2022 Prepared by B.K. MABINA 2

 Meaning of key Terms
 Goods are materials that satisfy human wants and
provide utility. Utility means ability of the
product/goods to satisfy human wants, examples of
goods can be clothes, television, books, information,
furniture etc.
 Goods are capable of being physically delivered to a
consumer. Goods that are economic intangibles can
only be stored, delivered, and consumed by means
of media. Goods, both tangibles and intangibles,
may involve the transfer of product ownership to the
consumer.
November 6, 2022 Prepared by B.K. MABINA 3
 Meaning of key Terms
services: Intangible products such as
accounting, banking, cleaning, consultancy,
education, insurance, expertise, medical
treatment, or transportation.
Sometimes services are difficult to identify
because they are closely associated with a
good; such as the combination of a diagnosis
with the administration of a medicine.

November 6, 2022 Prepared by B.K. MABINA 4

 Meaning of key Terms
Services do not normally involve transfer of
ownership of the service itself, but may involve
transfer of ownership of goods developed or
marketed by a service provider in the course of
the service.

November 6, 2022 Prepared by B.K. MABINA 5

 Meaning of key Terms
For example, sale of storage related goods,
which could consist of storage sheds, storage
containers, storage buildings as tangibles or
storage supplies such as boxes, bubble wrap,
tape, bags and the like which are consumables,
or distributing electricity among consumers is a
service provided by an electric utility company.

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 Meaning of key Terms
This service can only be experienced through the
consumption of electrical energy, which is available in a
variety of voltages and, in this case, is the economic
goods produced by the electric utility company . While
the service (namely, distribution of electrical energy) is a
process that remains in its entirety in the ownership of
the electric service provider, the goods (namely, electric
energy) is the object of ownership transfer. The consumer
becomes electric energy owner by purchase and may use
it for any lawful purposes just like any other goods.

November 6, 2022 Prepared by B.K. MABINA 7

 Meaning of key Terms
This service can only be experienced through the
consumption of electrical energy, which is available in a
variety of voltages and, in this case, is the economic goods
produced by the electric utility company . While the
service (namely, distribution of electrical energy) is a
process that remains in its entirety in the ownership of the
electric service provider, the goods (namely, electric
energy) is the object of ownership transfer. The consumer
becomes electric energy owner by purchase and may use
it for any lawful purposes just like any other goods.

November 6, 2022 Prepared by B.K. MABINA 8

 Meaning of key Terms
There fore service is a type of economic activity that is
intangible, is not stored and does
not result in ownership.
A service is consumed at the point of sale. Services
are one of the two key components of economics, the
other being goods. Examples of
services include the transfer of goods, such as the
postal service delivering mail, and the use of expertise
or experience, such as a person visiting a doctor

November 6, 2022 Prepared by B.K. MABINA 9

 Meaning of key Terms
• Works: Works: are related all activities
involved with constructions, this includes new
construction of structures of all kinds such as
buildings, highways, roads, bridges, and
similar structures, renovations, demolition,
extensions, and repairs.

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 TYPES OF PROCUREMENT
Private Procurement: Done by the private
sector

Public Procurement: Done by the public

entities

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 PUBLIC AND PRIVATE PROCUREMENT

• Private procurement: Procurement done the

private sector which aimed at making profit.
This does not rule out the fact that private
entities may also seek social benefit; however,
it is not their primary business objective

November 6, 2022 Prepared by B.K. MABINA 12

 PUBLIC AND PRIVATE PROCUREMENT
 Public procurement; means acquiring goods, works or
services for supporting government operations and to provide
public services.

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 THE DIFFERENCES OF PUBLIC AND PRIVATE
PROCUREMENT

The aim or objectives of procurement: the

aim of public procurement is to serve the
public interest while private procurement
aims at making profit.

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 The Differences of Public and private
procurement
• Accountability: public procurement officers are accountable
to the public while private officers are accountable to the
shareholders.
• The Law or Act: Public procurement is guided by the public
procurement Act while private procurement is not.
• Delivery time: Public procurement takes a long time because
the long and strict procedure involved in public procurement.

November 6, 2022 Prepared by B.K. MABINA 15

The Differences of Public and private procurement

• Budgeting: Under public procurement the budget is

strictly followed, flexibility is very minimum in public
procurement while in private procurement any change
may be initiated depending on the owners’ decisions.
• Procedures: in public procurement strictly procuring
procedures under the public procurement Act must be
followed while in private procurement there are no
strictly procedures. Owners of private organization have
the right to decide what procedure to follow.

Prepared by B.K. MABINA 16

November 6, 2022
 The Differences of Public and private procurement

 Source of fund: Source of fund in public

procurement are the tax payers (the public)
while in private organizations source of fund
are the shareholders.

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 Procurement procedures:
Procurement procedures: These are stages
used by every organization that purchases
goods, works or services. These procedures
cover all aspects of the procurement cycle,
including the selection of the supplier, contract
negotiations, order placement and payment.

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 Procurement Procedures

procurement procedures are used to

control spending activity, ensure
appropriate approvals are in place and
reduce the risk of overpayment.
Procurement activity encompasses all
spending activity, excluding payroll, and
often represents more than 50 percent of all
expenditures.
November 6, 2022 Prepared by B.K. MABINA 19
 PROCUREMENT PROCEDURES, CYCLE,
STEPS, OR PHASES
Procurement cycle, steps, phases or procedures in modern
businesses usually consist of the following steps:
 Identification of need/requirement
Procurement plan
specification
Supplier Identification
Communication with supplier
Negotiation with the selected supplier
Supplier Liaison/agreement
Logistics Management
Contract Management and payments etc.
November 6, 2022 Prepared by B.K. MABINA 20
 Identification of need

• Identification of need: This is an internal step

for a company that involves understanding of
the company needs by establishing a short
term strategy (three to five years) followed
by defining the technical direction and
requirements.

November 6, 2022 Prepared by B.K. MABINA 21

 Supplier Identification
• Supplier Identification: Once the company
has answered important questions like:
Make or buy, multiple or single suppliers,
then it needs to identify who can provide the
required product/service. There are many
sources to search for supplier like company’s
past records, other suppliers, trade shows,
from internet etc.

November 6, 2022 Prepared by B.K. MABINA 22

 Supplier selection
• Supplier selection: involves with finding
potential suppliers.
• Identifying and selecting suppliers are
important responsibilities of the purchasing
department
• Some search is done to have knowledge of
the potential suppliers. A list is prepared for
all these suppliers

November 6, 2022 Prepared by B.K. MABINA 23

 Supplier selection

• There are three types of sourcing/supply

– sole sourcing: it means there is only one supplier
available because of patents, technical
specifications, location, raw materials, etc
– Multiple sourcing: is the use of more than one
supplier for an item. Competition will result in
lower prices, and better services for the buyer
– Single sourcing: this is a planned decision by the
organisation to select one supplier for an item
when several sources are available. The aim is to
build long-termPrepared
November 6, 2022
partnership
by B.K. MABINA 24
 Supplier selection

• In selecting supplier, several factors are taken

into consideration
 Technical capability: relevant technology, can the
supplier assist in improving the product features?
 Manufacturing capability: does the supplier have
strong financial capability, competent personnel,
control systems for timely delivery?

November 6, 2022 Prepared by B.K. MABINA 25

 Supplier selection

 Reliability: what is the reputation of the suppliers in this

kind of job? Can the supplier be trusted?
 After sale service: can the supplier provide some technical
support, or any other after-sale service as specified by the
customer/buyer?
 Price: competitive price is desirable
 Other considerations: credit terms, willingness to hold
inventory for the buyer

November 6, 2022 Prepared by B.K. MABINA 26

 Supplier selection
• Potential suppliers are identified with the
help of:
– Salespersons of supplier/buyer firm
– Internet
– Catalogues
– Trade magazines
– Trade directories

November 6, 2022 Prepared by B.K. MABINA 27

 Supplier selection

• A list of suppliers is made, then purchase

department prepares document known as
purchase enquiry or request for quotations
• The document is sent to potential suppliers in
order to make sure that competitive and
reliable quotations are received
• The enquiry can also be advertised in the
press: for example invitation to tender
November 6, 2022 Prepared by B.K. MABINA 28
 Supplier selection

• Supplier Communication: When one or more suitable

suppliers have been identified, requests for quotation,
requests for proposals, requests for information or requests
for tender may be advertised, or direct contact may be made
with the suppliers. References for product/service quality
are consulted, and any requirements for follow-up services
including installation, maintenance, and warranty are
investigated.

November 6, 2022 Prepared by B.K. MABINA 29

 Supplier selection

• After the suppliers have completed and

returned the quotations to the buyer, the
quotations are analyzed for manufacturing
capability, technical ability, reliability, price,
compliance to specification, terms and
conditions of sale, delivery and payment terms
• Then the buyer firm makes final selection of
the supplier
November 6, 2022 Prepared by B.K. MABINA 30
 Method for selecting supplier
One method is known as the ranking method
 Select factors (financial, technical, reputation in industry,
price, etc) that must be considered in evaluating potential
suppliers
 Assign weight to each factor. This weight determines the
importance of the factor in relation to the other factors.

November 6, 2022 Prepared by B.K. MABINA 31

 Method for selecting supplier

 Assume a scale of 1 to 10 with 10 carrying most weight (most

important)
 Rate the supplier for each factor on their ability to meet the
requirements of each factor. Use the scale of 1 to10.
 Rank the suppliers. For each supplier, the weight of each
factor is multiplied by the supplier rating for that factor.
 E.g. if a factor had a weight of 6 and a supplier was rated 4
for that factor, the ranking value for that factor would be 24

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 Method for selecting supplier
The supplier rankings are then added to
produce a total ranking
The suppliers can be listed by total ranking;
and the supplier with the highest ranking is
chosen
The figure on the next page provides an
example of supplier rating

November 6, 2022 Prepared by B.K. MABINA 33

 Supplier Rating

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 Supplier selection
Supplier Liaison: this involves entering into
contract with a supplier. During this phase,
the company/procuring entity evaluates the
performance of the Product/Service and any
accompanying service support, as they are
consumed.

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 Supplier selection
Supplier scorecard is a popular tool which
can be used for this purpose. When the
product or service (P/S) has been consumed
or disposed of, the contract expires, or the
product or service is to be re-ordered,
company experience with the P/S is
reviewed. If the P/S is to be re-ordered, the
company determines whether to consider
other suppliers or to continue with the same supplier.

November 6, 2022 Prepared by B.K. MABINA 36

 Logistics Management

 Logistics Management: Supplier preparation, expediting,

shipment, delivery, and payment for the P/S are completed,
based on contract terms. Installation and training may also
be included in this stage.

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 Logistics Management
For example, the flow of material,
information, money, and services from raw
material suppliers through factories and
warehouse to end customer.

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 Logistics Management

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 Additional Step
• Additional Step - Tender Notification: Some
institutions choose to use a notification
service in order to raise the competition for
the chosen opportunity. These systems can
either be direct from their e-tendering
software, or as a re-packaged notification
from an external notification company.

November 6, 2022 Prepared by B.K. MABINA 40

Additional Procurement procedures in
public procurement
 In public procurement , procurement procedures include:
need identification, specification, preparation of tender
documents, invitation to tender, issuing of tender
documents, receiving tender documents, opening of tender
documents, evaluation of suppliers, selection of suppliers,
communication with the selected supplier, signing of
contract and contract management and to make payment

November 6, 2022 Prepared by B.K. MABINA 41

 Procurement procedures:
The primary driving force for the
development of procurement procedures is
to control all spending. The actual
procedures used can vary slightly but will be
similar. An appropriate approval process
usually involves a separation of tasks and the
involvement of senior managers for
transactions that will cost more than a
specific price.

November 6, 2022 Prepared by B.K. MABINA 42

 Procurement procedures:
Another standard procurement procedure is to limit access
to the purchase order forms and require signed
authorization from a manager other than the person using
the goods. This separation of the goods recipient and the
approval is designed to ensure that a senior staff member is
aware of the order and can confirm that the materials are
required and will be used for the proper purpose

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ACTORS, STAKEHOLDERS AND BENEFICIARIES IN PUBLIC
PROCUREMENT

ACTORS:
Procurement practitioners are the principal actors in the
public procurement process. They are responsible for
ensuring the goal of public procurement is achieved. They
must gain stakeholder’s trust and ensure they fully
understand the procurement process. Procurement
practitioners are directly and indirectly engaged in the
procurement process, from need assessment to contract
close-out.

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 ACTORS IN PROCUREMENT

Contract Administrators are the principal actors in the

contract administration process. They are responsible for
ensuring the goal of contract administration is achieved.
They must also gain stakeholder’s trust and ensure they fully
understand the contract administration process.
Contract Administrators must coordinate with procurement
practitioners, contractors, suppliers and service providers to
ensure timely actions are executed according to contractual
requirements.

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 Stakeholders in Public procurement

Stakeholders are all those who stand to benefit from the

results of public procurement, including those interested
in the process and who might be affected, directly or
indirectly, by a particular procurement action. The
difference between actors and stakeholders is
participation. Actors play an active role in the
procurement process, while stakeholders play a more
passive role. Actors are also stakeholders because of the
benefits they derive from the use of public goods and
services.
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 Beneficiaries in Public Procurement

All inhabitants/citizen of a country are

beneficiaries of the public procurement
system through public goods and services
available and provided in the form of
transportation systems, public utilities,
educational systems, and medical services and
facilities, among others.

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 PUBLIC PROCUREMENT CATEGORIES:

In Public Procurement there are generally three procurement categories:

goods, services and works:

 Goods: are physical products that are finished or

manufactured on request. There is usually an element of
service involved, such as when the agreement is for the
purchase of goods to be assembled and/or installed. The
extent of the service provided is directly related to
acceptance of the goods purchased. Typical examples of
goods are: office supplies and equipment, furniture, IT
equipment, books, vehicles, medical supplies and other
commodities

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 PUBLIC PROCUREMENT CATEGORIES:

 Goods” means raw materials, products, equipment and

other physical objects of every kind and description,
whether in solid, liquid or gaseous form, electricity,
intangible asset and intellectual property, as well as
services incidental to the supply of the goods provided
that the value of the services does not exceed the value
of the goods themselves.

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 PUBLIC PROCUREMENT CATEGORIES:

• Services: are classified as either consulting

services or non-consulting services. In some
cases, they are simply classified as services
because of the difficulty, at times, in clearly
determining the difference. The
distinguishing factor between the two,
however, is the degree of importance of the
measurable physical output of the service
provided.

November 6, 2022 Prepared by B.K. MABINA 50

 PUBLIC PROCUREMENT CATEGORIES:

• Consultancy Services: are usually technical services the

output of which is not equipment intensive. Advisory and
project related services are typical consulting services, which
includes: feasibility studies, project management,
engineering services, finance and accounting services,
training and development, and other technical assistance.
This is procurement category which focuses on the hiring of
firms or individuals to provide services that are primarily
intellectual in nature. Studies, training, advice, and technical
assistance are consulting services.

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 PUBLIC PROCUREMENT CATEGORIES:

The expression “consulting services” defines services of an

intellectual and advisory nature provided by consultants
using their professional skills to study, design, and organizes
specific projects, advice clients, conduct training, and
transfer knowledge. Therefore consultancy is an activity of
providing professional advice to the clients or customers.

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 PUBLIC PROCUREMENT CATEGORIES:

Consultant: means a firm, company,

corporation, organization, partnership or
individual person engaged in or able to be
engaged in the business of providing services
in architecture, economics, engineering,
surveying or any field of professional activity.

