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Common Terms

Evaluation Committee/ Panel

A committee made up of an odd number of members (at least three) with the necessary technical and administrative expertise to give an informed opinion on tenders or grant applications.

BVM

Short for “Best Value for Money”; the best combination available of monetary and non-monetary requirements that an organization can get from its selection of suppliers.

HPCs:

Short for “Humanitarian Procurement Centers”. Are not-for-profit organizations specialized in the technical and commercial management of supplies and services necessary for the implementation of humanitarian actions. They can provide technical assistance in procurement or supply pre-established stocks, purchasing or logistics capacity

ISO

Short for “International Organization for Standardization”. An independent entity that has been thinking and standardizing the formulas that describes the best way of doing something.

ISO Certification

Guarantee that a product and/or company has followed a quality process.

Lead time:

The time between initiation of the acquisition of the goods and services up to the time of delivery.

Market Analysis:

An essential component of context analysis, collecting information that will be useful to program the intervention and how to implement it.

Market Research:

Activities and means to identify suppliers in a specific market.

Negotiated Procedure

Procedure without prior publication of a procurement notice, in which the Contracting Authority consults the candidate or candidates of its choice and negotiates the terms of the contract with one or more of them.

Procurement

The process of identifying and obtaining goods and services

Purchase:

The specific function associated with the actual buying of goods and services from suppliers.

QA:

Short for “Quality Assurance”; A procedure to ensure the quality of products or services by preventing mistakes and defects in manufactured products and avoiding problems when delivering products or services to beneficiaries.

QC:

Short for “Quality Control”; checks to ensure quality in a product or a service.

Quality

All the elements and characteristics which constitute the product and which contribute to its compliance with the defined technical specifications.

Sourcing:

Identifying and working with appropriate suppliers.

Services:

Intellectual and non-intellectual services.

Supplies:

Know as well as Goods, Products, Materials…. are tangible items and/or inter-related sets.

Segregation of duties:

Principle by which must have more than one person to complete a procurement activity.

TCO:

Short for “Total Cost of Ownership”; Cost involved in buying and using a product over time.

Tender Procedure

The overall process of putting a contract out for tender, starting with the publication of a procurement notice and ending with the award of the tendered contract

Works:

The design and/or the execution of a rehabilitation, construction, etc. in accordance with the previously specified requirements


1.  Procurement, an Introduction

It is common to see the procurement as a bottle neck and a time-consuming activity, usually associated with delays and strict bureaucracy. However, the Procurement activities can be agile and practical if we understand the roll that procurement plays, why exist and what are the principles that guide it, and how to manage the procedures that implements.


Through procurement activities we are going to acquire the needed things to perform our daily organizational activities and provide the resources to accomplish with the project needs.


1.1. Procurement Definition

Procurement is the process of identifying and obtaining goods and services. It includes sourcing, purchasing and covers all activities from identifying potential suppliers through to delivery from supplier to the users or beneficiary[1].


It´s important to note that Procurement is not a single action but a Process.  A series of activities aimed at meeting the needs of our projects as well as our operation in general. This process is standardized in such a way that we can replicate it regardless of the place, time or context, but at the same time it is flexible enough to encompass each of the different challenges that the purchasing manager faces.

 
The process is guided by principles, policies and procedures. By understanding it not as part of a checklist, but as a guiding path, the person or team responsible for procurement will be able to anticipate, be prepared, and respond to demands in a practical and diligent way.


The words Purchase and Procurement are frequently used interchangeably, however, even if is common this is not necessarily accurate. Purchasing is just a part of the Procurement process, an important one, but only the specific function associated with the actual buying of goods and services from suppliers.  This is how procurement and purchasing will be defined throughout this guide.


1.2. Procurement in the humanitarian context

o   Procurement objective. (6 Rights)

A successful procurement process is the one capable to accomplish with several requirements that can be summarized in the six ‘Rights’. Therefore, every purchase should be procured


  • At Right
  • from the Right sources.
  • in the Right 
  • of the Right quality and condition.
  • delivered to the Rightlocation.
  • at the Right time.


By assuring these ´Rights´ one of the guiding rules of every intervention, the Best Value for Money in the procurement activities is accomplished. Notice that is not mentioned here the lowest price or the highest quality, but the one that can accommodate best the needs in a holistic way.

o   Procurement Principles

There are certain principles that will govern the way in which a procurement activity is carried out. These principles are not random or chosen by chance; they are the result of many experiences and lessons learned, set up after several discussions and revisions. Humanitarian actors can have a great financial impact in the context they work, and procurement takes an important role on it since it has to do with the exchange of money, selection of providers, distributions in contexts that are not always safe, and constant exposure to various risks that need to be mitigated for the correct implementation of the programs.


Hence, a series of principles have been developed that should govern the procurement actions, to which the procurement entity must adhere and ensure its compliance with the ultimate goal of having an economic and efficient intervention with the best quality-price ratio.

§  BEST VALUE FOR MONEY

Best Value for Money (BVM) refers to the best combination available of monetary and non-monetary requirements that an organization can get from its selection of suppliers. It does not mean to achieve the cheapest offer but to balance the attributes such as quality and availability according to the organization needs[2].


The Combination of which this definition speaks are those of cost, quality and sustainability that best meets the organization´s requirements.

Cost understood as those of the entire life cycle of the product or service, which is known as Total Cost of Ownership (TCO) that takes into consideration not only the price but all the cost involved in buying and using a product over time.

Quality understood as sufficient specifications to meet the organization requirements, which in part can be summarized in the term Fit for Purpose.

Sustainability, taking into account the economic, social and environmental impacts.


Those responsible for procurement will look for the lowest overall cost to get the best return of investment.

