Supply Chain Management Policy For Accounting Officers PDF

SUPPLY CHAIN MANAGEMENT POLICY FOR ACCOUNTING OFFICERS  AN OVERVIEW Fair Equitable Transparent Competitive, and Cost effective  AN OVERVIEW The Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA] Treasury Regulatio...

SUPPLY CHAIN MANAGEMENT POLICY FOR ACCOUNTING OFFICERS  AN OVERVIEW Fair Equitable Transparent Competitive, and Cost effective  AN OVERVIEW The Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA] Treasury Regulations: SCM Chapter 16A The Framework for Supply Chain Management dated December 2003, issued by National Treasury National Treasury's Supply Chain Management Guide for Accounting Authorities, dated February 2004 The Policy Strategy to guide uniformity in Procurement Reform Process in Government, dated July 2003 The Broad-Based Black Economic Empowerment Act, (Act No. 53 of 2003), and its codes of good practice as promulgated on 9 February 2007 The Preferential Procurement Policy Framework Act, 2000 (Act No. 5 of 2000) Promotion of Access to Information Act, 2000 (Act No. 2 of 2000)  SUPPLY CHAIN MANAGEMENT Supply Chain Management is an integrated part of financial management, intended to introduce international best practices. A collaborative strategy to integrate procurement and provisioning processes so as to: Eliminate non-value added cost, Infrastructure, time and Activities in a way that will serve end users better and more competitively  PURPOSE OF THE POLICY The purpose of this policy on Supply Chain Management (SCM) is to give effect to the five pillars of procurement Modernising the management of the public sector Make it more people-friendly and sensitive to meeting the needs of the communities it serves The accountability chain is the most critical driver for improving financial management in the public sector. An accounting officer/authority who fails to implement the measures suggested in Guideline documents may be personally liable in the event of scrutiny by the Standing Committee on Public Accounts (SCOPA) or the Provincial Accounts Committee  SCM POLICY OBJECTIVES Transform government procurement and provisioning practices into an integrated SCM function; Introduce a systematic approach for the appointment of consultants; Create a common understanding and interpretation of the preferential procurement policy; and Promote the consistent application of ‘best practices’ throughout government’s supply chain.  SCM FUNCTION The introduction of an integrated SCM function will address: The inefficiencies in government’s current method of procurement, Contract management, Inventory/asset control and obsolescence planning THE INTEGRATED SCM FUNCTION Demand management Acquisition management Logistics management Disposal management Supply chain performance  DEMAND MANAGEMENT: This is the beginning of the supply chain where: a needs assessment to ensure that goods or services are acquired in order to deliver the agreed service is done; Specifications are precisely determined; Requirements are linked to the budget; and The supplying industry has been analysed. This phase will bring the supply chain practitioner close to the end user, to ensure that value for money is achieved. DEMAND MANAGEMENT  ACQUISITIONING MANAGEMENT Procedural considerations are: To decide on the manner in which the market will be approached; To establish the total cost of ownership of a particular type of asset; To ensure that bid documentation is complete, including evaluation criteria; To evaluate bids in accordance with published criteria; and To ensure that proper contract documents are signed. ACQUISITION MANAGEMENT  LOGISTICS MANAGEMENT This aspect addresses: The setting of inventory levels; Receiving and distribution of material; Stores, warehouse and transport management; and The review of vendor performance. From these processes, the financial system should be activated to generate payments. LOGISTICS MANAGEMENT  DISPOSAL MANAGEMENT At this stage consideration should be given to: Obsolescence planning; Maintaining a data base of redundant material; Inspecting material for potential re-use; Determining a disposal strategy; and Executing the physical disposal process. ASSET DISPOSAL MANAGEMENT  SCM PERFORMANCE This is a monitoring process, undertaking a retrospective analysis to determine whether the proper processes have been followed and whether the desired objectives were achieved. Some of the issues that may be reviewed are: Compliance to norms and standards; Cost efficiency of SCM process (i.e. the cost of the process itself); and Whether supply chain practices are consistent with Government’s broader policy focus. SCM PERFORMANCE RISK MANAGEMENT  IMPLEMENTATION STRATEGY INSTITUTIONS Accounting officers/authorities are fully responsible and should be held accountable for any expenditures relating to SCM within their line of responsibility. Any expenditure incurred should be subject to appropriate regulation and accounting officers’/authorities’ directives and procedures. It is the responsibility of each accounting officer/authority to work out the detailed implementation of the principles contained in the SCM policy The development of a world-class professional SCM system should result in continuing improvement in affordability and value for money  INSTITUTIONS In dealing with suppliers and potential suppliers, institutions should: Preserve the highest standards of honesty, integrity, impartiality and objectivity; Be fair, efficient, firm and courteous; Achieve the highest professional standards in the awarding of contracts, so as to maximise value for money while adhering to international standards; Provide clear specifications for requirements which encourage innovation and refer, where appropriate, to relevant technical and other standards;  INSTITUTIONS In dealing with suppliers and potential suppliers, institutions should: Make available as much information as suppliers need to respond to the bidding process and to define and publicise procurement contact points; Manage the bidding process so that genuine competition is preserved and discrimination is avoided; Make available the broad criteria intended for the evaluation of bids, to evaluate bids objectively and to notify the outcome promptly;  INSTITUTIONS In dealing with suppliers and potential suppliers, institutions should: Pay promptly for work done in accordance to standards as set by a legal and binding contract; and Respond promptly, courteously and efficiently to suggestions, enquiries and complaints. Within the bounds of commercial confidentiality, to debrief unsuccessful bidders of the outcome of the bidding process so as to facilitate better performance on future occasions; Achieve the highest professional standards in the management of contracts;  INSTITUTIONS In furthering these principles, labour standards should not be compromised Suppliers must demonstrate "good standing" as far as all their tax, levy and service charge obligations are concerned as a prerequisite for doing business with Government. Capacity building would include the establishment of SCM units in the relevant Chief Financial Officer (CFO) structures The establishment of clear lines of authority and accountability Performance criteria for the minimising of risk It is the responsibility of every accounting officer/authority to ensure that their SCM personnel are adequately trained  FRAUD AND CORRUPTION In pursuance of this policy, Government defines, for the purposes of this provision, the terms set forth below: “Corrupt practice” means the offering, giving, receiving, or soliciting of any thing of value to influence the action of a public official in the selection process or in contract execution; “Fraudulent practice” means a misrepresentation of facts in order to influence a selection process The execution of a contract to the detriment of the accounting officer/authority, Collusive practices among bidders/contractors Deprive the accounting officer/authority of the benefits of free and open competition  IMPLEMENTATION STRATEGY DEMAND MANAGEMENT Accounting officers/authorities should ensure that: Future as well as current needs are understood; Requirements are linked to the budget; Specifications are determined; The need forms part of the strategic plan of the institution; An analysis of the past expenditure may assist in determining the manner in which the institution fulfilled this need in the past; The optimum method to satisfy the need is considered, including the possibility of procuring goods, works or services from other institutions  DEMAND MANAGEMENT Accounting officers/authorities should ensure that: The frequency of the requirement is specified; The economic order quantity is calculated; Lead and delivery times are identified; and An industry and commodity analysis is conducted IMPLEMENTATION STRATEGY WHAT ARE YOU BUYING? IS IT: YOU REQUIRE SOMETHING NOT LISTED ABOVE: CAN YOU OBTAIN IT:  URGENT AN EMERGENCY CASES In an urgent and emergency cases, the institution may dispense with the invitation of bids and may obtain the required goods, works or services by means of quotations Use of the database of prospective suppliers, or otherwise in any manner to the best interest of the State. Urgent cases are cases where early delivery is of critical importance and the invitation of competitive bids is either impossible or impractical. Emergency cases are cases where immediate action is necessary in order to avoid a dangerous or risky situation or misery The reasons for the urgency/emergency and for dispensing of competitive bids, should be clearly recorded and approved by the accounting officer/authority or his/her delegate. CAN I NEGOTIATE DIRECTLY WITH A SUPPLIER? CAN I USE “LIMITED BIDDING’’?  CAN I USE “TWO-STAGE BIDDING’’? Contracts for large complex plants or works of a special nature, when it may be undesirable or impractical to prepare complete detailed technical specifications in advance. Technical bids Commercial bids These procedures are also appropriate in the procurement of equipment that is subject to rapid technological advances If it is not feasible to formulate detailed specifications for the goods, works or services, to identify their characteristics  HOW DO BIDDING PROCEDURES WORK? There are essentially five distinct stages in the bidding process and these are: Compiling bid documents; Inviting bids; Receiving bids; Evaluating bids; Clearing successful bidder’s and awarding contracts.  COMPILING BID DOCUMENTS General and Special Contract Conditions- all contracts should be based on the General Conditions of Contract (GCC), issued by the National Treasury. Any aspect not covered by the GCC should be dealt with in the special contract conditions (SCC). These conditions should form an integral part of the bidding documents. PPPFA and the other Regulations The basis for bid evaluation and selection should be clearly outlined in the instructions to bidders and/or in the specifications.  