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 PUBLIC PROCUREMENT CATEGORIES:

Consultancy is a work contracted to an

external supplier that is project-based,
outside the client’s ‘business as usual’,
and where there is a clear end-point for
the supplier’s involvement.
Responsibility for the final outcome, or
on-going service, rests largely with the
client.

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 PUBLIC PROCUREMENT CATEGORIES:

Consultancy services usually include:

 Finance
 Human resources, training and education
 Information and communications technology and
information systems
 Management consultancy (strategy, project and programme
management)
 Marketing and communications
 Property and construction; and
 Technical.

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 PUBLIC PROCUREMENT CATEGORIES:

Consultancy services consist of the provision of advice on

particular projects or problems. These include planning,
system and implementation design, financial, fiscal, legal
and other professional services, as well as management,
production, inspection, testing and quality control. They also
include such services as appearances before commissions,
boards or other judicial bodies to give evidence or otherwise
submit professional opinions.

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 PUBLIC PROCUREMENT CATEGORIES:

Non- consultancy services: means services

which do not involve the provision of
professional advice to the customers. For
example Cafeteria services, stationery
services, canteen services, photocopy
services, internet services, cleaning and
gardening Services, security guard services,
cleaning services, insurance services, hotel
services etc

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 PUBLIC PROCUREMENT CATEGORIES:

 Non-Consulting Services on the other hand, usually involve

the use of equipment and a standard methodology for
achieving the objectives. Some typical examples of non
consulting services are: equipment maintenance and repair,
operation and maintenance services, utility management,
installation and maintenance services, and surveys and field
investigations, to mention a few.

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 PUBLIC PROCUREMENT CATEGORIES:

• Works: are related to civil works, this includes new

construction of structures of all kinds (buildings, highways,
roads, bridges, and similar structures), renovations,
extensions, and repairs. This category can also include,
water and sanitation, transportation and electrical plant
infrastructure. Goods and works procurements are usually
provided by business entities, while consulting and non-
consulting services are generally provided by business
entities as well as individuals, depending on the
requirement.

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 PUBLIC PROCUREMENT CATEGORIES:

 WORKS: means –
All works associated with the
construction,reconstruction, demolition,
repair or renovation of a building, structure,
road or airfield. Any other civil works, such
as site preparation, excavation erection,
building, installation of equipment or
materials, decoration and furnishing.

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 PUBLIC PROCUREMENT CATEGORIES:

Service which is tendered and contracted on the basis of

performance of a measurable physical output such as
drilling, mapping, satellite photography or seismic
investigations: This means that services that its contracts
include the provision of works and services shall be
regarded as works contracts if the total value of the works
is greater than the value of the services covered by the
contract.

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 WORKS

Bill of quantities (BOQ) is a bill or document

which contains items of work for the
construction, installation, testing, and
commissioning of work to be done by the
Contractor. The Bill of Quantities is used to
calculate the Contract Price. The Contractor
is paid for the quantity of the work done at the
rate in the Bill of Quantities for each item.
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 WORKS

“Contractor'' means a company,

corporation, corporation, partnership or
individual person engaged in civil, electrical
or mechanical engineering or in
construction or building work of any kind
including repairs and renovation, and who
is, according to the context a potential
party or the part to a procurement contract
with the procuring entity.
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 PROCUREMENT STEPS

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 Set-up of Procurement in the
Procuring Entities
• The PPA 2011 provides the procedures on how the
procurement functions should be handled in the procuring
entities using the organs established within the procuring
entities that are Accounting Officer (AO), Tender Board (TB)
and Procurement Management Unit (PMU). It has also
provided the mechanism on handling the disagreement
between the organs in the procurement process. Furthermore,
it has the provision on the mechanism of handling the disputes
which arising between PEs and bidders in the process

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 Procurement Authorities
 Procuring entity: means a statutory body, department of the central
government, local government and any other body, or unit established
and mandated by government to carry out public functions. The head of
a PE is known as Accounting officer
 Tender Boards : A tender board is an entity created by law to oversee
the public procurement process and to ensure that all public
procurement activities are carried out in accordance with the public
procurement rules. Depending on the law, there could be several types
of tender boards: departmental, ministerial and cabinet, each
responsible for handling procurement actions at certain monetary value
thresholds.

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 Procurement Authorities
Some tender boards have similar functions as a procuring
entity. Others only oversee and approve actions taken by
the procuring entity and evaluation panels at various stages
in the procurement process. The chair person is the head of
tender board
 Procurement Management Unit (PMU) means a division or
department in each procuring entity responsible for the
execution of the procurement functions. PMU is headed by
the Head of PMU who is the secretary of the tender board.

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 Set-up of Public Procurement in
Tanzania
Ministry of Finance (MoF):
The Ministry of Finance is one of the major actors in the
procurement system with the responsibility of ensuring that
funds are available and disbursed to the procuring entities
according to the budget and plans for the government
institutions to implement their functions in the respective
financial years. The PPA 2011 Section 45 requires all PEs to
prepare Annual Procurement Plan (APP) which indicates
volume of procurement and timing of each activity in the
procurement process.

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 PPRA
The PPRA has been established under Section 5 of PPA
2011 under the Ministry of Finance as an oversight body in
the procurement functions in the country as well as
regulating and monitoring procurement activities
undertaken by the PEs. The main objective of monitoring
procurement activities is to ensure that the funds
disbursed by the government for procurement of goods,
non consultancy service, disposal of public assets by tender
and consultancy services are utilized in accordance with
procedures laid down in the Act and its regulations. The
PPRA has the responsibility of ensuring that there is
application of fair, competitive, transparent, non-
discriminatory and value for money procurement
standards and practices in public procurement system.

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 PSPTB
The Role of Procurement and Supplies
Professionals Technicians Board (PSPTB) on the
improvement of public procurement includes
Procurement and supplies professionals and
technicians in the public sector need to exercise
high level of Competence and integrity in
performing their duties and updating
themselves on the requirements of Laws and
regulations as a way to enhance compliance to
the same.
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 PPRA
Procurement process in Tanzania is guided and regulated by the Public Procurement Act of

2011 and its Regulations of [Link] activities in Tanzania are under the oversight of

the Public Procurement Regulatory Authority (PPRA).Its existence ad responsibilities has been

stipulated under Section 7(1) up to section 30 of PPA, 2011. The objective of PPRA is to

determine whether procedures, processes and documentations for procurement and

contracting were in accordance with the provisions in the PPA 2011, Public Procurement

Regulations (GN. No.446 of 2013) and the standard documents prepared by PPRA and that

procurement carried out achieved the expected economy and efficiency (value for money for

the allocated resources), and the implementation of contracts conformed to the terms thereof.

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 The Public Procurement Appeal Authority (PPAA)

The Public Procurement Appeals Authority (PPAA)

has been established under Section 77 of the PPA
2011 in order to provide for an independent
mechanism to deal with the handling of complaints
and appeals arising in the public procurement
process. The PPAA is also providing clarification on
disputes among parties as well as providing advice
to the Public Procurement Regulatory Authority on
areas requiring improvement within the public
procurement process

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 PPPD
Public Procurement Policy Division(PPPD), this is
the division established , under the public
procurement Act section 5 of 2011 with the role of
developing a National Procurement Policy,
reviewing procurement policies, regulations,
circulars and implementation of Public
Procurement Policies. The PPPD also advise the
Central government, Local governments and
statutory bodies on issues related to procurement
policies. PPPD has a mandate of developing and
developing procurement cadre.

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 GPSA
Government Procurement Services Agency
(GPSA), This is an executive agency of the
Ministry of Finance, established under the
Executive Agency Act No. 30 of 1997 as
amended through Government Notice No. 235
of 7th December 2007 as amended by
Government Notice No. 133 of 13th April
[Link] role of GPSA is to ensure availability of
secure and quality procurement services to the
November 6, 2022 Prepared by B.K. MABINA 74
 GPSA
government and non-government institutions in a
sustainable and cost effective manner with a
mission of providing effective and efficient
procurement services to the government and non-
government institutions. GPSA is expected to
implement the system for procurement of
common use Items and Services (CUIS) by PEs to
provide an efficient, cost effective and flexible
means to procure goods, works and services that
are required continuously or repeatedly over a set
period of time.

November 6, 2022 Prepared by B.K. MABINA 75

 Procuring Entities (PEs)
The PPA 2011 provides set up of procurement functions in the
PEs by established organs such AO, TB, UD, EC and PMU. All
these organs are required to undertake procurement functions
independently and be accountable. Furthermore there is a
Internal Audit Unit in each PE intended to serve as a tool of
checking the efficiency and effectiveness of financial
management and internal control systems. It is designed to add
value and improve the procuring entities operations in spending
public funds. The unit is responsible for ensuring that
procurement procedures are followed by the entity in the
procurement of both goods and services.

November 6, 2022 Prepared by B.K. MABINA 76

 Functions and powers of accounting
officer
The accounting officer shall have the overall
responsibility for the execution of the
procurement process in the procuring entity, and
in particular, shall be responsible for:
Establishing a tender board in accordance
with this Act
Appointing the members of the tender board
specified in the Second Schedule;

November 6, 2022 Prepared by B.K. MABINA 77

 Powers of Accounting Officer
 causing to be established a Procurement
Management Unit staffed to an appropriate level
 Approving all procurement opportunities
 Appointing the evaluation committee and
negotiation team;
 Communicating award decisions;
 Certifying the availability of funds to support the
procurement activities
 Signing contracts for the procurement activities
on behalf of the procuring entity.

November 6, 2022 Prepared by B.K. MABINA 78

 Responsibilities of the Accounting
Officer
• Handling complaints by suppliers, contractors
or consultants;
• Submitting a copy of complaints and reports
of the finding to the Authority;
• Ensuring that the implementation of the
awarded contract is in accordance with the
terms and conditions of the award;

November 6, 2022 Prepared by B.K. MABINA 79

 Responsibilities of the Accounting Officer

 Submitting to the Authority a list of contracts

awarded, annual procurement plan and a list
of blacklisted firms
 Implementing decisions made by the
Authority and Appeals Authority after
investigation or adjudication of a complaint

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 Responsibilities of the Accounting
Officer
Providing feedback on the implementation of
the decision of the Authority or the Appeals
Authority within fourteen days of receiving
communicating of the decision.

November 6, 2022 Prepared by B.K. MABINA 81

 Functions of Tender Boards
To approve procurement and disposal by
tender procedures; and
To ensure that best practices in relation to
procurement and disposal by tender are strictly
adhered by procuring entities.

November 6, 2022 Prepared by B.K. MABINA 82

 Powers of Tender Boards
Request for any professional or technical
advice from any appropriate body or person in
Tanzania or elsewhere, and
Examine such records or other documents and
take copies or extracts therefrom; and
Do all such acts and things as they may be
considered reasonable and justifiable to the
attainment of their objects.

November 6, 2022 Prepared by B.K. MABINA 83

 Functions of a Procurement
Management Unit
To manage all procurement and disposal by
tender activities of the procuring entity except
adjudication and the award of contract;
To support the functioning of the tender
board;
To implement the decisions of the tender
board;
To act as a secretariat to the tender board;

November 6, 2022 Prepared by B.K. MABINA 84

 Functions of a Procurement Management
Unit
To plan the procurement and disposal by
tender activities of the procuring entity;
To recommend procurement and disposal by
tender procedures;
To check and prepare statements of
requirements

November 6, 2022 Prepared by B.K. MABINA 85

 Functions of a Procurement
Management Unit
To prepare tendering documents
To prepare advertisements of tender
opportunities
To prepare contract documents
To issue approved contract documents

November 6, 2022 Prepared by B.K. MABINA 86

 Functions of a Procurement Management
Unit
To maintain and archive records of the
procurement and disposal process
To maintain a list or register of all contracts
awarded
To prepare monthly reports for the tender
board;

November 6, 2022 Prepared by B.K. MABINA 87

 Functions of a Procurement
Management Unit
To prepare and submit to the management
meeting quarterly reports on the
implementation of the annual procurement plan
To co-ordinate the procurement and disposal
activities of all the departments of the procuring
entity; and
To prepare other reports as may be required
from time to time.

November 6, 2022 Prepared by B.K. MABINA 88

 Functions of User department
Liaise/link with and assist the Procurement
Management Unit throughout the
procurement or disposal by tender process to
the point of contract placement;

November 6, 2022 Prepared by B.K. MABINA 89

 Functions of User department
• To initiate procurement and disposal by
tender requirements and forward them to the
Procurement Management Unit;
• To prepare technical inputs to statements of
requirements and or terms of reference for
procurement requirements to the
Procurement Management Unit;

November 6, 2022 Prepared by B.K. MABINA 90

 Functions of User department
• To propose technical specifications to the
Procurement Management Unit when
necessary;
• To participate in tender evaluation;
• To certify for payments to suppliers,
contractors or consultants;

November 6, 2022 Prepared by B.K. MABINA 91

 Functions of User department
• To report any departure from the terms and
conditions of an awarded contract to the
Procurement Management Unit;
• To forward details of any required contract
amendments to the Procurement
Management Unit for action;

November 6, 2022 Prepared by B.K. MABINA 92

 Functions of User department
• To maintain and archive records of contracts
management;
• To prepare any reports required for
submission to the Procurement Management
Unit, the tender board or the accounting
officer;

November 6, 2022 Prepared by B.K. MABINA 93

 Functions of User department
• To oversee contract implementation including
reviewing and approving technical reports,
design or any outputs as per contract; liaise
with the Procurement Management Unit
during budgeting; and
• To liaise with the Procurement Management
Unit during budgeting.

November 6, 2022 Prepared by B.K. MABINA 94

 The National Audit Office (NAO)
The National Audit Office of the United Republic of
Tanzania (NAO) is established under Article 143 of
the Constitution of the United Republic of
Tanzania. The statutory duties and responsibilities
of the Controller and Auditor General (CAG) are
provided for in the Public Finance Act (PFA) No. 6
of 2001 and the Local Government Finance Act
No.9 of 1982. The NAO has responsibilities of
undertaking external financial and performance
audit of all government entities, public authorities
and other bodies at least once a year.

November 6, 2022 Prepared by B.K. MABINA 95

 NAO
In addition, NAO is required under section 33 of
the PFA 2001 to carry out Performance Audit and
report to the Parliament on the economy,
efficiency and effectiveness in the use of public
money and other resources. The performance
audit performed by NAO covers also expenditure
of funds being used for procurement of goods
and services by the government entities. The Act
requires Auditor General to state whether or not
the provisions of PPA 2011 have been complied
with in his annual report every year.

November 6, 2022 Prepared by B.K. MABINA 96

 Technical Audit Unit (TAU)
Technical Audit Unit is established by treasury Circular No.8 of
2001. The unit works and reports directly to the Paymaster
General (PMG) who is the custodian of all Government funds.
The unit is the PMG’s tool to monitor and provide feedback on
the use of Government funds through procedures of
monitoring, performance auditing and evaluation. The TAU
conducts its major function to ensure economy, efficiency and
effectiveness in the utilization of public funds in the execution
of works, hiring services, and procurement of goods

November 6, 2022 Prepared by B.K. MABINA 97

 TAU
The Unit (TAU) uses the Audit findings to advise
the Auditee (Implementing Agency) on the
interventions / corrective actions necessary to
remedy and/ or improve on a particular
situation before it worsens. TAU is guided and
controlled by the Public Finance Act No.6 of
2001, the Public Procurement Act No.21 of
2004 and Treasury Circular letters.

November 6, 2022 Prepared by B.K. MABINA 98

 Stock Verification Department (SVD)

Stock Verification Department is the unit under

the Ministry of Finance responsible for stocks
and inventory audits, inspection and controlling
of Government assets/properties and disposal
of government assets/properties.