§  COMPETITION

The Supplier selection and therefore the procurement of products and services is based in a competitive process. That means that solicitation documents shall be issue to several and different suppliers enabling an effective competition to achieve the Best Value for Money while guarantying the respect and care to the local market.  

This entails:

  • promoting a culture of neutral specifications (avoiding over/under-specification);
  • providing suppliers with adequate notification to ensure that there is sufficient time to participate in the procurement processes; and
  • ensuring the comprehensive, impartial and timely evaluation of offers.


It is a good practice to give feedback to the non-successful bidders, explaining them the reasons for not being selected to allow them to improve their processes.

§  TRANSPARENCY

Purchases are part of the joint action of many actors - headquarters, project managers, technical services, field staff, suppliers and communities - it is key, therefore, that each party know separately at any time the means and processes implemented to achieve procurement objectives. Both inside and outside the organization, procedures should be shared and available to ensure that each person or group can know and question the steps taken for each of the processes. Transparency does not mean that a humanitarian organization loses independence, but rather that it can reason the actions and clarify the principles that have guided it, accrediting the decisions made in the purchase of goods or services.


Transparency is also an important part of security management, since a perception of partiality or lack of transparency could lead to threats or increase risk for the teams in the ground.

§  PROPORTIONALITY

In the search for efficiency, aid agencies must diligently ensure principles guide procurement activities. It is strongly advised that there should be increases in control measures and procedures proportional to the value the contract or procurement. The higher that value, the more measures, resources, and stricter procedures will be required. In the same way, if the value is reduced, procedures should be more lax. This principle is the base of the different Procurement Procedures.

§  FAIRNESS (EQUAL TREATMENT AMONG ALL POTENTIAL SUPPLIERS)

Humanitarian aid organizations are generally important economic actors in the places in which they operate, due to the high volume of products and services involved in humanitarian operations. Normally aid organizations operate in very small or disrupted markets, so it is convenient to pay attention to the market assessments and keep it in mind in each context analysis.


Humanitarian organizations need to be aware of the local market composition and who are the different actors involved. When designing and implementing interventions, there is a need to assess and analyze local markets and supporting supply chains, in order to facilitate their recovery. This principle is intended to ensure that all potential suppliers have the same tools and information to compete fairly; agencies must be clear in the requirements and the criteria that we are going to use to award the contracts.

The equal treatment of suppliers does not mean that market categories that exclude or include certain suppliers cannot be made, but agencies must ensure that all of them have the same opportunities to be awarded.

§  SEGREGATION OF DUTIES

Segregation of duties is a core principle of internal control and must be preserved in all procurement actions. According to the principle of segregation of duties, no single individual or team shall control all the stages of procurement process[3].

For the sake of quality and control, segregating responsibilities during the purchase process helps not only to identify errors by adding review and oversight steps, but also limits the possibility of fraud, adding clarity and confidence in the process.

Having more than one person involved in the process helps, as well, to protect those with procurement responsibilities from vague accusations.

The best result of duties segregation is the involvement of different points of view, knowledge and ideas, making decisions more likely to be successful while everyone is informed and in agreement.


The table below shows different examples on how to ensure the Segregation of duties:

The person to:

Should not be the only person to:

Request an article and/or fill the PR


Approve the Purchase Order (PO)

Execute the contracting/acquisition procedure


Approve the Purchase Order or the Contract / Framework Agreement

Select the supplier


Approve the Purchase Order or the Contract / Framework Agreement

Approve the Purchase Order (PO)

Receive the goods / services, e.g., Approve a Goods Receipt Note

Execute the contracting/acquisition procedure


Receive the goods / services, e.g., Approve a Goods Receipt Note

Receive the goods / services, e.g., Approve a Goods Receipt Note


Create payment request / Prepare Payment Package / Authorize payment

Save the Children International. Procurement Manual 2.0 01.01.2020.

2.  Ethics

The humanitarian action has its own defacto code of conduct, that has been and continues to be the object of a great internal debate. This set of principles has led to the development of multiple norms, or even rules, that agencies should observe in the implementation of programs. A good compendium and example of those is the Sphere Project, both for its depth and for the high consensus achieved. This is based on the need to contribute to improving the humanitarian response, to assert the rights and meet the needs of the affected people in a dignified way.


There are - for example - codes of conduct, which are understood and signed by all employees which may include:

  • Staff do not use their authority or status for personal gain.
  • Staff maintain a high level of integrity and ethics in business relationships.
  • Staff use the resources and assets of the organization responsibly.
  • Staff do not accept personal gifts from suppliers or engage in any other anti-competitive conduct.
  • Staff acts and behaves in a professional manner as representative of the organization and donors, and avoids anything that could bring discredit to the organization or donors.

Each organization will establish controls, including disciplinary procedures, to manage any misconduct.


Applying the aforementioned standards and protocols in relevant ways and in specific operational contexts is an ongoing challenge for humanitarian organizations. The organizations, bound by these standards, have developed over the years a framework that enables their leaders and collaborators on the ground to act in accordance with these principles while applying tailored solutions and pragmatic approaches. These principles of action are usually understood as a guide, and may include the following:


  1. Humanitarian responsibility. "Do not harm" (prevention of negative impacts, we are guests, respect local cultures)
  2. Protection of victims. Presence with the victims as protection
  3. Collaboration with stakeholders (local, international): exchange know-how, optimization of resources, empowerment, sustainability
  4. Commitment to improve the education and training of our teams (national staff) and beneficiaries.
  5. Prioritization of the most vulnerable groups. Women, the elderly and children
  6. Maximum participation of the beneficiaries. Search for their autonomy, listening mechanisms
  7. Respect for the environment.
  8. Environmentally friendly technical solutions, R&D, impact analysis, community awareness
  9. Integrated approach to interventions/Coordination with other organizations


To guide and enforce these principles, specific policies have been drafted, addressing each issue in depth, explaining the why and how, and establishing corrective measures. Among the most common internal policies are:


“Whistle-blower” Protection Policy: Protection against retaliation for reporting misconduct and for cooperating with duly authorized audits and investigations.


