chapter 6: the Procurement
Plan
About this Chapter
Good procurement starts with a good plan. This chapter describes a simple procurement plan format suitable for use by local governments for small local development projects.
What is the Procurement Plan for?
Procurement processes often take a long time. Even for a simple construction contract, construction of a new school building, the time needed from approval of the budget to signing a contract may be more than six months. A period of time will subsequently be needed for construction before the building is ready for use. Therefore, if the building is needed for a particular date, for example, the start of the next school year, procurement may need to start nine months to one year before that date. One use of the procurement plan is to ensure that procurement begins in time so that the product – goods, works or services – is available when needed.
The second use of the procurement plan is to propose the procurement methods that will be used. Normally, this will be based on rules (for example, open bidding to be used for contracts over USD 10,000) but these rules can be complicated or can allow for some flexibility. Through the procurement plan, the procurement officer proposes a method to use. The chief executive (or the official who has approving power) reviews the plan and signs it to indicate approval of the method proposed. In some cases, donor agencies may require the right to review and approve procurement plans (The World Bank routinely does this as part of its project supervision arrangements).
The third use of the procurement plan is as a tool for monitoring and ensuring that procurement processes are on track.
Preparing the Procurement Plan
The procurement plan should be prepared immediately after the annual plan and budget is approved. The procedure for preparing the procurement plan should be:
1. From the plan and budget, identify each item that needs procurement (that is, every item of goods, works or services;
Chapter 6: The Procurement Plan
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2. Write down the approximate cost (the budget or initial cost estimate) of the item;
3. When all the items are identified, examine whether there are items of a similar nature that can be grouped together in a single package for procurement. For example, if there is a plan to buy computers for two different departments of the local
administration, the computers should be procured together in one package. There are often quite strict rules to prevent items of a similar type that could be procured as one package, being split into separate packages.
4. Next, for each package, identify the procurement method that will be used. This will normally be determined by the type of item, and the total value of the package.
5. Finally, write in the estimated date for the start of procurement, considered as the time when the bid advertisement will be published or the bid documents will be issued; the estimated date for signing the contract and the estimated date for completion (delivery of the goods or completion of the works or services). These dates will normally be calculated backwards:
• The completion date is the date when the goods, works or services are needed. In the example of a school building, this might be the start of the school year.
• The contract signing date is calculated by counting back from the completion date, the number of months needed for the construction;
• The advertising date is calculated by counting back from the contract signing date, the number of months needed for the competitive bidding procedure.
Example: The budget for the construction is USD 25,000.
Example: The plan also includes a school in West Village, with a budget of
USD 40,000. So the two schools are combined in a package with a total value of USD 65,000. Procurement rules require that works contracts valued over USD 10,000 are procured by open competitive bidding.
Example: The school buildings are needed for the start of the 2011 school year in
August 2011. The construction period is estimated as six months so the contract signing must be no later than February 2011. The time required to complete the open competitive bidding process is two months, so advertising must be no later than December 2010.
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Chapter 6: The Procurement Plan Procurement Plan for EastWest Sub-District, Financial Year 2010 – 2011
Package Item Budget Procurement Method Key Dates Comment
Advertising Contract Completion
1 Primary schools package Competitive Bidding 1/12/2010 1/2/2011 1/81/11 Needed
for start of school year 1.1 Primary schools in East Village $25,000 1.2 Primary schools in West Village $40,000 TOTAL PACKAGE $65,000
2 Computers Request for Quotations 1/11/2010 15/12/10 31/12/10
2.1 1 computer for Finance Dept $1,500
2.2 1 computer for Admin Dept $1,500
2.3 1 printer for Admin Dept $500
TOTAL PACKAGE $3,500
3 Consultant to write
training materials for gender training for staff
$10,000 Selection based on Consultant’s Qualifications
30/9/10 31/12/10 31/3/11
NOTE: The example above shows the very minimum information needed on a procurement plan. Depending on the rules in force, other information might be needed. For example, if a donor requires that certain contracts are subject to prior review, there might be a column to indicate prior review contracts on the plan.
splitting of Packages
Procurement officials often try to avoid competitive bidding processes if they can. For this reason, they may try to split up procurement of similar types of works (or goods or services) into small packages so that the value of each package is below the threshold value for competitive bidding.
Procurement guidelines, particularly those of the major international development banks, often have strict rules against this practice. The reason is that more competition should result in lower costs.
However, there can be cases where packaging works combined into a higher-value contract has the effect of reducing, not increasing competition. This can happen if the local firms have the qualifications needed to bid for small contracts but not for large ones. Local firms may be able to undertake the work for a lower cost than a large firm from a distant city. Rules on this matter should be
applied in a flexible and intelligent manner, with the objective of ensuring that packages are suitable to the capacity of local contractors and suppliers wherever possible.
Example: The cost of a school with two
buildings is USD 25,000. The threshold for open competitive bidding is
USD 15,000. The buyer seeks to split the construction into two contracts worth around USD 12,500 each, with the sole objective of avoiding competitive bidding.