November 6, 2022 Prepared by B.K. MABINA 99

 Development Partners
For donor funded projects, there are control
mechanisms instituted by the donor to monitor
the projects to ensure that funds are utilized
according to the guidelines and procedures laid
down in the agreement.

November 6, 2022 Prepared by B.K. MABINA 100

 Prevention and Combating of Corruption Bureau
(PCCB)
The Prevention of Corruption Act No. 3 of
1971 has been repealed by the government
and enacted the Prevention and Combating of
Corruption Act, 2007 which provides the
overall legal framework for prevention and
combating corruptions in Tanzania. The
enacted Act has provision of corrupt
transactions in contracts (Section 16) and
corrupt transactions in procurement (Section
17) which state the penalties for person
convicted of such offences.
November 6, 2022 Prepared by B.K. MABINA 101
 PCCB

The Act also provides extensive protection to

informers (whistleblowers) Section (51) as well
as protection of witnesses, experts and victims
(Section 52). This is a step ahead in detecting
and fighting corrupt practices in procurement
process. It is expected that the implementation
of the provisions in the Act will ensure that
procurement will be done in fair and
transparency manner as stipulated in the PPA
2011.
November 6, 2022 Prepared by B.K. MABINA 102
 PSPTB
The Role of Procurement and Supplies
Profession Technical Board (PSPTB) on the
improvement of public procurement includes
Procurement and supplies professionals and
technicians in the public sector need to exercise
high level of Competence and integrity in
performing their duties and updating
themselves on the requirements of Laws and
regulations as a way to enhance compliance to
the same.
November 6, 2022 Prepared by B.K. MABINA 103
 Blanket Purchase Order
 A blanket order, blanket purchase
agreement or call-off order  is a purchase
order which a customer places with its supplier to
allow multiple delivery dates over a period of time,
often negotiated to take advantage of
predetermined pricing.
 It is normally used when there is a
recurring/repeat need for expendable goods.
 Blanket orders are often used when a customer
buys large quantities and has obtained special
discounts.
November 6, 2022 Prepared by B.K. MABINA 104
 Blanket Purchase Order
Based on the blanket order, sales orders
('blanket releases' or 'release orders') and
invoice items can be created as needed until
the contract is fulfilled, the end of the order
period is reached or a pre-determined
maximum order value is reached

November 6, 2022 Prepared by B.K. MABINA 105

Benefits of Blanket Purchase Order
Issuing a blanket order allows a customer not to
hold more stock than necessary at any time, and
avoids the administrative expense of processing
frequent purchase orders, while
favoring discount pricing through volume
commitments or price breaks.
On the supplier's side, a blanket order may
provide the benefit of guaranteeing ongoing
business and also help suppliers better predict
future cash flows and orders
November 6, 2022 Prepared by B.K. MABINA 106
Benefits of Blanket Purchase Order
A blanket order is set at a fixed priced
contract for a period of time. The buyer looks
for the best pricing among competing supplier
bids. After the best one is chosen, the prices
of goods are fixed, and also quantities of each
product are given to the supplier to prepare
stock for on requested delivery.

November 6, 2022 Prepared by B.K. MABINA 107

Benefits of Blanket Purchase Order
• Forecasted quantity is provided by the buyer
as full usage quantity recorded historically few
years or as needed for quantitative analysis.
The supplier may give a condition of quantity
to supply for this [contract]. For example, 80%
of the forecast quantity must be bought at the
end of the contract, which may be one or two
years.

November 6, 2022 Prepared by B.K. MABINA 108

 THE ROLE OF PROCUREMENT
There are two basic types of procurement
roles:
 Procurement for Resale
procurement for consumption or
transformation. The former is generally
associated with retailers and wholesalers.
The latter is defined as industrial
procurement.

November 6, 2022 Prepared by B.K. MABINA 109

 THE ROLE OF PROCUREMENT
Procurement can also be seen as either
strategic or transactional. Also, the words
"direct" and "indirect" have been used to
distinguish the two types. Strategic (direct)
buying involves the establishment of mutually
beneficial long-term relationships between
buyers and suppliers.

November 6, 2022 Prepared by B.K. MABINA 110

 THE ROLE OF PROCUREMENT
Usually strategic buying involves purchase of
materials that are crucial to the support of the
firm's distinctive competence. This could
include raw material and components
normally used in the production process.
Transactional (indirect) buying involves
repetitive purchases, from the same vendor,
probably through a blanket purchase order

November 6, 2022 Prepared by B.K. MABINA 111

THE ROLE OF PROCUREMENT
The procurement department is responsible for
determining the organization's requirements, selecting
an optimal source of supply, ensuring a fair and
reasonable price (for both the purchasing organization
and the supplier), and establishing and maintaining
mutually beneficial relationships with the most
desirable suppliers. In other words, purchasing
departments determine what to buy, where to buy it,
how much to pay, and ensure its availability by
managing the contract and maintaining strong
relationships with suppliers.

November 6, 2022 Prepared by B.K. MABINA 112

 THE ROLE OF PROCUREMENT
Therefore the roles/ responsibilities Procurement
Department/ Unit (PMU) include:
 Coordinating purchase needs with user departments
 identifying potential suppliers
 conducting market studies for material purchases
 proposal analysis
 supplier selection
 issuing purchase orders

November 6, 2022 Prepared by B.K. MABINA 113

 Procurement Roles include:
meeting with sales representatives
negotiating
contract administration
resolving purchasing-related problems
maintenance of purchasing records

November 6, 2022 Prepared by B.K. MABINA 114

 Procurement Roles
As the role of purchasing grows in importance, purchasing
departments are being charged with even more
responsibilities. Newer responsibilities for purchasing
personnel, in addition to all purchasing functions, include
participation in the development of material and service
requirements and related specifications, conducting material and value-
analysis studies, inbound transportation, and even management of
recovery activities such as surplus and scrap salvage, as well as its
implications for environmental management.

November 6, 2022 Prepared by B.K. MABINA 115

 Procurement Roles
As purchasing personnel became even more central to the
firm's operations they became known as "supply managers."
As supply managers, they are active in the strategic-planning
process, including such activities as securing partnering
arrangements and strategic alliances with suppliers;
identification of threats and opportunities in the supply
environment; strategic, long-term acquisition plans; and monitoring
continuous improvement in the supply chain.

November 6, 2022 Prepared by B.K. MABINA 116

 Procurement Roles
A study by found that strategic purchasing enables firms to foster close
working relationships with a limited number of suppliers, promotes
open communication among supply chain partners, and develops a long-
term strategic relationship orientation for achievement of mutual goals.
This implies that strategic purchasing plays a synergistic role in fostering
value-enhancing relationships and knowledge exchange between the
firm and its suppliers, thereby creating value. In addition, supply
managers are heavily involved in cross-functional teams charged with
determining supplier qualification and selection, as well ensuring early
supplier involvement in product design and specification development.

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 Comprehensive List of Objectives of Procurement

A comprehensive list of objectives for

procurement and supply management
personnel would include:
 to support the firm's operations with an uninterrupted flow
of materials and services:
 to buy competitively and wisely (achieve the best
combination of price, quality and service);

November 6, 2022 Prepared by B.K. MABINA 118

 Comprehensive List of Objectives of Procurement

 To minimize inventory investment and loss;

 To develop reliable and effective supply sources;
 To develop and maintain healthy relations with active
suppliers and the supplier community;
 To achieve maximum integration with other departments,
while achieving and maintaining effective working
relationships with them;
 To take advantage of standardization and simplification;

November 6, 2022 Prepared by B.K. MABINA 119

 Comprehensive List of Objectives of Procurement

 To keep up with market trends;

 To train, develop and motivate professionally competent personnel
 To avoid duplication, waste, and obsolescence;
 To analyze and report on long-range availability and costs of major
purchased items;
 To continually search for new and alternative ideas, products, and
materials to improve efficiency and profitability; and
 To administer the purchasing and supply management function
proactively, ethically, and efficiently.

November 6, 2022 Prepared by B.K. MABINA 120

 PROCUREMENT LEGAL FRAMEWORK

Public procurement in Tanzania is governed

by the Public Procurement Act, 2011 and its
regulations, 2013. Procurement legal
framework is a law or regulation (or part of a
law or regulation) that is sanctioned by the
judicial system of a particular country. This sets
the rules for the management of public procurement.

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 PROCUREMENT LEGAL FRAMEWORK

The procurement legal framework is usually further

developed into policies and procedures, procurement and
contract administration manuals and guidelines, including
standard solicitation documents that are used to call for
offers from contractors, suppliers and service providers. The
language of public procurement policies, procedures,
guidelines, manuals and standard solicitation documents must align
with what is established in the public procurement legal framework.
Adherence to the public procurement law is obligatory any infraction is
punishable by law

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 PROCUREMENT LEGAL FRAMEWORK

 The procurement legal and institutional frameworks

(procurement rules) govern everything from the
identification of a requirement through to the closing out of
a contract sometimes including disposal, reutilization and
destruction of goods.
 Therefore public procurement Act (PPA), 2011 and its
regulations, 2013 is the legal framework or law which
governs the public procurement activities in the United
Republic of Tanzania.

November 6, 2022 Prepared by B.K. MABINA 123

 PROCUREMENT SPECIFICATIONS OF GOODS:

Specification: means a description of any

commodity or works by reference to its
nature, quality, strength, purity,
composition, quantity, dimensions, weight,
grade, durability, origin, age or other
characteristics.

November 6, 2022 Prepared by B.K. MABINA 124

 Technical Specifications Goods

Technical specification for goods may include:

Physical/chemical properties
Performance requirements
Reference to Design drawings
Locally applicable standard and regulations

November 6, 2022 Prepared by B.K. MABINA 125

 QUESTION

Procurement of 1000 motorcycles for Ministry

of Health Rural Services in Tanzania included
the following specifications:
Engine size 100 cc
Fuel consumption: 70 km/liter
•What is wrong with the above specification?
•Why the above specifications would lead to
numerous complaints?
November 6, 2022 Prepared by B.K. MABINA 126
 Technical Specifications Works
Technical specifications for works may include:
• Reference to Working Drawings
• Bill of quantities (BOQ)
• Industry standards
• Locally applicable codes

November 6, 2022 Prepared by B.K. MABINA 127

 Specification
In order to specify clearly, bidding documents shall be so
worded as to permit and encourage international competition
and shall set forth clearly and precisely the work to be carried
out, the location of the work, the goods to be supplied, the
place of delivery or installation, the schedule for delivery or
completion, minimum performance requirements, and the
warranty and maintenance requirements, as well as any other
pertinent terms and conditions.

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 Specification
In addition, the bidding documents, where
appropriate, shall define the tests, standards,
and methods that will be employed to judge
the conformity of equipment as delivered, or
works as performed, with the specifications.
Drawings shall be consistent with the text of
the specifications, and an order of precedence
between the two shall be specified.

November 6, 2022 Prepared by B.K. MABINA 129

 Specification
Standards and technical specifications quoted
in bidding documents shall promote the
broadest possible competition, while assuring
the critical performance or other
requirements for the goods and/or works
under procurement. As far as possible, the
Borrower shall specify internationally
accepted standards such as those issued by

November 6, 2022 Prepared by B.K. MABINA 130

 Specification
the International Standards Organization with which the
equipment or materials or workmanship shall comply.
Where such international standards are unavailable or
are inappropriate, national standards may be specified. In
all cases, the bidding documents shall state that
equipment, material, or workmanship meeting other
standards, which promise at least substantial
equivalence, will also be accepted
.

November 6, 2022 Prepared by B.K. MABINA 131

 Use of Brand Name for Specification
Specifications shall be based on relevant characteristics and/or
performance requirements. References to brand names, catalog
numbers, or similar classifications shall be avoided. If it is
necessary to quote a brand name or catalog number of a
particular manufacturer to clarify an otherwise incomplete
specification, the words “or equivalent” shall be added after
such reference.

November 6, 2022 Prepared by B.K. MABINA 132

 Specification cont.

The specification shall permit the acceptance

of offers for goods which have similar
characteristics and which provide
performance at least substantially equivalent
to those specified. Standardizing technical
specifications may be advantageous,
depending on the complexity of the goods
and the repetitiveness of the type of

November 6, 2022 Prepared by B.K. MABINA 133

 Specification
procurement. Technical Specifications
should be broad enough to avoid
restrictions on workmanship, materials,
and equipment commonly used in
manufacturing similar kinds of goods.
Standards for equipment, materials, and
workmanship specified in the Bidding
Documents shall not be restrictive.
Recognized international standards should
November 6, 2022 Prepared by B.K. MABINA 134
 Specification cont.
be specified as much as possible. Reference to
brand names, catalogue numbers, or other
details that limit any materials or items to a
specific manufacturer should be avoided as far
as possible. Where unavoidable, such item
description should always be followed by the
words “or substantially equivalent”.

November 6, 2022 Prepared by B.K. MABINA 135

 Specification cont.
Technical Specifications shall be fully
descriptive of the requirements in respect of,
but not limited to, the following:
• Standards of materials and workmanship
required for the production and
manufacturing of the Goods.
• Detailed tests required (type and number

November 6, 2022 Prepared by B.K. MABINA 136

 Specification cont.
Other additional work and/or Related Services
required achieving full delivery/completion.
Detailed activities to be performed by the
Supplier, and participation of the Purchaser
thereon.
List of detailed functional guarantees covered
by the Warranty and the the specification of
the liquidated damages to be applied in the
event that such guarantees are not met.

November 6, 2022 Prepared by B.K. MABINA 137

 Summary of Technical Specifications

The Goods and Related Services shall comply

with following Technical Specifications and
Standards:
• Item No - Name of Goods or Related
• Service Technical Specifications and Standards
• Specify what you need, not how to get what
you need

November 6, 2022 Prepared by B.K. MABINA 138

 Specification cont.
• Look to increase competition, not reduce it.
• Be as flexible as possible without
compromising the objective.
• Be clear

November 6, 2022 Prepared by B.K. MABINA 139

 PROCUREMENT METHODS
Procurement methods are the procedures
used by the procuring entity to acquire goods,
services and works. These methods can be
competitive and non competitive. There’s a
preference for using competitive methods of
procurement given that they tend to promote
transparency, economy and efficiency, and
limit favoritism.

November 6, 2022 Prepared by B.K. MABINA 140

 TYPES OF PROCUREMENT METHODS

Procurement methods are many, and they go by different

names depending on the procurement category. Most, with
few exceptions, generally fall into the following:
1. Open Competitive Tendering (International and National
Competitive tendering)
2. Closed Tendering or Restricted Tendering,
3. Request for Proposals,
4. Request for Quotations,

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 TYPES OF PROCUREMENT METHODS

5. Single-source Procurement or direct contracting,

6. Force Account,
7. Private Public Partnership Method.
From the above-mentioned procurement methods, tendering
and request for proposals are considered competitive
procurement methods because the solicitation
documents are advertised and open to any
qualified firm interested in competing for the assignment

November 6, 2022 Prepared by B.K. MABINA 142

 TYPES OF PROCUREMENT METHODS

In contrast, request for quotations and single-source

procurement are considered non-competitive procurement
methods because the invitation to submit offers is not
advertised, and it is sent only to firms or individuals
specifically invited by the procuring [Link]
respect
to restricted tendering, there’s debate as to
whether it is a competitive or non competitive
procurement method.

November 6, 2022 Prepared by B.K. MABINA 143

 TYPES OF PROCUREMENT METHODS

Restricted tendering can be considered as a

non competitive procurement method
because the solicitation documents are sent
to a limited number of suppliers, contractors,
or service providers.