Policy on Harassment, Sexual Harassment and Abuse of Authority: ensuring that all its workplaces are free from abuse, offensive behavior, harassment, abuse of authority and discrimination. Promoting a work culture in which every employee understands, and is able to carry out, his/her personal responsibilities for maintaining the dignity of work colleagues.


Conflict of interest

Conflict of Interest can be defined as any actual, perceived or potential incompatibility between an Organization employee’s private interests and either his/her official duties or the interests of the Organization. It includes, but it is not limited to, circumstances in which an Organization employee, directly or indirectly, would appear to benefit improperly, or allow a third party to benefit improperly, from his/her association in the management or the holding of a financial interest in an enterprise that engages in any business or transaction with the Organization.

Examples of Conflicts of Interest;

  • Accepting gifts from individuals or external entities with which the Organization has a relationship, including vendors, consultants and governments.
  • Accepting entertainment from individuals and organizations which seek to do business with the Organization or influence it.
  • Supporting an external organization through your work, major financial donations, or by lending your name or reputation to an effort.
  • Using the reputation of the Organization for personal benefit.
  • A direct financial or family relationship with individual or external entities with which the organization has a relationship.


It is not necessarily enough to ensure that those principles are respected internally; they have to be enforced them in the relations with third parties. To facilitate this, it is common to include in the contracts or agreements specific policies making these third parties to be adhered to, by signing them. Example of those policies are: 


  • Anti-Fraud and Anti-Corruption Policy
  • Prevention against Child-labor
  • Prevention against Modern slavery
  • Waste management best practices
  • Antiterrorism


These policies are included, or referenced as well, in the Terms & Conditions (T&C) attach to any PO where should inform as well, about the feedback mechanism in place, allowing the suppliers to inform about any potential misuse or deviation perceived.


When possible is a best practice to include the ethical component when we publish the tenders, and use its compliance as part of the selection criteria, even though in some contexts it is not always easy to evaluate them.  There could be suppliers that do not have standard certifications - - nor they are used to pay attention to this kind of policies. That´s when it becomes more important to have a good Market Analysis and pay regular visits to our suppliers, in order to be able to evaluate their way of working.


Good Working Practices with Suppliers,

  • Business should be conducted during normal working hours
  • Meetings with suppliers should be with minimum two organization staff members
  • Suppliers should not be invited to organization staff offices but to the cafeteria or meeting room
  • Meetings should have an agenda and minutes
  • Ensure sufficient distance when working with suppliers, especially when the same one for many years
  • Make sure you are aware of relevant policies and how to apply organization’s ethical principles in your work


Ethics is about doing the "right thing" even beyond the workplace. It is important to be vigilant and not relax your own behavior or that of colleagues, common reasons given as ‘excuses’ for breach of ethics can be:

  • “I have to cut corners to meet my goal.”
  • “I lack the time/resources to do what is right.”
  • “My peers expect me to act this way.”
  • “My superiors want results.”
  • “I don’t think it is really wrong or illegal.”
  • “Others would think that it is a good choice.”
  • “No one will ever know the difference.”
  • “I am afraid to do what I know is right.”
  • “This is how it has always been done.”
  • “Let’s be practical.”


It is important to be aware of possible symptoms of unethical behavior and watch out for potential “Red flags”. Some examples may be the following:

  • Deviations from correct procedures
  • Poor record keeping / Missing files
  • Excessive secrecy
  • Reluctance to delegate
  • Protective of certain suppliers
  • Resistance to audit
  • Unnecessary meetings with suppliers
  • Overcharging by the supplier


Ethics - Transparency is everyone’s business

  • Respect organization’s rules and regulations
  • Always bear organization’s interest in mind
  • Apply principles of professionalism, efficiency and integrity
  • When managing a contract, balance the need to get the supplier’ trust with the one of keeping distances
  • Refrain from sharing confidential information
  • Act in the interest of the organization but taking into account rules and procedures
  • Try to understand the “spirit of the law” and what the rationale behind the rules is
  • Be alert about potential “red flags”
  • Openly discuss whenever facing difficulties
  • Share procurement knowledge within your unit
  • Increase the awareness of ethical values in your unit
  • Ensure compliance with correct procurement procedures.
  • Increase your knowledge of procurement rules and procedures
  • Be aware that there are many documents that might help you to deal with “grey areas”
  • Be sure to document and file any deviation from the correct rules
  • Set a good example
  • If in doubt: ask!


3.  Procurement Management

3.1.            Market Categories

In the humanitarian sector is common to work with the concept of market categories, to organize the set of rules that applies to the different procurements processes all along a project or intervention.  


Basically, market categories are a convention that allows a more structured way of compiling and combining purchases due to their nature and specificities, and to ensure that the procurement principles are followed while facilitating the procurement process by establishing standards and tools.  In addition, it is possible that the different categories could have different thresholds. In general, there are four main categories or “markets” humanitarian organizations work with, however variations and additional categories can and do exist.

§  Goods/Supplies

The Goods or Supplies Category includes the purchase of tangible items and/or its interrelated sets. In general, a market is considered as Goods/Supplies when there is a transfer of ownership of tangible products.


