Procurement and Commissioning of Contracts in Public Sector - Essay Example

Running Header: Procurement and commissioning of contracts in public sector Student’s Name: Instructor’s Name: Course Code: Date of Submission: Table of Contents Table of Contents 2 Introduction 3 Policy context of procurement within public services 3 Relevant legislation on procurement process 4 Social issues relating to procurement and their impact on the procurement process 5 Implications of the private finance initiatives 6 Roles of the key actors involved within a collaborative project 7 Process of procurement in two public service contexts 8 Risk implications of procurement process 9 Conclusion 9 References 10 Introduction Public procurement and commissioning of contracts are defined by specific procurement processes that are structured on a specific procurement strategy. Procurement processes ought to abide by specific legislative framework and policies (Pollock et al, 2002). This essay reports on policy context of a public sector procurement process, relevant legislations on public sector procurement, social issues that relate to procurement process and rationale social issues impact on procurement process, implication of Private Financing Initiatives (PFI), roles of key players in a collaborative project, evaluation of process of procurement in two public service contexts and risk implications of procurement process. Policy context of procurement within public services The public procurement process is dependent on a public context for procurement of contracts. The context of procurement processes are laid down by the public sector agencies and constitute policies, standards, procedures and legislations-regulations on procurement strategy (Bing et al, 2005). The context of procurement process is structure don framework agreements. The procurement framework agreements outline requirements that should be met and followed during contract awards. The procurement process context should outline key elements that define contract for instance the price [quoted price of tender or contract], quality of the service and quantity of resources to be used. The procurement framework agreements are laid down by public contract regulations agencies (Kuttner, 1997). The procurement context of public contracts are subject to compliance with freedom of Information act hence need for information disclosure on public contracts and terms that govern the public contracts. The firms should seek to determine if a contract is subject to confidentiality clause or satisfies requirements of freedom of information Act for instance procurement processes that involve trade secrets. This implies, the context of procurement process could be subject to commercially confidential process which demands firm procurement personnel to comply with non-disclosure agreements if they seek to participate in either negotiated procurement process or competitive dialogue procurement procedure (Hartley & Parker, 2003). The public procurement process is defined by procedures that form part of public official procurement process and governed by specific time schedules. The cost of the contract influences on the contract time schedule and procurement risk exposures are higher for expensive contracts and vice versa (Venkat & Bjorman, 2009). The public contracts are awarded on basis of competitive dialogue procurement procedure. The public procurement process is governed by public procurement legislations and regulations. The context of public sector procurement is governed by expression of interests and freedom of information Act. The context of public sector procurement further integrates verification of the firms competencies in meeting quality requirements of the contract based on rationale for managing contract risks and capability to promote public value of money hence award of contacts exploits values of a trade off between quality expected and costs of contract and includes post contract issues like lifetime contract costs and maintenance costs (Minnow & Freeman, 2009). Relevant legislation on procurement process The procurement process is governed by legislations in order to protect public interests and foster ethical practices and imposition of control on the procurement process (Grimsel & Lewis, 2004). The procurement legislations are meant to contribute into a free and fair contractor access to contracts in public sector. The legislations provide foundation for tendering and awarding of contracts. The legislations that influence on public procurement process are structured towards achievement of equal treatment of contractors, transparency in the procurement process, proportionality and mutual recognition. Procurement should be structured on contractor equal treatment through conformity of procurement process to principle of justice and principle of fairness at every phase of contract award procedure (Hellowell & Pollock, 2007). The procurement process should be governed by transparency subject to availability and access to information on contracts to all interested contractors. Transparency should be demonstrated through communication on rules and rationale for contractor selection. Proportionality of the contracts should be defined by relevance of demands of quality on all service providers. The