November 6, 2022 Prepared by B.K. MABINA 144

 Deciding on procurement method to use

A decision to use a particular procurement method must be

based primarily on the stipulations of the procurement
guidelines, manuals and procedures; which necessarily stem
from the procurement legal framework. It’s also important to
consider (among others):
• the value and complexity of the requirement
• the degree to which the procuring entity is able to clearly
define the requirement

November 6, 2022 Prepared by B.K. MABINA 145

 Deciding on procurement method to use

• if there is a need for prospective bidders to

participate in finalizing the specifications of
the requirement
• the urgency of need
• market availability

November 6, 2022 Prepared by B.K. MABINA 146

 procurement methods
1. OPEN COMPETITIVE TENDERING
 Open tendering is the preferred competitive
public procurement method used for
acquiring goods, services and infrastructure
works. It is executed in accordance with
established procedures set out in the
procurement guidelines and detailed in the
standard bidding documents.

November 6, 2022 Prepared by B.K. MABINA 147

 procurement methods
• Open tendering is also known as open competitive bidding,
open competition or open solicitation, and the procurement
notices used to call for bids for these requirements are
identified as: Invitation for Bids or Invitation to Tender.
• Tender means an offer, proposal or quotation made by a
supplier, contractor or consultant in response to a request by
a procuring entity.

November 6, 2022 Prepared by B.K. MABINA 148

 Procurement Methods

“competitive selection'' means the method

of procurement whereby limited number of
consultants or providers of services are
invited by the procuring entity to compete
with each other in submitting either un-priced
or priced tenders, where the tenders are
evaluated either on the basis, of quality alone
or on the basis of a combination of quality
and cost.
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• ‘‘Competitive tendering'' or ''tendering'' means the method
of procurement whereby suppliers, contractors or consultants
are invited by the procuring entity to compete with each
other in submitting priced tenders for goods, works or
services.
The fundamental requirements of open tendering are that
they should:
• Be open to all qualified and interested bidders,

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 Procurement Methods
Requirements of open tendering are that they should:
• Be advertised locally (and internationally, when required),
• Have objective qualifications criteria,
• Have neutral and clear technical specifications,
• Have clear and objective evaluation criteria, and
• Be awarded to the least-cost provider, without contract
negotiations.

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It is presumed that this procurement method fosters effective
competition and adds value for money; however, there are
arguments to the contrary given that the open tendering
method is strictly procedures-based and was primarily
designed for the procurement of simple goods. As a result, it
is not suitable for complex procurements where the focus is
more on the output and outcome of the contracting process
rather than on strict adherence to standards.

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Disadvantages of the open tendering process are:
• Lengthy timeframe for completion of the procurement action,
• Requires strict adherence to procedures,
• Assumes existing internal capacity for the completion of clear
and precise specifications,
• Restricts suppliers’ participation in determining the technical
specifications,
• Limits the possibility of building long-term relationships,

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Disadvantages of the open tendering process
are:
• Focuses only on a least-cost solution,
• Suppresses innovation, and
• Excessive formalism may limit supplier
participation in the tendering process

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• International Competitive Tendering/Bidding Method: The
procuring entity invites suppliers, contractors or consultant
regardless of their Nationality, by means of an expression of
interest notice that shall be advertised internationally.
• National Competitive Tendering/Bidding Method: The
procuring entity invites suppliers, contractors or consultant
regardless of their Nationality, by means of an expression of
interest notice that shall be advertised in the United Republic
of Tanzania.

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• Competitive tendering involves a purchasing organization
advertising business and requesting tenders to supply that
business. In some countries the tendering process is called
"bidding". Competitive tendering can be broken into two
main types:
• Open competitive tendering is where the invitation to tender
is publicly available for all interested suppliers to respond.
This method is most commonly used in government
organizations.

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• Closed competitive tendering is where the invitation to
tender is issued to a predetermined, or restricted number of
suppliers
Advantages of Competitive Tendering
Competitive tendering is often considered to have the
following benefits:
• It promotes competition between suppliers,
resulting in best "value for money" for
purchasers and users.

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Advantages of Competitive Tendering
• It offers a kind of transparency that helps mitigate favoritism
and corruption
• Open tendering gives all suppliers the opportunity to win the
business that is advertised.
Disadvantages of Competitive Tendering
Competitive tendering has many disadvantages. Because there are
different types of competitive tendering, not all the disadvantages
outlined below will apply in every situation.

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Disadvantages of Competitive Tendering
Factors such as whether open or closed competitive tendering
is used; or whether competitive tendering is being used by a
private or government organization will determine if these
disadvantages apply. The disadvantages include:
• Leading Suppliers may not tender.
 Barriers to Communication between Supplier and
Customers.

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Disadvantages of Competitive Tendering
• Increase in Costs
• Use of Cheaper, Poor Quality Materials and/or Labor
• Competitive tendering can be extremely slow
• Supplier who wins the tender, can be unable to meet the
contractual requirements
• Increase lead time

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Disadvantages of Competitive Tendering
I. Leading Suppliers may not tender:
The government procurement Act and its guidelines in
Tanzania only allow suppliers who actually tender to be
considered for a procurement decision. If the leading
supplier or suppliers do not tender, the purchaser can
only consider bids from suppliers who do tender. If
leading suppliers are not considered, the purchaser may end
up buying inferior product or service

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Disadvantages of Competitive Tendering
Reasons leading suppliers not to submit a bid. These include:
 The expense of the tendering process. Some complex tenders can involve
huge costs that are not reimbursed to the bidder
 Suppliers may not believe that the tendering process is fair.
 Suppliers may already be heavily committed to other customers and may
not need the business that is being advertised by the purchaser. The
supplier may be so popular that he has a waiting list.

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Disadvantages of Competitive Tendering
II. Barriers to Communication between Supplier and
Customers:
When making significant purchases, frank and open communication
between potential supplier and customer is crucial. Competitive
tendering is not conducive to open communication. Practitioners have
recognized that competitive tendering stifles valuable coordination
between the procurer and potential supplier before the plans and
specifications are finalized.

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Disadvantages of Competitive Tendering
II. Barriers to Communication:
To see this, note that the primary information that the procurer receives
from suppliers in a competitive tender in their bid. A supplier has no
incentive to offer the procurer advice on how to improve the plans or
avoid certain pitfalls. In fact, the supplier would have the incentive to
keep any findings of this kind to himself as they offer him a competitive
advantage over his rivals in a competitive tendering process".

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Disadvantages of Competitive Tendering
II. Barriers to Communication:
However, when more effective procurement methods are
used "the procurer and supplier typically spend a good deal
of time discussing the project before the work begins. During
such negotiations the procurer can elicit the supplier's views
about where the designs and specifications can be improved"

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Disadvantages of Competitive Tendering

[Link] in Costs
Competitive tendering often results in strictly worded
contacts between supplier and procurer. Deviations to
contractual terms can be extremely expensive. This can
create a situation that is sometimes referred to as "cost-
plus". It is too late for the customer to try and make
other arrangements. Production is under way and must
be continued without interruption.

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Disadvantages of Competitive Tendering
[Link] of Cheaper, Poor Quality Materials and/or Labor
A supplier forced to play the competitive tendering game may
come under pressure to keep costs down to ensure he gets a
satisfactory profit margin. One way a supplier can lower costs
is by using cheaper labor and/or materials. If the cheaper
labor and materials are poor quality, the procurer will often
end up with inferior, poor quality product or service.

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Disadvantages of Competitive Tendering
[Link] slow:
When government agencies use competitive tendering it can
take several years to choose a successful bidder. The result is
the customer can wait incredibly long periods for product or
service that may be required quickly. By comparison, the use
of direct sourcing procurement can take a fraction of that
time.

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Disadvantages of Competitive Tendering
[Link] who wins the tender can be unable to meet the
contractual requirements
A problem that compounds the problem of competitive
tendering lengthy time frame, is when a selected supplier is
unable to meet the requirement that he has contracted for.
To the procurer's frustration, the lengthy competitive
tendering process may have to begin again.

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Disadvantages of Competitive Tendering
[Link] who wins the tender can be unable to meet the contractual
requirements
Therefore Competitive tendering rarely produces what is best for the
customer. It is not efficient and is rarely effective. The exact amount of
damage done by this procurement method is unknown and unknowable.
To bring about improvement; organizations' requirements for
effectiveness and efficiency will need to outweigh their requirements for
their procurement business to be open and available to all suppliers.

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Disadvantages of Competitive Tendering
[Link] who wins the tender can be unable to meet the
contractual requirements
Therefore Competitive tendering rarely produces what is best for the
customer. It is not efficient and is rarely effective. The exact amount of
damage done by this procurement method is unknown and unknowable.
To bring about improvement; organizations' requirements for
effectiveness and efficiency will need to outweigh their requirements for
their procurement business to be open and available to all suppliers.

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Disadvantages of Competitive Tendering
From the above disadvantages one can recommend abolishing
competitive tendering. Where possible, long term, mutually
beneficial relationships should be developed with trusted and
reputable suppliers. Selection of these suppliers should be
based on thorough research. The selected suppliers should be
paid a fair profit margin for the quality product or service they
provide.

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2. CLOSED OR RESTRICTED TENDERING

• Restricted tendering: A procuring entity may restrict the
issue of request for proposal to a limited number of
specified suppliers, contractors or consultants under the
following circumstances:
 Suppliers, contractors or consultants have been pre-
qualified.
 Specialized items can be obtained from limited number of
suppliers.

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2. CLOSED OR RESTRICTED TENDERING
Circumstances for restricting tenders include:
 Estimated value is within limit of restricted tendering
 Urgent need of goods/services such that there would be
insufficient time for procuring entity to engage in open
national or international tendering.
• Restricted tendering is a procurement method that limits the
request for tenders to a select number of suppliers,
contractors or service providers.

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2. CLOSED OR RESTRICTED TENDERING
• This method of procurement is also called: Limited Bidding
and Selective Tendering. Although considered a competitive
procurement method, competition is limited to only firms
shortlisted or invited by the procuring entity.
• In closed tendering the process should be in place for arriving at the
number and specific firms that will be invited; that number however is
dependent on the stipulations of the public procurement legal
framework.

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2. CLOSED OR RESTRICTED TENDERING
• Any decision to use the Restricted Tendering procurement
method must conform to the policies and procedures
governing the procurement system
• A basic characteristic of restricted method is that competition
is confined to a certain number of firms either because only a
few firms are qualified to fulfill the specific type of
requirement, or certain conditions warrant the use of a limited
number of firms in order to reduce the time and cost of the selection
process.

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2. CLOSED OR RESTRICTED TENDERING
• Pre-qualification: Pre-qualification means a formal procedure where by
supplier or contractors are invited to submit details of their resources and
capabilities and screen them prior to invitation to tender on meeting the
minimum criteria on experience, resource capacity and financing.
• “Post-qualification'' means a formal procedure applied after tenders have
been evaluated prior to award of contract, to determine whether or not
the lowest evaluated tenderer has the experience, capability and
resources to carry out the contract effectively.

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3. SINGLE SOURCE METHOD
The use of single source must be approved by tender board when:
 Goods or services are available from a particular supplier or service
provider has exclusive rights in respect of goods or services and no
reasonable alternative.
 There is urgent need for the goods or services provided that the
circumstances giving rise to the urgency are not caused by procuring
entity.
 Procurement involving national defense or national security.
 Additional items required for ongoing projects

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3. SINGLE SOURCE METHOD
• Single source means acquiring goods, services and
construction works from only one source. It is sometimes
known as: sole-source procurement, single-source
procurement, sole-source selection, direct procurement,
among others. This is clearly a non-competitive procurement
method, and it should be used only under exceptional
circumstances, namely:

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3. SINGLE SOURCE METHOD
• It should be used only under exceptional circumstances such as:
 For emergency situations
 When only one firm or individual is qualified to fulfill the requirement
 for the continuation of previous work, or additional work, that cannot be
acquired from another firm or individual due to patent, compatibility
issues, or exclusive rights

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3. SINGLE SOURCE METHOD
• It should be used only under exceptional circumstances such as:
 The total cost is within the threshold set for this method of procurement
 For the procurement of related items that are available only from one
source
 For other situations contemplated in the procurement legal and
regulatory framework.

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3. SINGLE SOURCE METHOD
• The use of this method should be preceded by a rigorous approval
process. A checklist should preferably be developed for requesting
entities to complete in sufficient detail to justify the need for fulfilling a
procurement requirement from a single source. Such justification should
identify the requesting entity, describe the requirement, address why the
requirement can only be fulfilled from the identified source, including
action taken to identify additional sources, in addition to the total cost
and planned future actions to preclude the need for using this method.

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4. Force Account
This is the construction by the use of the procuring entity’s
own personnel and equipment may be the only practical
method for constructing some kinds of works.

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 Force Account
The use of force account may be justified if it meets
any of the following conditions:
(a) the required works are scattered or are in remote
locations for which qualified construction firms
are unlikely to tender at reasonable prices;
(b) work is required to be carried out without
disrupting ongoing operations;

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 Force Account
(c) risks of unavoidable work interruption are
better
borne by a procuring entity or public
authority
than by a contractor;
(d) there are emergencies which require a
prompt
attention;
November 6, 2022 Prepared by B.K. MABINA 186
 Force Account
(e) the procuring entity has qualified personnel
to
carry out and supervise the required works;
or
(f) the maintenance or construction is part of the
routine activity of the procuring entity

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4. Force Account
The use of force account may be justified where:
• Work is required to be carried out without disrupting ongoing
operations
• Risks of unavoidable work interruption are better borne by
the Borrower than by a contractor and
• There are emergencies needing prompt attention.

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5. Private Public Partnership Method
This procurement method refers to the collaboration between
public and private sector in order to achieve financing,
management or maintenance of a project or the provision of
services. Public and Private sectors cooperate in the
following sectors:
 Transport, Public health, Education, Safety,
Waste management, Water supply and
energy.

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5. Private Public Partnership Method
• A PPP project is not different from the others. It is the
financing of the project that is different.
• The Private sector is responsible:
 To provide the whole, or part of the project financing.
 For the risks that are related to the construction or operation
of the project.
 Has long term benefits from the project

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 Procurement Methods
5. Private Public Partnership Method
• The Private sector is responsible to:
 Design of the project (or part of the design)
 Construct the project
 Finance the project
 Manage and operate or maintenance the project
 Return of project to the public after the completion of the contract period

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5. Private Public Partnership Method
• The Public sector is responsible to:
 Determine the drawing, technical, operational and financial
requirements of the project
 Assesses the proposal of the private sector
 Supports the construction of the project
 Monitors the project and makes sure the private sector conforms with the
contract
 Proceeds with payments to the private sector by Concessions

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• Concessions: It is really a division of the PPP
• PPP Projects:
 The private financing is paid with the ‘use of the project’ by
the private sector for a specified period (e.g. the use of
payment by users of a road to pay off the cost of the project
i.e users make payments)
 The construction of public buildings such as schools where
the private sector cannot ‘use the project’ in order to gain profit
to pay off the financing of the project.

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The difference between a PPP and
Concessions is that with the latter, the private
sector ‘is using the project’ in order to make
money to pay towards the financing of the
project
The private sector (businessman) gets his
profit by ‘using the project’.

194
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• Advantages of Private Public Partnership:

 The Public sector gains the advantages the private sector
offers such as: ability to design, construct, manage and
finance a project.
 Public money is better used and at difficult economic
periods for a government, this method is good.
 They promote and help the innovation in the public
sectors with the transfer of knowledge and new
techniques.