A product is defined by two elements:

  • Technical specification or detailed description (including images if necessary)
  • Purchase Unit (Kg, Lt, piece, etc)


The Total Cost of Ownership  - All the costs associated to production, preparation, installation, maintenance and disposal - related to the purchased products, can be considered as part of Goods Market if the additional services have been procured, delivered and invoiced together and as long as these costs remain lower compared to the total purchase cost.


The typical purchases in the Goods Market are; Food, tools, construction materials, office supplies, equipment, etc

§  Construction/Maintenance

Construction/Maintenance is a market category that includes the design of the work and/or its execution in accordance with the previously specified requirements.


It usually implies the visit, with the possible bidders, to the place where the works should be performed, allowing them to better understand what is needed and the requirements in order to make a more accurate offer. As the works usually takes some time to be finalized, an execution chronogram must to be included in the plans as well as moments where inspection visits have to be performed.


Common examples are; a building rehabilitation (in full or part), any kind of construction, road sections, etc.

§  Services

Services is a market category that includes the intellectual and non-intellectual services that do not fit in Goods and Works Markets definitions. Evaluations, technical assistance, or any other activity not implying the transfer of a tangible product are considered as a Service.


Under this market its possible to hire the services of Dispatchers, lawyers, Consultants, Translation services, Transport, etc.

§  Property/Rental

It refers to the rental of real state, whether land or buildings, regardless of their purpose.


This market possesses certain characteristics that makes the sourcing and selection process slightly different from the other markets.

  • There is not suppliers or provider but Landlords
  • There is not transfer but right of use for a period of time
  • There are specific laws applying to it

However, what really makes it different is the difficulty to measure two or more premises exactly by the same criteria, while there are some aspects as the location, the structure, the internal distribution, security considerations, that makes the selection complex. The logistician has to evaluate the local market (actively) and choose the more economical option that could fit as much initial requisites as possible.

§  Hybrid markets

There are cases where a procurement implies a combination of two markets. In these cases, the market rules that applies are defined in base of the market with the highest cost.

For example, a procurement that implies Goods (Timber) and Services (Transport by land) will be defined as Goods if the cost of Timber is highest then the transport. However, If the transport cost exceeds the Timber cost the rules that applies are the ones stated for the Services Market.


3.2.            Procurement Strategy and Planning


It is fundamental to develop a strategy for the successful acquisition of everything needed to facilitate the organization´s operations. This strategy must observe the core procurement principles and should be the result of the different procurement plans prepared for any action, program or project where the needs are identified.


A strategy will be based on market and context analysis results, knowledge from where we can build the best approaches to manage the acquisitions. Knowing what and where supplies are needed, agencies can better choose the supply strategy, paying attention to the total cost of ownership (e.g., initial purchase, shipping, operation, maintenance and disposal costs), the special field conditions and the real possibilities to acquire (or ship) the materials and services needed.


In other words, if agencies do not approach procurement strategically, they run the risk of not being able to accommodate all needs (or can’t do it in accordance with our budgets restrictions) which can lead to financial, reputational or even security risks.


A strategy has to be flexible and ready to be revised each time a new condition arises, either in the requirements or in the context surround the organization. For this reason, each intervention must to have a procurement plan, as the tool that reflects the minimum information on the anticipated needs, allowing:


  • improve sourcing and thereby increase competition;
  • mitigate the risk of redundancy, reducing transaction costs and prices through the consolidation of procurement actions;
  • increase the efficient use of resources by avoiding last minute actions;
  • prevent non-compliance with regulations, rules and procedures due to oversight or time constraints.


Procurement plans are the base and precondition to launch any procurement process. They must be prepared before the start of any action, program or project, and must be based on analysis of budget, beneficiary numbers and activities. The exercise is a common effort among all the participants, including the who identify the needs, who will procure and that will control the budget to concretize the details of:


  • description of goods/services to be procured;
  • estimated costs and quantities of the needed goods and services;
  • categories of goods and services;
  • solicitation methods;
  • target delivery dates (timeline/schedule).


It is possible that aid organizations cannot not foresee all needs throughout the project duration, and that any given plan may undergo slight or deep modifications due the volatile situations on the ground. However, there are always recurring requirements that can be anticipated, or at least reasonable estimates based in past experiences from where we can extract information to assure that the activities could be done in a timely manner.


It is key to clearly define the requirements for every needed good or service at the planning phase, to better understand the function, performance and technical specifications that will be required to cover the requester needs, to determine the best solution to fit them and to stablish the evaluation criteria to assure the quality standards


3.3.            Common Documents in Procurement

The following documents can have different names in each organization.

Step in the procurement Process

Acronym

Document´s Name

Definition

Sourcing

BOQ

Bill Of Quantities

A document used in tendering in the construction industry in which materials, parts, and labor (and their costs) are itemized

EOI

request for Expression Of Interest

A formal notification aimed at determining the capacity, interest, and availability of potential suppliers in the market to deliver the goods and services required

RFI

Request For Information

Is used to supplement the writing of the technical annexes to the solicitation documents and ensure those are accurate and have a comprehensive set of requirements.

Requisition

PR

Purchase Request

The standard and official form to request a purchase

SOW

Scope of Work

Is used in all types of civil, mechanical, electrical or other engineering/installation services for works, as well as the supply of construction materials and equipment included therein. It provides all information required to allow the contractor to undertake the works.

TOR

Terms of Reference

A description of the work to be performed, the level of quality and effort, the timeline and the deliverables, used to define the performance requirements for services that cannot easily quantified.

-

Technical Specifications

A document drawn up by the Contracting Authority setting out its requirements and/or objectives in respect of the provision of supplies, specifying, where relevant, the methods and resources to be used and/or results to be achieved.