contractors should be exposed to same standards, specifications and qualifications for tenders through conformity to principle of mutual recognition. Social issues relating to procurement and their impact on the procurement process The procurement process should be governed by compliance with social and ethical issues. Compliance with social issues that govern procurement process contributes into a procurement process that is characterized by probity, transparency and accountability (Kuttner, 1997). Conformity to probity, accountability and transparency standards fosters security for best interests for public money. The element of probity ensures procurement process is conducted in an ethical, honest manner that make sit possible for realization of transparency and accountability of decisions on procurement process through clarity and objective award of contracts (Industry Commission, 1990). The procurement process should be cost effective and demonstrate efficiency in resource use and capability to demonstrate high integrity. The compliance with social issues should conform to Comptroller and Auditor General Acts and Accounting for costs of procurement process should conform to recommended ethical and social practices (Strauch, 2009). The procurement process should demonstrate high level of transparency through appropriate procedures that are relevant to public procurement and contracting practices. Implications of the private finance initiatives The Private Financing Initiatives (PFI) is a subset of Public-Private Partnership (PPP) that is achieved through funding of public infrastructure or spending through use of private capital (HEllowell & Pollock, 2007). PFI has been demonstrated to involve use of private sector debt and equity or financing that is underwritten by public. PFI forms basis for privatization and finacialization that is structured towards achievement of transparency, accountability and efficiency in procurement expenditure and projects. PFI processes are defined by lead times [short lead times] which ensures projects or procurement processes are carried out in a short time hence forming foundation for achievement of tangible benefits (Pollock et al, 2002). Project delivery in a short time reduces costs and expenses in the long term hence PFI is associated with decreased running costs as well as high level of quality services. PFI has however been criticized to be prone to economic crisis. The inefficiencies are brought about by higher level of borrowing from public funds which results into public funding of the projects and creation of higher profits to the private sector (Bing et al, 2005). The cost benefit analysis of PFI as a function of resistance to financial crisis demonstrates PFI as inefficient technique for financing projects or procurement tenders. As a result, the costs of PFI are higher compared to public financing and management of procurement or public procurement process. PFI, through use of public sector staff that are transferred or absorbed by private sector post privatization, makes PFI a form of outsourcing that makes public procurement process to be cheaper by reducing costs of human resource management. Roles of the key actors involved within a collaborative project A collaborative project is represented by a Public-Private Partnership (PPP) that is characterized by a public sector contract with a private firm (Spackman, 2002). In a PPP, the private firm or private contractor provides a public service [outsourcing of private service] while the technical, financial and operational risks are borne by the private firm/contractor. The private contractor is supposed to make capital investment on the strengths of the public contract. The cost of service provision is borne by the public sector as service outsourcing agency (Hartley & Parker, 2003). A collaborative project implies dual roles in projects for instance the public sector as project owner could provide capital subsidies to private firms that provide private contract support in terms of tax and guaranteed annual revenues that are defined by a fixed period of monthly or periodic reimbursement. The collaborative projects could be carried out through measures where the government could be subject to allotment via equity shares through a consortium termed as Special Purpose Vehicle (SPV) (Spackman, 2002). The SPV is composed of the building contractor, [principle contractor], maintenance firms and financier of the contract for instance a financial institution. The role of the SPV is to contribute into contract signatory between the government agency or representative and contractors and sub-contractors. Process of procurement in two public service contexts The procurement process sin the public sector is defined by a competitive procurement process. The public contracts that are identified to be above threshold are advertised through the print media or contract notice. The advertisement outlines rationale fro firms to express interests in contract and terms and conditions for participation in bidding process (Grimsey & Lewis, 2004). The ministry of Health utilized two forms of procurement processes namely the open procurement procedure where firms that have interests on the contract are requested to return their tenders and expression of interests (EOI) whereupon the contract is awarded to the best bidder who demonstrates potential to provide expected level of quality vis-a-vis the costs of contract that are within budgetary requirement of the contract. The ministry of health further utilizes a restricted procurement procedure for contracts for supply of medical drugs and medical equipments (Hellowell & Pollock, 2007). The restricted procurement procedure is implemented through a two stage phase where in the first phase; firms that have submitted EOI are selected through a pre-qualification questionnaire. The selected firms are then required to respond to contractors Invitation to Tender (ITT) and firm is selected based on ITT. The ministry of housing and road construction utilizes a competitive dialogue procurement procedure that is achieved through a contract notice and selection process for the award of the contract (Hartley & Parker, 2003). The procurement is arrived after firms engage in dialogue with the contract owner on rationale for achievement of a viable solution whereupon a few selected companies, based on capacity to meet proposed solutions to contract work, are selected. This is further followed by use of a negotiated procurement procedure depending on the size of the contract where two or more firms are elected to collaborate in the contract (Grimsey & Lewis, 2002). Risk implications of procurement process The procurement process sis characterized by diverse risks. The procurement risks arise due to failure of the procurement process to comply with the procurement legislations or procumbent strategies (Kuttner, 1997). Procurement process is exposed into risks of procurement strategy and legislation is the contract awards are awarded without expression of interests or bidding and tenders are awarded by contractors that have been providing contracts or procurement services to the public firms. The risks of procurement demonstrate weaknesses in governance of the procurement process and further provide implications of lack of consideration of social and ethical practices that should define the procurement process for instance lack of application of principle of justice and principle of fairness (Hartley & Parker, 2003). Procurement process could be negatively affected by need to comply with standards of engaging with firms that are ISO certified which excludes participation of firms that are not yet ISO certified or companies that implement organic management approaches. Use of ISO standards certified companies could result into failure to abide by procurement strategy and need to utilize ethical and social values in procurement (Bing et al, 2005). Conclusion Procurement process and procurement strategy could be negatively affected by risks arising from financial implications or legal implications, political, technological, which could result into non-compliance with procurement strategy and procurement procedures that could affect firm’s brand image and reputation (Strauch, 2009). The procurement risks could result into inability for procurement process to contribute into creation of value to public money as well as failure to comply with public contract regulations which may contribute or predispose incapacity to appropriately manage purchasing and procurement processes in a ethically and socially responsible manner (Venkat & Bjorkman, 2009). Compliance with procurement procedures, processes and strategy should be demonstrated through continuity of policy reviews on procurement procedures, practices and ethical characteristics of the process. References Bing L., Akintoye A., Edwards, P.J. & Hardcastle C. 2005, The Allocation of risk in PPP/PFI construction projects in the UK, International Journal of Project Management, 23, 25-35. Grimsey D, and Lewis M. K. 2004, The Governance of Contractual Relationships in Public-Private Partnerships, New York, GreenLeaf Publishing Grimsey, D & Lewis M 2002, Evaluating the risks of public private partnerships for infrastructure projects, International Journal of Project Management 20, 107-118. Hartley, K & Parker D 2003, Transaction costs, relational contracting and public private partnerships: a case study of UK defence, Journal of Purchasing and Supply Management, 9, 97-108. Hellowell, M & Pollock, Allyson, M 2007, The PFI: Scotland's Plan for Expansion and its Implications, Edinburgh, University of Edinburgh. Industry Commission 1996, Competitive Tendering and Contracting by Public Sector Agencies, Canberra, Australian Government Publishing Service. Kuttner, R 1997, Everything for sale: The virtues and limits of Markets, New York, Knopf. Minnow, Martha & Jody Freeman 2009, Government By Contract: Outsourcing and American Democracy, Harvard U.P. Pollock, Allyson M., Jean Shaoul & Neil Vickers 2002, Private finance and "value for money" in NHS hospitals: a policy in search of a rationale? British Medical Journal, 342, 1205–1209 Spackman, M 2002, Public-private partnerships: lessons from the British approach, Economic Systems, 26(3), 283–301. Strauch, L 2009, Public Private Partnership in European Road Infrastructure: PPP as Investment Asset Following the M6 Road Project in Hungary, VDM. Venkat Raman, A. & JW Bjorkman 2009, Public Private Partnerships in Health Care in India: Lessons for Developing Countries, London, Routledge. Read More