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• Advantages of Private Public Partnership
 Better quality infrastructure and better operation
throughout the life of the project (maintenance of the
project by the private).
 More efficient and more economical maintenance of the
project.
 Reduction of the construction cost and maintenance of
the project.

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• Advantages of Private Public Partnership
 Use of private sector in areas where there are ‘weaknesses’ in
the public sector such as:
– Lack of expertise and qualified employees, no
ability to promote new techno economical
solutions.
– Lack of efficient and effective use of human resources
– Lack of sensitivity and knowledge and expertise in the use available
energy sources.

197
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• Disadvantages of Private Public Partnership:
 The ‘use’ of the project by the private sector (for example payment by
users of a new bridge every time they go through the bridge) is difficult
for low income people. However, this way has the advantage that only the
users pay and not the tax payer.
 Vital infrastructure or important operations are operated by the private
sector.
 By reducing the cost of a project, there is a danger that the quality of the
works may be affected.

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• Disadvantages of Private Public Partnership:
 Generally, the public sector can get cheaper loans than the
private sector.
 The ‘use’ of the project by the private sector (for example
payment by users of a new bridge every time they go through
the bridge) is difficult for low income people. However, this
way has the advantage that only the users pay and not the tax
payer.

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• Disadvantages of Private Public Partnership:
 In some cases, there may be in the contract some clauses or
provisions which may:
– not aim at the public interest but at the increase
of the profit of the private investor
– allow monopoly
– Allow the private sector to alter/increase the price
of a service or a product after completion of a
project

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 Procurement Methods
6. REQUEST FOR QUOTATIONS:
 A request for quotation (RFQ) is a standard business process
whose purpose is to invite suppliers into a bidding process to
bid on specific products or services.
 A quotation is a procedure for seeking a price and delivery time for goods
which are easily specified or a quotation is an offer by a trading firm to a
purchasing organization regarding the supply of materials or performance
of services subject to specified conditions.

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6. REQUEST FOR QUOTATIONS:
• Quotation is different from tender because a tender is more
formal and detailed exercise of obtaining sealed bids for
goods where the value is high and/or the specification is
detailed or complex and/or special terms and conditions may
apply.

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6. REQUEST FOR QUOTATIONS:
 The request for quotations is a procurement method that is
used for small value procurements of readily available off-the-
shelf goods, small value construction works, or small value
services procurements. 
 This procurement method is also known as invitation to quote and
shopping, and it does not require the preparation of tender documents to
the same extent as open tendering or request for proposals

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6. REQUEST FOR QUOTATIONS:
 The invitations are not complex, and this method is
considered non-competitive because the procuring entity
determines which contractors, suppliers or service providers
to request quotations from as long as a minimum of three are
invited.
 This procurement method is used under conditions stipulated in the
procurement legal and regulatory framework and, accordingly, can be
requested in writing: email, fax, courier, but not telephonically.

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6. REQUEST FOR QUOTATIONS:
 Sometimes there are limitations set on the period of time
and frequency within which this method can be used for the
procurement of similar goods, work or services. This is to
prevent the procuring entity from splitting requirements in
order for them to fall within the threshold level where the
request for quotation method can be applied.

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6. REQUEST FOR QUOTATIONS:
 Quotations received in response to a request for quotation should be first
evaluated to determine compliance with the technical specifications or
scope of work of the requirement and also for compliance with
administrative requirements of the request for quotations. Only after the
administrative and technical compliance determination, a price
comparison is made between firms found to be compliant, and then a
purchase order is signed with the bidder submitting the lowest price
quotation within the stipulated delivery or completion date.

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Advantages of Request for Quotations:
 Procurement lead-time is significantly reduced given that
there’s no need to prepare solicitation documents, or to
advertise requirements. And the period for quotations
submission is also equally reduced.
 The number of quotations received is limited to the number of
bidders quotations were requested from, so the selection
process time is also reduced.

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Advantages of Request for Quotations:
The procuring and/or requesting entities would
usually have a pretty good idea of where and
from whom the goods, services or works can
be procured, so there’s a higher probability of
response to the request for quotations.

208
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 Procurement Methods
Disadvantages of Request for Quotations:
 Lends itself to irregularities because the procuring entity
decides which suppliers, contractors or service providers to
send request for quotations to, and competition is very limited.
 Could be abused as a result of the breaking of requirements into smaller
sizes in order to apply this method of procurement.
 Could easily lead to requesting quotes from a limited number of firms even
if the goods, services or works are available from a greater number.

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 Procurement Methods
7. REQUEST FOR PROPOSALS:
 The Request for Proposal (RFP) is a two envelope
procurement method (Technical and Financial) that can be
used for goods, services or works. It is used when suppliers,
contractors or services providers are expected to propose a
specific solution (methodology and work plan) to fulfilling a
specific requirement.
 Firms are required to submit technical and financial proposals
in two separate envelopes.

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7. REQUEST FOR PROPOSALS:
 The technical proposal is evaluated first and ranked
according to pre-established evaluation criteria, and only
the financial proposals of those firms that achieved the
minimum qualifying mark (score), indicated in the RFP,
are opened and evaluated. The RFP method differs from
open tendering in six fundamental aspects:
 Proposals are submitted in two sealed envelopes.
 At the opening event, the financial proposals are left unopened and
are safeguarded.

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7. REQUEST FOR PROPOSALS:
The RFP method differs from open tendering in:
 Financial proposals are opened only after completion of the
evaluation of technical proposals,
 Only the financial proposals of the firms achieving the
minimum qualifying mark or more are opened,
 Selection is based on a proposed solution and not on price,

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7. REQUEST FOR PROPOSALS:
The RFP method differs from open tendering in:
 The sum of the combined weighted score of the technical and
financial proposals determines the winning firm with which
the contract is negotiated.
 There are some differences in addition to the above, on the
application of the request for proposals that introduces a bit of
confusion with respect to this method.

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7. REQUEST FOR PROPOSALS
 As with other methods, the use of this one must strictly adhere
to the stipulations of the governing procurement legal
framework. Under the guidelines of most international
development banks (World Bank, Asian Development Bank,
African Development Bank, etc.) and some donor entities
(Millennium Challenge Corporation, for instance) request for
proposals are used primarily for hiring consulting firms.

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7. REQUEST FOR PROPOSALS
The following are examples of the selection procedures
for consulting services that use the RFP procurement
method:
 Quality and cost-based selection (QCBS),
 Quality based selection (QBS),
 Fixed budget selection (FBS), and
 Least-cost selection (LCS).

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Essential Characteristic of the RFP are:
(i) Sealed proposals (technical and financial) are received in
response to the RFP,
(ii) The technical proposals are opened and evaluated before the
financial proposals are opened,
(iii) Only the financial proposals of the firms achieving at least
the stipulated minimum qualifying mark on their technical
proposals, are publicly opened,

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Essential Characteristic of the RFP are:
(iv) The final score is usually the sum of the weighted score of
the technical and financial proposals, and
(v) The final contract is awarded based on the highest combined
score rather than lowest price, except in the case of least-cost
selection (the subject of a future post).

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 Community participation in procurement

• Where, in the interest of project sustainability

or to achieve certain specific social objectives
of the project, it is desirable in selected
project components to:

November 6, 2022 Prepared by B.K. MABINA 218

Community participation in procurement
(a) call for the participation of local communities
or
farmers’ groups;
(b) increase the utilization of local know - how
and locally manufactured products; or
(c) employ labour intensive and other
appropriate technologies,

November 6, 2022 Prepared by B.K. MABINA 219

Community participation in procurement
The procurement procedures, specifications and
contract packaging shall be adopted to reflect
such interest or objectives.

November 6, 2022 Prepared by B.K. MABINA 220

 Turnkey Contract
A turnkey contract is a business agreement in
which a company is given the responsibility of
planning and building a product that can generate
cash flow for the client upon completion.
Turnkey Contract. Is an agreement under which a
contractor completes a project, then hands it over
in fully operational form to the client, which needs
to do nothing but ""turn a key"", as it were, to set
it in motion.
 Turnkey contracts

•Construction contract in which the project is

ready to produce cash flow upon completion.
•They are sometimes called “package deal”
contracts.
•They may be of several forms depends on the
client choice.
•This are type of contracts that requires a
client who is expert enough and can give a
complete client’s requirements to designers.
 Turnkey contracts cont’
• Also it requires a well experienced contractor.
• It is an integrated form of project delivery
involving a contractor carrying all risks for
design and build.
• A contractor is single point of responsibility
for the design and build.
 Where is it applicable?
• Where client need single point of
responsibility.
• Where the client is experienced enough to
define requirements early from outset.
 NATIONAL INSTITUTE OF TRANSPORT (NIT)

Higher Diploma in Procurement and Logistics Management

(HDPLM- First Year)
Module Name: PROCUREMENT TECHNIQUES
Module Code: BPU 07315
By
B.K. MABINA
Mob. 0655/0755 02 97 80
E-mail: bahatimabina@[Link]

Handout No. 02
November 6, 2022 Prepared by B.K. MABINA 225
 TRADITIONAL PRINCIPLES OF RIGHT
PURCHASE

Traditional principles of right procurement (6rs)

includes:
Right Source/Supplier
Right Price
Right Quantity
Right Quality
Right Time
Right place
November 6, 2022 Prepared by B.K. MABINA 226
 RIGHT SOURCING/SUPPLIER
 Supplier selection is the process by which firms identify,
evaluate, and contract with suppliers. The supplier
selection process deploys a tremendous amount of a firm’s
financial resources. In return, firms expect significant
benefits from contracting with suppliers offering high
value.
 Part of the sourcing decision involves determining whether to
purchase a part from an outside supplier or produce the part
internally. This is typically known as a make-or-buy (buy means
outsourcing) decision.

November 6, 2022 Prepared by B.K. MABINA 227

 SUPPLIER IDENTIFICATION
 If the buyer chooses to purchase (outsource) the part
externally, then he must find qualified suppliers who are
willing to make and sell the product to his or her firm
under the specified conditions.
 Buyers have a number of places to go to locate sources of
supply, some obvious and some indirect.

November 6, 2022 Prepared by B.K. MABINA 228

 Determining Sources of Supply
 The sources of supply include manufacturer directories,
trade shows, internet, agents, friends, trade registers and
so on. Suppliers also may be found at trade exhibits, in
supplier catalogs, or via recommendations from other
knowledgeable sources, such as salesmen and engineers.
Probably the most important and frequently used source
will soon be the World Wide Web; countless firms
maintain Web pages and are listed in online catalogs and
directories.

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 Determining Sources of Supply
 Many firms find themselves in a situation where a suitable supplier
cannot be found. In this situation, the firm is forced to develop a
supplier. Supplier development is sometimes referred to as "reverse
marketing," which entails finding the supplier with the most potential
for success and providing the resources necessary for the supplier to
manufacture the needed product. This could include training in
production processes, quality, and management assistance, as well as
providing temporary personnel, tooling, and even financing.

November 6, 2022 Prepared by B.K. MABINA 230

 Determining Sources of Supply
 When the product being purchased is fairly standard and
readily available, most firms choose to utilize the competitive
bidding process of supplier selection. This involves little or no
negotiation. A request for bids is sent to a limited number of
qualified suppliers asking for a price quote for the product,
given the terms and conditions of the contract. The contract
generally goes to the lowest bidder. For government bid
requests, the contract legally must go to the lowest bidder
qualified to fulfill the contract.

November 6, 2022 Prepared by B.K. MABINA 231

 Supplier selection
QUESTION:
In procurement process there are several steps, starting from
need identification to payment and closing of the order.
Among the steps is search for prospective suppliers. What
type of information from these suppliers is the most
important and why is it so important in the process of
procurement?

November 6, 2022 Prepared by B.K. MABINA 232

 Supplier selection
• This is the most critical element in purchasing
• Factors guiding selection are
– Geographical location of the supplier
– Single or multiple supplier
– Reserve productive facilities available to the
supplier
– Internal facilities available to the supplier

November 6, 2022 Prepared by B.K. MABINA 233

 Supplier selection
– Labor relations the supplier has developed
– Plant analysis of the supplier
– Credit and financial analysis of the supplier
– Size of the supplier firm
– Distribution services
– Quality discipline observed by the supplier

November 6, 2022 Prepared by B.K. MABINA 234

 Geographical location
– Transportation cost
– Lead time
– Accidents on the way
– Strikes
– Floods
– Transport inadequacy
– Carrying cost
– Capital tied up

November 6, 2022 Prepared by B.K. MABINA 235

 Internal facilities
• Technological development
• Supplier’s approach to innovations
• Quality control and inspection
• Standard of plant maintenance
• Modernization of the available facilities
• Practice of plant maintenance

November 6, 2022 Prepared by B.K. MABINA 236

 Reserve productive facilities
– Ability to meet rising demands
– Technical ability
– Financial ability
– Physical plant ability
– Managerial skills
– Other facilities

November 6, 2022 Prepared by B.K. MABINA 237

 Labor relations
– Harmonious or confrontational?
– Labor policy pursued by the supplier
– Wage system in the supplier firm
– Incentives culture in the supplier firm
– Morale of the working force
– Working conditions
– Environment of the plant of the supplier
– Historical development of labor relations

November 6, 2022 Prepared by B.K. MABINA 238

 Plant analysis
The buyer firm should visit the plant of the
prospective supplier to observe
◦ Technical, managerial, business, and handling
facilities of the supplier
◦ Efficiency of the personnel
◦ Job-satisfaction the personnel feel
◦ Maintenance of the plant
◦ Degree of specialization and standardization

November 6, 2022 Prepared by B.K. MABINA 239

 Credit and financial analysis
• The following shall be examined
– Supplier’s financial statements
• Current ratio
• Sales-receivable ratio
• Net profit
• Cash flow
• Inventory turnover
– Information from credit service institutions:
banks, insurance firms, credit firms, etc

November 6, 2022 Prepared by B.K. MABINA 240

 Size of the supplier firms
– Larger firms: more facilities, but difficult to
negotiate for favorable terms
– Medium terms: better in facilities than smaller
firms; easier to negotiate than for larger firms
– Smaller firms: fewer facilities, but are
appreciative, and can get good deal out of
negotiations

November 6, 2022 Prepared by B.K. MABINA 241

 Single or multiple firms
• Single firms: risk of supply, but easy to
coordinate
• Many firms: less risk of supply, but difficult
and costly to coordinate
• Many firms: competitive deals, right quality
goods

November 6, 2022 Prepared by B.K. MABINA 242

 Quality issues
– Specifications
– Quality disciplines
– Costs of quality
• Distributor
– Favored supplier
– Locally available
– Quality assured
– Regular supply

November 6, 2022 Prepared by B.K. MABINA 243

 Right price

November 6, 2022 Prepared by B.K. MABINA 244

 Right price

• Factors for right price

– Quality
– Quantity
– Delivery time
– Demand and supply curve
– Standard and non-standard materials
– Government restrictions
– Discount, terms of purchase, after sale service, etc

November 6, 2022 Prepared by B.K. MABINA 245

 Where to find prices
– Price lists, catalogues
– Telephonic quotations
– Previous purchase records
– Letter of offer from supplier
– Price cards
– Negotiations
– Quotation letter

November 6, 2022 Prepared by B.K. MABINA 246

 Determining the purchase price
• Price is a reflection of the value of the goods
and services
– Cost based price
– Competitive/ Market based price
– Combination of the two
– Value based pricing

November 6, 2022 Prepared by B.K. MABINA 247

 Cost based price

November 6, 2022 Prepared by B.K. MABINA 248

 Cost based price

November 6, 2022 Prepared by B.K. MABINA 249

 Cost based price

November 6, 2022 Prepared by B.K. MABINA 250

 COMPETITIVE PRICING

November 6, 2022 Prepared by B.K. MABINA 251

 VALUE BASED PRICING

November 6, 2022 Prepared by B.K. MABINA 252

 Right place

November 6, 2022 Prepared by B.K. MABINA 253

 Right Place

November 6, 2022 Prepared by B.K. MABINA 254

 Right place of delivery
• This is especially important in connection with transport
costs, and time
• Delivering materials at wrong place or consumer means the
materials will be returned and that implies extra costs
• Mode of transport should be specified here
• Payment terms are also specified according to place.