Solicitation

RFQ

Request For Quotation

A written request made to suppliers for the purchase of goods or services, up to a maximum value stablished by the organization.

ITB

Invitation To Bid

A letter sent to selected candidates in a restricted procedure or competitive negotiated procedure inviting them to submit a bid. This term is use interchangeably with “RFQ” in this guide.

RFP

Request For Proposal

A written request made to suppliers for complex purchase exceeding the maximum value stablished by the organization. This term is use interchangeably with “Tender Dossier” in this guide.

 

Tender Dossier

The dossier compiled by the Contracting Authority and containing all the documents needed to prepare and submit a tender.

Evaluation

ET

Evaluation Table

Tool aimed to compare the different bids received and present them in a Comparative Table.

-

Tender Report

Document where present every detail about a tender process, including a comparative table and a reasoned proposition to award the contract

Ordering & Contracting

PO:

Purchase Order

A financial commitment that confirms the purchase details (Units, quantity, price, delivery time & Location, etc), officialising the Order

T&C

Terms & Conditions

The applicable rules governing the purchase of a product, service or works.

-

Contract

Legally binding agreement between the organization and the supplier. It defines the Terms & Conditions for the good and services provision, as well as the signatories related rights and obligations. (see Contracts).

LTA or FWA

Long-Term or Framework Agreement

A contract concluded between a Contracting Authority and an economic operator for the purpose of laying down the essential terms governing a series of specific contracts to be awarded during a given period, in particular as regards the duration, subject, prices, conditions of performance and the quantities envisaged. ( see LTAs)

Reception

DN

Delivery note

Documentary proof that the supplier commitments have been fulfilled.

RN

Reception note

Documentary evidence of the transfer of responsibility of a cargo.

-

Commercial Invoice

A document that state the parties involved in the transaction, describe the goods purchased and indicate their value.


Documentation management

Each specific purchase will need to be analyzed from the perspective of the organization's own procurement procedures, as well as from that of the funding agency's requirements.

Every procurement process must be justified and scrupulously documented, having its own dossier containing all the documents related to a procedure, whether simple or complex. In this way, we will call the Procurement Dossier to a set of documents that justifies the steps taken in a particular procedure. Not all dossiers will be the same in volume and complexity. (see Most Common Procurement Procedures). At the same time, those Dossiers have to be preserved for later use (see Documentation management, Files)


3.4.            Procurement Process

The procurement is common - almost everyone does it automatically every day. However, for a procurement officer procurement is a challenge in itself. Humanitarian logisticians purchase using funds provided by external donors to buy items/services defined by other colleagues with the aim to cover beneficiary needs. In order to align all those interests becomes essential to have some norms and tools.


In volatile context, with all the external and internal challenges and taking in consideration the capacity to impact the local market that the humanitarian aid has, is critical to have and implement standards over the whole process that could guide and ensure each of the Procurement Principles above.


Every coherent procurement process, regardless its aim or dimension, will have always six basic steps.

o   1. Sourcing and Identifying Vendors  

The procurement actions are based in a fair and transparent competition among different suppliers; what implies that a Market Research should be done in order to collect information about the desired product and the potential suppliers that could provide it.


Market research is used to identify suppliers, assist in the development of Technical Specifications, TORs and SOWs, ascertain freely available pricing information (e.g., company catalogues) and obtain information on available technology [4].


It is convenient to have a supplier database from which quotes are requested. If no such database exists, it is advisable to create one. A supplier database needs to be updated routinely, and agencies may look to platforms or sources of information such as:


  • Specialized journals;
  • Chambers of Commerce
  • Business meetings and seminars;
  • Professional associations.
  • External supplier rosters;
  • Online communities;
  • Yellow pages;
  • Search engine research.
  • Others


In the process of identifying suppliers, agencies may wish to follow a formal process. Many agencies issue official documents, including:


Request for Information (RFI)

Request for Expression of Interest (EOI)


These formal requests should be based on templates that will allow to build a more accurate opinion about the product or service that we pretend to acquire and its availability in the context we are working.


o   2. Product/Service Requisition (building criteria)

Any procurement for goods or services should be built upon needs. Once the needs are identified measured and planned, by a team or individual within an agency, should be formally communicated to the organization´s procurement team, usually through a formally defined a Purchase Request specifying:

  • The requesting unit
  • The requirements, including the criteria for evaluation.
  • The quantity
  • The Estimated cost or the Maximum Authorized Amount to be spent. (If possible)
  • The Delivery date and location.
  • Confirmation that funds are available.


A key component of any purchase requisition should be the inclusion of technical specifications. There are many ways for suppliers to define technical specification. These might include:

  • Physical Goods:
    • Photographs, material components, performance needs (example: storage space of a computer, volume of a bucket), quality standards such as ISO
  • Construction:
    • Blueprints, maps, material construction components


In other words, the requester should fill the format with the information agreed during planning, (if the plan was not done, the request may have some delays while the feasibility is assessed.)


The PR is usually the standard and official form to request a purchase. Basically, is where the different members involved in the procurement process agree and validate the details, turning these into commitments:


  • Requester Unit undertakes that all information included in the PR is accurate and sufficient. Attaching detailed specifications if necessary.
  • Procurement Unit undertakes to provide the requested Goods or services as stablished in the PR respecting quality, price and lead time.
  • Financial Unit undertakes to release the available funds.


