MZUMBE UNIVERSITY SCHOOL OF BUSINESS (SOB)
MZUMBE UNIVERSITY
SCHOOL OF BUSINESS (SOB)
COURSE: BBA-PLM
II
SUBJECT CODE: LOG 230
TASK: GROUP
ASSIGNMENT
GROUP NO:
ONE
DATE:
31stMarch 2015
QUESTION;
How
can value for money be achieved in and through procurement?
Procurement is the
acquisition of appropriate goods, work or services at the best possible total
cost of ownership to meet the need of the purchaser in term of quality,
quantity, time and location. Purchasing bodies define processes intended to
promote fair and open competition for their business while minimizing exposure
to fraud and collusion.
Value for money is
the assessment of whether or not an organization has obtained the maximum
benefit from the goods and services it acquires or provides within the resources
available to them. Also it can mean the utility derived from every purchase as
well as every sum of money spent.
It is not only based on the minimum purchase
price (economy) but also on the maximum efficiency and maximum effectiveness of
the purchase.
A thorough consideration of value for money
begins by officials clearly understanding and expressing the goals and the
purpose of the procurement. When a business requires arises officials should
consider whether a procurement will deliver the best value for money. It is
important to take into consideration the following factors stakeholder inputs,
scale in scope of business requirements, relevant entity resources and budget
as well as the obligation and opportunity under existing arrangement.
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 and efficiency with which
public financial resources are converted into procured quality goods, services
and works. It is evaluated on a whole-life basis of the good or service being
procured and is influenced by a number of factors which procuring entities
have to observe. So value for money in procurement can be achieved through the
following;
Price, the value of the goods, services or works
purchased should be equal to the value of money spent and should meet the
expected budget. That is sharpening the approach to negotiations to ensure
departments get a good deal from a supplier. Department should act as
intelligence customers by discussing with the suppliers all the elements of the
contract price including level of services, time scale of assignment, skill mix
of the suppliers team and how cost are to be remunerated.
Quality, refers to the fitness or suitable for the
purpose, that can be achieved by getting an increase level or quality of
service at the same cost, this involve the specification of the purchasing
requirements in output terms so that suppliers can recommend cost effective and
innovative solutions to meet the needs.
Time delivery, also value for money can be achieved in
procurement by considering the time of arrival of the requirements that the
requirement should neither be very early nor too late because if they arrival
too early they can lead to extra cost like storage cost and obsolescence also
if they arrive too late can lead to halt of production so the item must arrive
at the right time.
Quantity, the acquisition of goods, services or works
must meet the need of the users but not exceed the user’s requirements. The
officials responsible for procuring of materials should avoid unnecessary
purchase of materials in order to prevent the wastage of money.
More over value for
money can be achieved through procurement as the following;
The use of public resources in an efficient,
effective, economical and ethical manner that is consistent with the policies
of the society.
Efficient and effectiveness
of the available public resources should be used in the productive manner
including the developing a more effective working relationship with key
suppliers to allow both departments and suppliers to get the maximum value from
the assignment by identifying the opportunities to reduce costs and adopt
innovative approaches.
Economical this involve the acquiring of the goods services
and works at the minimum cost which is optimal to meet the requirements,
include the optimizing cost of delivering, maintenance cost, consumable cost,
disposal cost as well as the initial purchase price of goods.
Ethical, the officials should adhere the set of regulations
in the organization as well as the society in particular include the individual
behavior of the employee and the ethical use of the available resources so that
to achieve value for money, the application of the highest ethical standard
will help to ensure the best achievable procurement outcome which entail more
than just getting the best price, ethics are important when considering value
for money.
Encourage competition and the policy of
non-discriminatory.
By encouraging
competition and remove discrimination during supplier selection will help the
procuring entity to procure good services or works at high quality and
affordable price, this is because competition leads to increase in quality and
reduce price to win the competitive advantage. Also by removing discrimination
during supplier selection will lead to increase in number of the bidders so as
to have a wide range of choice which will help them to choose the best supplier
to achieve value for money.
Facilitate accountability and transparency in
decision making,
This involve the
encouragement of openness and honest as well as make people accountable for
their actions during the selection of suppliers, when it comes to the making of
the decision in order to avoid unwholesome activities such as corruption and
abuse of public resources the officials must be accountable, that is performing
their duties as it is instructed as well as conducting the activities of
acquiring good services or work in the honest way without making unnecessary
secrets which can lead to the corruption. For example the making of
advertisement should be open to every interested part so that to have wide
range of choice which facilitate evaluation and make the best choice hence
value for money is achieved.
The use of experts in the procuring process.
Also the process of
procuring of good services or work must involve the personnel who are
specialized in procurement processes, who will know exactly what procedures
should be followed to achieve value for money. That through procurement we can
achieve value for money if the personnel responsible will be competent and have
the knowledge, experience, moral and ethics.
By concluding, “Taxes
represents a major source of the fund expended in public procurement.” Leenders
et al. (2006). The objectives of sound supply management in both public and
private sector are effective contribution to organization goal and assurance of
value for money spent but public procurement is subjected to special laws,
rules and regulations. Therefore the wise and effective spend of tax payers
shillings ensure that government services benefit those for whom there intended
but also help build taxpayer confidence and trust in government.
REFERRENCES
Leenders, M.R, Johnson, P.F, Flynn, A.E, Fearon,
H.E, (2006), Purchasing and Supply
Management, 13th Ed, McGraw-Hill/Irwin, New York.
Baily, P, Farmer, D (1977), Purchasing Principles and Techniques, 3rd Ed, Pitman
Publishing Limited, London.
Christopher, M. (2005). Logistics
and Supply Chain Management-Creating Value Adding Networks, Prentice Hall
(FT), Pearson Education Limited. Great Britain