November 6, 2022 Prepared by B.K. MABINA 255

 PROCUREMENT PROCEDURES

Procurement as a process has a number of

identifiable stages. We list some of these below:
Need identification
Specification
Sourcing
Evaluation and selection

November 6, 2022 Prepared by B.K. MABINA 256

 PROCUREMENT PROCEDURES

Negotiation
Contract award
Payment
Vendor rating
Supplier development
Disposal
November 6, 2022 Prepared by B.K. MABINA 257
 Need Identification

This is the first stage of the process and

involves deciding which product or service we
need to buy. The process involves identifying
needs which may be as simple as receiving
requisitions from internal users or re-order
levels from our inventory replenishment
system. It may be that we have a project
requiring materials to be fully implemented.
November 6, 2022 Prepared by B.K. MABINA 258
 Sourcing
This is the part of the process where we decide
from whom we are going to buy the product.
We may have done much of the hard work
involved in this stage before the need for the
product arises. The process involves sending out
inquiries to potential suppliers and then
evaluating the received quotes.

November 6, 2022 Prepared by B.K. MABINA 259

 Bid or Negotiation
This stage involves making sure that our
chosen supplier can deliver what we want,
when we want it, and at an acceptable price.
The process may be very long and complicated;
imagine how long it would take to decide how
much we were going to have to pay for the
construction of a new hospital. On the other
hand, negotiation for a spare part bought from
a catalogue may only involve discussions about
discounts for larger quantities and the speed of
delivery.
November 6, 2022 Prepared by B.K. MABINA 260
 Bid or Negotiation
• In the public sector, we often replace negotiation by a formal
bidding process. Here we use sealed bids or tenders to secure
a deal, which is intended to ensure competiveness, fairness
and high standards of accountability when we spend public
funds. The evaluation and selection must be seen to be
transparent by all key stakeholders of our public sector
organisation.

November 6, 2022 Prepared by B.K. MABINA 261

 Placing the Order
• At this stage we raise the necessary paperwork to back up
our intention to buy. This may be no more complicated than
sending out a purchase order that shows our terms and
conditions on the back. On the other hand, we may need to
involve lawyers to draw up a contract that specifies a whole
range of terms and conditions, not least of which might be
the liquidated damages in the event that the supplier fails to
deliver within the specified timescales.

November 6, 2022 Prepared by B.K. MABINA 262

 Managing the Product or Service
It is important that goods and services are
delivered according to the set timescales.
As procurement staff we are expected to
expedite delivery of the goods and services
from the onset a contract or order is
placed. We will avoid the need for
liquidated damages above when we
follow-up with our suppliers immediately
than waiting until the delivery date.

November 6, 2022 Prepared by B.K. MABINA 263

 Managing the Product or Service
• Our involvement with the product does not
finish when it is delivered. It is also in our
interest that suppliers are paid on time, if they
are going to be there for us in future. Late
payment of suppliers will impact on our
relationship and our suppliers will have a bad
perception of doing business with us in future.

November 6, 2022 Prepared by B.K. MABINA 264

 Managing the Product or Service
• There may also be a need for us to become
involved in warranty claims, to purchase
consumables and spare parts when the
product is in use and to begin the purchasing
process all over again when the product
begins to reach the end of its life. Even in the
public sector, there can be lots of issues we
need to consider at this stage in the process.

November 6, 2022 Prepared by B.K. MABINA 265

 Vendor/supplier performance rating
Another important aspect of procurement is
that we can evaluate the performance on our
suppliers for future purposes. Usually some
organisations have a set of criteria that they
use to evaluate how their suppliers have
performed in a previous contract. Our
suppliers can only improve themselves if we
tell them how we feel they have performed.

November 6, 2022 Prepared by B.K. MABINA 266

 Disposal
• With some products there is no formal requirement for
disposal after use: they are simply thrown away. However,
some products, such as machinery, may have a residual
value which we may be able to trade in for a new product or
sell to someone else. We may need to dispose of some
products, such as chemicals, in line with current legislation,
which may involve specialist contractors. As procurement
staff we need to factors this cost in our life cycle costing. We
may not be directly involved in the process of disposal, but
should we, and then we need to be acquainted with our
organisations‟ standard procedures.

November 6, 2022 Prepared by B.K. MABINA 267

 PURCHASING RELATIONSHIPS
As we have already seen, procurement staff manages a
complex set of tasks and processes – even at the basic level –
and this also means dealing with a complex set of
relationships. Typically, these may be considered as:
Internal, i.e. with users (customers) and other stakeholders
within the business
External, i.e. with suppliers, distributors, partners and other
companies on occasions,

November 6, 2022 Prepared by B.K. MABINA 268

 PURCHASING RELATIONSHIPS
In procurement, we must provide a balance between our
suppliers and our users, who may often work together,
developing their own relationships and bypassing us. In
procurement, we must accept the concept of the user as a
„customer‟ and recognize that there may be a need to sell the
benefits that a proactive procurement team can offer. Some
suppliers will attempt to avoid procurement – some users will
encourage them to do so! Our role is to ensure that the
objective of procurement is achieved every time.

269
November 6, 2022 Prepared by B.K. MABINA
 Internal Relationships
• We, in procurement, need to work closely
with staff from other functions across a very
wide range of activities. This will allow us to
fulfill more than the basic transactional role by
progressing into external resources
management, developing sourcing strategies
and identifying suitable sources of supply.

November 6, 2022 Prepared by B.K. MABINA 270

 External Relationships
• We need to develop relationships with suppliers once we
have determined their fitness to provide the goods and
services we require. Once we have set up the relationship we
must manage it over the period of the deal or contract. The
lead times can be reduced by maintaining a healthy
relationship with our suppliers. All our relationships are,
therefore, a function of complexity, time and our supplier
relationship strategy.

November 6, 2022 Prepared by B.K. MABINA 271

 TYPES OF RELATIONSHIPS
There are several different types of relationships, ranging from
arm’s length to partnership.
By an arm’s length relationship: this means that the buyer
and supplier regard themselves as entirely separate
organisations, each acting in their own interests.
By a partnership, This means that buyer and supplier regard
themselves as part of the same team, working to common
objectives. But true partnerships are quite rare and require
significant inputs of time and trust.

272
November 6, 2022 Prepared by B.K. MABINA
 Benefits of Partnership Relationships
• The reason for lower inventory in the case of partnership
relationships is that the buyer does not need to hold buffer
stocks to protect against the supplier’s failure to deliver quality
parts on time. Because the buyer and supplier are working so
closely together, the buyer has confidence that this will not
happen. Partnering, however, implies single sourcing, whereby
suppliers can still fail; as prudent buyers, we may find it
necessary to develop an alternative supplier (dual sourcing) in
case the major partner should fail.

November 6, 2022 Prepared by B.K. MABINA 273

 Benefits of Partnership Relationships

The benefits include but not limited to:

Reduction of costs
Improved quality
Reduced lead time
Early supplier involvement
Avoiding under and over stocking
Ensure customers’ satisfaction

November 6, 2022 Prepared by B.K. MABINA 274

 GLOBALIZATION & SUSTAINABILITY

• Globalization: refers to moving from local or regional

suppliers to those of a more global/international location. For
example, you can now purchase many manufactured
products from countries such as China, which is far cheaper
than sourcing locally due to the low labour costs in the Far
East. Even when other costs are included such as freight, the
total acquisition cost is still much cheaper. This can therefore
give your business competitive advantage in its trading
markets.

November 6, 2022 Prepared by B.K. MABINA 275

 Sustainability
• In general terms, we can view the term
„sustainability‟ as aiming to keep in existence
or to maintain the natural resources of the
globe. An example of this is the fishing quotas
introduced to preserve the existence of the
cod species.

November 6, 2022 Prepared by B.K. MABINA 276

 Sustainability
• Sustainability is “A process whereby
organizations meet their needs for goods,
services, works and utilities in a way that
achieves value for money on a whole-life basis
in terms of generating benefits not only to the
organization, but also to society and the
economy, whilst minimizing damage to the
environment”.

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 Sustainability
Businesses can consider sustainability in many parts of the
business. For example, when we are designing a new product the
designers might consider:
Avoiding the use of non-renewable materials; for example,
avoid using such materials as oil-based plastics, rare minerals or
metals etc.
Using materials that can be recycled for further use, e.g. using
glass containers rather than plastic ones

November 6, 2022 Prepared by B.K. MABINA 278

 Sustainability
New product the designers might consider
Designing products that can be safely disposed
of at the end of their useful life without
damaging the environment, e.g. avoid using
refrigeration cooling substances that might
damage the ozone
Using energy efficient materials, e.g. building
bricks, insulation, etc.

November 6, 2022 Prepared by B.K. MABINA 279

 Sustainability
Increasingly, we in the procurement department need to
include sustainability within the whole procurement process.
Typical examples might include:
Motivating our suppliers to offer more sustainable products.
When selecting suppliers, one of the considerations might
include conformance to environmental specifications, e.g. what
are the suppliers doing to increasingly save energy? Another
example might be only purchasing stationery that is made from
100% recycled materials.

November 6, 2022 Prepared by B.K. MABINA 280

 Sustainability
• Finally, when we in procurement need to
include environmental requirements from our
suppliers it is important to make this clear at
the outset of the procurement process. The
increasing challenge we face in procurement
is the need to balance achieving value for
money for the business whilst also protecting
the environment.

November 6, 2022 Prepared by B.K. MABINA 281

 PURCHASING CYCLE PROCESSES &
DOCUMENTATION
In the previous section we described the steps involved in the
purchasing cycle. To control this cycle of activities, organizations
will use various types of processes and documentation. The
exact nature of the approach to the purchasing cycle will vary
from company to company. For example, some companies might
have a computerized system that generates appropriate forms
for each stage of the cycle. Other companies might use less
formal documentation.

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 PURCHASING CYCLE PROCESSES & DOCUMENTATION

The following section briefly outlines some of

the key processes and documents we might find
being used at key stages of the purchasing cycle.

November 6, 2022 Prepared by B.K. MABINA 283

 key processes and documents
Confirming Purchase Requirements
A document called a „Purchase Requisition‟
(PR) is a common method used by departments
to request the purchase of goods and/or services.
PR is normally raised to purchase goods/services
exceeding a certain value, For instance, Tshs
50,000. Items required below this value might be
purchased using petty cash.

November 6, 2022 Prepared by B.K. MABINA 284

 Key Processes and Documents
Obtaining Quotations
The Request for Quotation (RFQ) is a document used to get
offers from suppliers to provide specified goods/services.
Quotation documents must include all the information
necessary to enable potential suppliers to prepare appropriate
submissions in response. Typically, the RFQ will contain:
Terms and conditions of quotation
Description/specification of the goods or services required

November 6, 2022 Prepared by B.K. MABINA 285

 Key Processes and Documents
Processing Orders
The formal request for a supplier to provide goods/services is
done via the issue of a Purchase Order (PO). The PO
documentation is a commercial document issued by
procurement to the supplier. Sending a PO to a supplier
constitutes a legal offer to buy products or services. Acceptance
of a PO by the supplier usually forms a contract between both
parties.

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 Key Processes and Documents
Processing Orders
A purchase order usually contains: PO
number, delivery date, invoice address, terms of
payment and a list of services/products, often
including specifications and the reference or
part numbers of the items to be purchased, with
quantities and prices.

November 6, 2022 Prepared by B.K. MABINA 287

 Key Processes and Documents
Expediting Orders
Expediting is the follow-up, or progressing of,
an order to ensure that our suppliers meet their
contractual obligations in respect of order
quantity, delivery date(s) and delivery point(s).
We achieve expediting through procurement,
who communicate with the supplier to check on
delivery intentions and to identify any possible
problems.

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 Key Processes and Documents
Different organizations choose different methods by which to
trigger the expediting process. These methods might include:
Schedules
Computer reminders
Copies of orders filed in an index according to the date of
delivery
Card index system aided by coloured signals
Loose leaf record sheets
Charts
Daily diary

November 6, 2022 Prepared by B.K. MABINA 289

 Key Processes and Documents
• Expediting: Our reminder systems can range from the simple
to the complex, depending on the number of orders we
need to expedite. A simple diary system may be adequate.
Another simple system is to make an extra copy of the order
and file it in its „action required‟ date order. More complex
systems will often be computerized, where expediting
messages are automatically produced by the system and
emailed to the respective suppliers. We do not need to
expedite all orders. Indeed, it is common for purchase
orders to be categorized for expediting action.

November 6, 2022 Prepared by B.K. MABINA 290

 Key Processes and Documents
Receiving & Inspecting
When we raise a PO it is common practice to also raise a
Goods Received Note (GRN). This GRN will be sent to the
receiving point in our company to make them aware of the
expected delivery. When goods are received and accepted, the
GRN can be sent to the Finance Department to assist them in the
payments process. At the Point Of Delivery, all goods-in must be
checked against the accompanying delivery note before
unloading takes place.

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 Key Processes and Documents
Receiving & Inspecting:
Checks must be made to ensure that the goods
have been delivered to the correct delivery point
and if the materials are hazardous in any way and
need special handling.
On confirmation of the receipt of the correct
goods, the delivery is unloaded and placed in the
goods receiving area for checking. Any
discrepancies found in the number of goods
received are noted on the delivery note.
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 Key Processes and Documents
Receiving & Inspecting:
Inspection will usually also check the supplied
goods to see if they conform to the required
specification. Any discrepancies are noted on
the GRN and, in some instances, a separate
inspection report is produced. Major problems
with the received goods might result in the
goods being returned to the supplier, together
with an inspection report that explains the
reason(s) for the rejection.
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 Key Processes and Documents
Receiving & Inspecting:
The procurement department is usually
responsible for ensuring that suppliers comply
with their contractual obligations. As a result,
we must advise them of any discrepancies or
problems with deliveries. If the supplier deviates
from the agreed terms, it is the job of
procurement to ensure that the supplier
rectifies the problem

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 Key Processes and Documents
Receiving & Inspecting:
If we reject goods, procurement must inform
the supplier immediately of the quantity involved
and our reasons for rejecting the goods.
Procurement must oversee the process for the
return or disposal of the rejected goods. As part
of this, they must ensure that corrections are
made to any invoices.

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 Key Processes and Documents
Processing Payment
When goods have been successfully supplied, the supplier will
send in an invoice, requesting payment. The request for payment
is usually processed using a system called „invoice matching‟,
which uses the following documentation to authorize payment:
A copy of the original PO
A copy of the GRN
Supplier invoice, which usually makes reference to the original
PO number.

November 6, 2022 Prepared by B.K. MABINA 296

 MONITORING SUPPLIER PERFORMANCE
Suppliers can have a very big impact on the
success or failure of the organisation. As such, we
in procurement can use a variety of ways by
which we can monitor the supplier’s
performance in delivering ordered goods and
services. Monitoring costs us money, so why do
it? There are many reasons including:

November 6, 2022 Prepared by B.K. MABINA 297

 MONITORING SUPPLIER PERFORMANCE
Reasons:
We can identify any supplier weaknesses and attempt to do
something about it. For example, if the supplier continues to be
late with deliveries it might be being caused by us possibly not
giving enough notice of requirement
The information that we get from an existing supplier
performance can also be used for other new suppliers we might
use.