One of the best ways to assure that each request is well presented, understood and agreed among all the Units involve in the process, is create a coordination space to do it. The best approach is the implementation of a recurrent meeting between requestors, heads of unit, and the procurement where the requests can be discussed and validated.


o   3. Solicitation

Once potential suppliers have been selected (or before launching an open bidding process), solicitation documents must be carefully prepared. The way in which these offers are solicited and received conditions the rest of the process; there is an inverse and direct relationship between what is solicited and what is offered. Procurement teams will only choose from the options offered by the providers, but what is offered largely depends on how and what the providers have been asked to offer. That is why the specifications of required products or services must be clear, and the terms of the requested bid must be well defined.


Supplier selection criteria must be established and communicated clearly and in advance to suppliers, ensuring equal treatment. It is important to take time to establish and/or understand the selection criteria since the supplier selection criteria cannot be modified or changed, once communicated to the suppliers.


The documents involved in the solicitation process can be different depending on the type of competition that applies (see Procurement Procedures) and the nature and complexity of the good and services being procure. It is important that all documentation contains details on procedural, technical, financial and contractual components, which suppliers must follow when submitting their offers. They are build based on templates, customized to fit the specificities of the procedure undertaken and completed with the details applicable to each solicitation.


In general, any Solicitation document, no matter the procedure, will contain;


What is Required

  • Depending on the nature:

For goods; Technical specifications (Functional, conformance and performance Specifications for products)

For services; Terms of Reference (TOR) (background, objectives, deliverables, standards to be met, performance evaluation method, timelines, etc.)

For construction works or services; Statement of works (SOW) shall provide all information required to allow the contractor to undertake the works (e.g., location, time schedules for the execution of the works, relevant information about the construction site and other technical requirements that are deemed necessary).

  • Quantities
  • Expected Delivery Conditions; means, times and place.


Instruction to suppliers

  • Instructions for preparation and submission, submission language.
  • Timing: deadline for submission, offer validity and expected award times.
  • Details of pre-bid where applicable. (meetings/site visits, and/or samples/ demonstrations)
  • Method of evaluation and evaluation criteria.
  • Payment terms.
  • Contact information.


The applicable Terms & Conditions

  • Ethical policies to be adhered by the supplier
  • Special conditions applicable as; Termination; Trade Terms; Inspection; Warranties; Rights and Obligations; Remedies; Subcontracting; etc.


The solicitation document must to be distributed simultaneously among the preselected suppliers with sufficient time to analyze and properly build offers. The solicitation document could contain a standard submission format facilitating the comparison among the offers during the evaluation phase.



o   4. Evaluation & Awarding

Many agencies may choose to use what is known as a Bid Evaluation Committee/Panel to properly facilitate the process of analyzing and scoring incoming offers in a fair and transparent way. After properly recording every step undertaken during Solicitation process, and before bids are open, the Evaluation Committee/Panel will join together to study the offers. The Evaluation Panel composition could be as simple as two people (requester and purchaser) performing and informal evaluation or be regulated formally and integrated by teams of different departments. No matter the value of the procurement or procedure followed, there should always be a set of people to respect the segregation of duties principle. In the case of the most restrictive procedure, is common to form it at the very beginning of the process, officializing it by signing a “Declaration of Objectivity and Confidentially” and /or a “Disclosure of Conflict of Interest”.


The offers should be evaluated using the criteria and weight of each previously communicated.  Common offer evaluation criteria might include:


  • Competitive prices
  • Ability to meet specifications and standards
  • Product availability and ability to meet the requested delivery date
  • Product and service quality
  • Performance and durability of products
  • Reliable delivery methods
  • Quality control methods and practices
  • Technical and leadership skills
  • Ability to provide niche or unique products and / or to design concepts
  • Financial stability and credit power
  • Payment conditions / requirements
  • Compatibility with existing products
  • Distribution / storage facilities and adequate resources
  • Availability of spare parts
  • Guarantee, insurance, and supply commitment
  • Proven ability and experience
  • Availability of service support resources
  • Previous experience and demonstrated performance in supplying the products / services to be purchased (to be verified in previous certificates of compliance. So, “bad past experiences” must be documented).
  • Security


All evaluation criteria should be:

  • Objective - criteria that are verifiable and designed to measure facts rather than assumptions and promises from the supplier. Objective criteria are tangible, with little likelihood of being construed differently by different suppliers;
  • Unambiguous - there should be no confusion or overlap in the criteria selection, description and evaluation;
  • Reliable - clear and measurable criteria that can be evaluated consistently across multiple submissions and evaluators;
  • Fair - criteria that do not unduly exclude suppliers from the procurement or give undue advantage to a specific supplier;
  • Balanced - criteria with appropriate and defensible weightings when viewed objectively in the context of the procurement action.


During the evaluation process, it is necessary to balance various tangible and intangible factors, some of which may conflict with each other. Methods for determining the extent to which a potential supplier can meet the criteria include:


  • Visits to the supplier by the management and/or evaluation team (to visit the factory, warehouse, stock, production equipment and supplier equipment).
  • Confirmation of the status of the quality system, either through an on-site assessment, a written report, or by requesting a quality system registration certificate as ISO certification or any other.
  • Conversations with/recommendations from other NGOs served by the provider.
  • Obtaining financial reports available to the public (available in some countries) and checking negative files.
  • Evaluation (through laboratory tests or validation tests, for example) of samples obtained from the supplier. (see Quality Assurance)


To be able to present the evaluation results, is common practice to make a summary document, either in the form of a comparative table or a full report that has be signed by all the member of the Evaluation Panel. In any case, any summary document must have a reasoned recommendation on the supplier selection and contain as many explanations as necessary about this selection.


Once the proposal to award a supplier has been validated, the selection of the suggested supplier should be validated by the requisite internal approval process of the agency. The award decision should be communicated to the winning supplier, and unsuccessful suppliers shall be notified establishing a mechanism able to debrief them and take note of any possible complaint.

o   5. Ordering & Contracting

Each order has to be formalized by modifying the standard templates for this purpose, the Contract or the simpler Purchase Order.