COMPILING BID DOCUMENTS Using Standard Bidding Documents- Institutions should customise and use the appropriate Standard Bidding Documents (SBDs) issued by the National Treasury with minimum changes, as necessary to address contract- and project-specific issues. Where no relevant standard bidding documents have been issued, the institution should use other internationally recognised standard contract forms The standard wording of the General Conditions of Contract must not be amended The standard bid documentation and GCC issued by the Construction Industry Development Board (CIDB) should be utilized in cases of bids related to the construction industry  COMPILING BID DOCUMENTS Type of contract-The bidding documents should clearly state the type of contract to be entered Into and contain the appropriate contract provisions. The most common types of contracts provide for payments on the basis of lump sum prices, unit prices, reimbursable cost plus fees, or combinations thereof. Language and Clarity of Documents-Bidding documents should be prepared in at least English Bid Content Inspections, tests and analyses Tax clearance  COMPILING BID DOCUMENTS Pricing-Bidders should be required to quote unit prices or lump sum prices and such prices should include all duties, taxes, percentage fees for cost reimbursable contracts and other levies. Bid submission- Bidders should be permitted to submit bids by mail or by hand. The deadline and place for receipt of bids should be specified in the invitation to bid Validity of bids Bidders should be required to submit bids valid for a period specified in the bidding documents. This period should be sufficient to enable the institution to complete the comparison and evaluation of bids, review the recommendation and award the contract.  INVITING BIDS Prequalifying bidders- Pre-qualification is usually necessary for large or complex works, or in any other circumstances in which the high costs of preparing detailed bids could discourage competition The scope of the contract and a clear statement of the criteria for qualification Institutions should inform all applicants of the results of pre-qualification. Advertising bids-Timely notification of bidding opportunities is essential in competitive bidding. Bids should be advertised for at least 30 days before closure in at least the Government Tender Bulletin  INVITING BIDS Sale of documents- A refundable or nonrefundable fee for bidding documents if and when necessary, provided that: The fee should be reasonable and reflect only the cost of their printingand delivery to prospective bidders; The fee should not be so high as to discourage prospective bidders; and That all monies received for the sale of bidding documents must be paid into the National Revenue Fund or Provincial Revenue Fund  RECEIVING RESPONSES Opening of Bids-The institution should open all bids at the stipulated time and place. Bids should be opened in public Late bids-Bids received after the time stipulated should not be considered. Clarification or alterations of bids- Bidders should not be requested or permitted to alter their bids after the deadline for receipt of bids Confidentiality-Information relating to the examination, clarification and evaluation of bids and recommendations concerning awards should not be disclosed to bidders or other persons not officially concerned with the process, until the successful bidder is notified of the award  RECEIVING RESPONSES Completeness of documentation- Original tax clearance certificates; have been properly signed are accompanied by the required securities; are substantially responsive to the bidding documents; and are otherwise generally in order If a bid is not substantially responsive, that is, it contains material deviations from or reservations to the terms, conditions and specifications in the bidding documents, it should not be considered further.  EVALUATING RESPONSES Evaluation and comparison of bids-Bids should only be evaluated in terms of the criteria stipulated in the bidding documents Rejection of all bids-Bidding documents should provide for the rejection of all bids if and when deemed necessary. This is justified when there is lack of effective competition, or bids are not substantially responsive. lack of competition should not be determined solely on the basis of the number of bidders. If rejection is due to lack of competition, wider advertising should be considered.  CLEARING SUCCESSFUL BIDDER AND AWARDING CONTRACT Vendor assessment-Suppliers should be assessed by SCM practitioners, for possible risks (facilities, financial standing, capacity and capability to deliver) Clearance of bidders prior to the award of a contract: DTI: NIPP- Before a contract over R10 million is awarded, clearance should be obtained from the DTI regarding the National Industrial Participation Programme Negotiations-Negotiations may take place provided that approval has been obtained from the accounting officer/authority Contract Award- Both parties should sign a written contract or, if necessary, a service level agreement. Original/legal copies of contracts should be kept in a secure place for judicial reference.