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 MONITORING SUPPLIER PERFORMANCE
Reasons:
Supplier performance information can be used as the basis for
trying to achieve continuous improvement with our suppliers.
For example, improving late deliveries might prevent production
processes from stopping due to a lack of material.
Monitoring supplier performance and then discussing the
outcomes with the supplier helps both parties gain a better
understanding. For example, a reoccurring quality problem and
its impact on production can be discussed with suggestions for
improvement.

November 6, 2022 Prepared by B.K. MABINA 299

 Vendor Rating
Vendor rating is a process for objectively assessing and monitoring
supplier performance. We would usually base it on a scoring and
weighting system measured against predefined performance
criteria. The objectives of vendor rating are:
To assess the performance of individual suppliers to ensure that
they are reaching acceptable standards
To benchmark the overall performance of the total supply base
To identify areas for improvement in the supply base

November 6, 2022 Prepared by B.K. MABINA 300

 Vendor Rating
Information gathered from our vendor rating
process will provide valuable data for
procurement when contracts come up for
renewal. The main performance criteria that we
use are delivery, quality and price.

November 6, 2022 Prepared by B.K. MABINA 301

 SUPPLIER DEVELOPMENT
A technique that is now increasing in
importance is our use of the data discussed
above to develop our suppliers‟ performance.
This will usually mean that the procurement
department should implement and lead
performance review meetings with suppliers.
The aim of these meetings is to improve the
relationship and performance of both parties.

November 6, 2022 Prepared by B.K. MABINA 302

 SUPPLIER DEVELOPMENT
Supplier development means that we provide
advice, finance, technology or other forms of
assistance to our supplier. We do this to enable
the supplier to offer a product or service that
better meets our needs, or to interface with our
organization in a mutually appropriate way.

November 6, 2022 Prepared by B.K. MABINA 303

 SUPPLIER DEVELOPMENT
Where our suppliers are strategically important to us, we may
use supplier development programmes. This is a practical series
of steps, based on our need to develop more effective
relationships and designed to get the best out of our supplier.
We should note that:
Supplier development is normally undertaken with existing
suppliers who can be (and agree to be) improved.

November 6, 2022 Prepared by B.K. MABINA 304

 SUPPLIER DEVELOPMENT
We often select suppliers for development as a
result of supplier assessment or vendor rating.
As we have seen, using this tool is a function of
our supplier strategy and we will generally
target it at those suppliers categorized as
strategically important.

November 6, 2022 Prepared by B.K. MABINA 305

 SUPPLIER DEVELOPMENT
Before we start the programme, we must
measure our supplier’s performance against the
agreed criteria. This will allow us to benchmark
the scope for development. It will also allow us
to monitor and measure the supplier’s
improvement over time

November 6, 2022 Prepared by B.K. MABINA 306

 SUPPLIER DEVELOPMENT
• Supplier development depends on good communication.
Suppliers will tend to view any client initiatives as just
another means of exploitation – driving down the buyer’s
costs at the expense of the seller’s profits. Our key starting
point is, therefore, to have a clear set of objectives, which we
have agreed internally. This will then form the basis of our
explanation and sale of the concept to our supplier. Our
supplier needs to participate as a willing partner.

November 6, 2022 Prepared by B.K. MABINA 307

 PAYMENT
• Normally, we in the procurement department will not pay
invoices and it is usually an audit requirement that we
separate these functions. We may be involved in certifying
invoices as „received‟ or in arranging for users to do this. We
are also likely to assist with any queries which may arise.
Typical queries would be: Have the goods been received?
Were there any faults? Was the delivery short on quantity?
Was all the data correct – for example, order number and
delivery date?

November 6, 2022 Prepared by B.K. MABINA 308

 PAYMENT
Procurement department must check , is the
price and discount correct? We will also have
specified the terms of payment in the contract.
Finance and procurement must check that the
payment claims are in accordance with the terms
and conditions of contract before payments are
made. We in procurement may also have a role in
helping suppliers to be paid more promptly if
invoices are not being cleared quickly.

November 6, 2022 Prepared by B.K. MABINA 309

 PAYMENT
• On some contracts we may negotiate
retentions. This means that we will retain (i.e.
withhold) a part of the total payment until our
supplier meets certain conditions. We do this to
ensure that we are protected if any problems
or defects in our supplier’s performance come
to light after the work is complete. This, in turn,
motivates our supplier to remedy the
problems..

November 6, 2022 Prepared by B.K. MABINA 310

 PAYMENT
If we apply retentions, we must ensure that they
are released at the appropriate time, in
accordance with the terms and conditions – for
example, final release may be linked to the end
of a warranty period. The purpose of retention
moneys is to allow us to pay for remedial work if
our supplier fails to carry out the work
expeditiously, or at all. Retentions are not a way
to save money on a deal

November 6, 2022 Prepared by B.K. MABINA 311

 Question One

Much of purchasing activity has traditionally been

’transactional’ and routine.
To what extent do you feel this is still true in your
organization?
If this still a significant activity, how might it be reduced in
the future?
Alternatively, if you feel it is no longer significant, how did your
organization achieve the reduction?

November 6, 2022 Prepared by B.K. MABINA 312

 Guidance

• Traditionally, the purchasing function within

many organizations has been viewed as a
simple replenishment mechanism. This often
involved following routine procedures
devoid/without of any real tactical and
strategic guidance.

November 6, 2022 Prepared by B.K. MABINA 313

 Guidance
• Much of this traditional administrative
burden can now be removed by utilizing e-
Procurement software and web-based
functions. The objective here is to make as
much of the purchasing cycle paper free.
This then allows the procurement
department to concentrate on more added
value activities such as supply market
research and analysis.

November 6, 2022 Prepared by B.K. MABINA 314

 Question Two
Explain the term ‘supplier appraisal’. What
typical information might be used in a supplier
appraisal prior to the award of a contract?

November 6, 2022 Prepared by B.K. MABINA 315

 Question Three
Give three examples of the criteria used in
supplier selection.

November 6, 2022 Prepared by B.K. MABINA 316

 PROCUREMENT DOCUMENTS
There are several documents used in the
purchasing process. Among them are:
Purchase requisition
Purchase enquiry
Supplier’s quotation
Comparative statement
Purchase order

November 6, 2022 Prepared by B.K. MABINA 317

 PROCUREMENT DOCUMENTS
• Delivery note
• Packing list/note
• Consignment note
• Invoice
• Other related documents: tender, quotations,
etc

November 6, 2022 Prepared by B.K. MABINA 318

 Purchase Requisition

• Purchase requisition is a written list of materials

prepared by user department; and is sent to the
purchase department for their procurement. It is
submitted to the head of purchase department,
and is generally prepared in triplicate (three
copies). One copy is sent to the purchase
department, the second to the inventory control
department; and the last is retained by the
requisitioning department.
November 6, 2022 Prepared by B.K. MABINA 319
 Purchase Enquiry

• Purchase Enquiry is a letter from the purchase

department to the supplier for quoting his prices for
the supply of the materials detailed therein. The aim
of this document is to find out the prices and quality
of goods which can be supplied by different
suppliers. The purchasing department can also make
enquiry by putting an advertisement in the press,
e.g. tender invitation. Telephone or fax can also be
used to make enquiries in case of urgency
November 6, 2022 Prepared by B.K. MABINA 320
 Supplier’s Quotation

• Supplier’s Quotation In reply the letter of

enquiry, the supplier quotes her prices and
the terms and conditions of the supply of
materials to the purchase department. The
content includes quality, quantity, time of
delivery, price, discount and other
concessions. This document is an offer in
legal terms.
November 6, 2022 Prepared by B.K. MABINA 321
 Comparative Statement:

• Comparative Statement: This document is

prepared after the receipt of quotations from
suppliers with a view to comparing their prices,
terms, conditions, etc; and to select one of the
suppliers whose terms are favourable to the
organisation. The statement so prepared is
submitted to the head of the purchase organisation.
Value analysis comes into picture at this stage.

November 6, 2022 Prepared by B.K. MABINA 322

 Comparative Statement:
The head of the purchase organisation is
required to carry out value analysis before
selecting one of the suppliers. Full realization
of money’s worth (Value of Money) is the
motto by which one should be guided before
making a selection of the supplier on the basis
of a comparative statement.

November 6, 2022 Prepared by B.K. MABINA 323

 Purchase Order:
• Purchase Order: This is a legal document for
all practical purposes and is prepared with
great care and in all details by the purchasing
department, so as to help the supplier to
supply the materials of right quality, in right
quantity and at right time. contract

November 6, 2022 Prepared by B.K. MABINA 324

 Purchase Order:
• There are about four or five copies of this
document. One is sent to the supplier,
duplicate is retained by the purchasing
department. Triplicate is sent to accounts; a
fourth copy is sent to the originating
department; and the last copy is sent to the
receiving department. Purchase order is a
contract.

November 6, 2022 Prepared by B.K. MABINA 325

 Delivery Note

• Delivery Note: This is a document sent by the

supplier to the buyer. It shows a list of goods
supplied, without showing the prices. It is used for
checking the goods without having to make use of
the invoice. When the goods are delivered to the
buyer, she is supposed to retain one copy, and
return the other copy to the supplier duly signed by
her. It is a proof that goods have already been
received by the buyer.
November 6, 2022 Prepared by B.K. MABINA 326
 Packing Note
Packing Note: It is also known as packing list.
This document is attached to the package. It is
an additional document to the delivery note.
It shows the lists of items packed in a
particular package. Not all companies use this
document, because delivery note serves the
same purpose.

November 6, 2022 Prepared by B.K. MABINA 327

 Consignment Note

• Consignment Note: This document is prepared

by the carrier in which the sender fills in the
details of the goods to dispatch. The names
and addresses of the supplier and buyer are
also shown. It indicates whether the freight is
already paid or whether the buyer has to pay it
at the destination. The buyer will have to sign
it as a proof of deliverance of the goods to her.
November 6, 2022 Prepared by B.K. MABINA 328
 Invoice

• An invoice, bill or tab is a commercial document

issued by a seller to a buyer, relating to a sale
transaction and indicating the products,
quantities, and agreed prices for products
or services the seller had provided the buyer.
Payment terms are usually stated on the invoice.
These may specify that the buyer has a maximum
number of days in which to pay, and is sometimes
offered a discount if paid before the due date.
November 6, 2022 Prepared by B.K. MABINA 329
 Invoice

• Invoice: After the goods have been delivered, the

supplier sends an invoice to the buyer. The
document includes information on the quantity,
quality, unit price, total value of the goods,
discount, transport charges, etc. Several copies are
prepared. One copy is sent to the purchasing
organization. Upon receipt of the invoice, the
purchasing department scrutinizes and passes it for
payment and sends it to the accounts department.
November 6, 2022 Prepared by B.K. MABINA 330
 Pro-forma Invoice

Pro-forma invoice: An abridged or estimated

invoice sent by a seller to a buyer in advance of a
shipment or delivery of goods. It notes the kind
and quantity of goods, their value, and other
important information such as weight and
transportation charges.

November 6, 2022 Prepared by B.K. MABINA 331

 Pro forma invoice
• Pro forma invoices are commonly used as
preliminary invoices with a quotation, or for
customs purposes in importation. They differ
from a normal invoice in not being a demand
or request for payment

November 6, 2022 Prepared by B.K. MABINA 332

 Pro-forma Invoice
• A pro-forma invoice is not a true invoice – it is
simply a document that declares the seller’s
commitment to provide the goods or services
specified to the buyer at certain prices. Pro-
forma invoices are not recorded as
an accounts receivable by the seller nor are
they recorded as an accounts payable by the
buyer.

November 6, 2022 Prepared by B.K. MABINA 333

 pro-forma invoice
• If you need to issue a sales document for
goods or services you haven't supplied yet,
you can issue a pro-forma invoice to offer
goods or services to customers.  Pro-forma
invoices are also often used to declare the
value of goods for customs

November 6, 2022 Prepared by B.K. MABINA 334

 Tender

• Tender is a document which indicates the

description of the good and prices at which the
tenderer can supply the goods to the buyer. When
a buyer offers invitation for tender, anybody who
is interested to supply the goods can submit her
tender. These tenders are submitted in sealed
envelopes and they are opened by the buyer on a
specific date. Tender documents are common
among government entities.
November 6, 2022 Prepared by B.K. MABINA 335
 Quotation
Quotation is an offer (from suppliers) to
supply goods according to the terms and
conditions stated. There are first hand
quotations (from manufacturers to traders)
and second hand quotations (from traders to
consumers) Proforma invoice is a kind of
quotation.

November 6, 2022 Prepared by B.K. MABINA 336

 Catalogues
Catalogues are documents showing details of
the goods offered for sale. Items in the
catalogue will be numbered for easy location
and reference. Even prices of the items in the
catalogue could be shown; not necessarily
though

November 6, 2022 Prepared by B.K. MABINA 337

 Price List
Price List: this is the document contains the
prices of the goods listed at the time it was
made out. This is not necessarily the price that
will be charged when the goods are sold.

November 6, 2022 Prepared by B.K. MABINA 338

 Receipt

• A receipt is a written acknowledgment that a

specified article or payment has been received. A
receipt records the sale of goods or provision of a
service. If the recipient of the payment is required to
collect a tax from the customer, the amount
collected would also be included on the receipt and
the amount would be deemed to have been collected
on behalf of the relevant government tax authority.

November 6, 2022 Prepared by B.K. MABINA 339

 Receipt
In many countries a retailer is required to
include the tax and similar amounts in the price
of goods sold. Stores that use barcode readers
may generate receipts with a barcode of the
receipt identification number, that enables a
salesperson to scan the barcode and quickly
retrieve the details of the original transaction,
for example if a customer seeks to return or
exchange goods or there is some other query.
November 6, 2022 Prepared by B.K. MABINA 340
 Receipt
• However, there is usually no set form for a
receipt, such as a requirement that it be
machine generated. Many point-of-sale
terminals or cash registers automatically
produce receipts. Receipts may also be
generated by accounting systems, be manually
produced or generated electronically, for
example if there is not a face-to-face
transaction.

November 6, 2022 Prepared by B.K. MABINA 341

 Receipt
• To reduce the cost of postage and processing,
many businesses do not mail receipts to
customers, unless specifically requested or
required by law; some transmit them
electronically. Others, to reduce time and
paper, may endorse an invoice, account or
statement as "Paid".

November 6, 2022 Prepared by B.K. MABINA 342

 PILLARS/PRINCIPLES OF PROCUREMENT

Procurement principles mean standards to be

adopted by the procuring entities in procuring
of goods, works or services.
Procuring entities shall, in the execution of
their duties, strive to achieve the highest
standards of equity, taking into account the
following core principles to be adhered to at
all stages of public procurement process.

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 Value for Money
Value for Money is a core principle underlying
public sector procurement. Value for Money
in a procurement function is a good measure
of an economy, efficiency and effectiveness
with which public financial resources are
converted into procured quality goods,
services and works.

11/06/22
 Value for money
• Economy is about cost of the product, service
of works
• Efficiency is about performance of items
procured
• effectiveness is about delivering the intended
results/outcome to meet the org. objectives

November 6, 2022 Prepared by B.K. MABINA 345

 Collapsed building in DSM

November 6, 2022 Prepared by B.K. MABINA 346

 Value for Money
It is evaluated on a whole-of-life basis of the
good or service being procured and is
influenced by a number of factors which
procuring entities have to observe:
 Adoption of procurement methods which are economical.
 Maturity of the market for the works or service sought, and
the knowledge of the market.