The PO is a financial commitment that confirms the purchase details (Units, quantity, price, delivery time & Location, etc), officialising the Order.

The PO is used for simpler orders, one-off purchase and smaller amounts, where there is no need to define any complex situation, and the purchase represent low risks for the organization.


Contracts are legally binding agreements between the organization and the suppliers. They define the Terms & Conditions for the good and services provision, as well as the signatories related rights and obligations. (see Contracts). Contracts are used when there is a need to specify the conditions in a complex order (partial deliveries, different timings or location, special conditions of the product, high financial volume or potential risk for the organization, etc) and always for a work or a specialized Service


Some agencies my prefer the use of some form of a Long-Term Agreement (LTA), where by a supplier is pre-vetted using the standard solicitation process, but has an open-ended contract for delivery of goods and services. Requesting agencies can use the PO as the confirmation to use the conditions applicable to it and concretizing, units, quantities, delivery details, etc.  



The organization must establish a threshold beyond which the relationship can no longer be formalized through a PO and a contract becomes necessary. However, the Organization´s Terms & Conditions applies in any case, therefore, a simplified T&C must to be communicated (attached to the PO) and Respected by both parties. The act of signing the PO - and the organization´s T&C- by the supplier makes the PO become a simplified contract.


o   6. Reception & Payment

The order documents (PO or contract) must clearly indicate the delivery conditions, who will assume responsibility for moving goods, when and where it is intended to transfer responsibility for the products and all the necessary details to plan accordingly and put in place any necessary means in terms of transport and logistics.


Delivery planning involves the review and consideration of all logistics related aspects of the procurement process. It starts at the needs assessment phase by considering the desired result of the Requesting Unit and the end user and identifying the actions needed to ensure the successful completion of the activity. [5]


The transfer of responsibility between the seller/carrier and the agency is a key moment in the procurement process. The transfer of responsibility can be done in the manufacturer/seller premises, or be undertaken fully by the supplier who will be responsible transporting the cargo to the agreed destination, either the agency premises, warehouse or other and in special cases directly to the beneficiaries. The most standard used method of defining the method and location of the transfer of responsibilities is through defining Incoterms in the procurement contract. Incoterms are only applicable for international procurements however, so the transfer of responsibility in domestic procurement may need to be spelled out explicitly.


In every case, the transfer of responsibility has to be clearly recorded through the standard set of shipping documents.


For simpler deliveries, in addition to the above, or when the Supplier is in charge to delivery at final destination, is common to use a Delivery Note that must contain at least:

  • The name and contact details of the seller
  • Name and contact details of the purchaser
  • Date of issue
  • Date of delivery of the goods
  • A description of the goods contained in the order
  • The quantity of each type of goods.


When goods are delivered, the recipient should perform a physical inspection of the packages against all delivery documents to ensure that they fully conform to the requirements of the contract, by checking


The Quantity: That the number received is the same as the one written in the documents and correspond to number requested in the PO.

The Quality: That the product received is in the conditions mentioned in both the shipping documents and matches what was defined in the procurement contract, has not received any damage and corresponds to the ordered specifications


If any deviation is found in either of these two elements, it is crucial that it is mentioned in writing in the delivery documents, since otherwise it will be very difficult to claim later the deviations or damage suffered.


The transfer of responsibility becomes effective when the representative of the organization signs the Delivery Note. The signed Delivery Note, the PO and the Commercial Invoice will be the minimum mandatory documents to process payment.


In the case that the supplier/carrier is not able to provide any delivery document nor even a Delivery Note, becomes essential to create and sign a Reception Note, officializing the transfer of responsibility over the cargo and stating any potential deviation.


3.5.            Procurement Procedures

A procurement procedure is an internal process stablished by every organization to set up the minimum requirements to ensure that the purchases made are compatible with the basic principles of responsibility, accountability, transparency, equal treatment of suppliers and proportionality, while guaranteeing the Best value for money.

The procurement procedures ensure objectivity during the supplier awarding process. However, the awarding criteria themselves will be adapted to the context, program needs and donor regulations.


A standard procurement procedure involves the following major steps:

  • Suppliers’ survey and /or publication (tender, Expression of Interest…)
  • Collection of technical/financial offers
  • Internal review of survey (offers analysis & comparison)
  • Approval of the supplier selection
  • Review of the documentation and financial commitment authorization
  • Publication/Communication of results
  • Order and/or contract’s signature
  • Receipt/transport of the purchase
  • Payment to the supplier (based on previously agreed conditions)
  • Final update, review of purchase dossier and its archiving.


Purchases are accompanied by significant cash flows, so the impact they generate in the contexts where they work, and the effect they may have on the beneficiaries, must always be taken into account, since the organization must be accountable not only to the donors but also the communities served. To do this, steps and tools are established that guide the procurement entity through the procurement process since this makes the characteristics of the product, work or service to be acquired better defined, competitive prices are achieved avoiding speculation and it is carried out a traceability of the process, giving visibility and transparency to the flow of money.

§  Most Common Procurement Procedures

For normal operations (not first phase of an emergency response), the procurement method is chosen based on a defined framework with value thresholds.  The framework includes, as a minimum, levels for Direct Purchase, Competitive Quotations and Tendering.  The levels of the thresholds are based on the context, taking into account monetary values; frequency of transactions; lead time to process the procurement and organization’s risk tolerance. The threshold set is continuously respected throughout the normal operations and reflects donor and INGO requirements. [6]


Although each organization and/or donor uses different names to the different purchasing procedures, they all share the same logic and basic principles. In this guide we are going to name the different procedures as follows.