11/06/22
 Value for Money
Performance history of each prospective
supplier through a product search and
maintenance of database of best performers.
Relative risk of each proposal gets duly
calculated in the entire process of
procurement.
 Financial considerations, including all relevant direct and
indirect benefits and costs.

11/06/22
 Value for Money
The anticipated price that could be obtained
at the point of disposal of procurement items
should be estimated.
Maintenance cost of procurement items
should be taken into account and be justified
in the procurement process decisions.
Evaluation of contract options that takes
value and quality on balance.

11/06/22
 Economy
Public procuring entities must recognize that
they are involved in a major function of the
national economy in which a large amount of
the government money is spent through
procuring goods, works and services. This is why they are
required to ensure that prudent economic decisions are made to open up
market opportunities to Tanzanian business entities (big, medium and
small), to increase their participation in the domestic and competitive
international markets.

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 Efficiency
• Efficiency relates to productivity of the
resources used to conduct an activity in order
to achieve the maximum value for the
resources used. In relation to procurement, it
includes the selection of a procurement
process that is consistent with Government
policy and is the most appropriate to the
procurement objective under the prevailing
circumstances
November 6, 2022 Prepared by B.K. MABINA 351
 Efficiency

• Efficiency in procurement is enhanced by

conducting transparent, fair and appropriately
competitive processes of a scale
commensurate with the size and risk profile of
each particular project.

November 6, 2022 Prepared by B.K. MABINA 352

 Efficiency
All procuring entities shall ensure efficiency
gains in the procurement function at all levels
and in all procurement stages. The
management of the procurement function
should be made simple and swift, providing
positive results without much delay. Efficiency
also implies practicality in terms of compatibility with the
Government laws and administrative procedures.

11/06/22
 Efficiency
All efforts shall be made to reduce the lead
time spend in the procurement function to
avoid risks and unstable inflationary events
characteristic of delayed procurement process
actions and consequently a poor economic
performance.

11/06/22
 Effectiveness
• Effectiveness relates to how well outcomes
meet objectives. It concerns with the
immediate characteristics of an organization’s
output, especially in terms of price quality and
quantity, and the degree to which outputs
contribute to specified outcomes.

November 6, 2022 Prepared by B.K. MABINA 355

 Effectiveness
Effectiveness can be achieved by ensuring that the property or
service being sought will make the maximum possible
contribution to the relevant outcome. This entails correctly
identifying the need, accurately drafting functional
specifications, rigorously assessing responses and negotiating
the final contract, and then diligently managing the contract.
Comprehensive monitoring and assessment at all stages of the
procurement process further contributes to effectiveness.

November 6, 2022 Prepared by B.K. MABINA 356

 Equity
All efforts shall be made to give equal
opportunity for all qualified actual and
potential competitors or contractors including
Small and Medium Enterprises (SMEs).Where
prudently possible all actions shall be made to
ensure an increased use of local inputs and
participation of local actors in the
procurement market.

11/06/22
 Integrity and Ethics
 Various stages and decisions in the procurement processes
are prone to corruption. In all procurement stages
procurement officers must observe honest. Among the
stages and decision events are the short listing of
consultants, proposal evaluation, selection of contractors and
suppliers contract awards, contract evaluation and payments to
contractors. In the above and all others related to the procurement
function, procuring entities are obliged to ensure corruption-free
processes during the execution of such actions and authoritative
decisions of the procurement processes.

11/06/22
 Integrity and Ethics
Public service authorities and practitioners are
compelled to adhere to professional code of
ethics, conduct and values. The procurement
function and process must be operated in consistency with
the standards and values that have been established by the
law, regulations and public expectations of a public servant.
This is in addition to existing code of procurement ethics
which include avoidance of practices related to conflict of
interest.

11/06/22
 Integrity and Ethics
The execution of the procurement functions
shall adhere to the sets of ethics and rules
governing public servants on Tanzania: the
Code of Ethics and Conduct for the Public
Service as directed towards all public servants;
and the Leadership Code of Ethics addressed specifically to
public service managers. Efforts shall be made to develop
specific code of ethics for professional public procurement
leaders, officers and other members of the workforce.

11/06/22
 Integrity and Ethics
Various stages and decisions in the
procurement processes are prone to
corruption. Among the stages and decision events are the short
listing of consultants, proposal evaluation, selection of contractors and
suppliers contract awards, contract evaluation and payments to
contractors. In the above and all others related to the procurement
function, procuring entities are obliged to ensure corruption-free processes
during the execution of such actions and authoritative decisions of the
procurement processes.

11/06/22
 Integrity and Ethics
Public service authorities and practitioners are
compelled to adhere to professional code of
ethics, conduct and values. The procurement
function and process must be operated in
consistency with the standards and values that have been
established by the law, regulations and public expectations of a public
servant. This is in addition to existing code of procurement ethics which
include avoidance of practices related to conflict of interest.

11/06/22
 Integrity and Ethics
The execution of the procurement functions
shall adhere to the sets of ethics and rules
governing public servants on Tanzania: the Code of
Ethics and Conduct for the Public Service as directed towards all public
servants; and the Leadership Code of Ethics addressed specifically to
public service managers. Efforts shall be made to develop specific code of
ethics for professional public procurement leaders, officers and other
members of the workforce.

11/06/22
 Integrity and Ethics
In the pursuit of the above procurement
requirements, the Government shall:
Strengthen institutions charged with anti-
corruption enforcement in public
procurement sector.
 Develop a comprehensive framework for promoting high quality public
procurement governance in terms of transparency and accountability as
well as effective management

11/06/22
 Integrity and Ethics
that can minimize corruption and deliver
optimum risk management and value-for-
money outcomes.
Institute transparent public procurement
procedures to limit bribery and corruption in
the public procurement sector.
 Develop and perfect proper codes of conduct within the field of public
and private procurement.

11/06/22
 Integrity and Ethics
Promote sufficient transparency and
competition in procurement processes to limit
avenues for corruption and violation of the
laid down procurement rules, procedures and
regulations.
Establish professional body that would
oversee and instill discipline among
procurement officers.

11/06/22
 Integrity and Ethics
Promote proper understanding of the best
practices in public procurement to limit
opportunities for procurement actors to
engage in corrupt activities.
Establish the Specific Code of ethics for Public
procurement Officials.
 Institute public procurement anti-corruption strategy and effective public
procurement accountability mechanisms.

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 Accountability
Effective mechanisms must be in place in
order to enable Departmental Accounting
Officers and their equivalents in other public
bodies to discharge their personal
responsibility on issues of procurement risk
and expenditure.

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 Competitive Supply:
Competitive Supply: - Procurement should be
carried out by competition unless there are
convincing reasons to the contrary.

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 Consistency
• Consistency: - Suppliers should, all things
being equal, be able to expect the same
general procurement policy across the public
sector.

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 Integrity
Integrity: - There should be no corruption or
collusion with suppliers or others.

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 Informed decision-making
Informed decision-making: - Public bodies
need to base decisions on accurate
information and to monitor requirements to
ensure that they are being met.

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 Legality
Legality: - Public bodies must conform to PPA
and other legal requirements.

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 Transparency
Transparency: - Public bodies should ensure
that there is openness and clarity on
procurement policy and its delivery.

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 Conflict of Interest
Stakeholders Should declare if they have family
or relatives with the potential suppliers. A
Bidder found to have an undisclosed conflict of
interest with a competing Bidder, shall be
disqualified from participating in a tender (see
Code of Conduct for Suppliers).

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 Expertise and Probity

Procurement authorities at all levels are required to ensure

that the staff involved in procurement, contract making and
contract administration are equipped with the requisite skills;
are conversant with the relevant policies, laws and regulations
within which specific procurement events take place. The
government shall ensure existence of mechanisms required to
safeguard against improper and unethical behaviour and
practices that may undermine the principles, laws and
regulations governing a procurement cycle, from ordering to
receiving, and to the payment for goods, services and works.
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 Probity in Procurement
• Probity in Procurement: A process that
conforms to the expected standards of probity
is one in which clear procedures are
established, understood and observed from
the outset. These procedures need to be
consistent with the legitimate interests of
tenders and the Government’s policies and
legislation as specified in the PPA No.7 of
2011.
November 6, 2022 Prepared by B.K. MABINA 377
 Probity in Procurement
• All potential tenderers must be treated
consistently and equitably in accordance with
these procedures. Good probity management
aims to minimize problems; avoid the
potential for corrupt practices to occur and to
produce better outcomes against stated
objectives and maintain public sector integrity

November 6, 2022 Prepared by B.K. MABINA 378

 Probity in Procurement
• Ways of maintaining probity in the
procurement process include the separation
of duties and responsibilities. For example,
different officials are responsible for spending
approval, evaluation of tenders and
authorization of payment, also organizations
should try to ensure that they have a
sufficient pool of trained officers who can
manage the tender process
November 6, 2022 Prepared by B.K. MABINA 379
 Reliability
• Procurement Officers shall at all the times
strive to ensure reliability of the vendors, that
procurement is contracted with providers who
can deliver on quality and timely. A good
procurement function that is adequately
institutionalized will strive to establish and
consistently apply rules, regulations and
procedures that are easily accessible and
unambiguous. The procuring entities should
procure only those items they require and are
useable in the public welfare.
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 BLACKLISTING
Means removing the suppliers from the
approved list.
Chosen suppliers are registered with the firm in
a list known as Approved Suppliers’ List
The list contains trusted and tried suppliers.
Suppliers who lose confidence with the firm,
will be removed from the Approved. Suppliers’
List; and be black listed in a Black List.

November 6, 2022 Prepared by B.K. MABINA 381

 Reasons for Black Listing
• Unsatisfactory delivery
• Supply of unsatisfactory quality
• No strict compliance of orders resulting in a
loss to the firm
• Submitting quotations of higher prices
• Submitting quotations of lowest prices; then
not delivering
• Not adhering to specification

November 6, 2022 Prepared by B.K. MABINA 382

 Reasons for Black Listing
• Quoting in unsealed covers
• Showing the tendency to influence firm’s
officials to accept quotations
• Non-quoting even after repeated enquiries
• Submitting quotations of lowest prices and
lower securing orders but asking for price
revision

November 6, 2022 Prepared by B.K. MABINA 383

 OUTSOURCING
Act of transferring some of the company´s
recurring internal activities and accompanying
decision rights and factors of production to
outside service providers according to the pre-
established contract.

November 6, 2022 Prepared by B.K. MABINA 384

 Reasons for Outsourcing
Looking to focus on core competences
Lack or inadequate capabilities
Discarding non core business or functions
Less investment in fixed assets
Higher profitability
Growth in revenues
Cost reduction

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 Commonly outsourced activities
Transportation
Security
Canteen
Printing
Training
Internet

November 6, 2022 Prepared by B.K. MABINA 386

 Outsourcing Challenges
Loss of control
Viability/practicability/capability of service
provider
Relationship between customer and
providers
Quality of service
Trust issues for example Information
disclosure, Laws and regulation
November 6, 2022 Prepared by B.K. MABINA 387
 Outsourcing Challenges
Hidden and uncertain costs
Limited customization and enhancements
Knowledge transfer
New and Shared environment for both parties
Legal and regulatory matters

November 6, 2022 Prepared by B.K. MABINA 388

 Types of outsourcing
According to Lysons and Farrington, outsourcing falls
into:
• Body shop outsourcing – management uses
outsourcing as a means of meeting short term
requirements.
• Project management outsourcing - employed for all
or part of a particular project such as developing a
new IT project, training new skills and management
consultancy.
• Total outsourcing - outsourcing supplier is given full
responsibility for a selected area such a catering and
security.
 Reasons for outsourcing
• Reducing costs by, among others, using
supplier’s purchasing economies of scale and
expertise/experience.
• Gain access to specialist management, e.g. VFM.
• Concentrate on firm’s core business.
• Gain better interface with the supply market.
• Lack of resources.
• Gain access to technology.
 5 drivers of outsourcing
• Cost: Increasing costs of tangible and
intangible items, sourcing looked upon as a
solution.
• Finance: Limited investment budget excludes
non-core activities. Hence, outsourcing.
• Quality: Actual capacity and capability of firm
not matching with demand increase.
 Continued…
• Cooperation: There may be conflict when
activities/products are produced by both. Such
activities/products subjected to total outsourcing.
• Core business: The urge to outsource non-core
business so that firms get ample time to concentrate
on core business is becoming greater.
 Relationship factors
Outsourcing implies the supplier will do better than
the buying organization. It is much more than
‘make or buy’. It often reflects the decision by an
organization to regard an activity as ‘non-core’.
The buying organization will seek the following in
outsourcing:
• Cost reduction.
• Service excellence.
• Freedom from detail.
• Technical excellence and competence.
 Continued…
• The supplier, on the other hand, will seek the
following:
• Profit.
• Their own economies of scale.
• Extras within the contract.
• Standardisation among the customers.
• Long-term contract.
 Challenges for the purchasing
organisation
• Making the decision to outsource on full facts
and full costs.
• Making sure that the promised benefits are
delivered all the time.
• Ensuring that the services are rendered in a
way that meets their needs best, rather than a
way that suits the supplier.
• Ensuring that it retains the knowledge to
critically assess the service of the supplier.
 Continued…
• Making sure that the supplier provides
information on alternative strategies and their
risks.
• Ensuring that the supplier remains keen on
delivering the service in the long-term
 The role/responsibility of purchasing
in outsourcing
• Ensuring a business case is made.
• Ensuring that the specification is correctly
specified.
• Assessing all the risks involved in the exercise
are understood in the purchasing
organisation.
• Ensuring that all alternatives are considered.
• Understanding the real costs of the current
operations.
 Continued…
• Calculating the payback realistically.
• Conducting the commercial process of the
project.
• Working out workable management
arrangements.
• Ensuring that the organisation retains a way
out.
 Activities that can be outsourced
Services that can be • Transport
outsourced include:
• Cleaning
• Catering
• Legal services
• Gardening
• Audit services
• Secretarial services
• Payroll management
• R&D
• Maintenance of
• Purchasing buildings
• Security • Mail services
• Staff recruitment • Vehicle maintenance
 Benefits accruing from outsourcing
• Reducing costs, e.g. staff costs.
• Freeing the firm to deal with core business,
bettering organisational focus.
• Improving return on investment.
• Meeting challenges of technology changes better.
• Getting better service in terms of quality, delivery
time etc.
• Reduction in risks that go with the provision of the
service or goods.
 Continued…
• Cost certainty.
• Reduction in staff management problems.
• Improved consistency of service.
• Reduced capital requirements, thus making
capital funds available for other investment.
 Problems of outsourcing
• Overdependence on suppliers.
• Cost escalation.
• Lack of supplier flexibility.
• Unrealistic expectations of outsourcing
suppliers due to over-promising at the
negotiations stage.
• Where a specific or unique knowledge of the
business is required, outsourcing may not do
well.
 Continued…
• Where all services are customised, outsourcing may
not work well.
• Where the employee culture is too fragmented or
hostile for the organisation.
• Difficult to control if the supplier is larger.
• Complacency of supplier over time.
• Lack of commitment to client by supplier.
• Lack of management skills by supplier.
• High staff turnover in supplier firm.
 Continued…
• Difficulties in coordinating suppliers.
• Redundancy and redundancy payments when
an activity traditionally done in-house is
outsourced.
• Loss of competitive advantage for the buying
firm through loss of skills and experience of
staff, insufficient internal investment and
passing of knowledge and expertise to
supplier.
 Procurement Techniques

THE END

November 6, 2022 Prepared by B.K. MABINA 405