  • Direct Purchase (single quotation)
  • Competitive, Negotiated procedure
  • Tender
    • Open or restricted
    • National or International

o   Direct Purchase or Single Quotation Procedure


The direct or single quotation procedure is the most relaxed one in terms of documentation, evaluation and requirements, as it is done for purchases with a low total value. Its main characteristic is that the goods or services are acquired without prior documented comparison of prices or purchase conditions, which makes the purchasing process relatively quick and easy.

The responsible for procurement will buy from the most advantageous supplier identified in the supplier catalogue. If the ordered article is not listed in the supplier catalogue or is the first time to purchase a specific item or service, is mandatory or at least a good practice to ask a supplier a RFI that will help to decide and plan the purchase more accurately and make an informal survey of the market (a call, visit or email to different suppliers).


In any case, the responsible for procurement has to contact the supplier to confirm the price and assure the criteria of satisfactory quality, delivery times, competitive market prices and correspondence with the available budget.


A purchase dossier would contain:

  • The Purchase Order signed by the relevant persons
  • Copy of the invoice
  • Proof of delivery of the items:
    • supplier’s Delivery Note,
    • or Internal Reception Note when delivered to the stock without supplier delivery note,
    • or Internal Delivery Note when delivered to the requester without supplier delivery note.
    • or the original invoice with a formal approval written on it like: “Purchase Dossier reference + “RECEPTION APPROVAL” + date + name and position of the person receiving the goods/services + signature”.



Images: Example of PR and PO

o   Competitive, Negotiated Procedure


For higher amounts, more information is required to objectively evaluate and justify the best quality-price ratio. In order to do so, a documented comparison of prices and purchase conditions must be carried out prior to the purchase itself.


Once the terms of the purchase request have been agreed, an official and detailed RFQ must be prepared in writing, which will be sent to at least 3 different suppliers, or the sufficient number of candidates to ensure a genuine competition. The RFQ must set a date for the offer’s delivery, all the technical specification and selection criteria that will apply in the process. In the event that three quotes cannot be obtained, the purchaser will attach the quote requests sent to the different suppliers to justify that it was not possible to collect the three quotations. All quotations must be complete and must clearly indicate the name and address of the suppliers, as well as the offer validity.

                                                                                                                                    

Exceptions might apply when a quotation is when an exactly similar purchase previously made and the quotations received back then are still valid.



A quotation for Submersible pumps in ACF-Syria 2016.


Quotations are analyzed based on the selection criteria mentioned in the RFQ and the results will be presented in a bid matrix. The supplier selection is generally the joint responsibility of the Procurement unit and the Requester.


Before the financial commitment becomes effective, some agencies choose to add an additional layer of validation, whereby the heads of the Procurement and Financial departments approve the purchase, certifying that both the process followed and the financial allocation are correct. In the case of contracts with a high amount, the validation of the preidentified relevant persons is usually mandatory.


A purchase dossier would contain:

  • The originals of the different suppliers’ quotations received and the Request for those quotations (especially if no quotes were received)
  • The negotiated procedure evaluation table with all necessary validations, along with an Explanatory Note, if relevant.
  • The PO or Contract signed by the parties
  • Copy of the invoice mentioning “Purchase dossier reference[i] + paid + payment method + date”
  • Proof of delivery of the products:
    • supplier’s Delivery Note,
    • or Reception Note when delivered to the stock without a supplier delivery note,
    • or internal Delivery Note when delivered to the requester without a supplier delivery note.

o   Public/Open Tenders

The comparative bidding process is the system for acquiring products, services or works, by requesting proposals (RFP/Tender Dossier) from “bidders” and choosing the supplier from the offers received. As in the previous procedures, the selection criteria must be established and communicated in advance to potential bidders.

Unlike the negotiated procedure whereby the organization recognizes at least three (3) potential suppliers from whom it requests a quote, a public or open tender process is public and anyone can submit an offer.

The offers are evaluated by a tender evaluation committee created at the beginning of the process. All members of the evaluation committee and the employees involved in the bidding process have the obligation to understand and sign the Declaration of Objectivity and Confidentiality or a similar document.


All documents necessary for the tender must be prepared and have been verified before the start of the tender. These documents are generally sent to headquarters for approval prior to the publication of the tender.


An open national tender might consist of:

  • Creation of the evaluation committee
  • Definition of the supplier selection criteria
  • Tender Notice publication in the media
  • Sending the Tender Dossier/RFP to interested suppliers who have requested it
  • Complete the List of Applicants and Bidders
  • Evaluation of all bids received using the Bid Evaluation Report
  • Complete the Report to look for validations.
  • Award the contract to the chosen provider and inform those not chosen
  • Sign the contract


[1] Source: Mangan, J., Lalwani, C. and Butcher, T. 2008, "Global Logistics and Supply Chain Management", Hoboken, NJ, USA, John Wiley and Sons, Inc.


[2] ULS Procurement Handbook. Universal Logistics Standards

https://handbook.ul-standards.org/en/humlog/#sec001


[3] Good and Services Procurement Manual. World Food Program (WFP), 2020.

 https://gsprocurement.manuals.wfp.org

[4] Good and Services Procurement Manual. World Food Program (WFP), 2020.

 https://gsprocurement.manuals.wfp.org

[5] Good and Services Procurement Manual. World Food Program (WFP), 2020.

 https://gsprocurement.manuals.wfp.org

[6] Procurement Standards. PARCEL Project (Partner Capacity Enhancement in Logistics)

 https://parcelproject.org/resources/logistics-standards/procurement/


 







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