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Procurement Administration and Evaluation, Study notes of Business Economics

Virginia State University (VSU)Business Economics

A comprehensive overview of procurement administration, including key concepts such as inputs, outputs, outcomes, efficiency and effectiveness measures, the seven rights of procurement, automated procurement systems, cooperative procurement, value analysis, total cost of ownership, cost reduction, requirement analysis, and various types of audits. It also covers the three phases of the evaluation process, different types of reports, electronic procurement, preferences, budgeting models, and the values and guiding principles of public procurement. A wide range of topics related to procurement management, making it a valuable resource for students, professionals, and researchers interested in understanding the complexities and best practices in this field.

Typology: Study notes

2023/2024

Available from 08/19/2024

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CPPB Prep Domain I: Procurement Administration
1.Inputs: Measures resources used. They include labor, materials,
equipment, and supplies. Demand for services may also be considered
an input metric.
2.Outputs: Record activity or effort that can be expressed in a
quantitative or qualitative manner.
3.Outcomes: Asses results of an activity and show whether expected
results were achieved. Must be benchmarked against other
departments and outside organiza- tions. A benchmark is simply a point
of reference that can be used as a standard to compare effectiveness
and efficiency measurements.
4.Efficiency measures: Represent the ratio of inputs to outputs or
outcomes. When outputs are increased and inputs are decreased, more
efficiency is generated.
5.Effectiveness measures: Reflect how long it takes to process a request
for procurement or the turnaround time to receive a commodity or
service. Essentially measures quality and affects customer satisfaction.
It should be tied back to the key objective.
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CPPB Prep Domain I: Procurement Administration

  1. Inputs: Measures resources used. They include labor, materials, equipment, and supplies. Demand for services may also be considered an input metric.
  2. Outputs: Record activity or effort that can be expressed in a quantitative or qualitative manner.
  3. Outcomes: Asses results of an activity and show whether expected results were achieved. Must be benchmarked against other departments and outside organiza- tions. A benchmark is simply a point of reference that can be used as a standard to compare effectiveness and efficiency measurements.
  4. Efficiency measures: Represent the ratio of inputs to outputs or outcomes. When outputs are increased and inputs are decreased, more efficiency is generated.
  5. Effectiveness measures: Reflect how long it takes to process a request for procurement or the turnaround time to receive a commodity or service. Essentially measures quality and affects customer satisfaction. It should be tied back to the key objective.
  1. 7 Rights of Procurement: Right materials, right quantity, right time, right place, right source, right service, right place
  2. Automated Procurement Systems: In-house computerized systems and processes used to perform tasks, store information, and facilitate transactions between procurement and client organizations.
  3. ERP Systems: Enterprise Resource Planning Systems are business process software systems that manage multiple management systems such as finance, accounting, human resources, procurement, inventory control, and other activities.
  4. Cooperative Procurement: 1. Action taken when two or more entities combine their requirements to obtain advantages of volume purchases including administra- tive savings and other benefits. 2. A variety of arrangements whereby two or more public procurement units purchase from the same suppliers using a single IFB or RFP. 3. May result in contracts upon which other entities may "piggyback".
  5. Piggybacking: A form of intergovernmental cooperative contracting in which an entity will be extended the pricing and terms of a contract entered into by a larger entity. The authority to engage in cooperative

performing more economically. Usually applied to construction projects. May be a part of a Request for Proposal or action taken by the contractor after the award.

  1. Total Cost of Ownership (TCO): A measure of all the cost components associ- ated with the procurement of a product or service. The sum of all fixed and variable costs attributed to a product or service. A philosophy for understanding all supply chain related costs of doing business with a particular supplier for a particular good or service.
  2. Life Cycle Costing: The total cost of ownership over the life span of the asset: a procurement technique that takes into account operating, maintenance, the time value of money, disposal, and other associated costs of ownership as well as the residual value of the item.
  3. Cost Reduction: Generally realized when a manufacturer is able to lower its material or labor costs used to make its products; interchangeably used to indicate a lower price paid by the buyer from what was previously paid.
  4. Cost Avoidance: Actions taken to avoid having to pay some sort of cost. This could be financial or in resource terms. Well defined specifications and value analysis will help to avoid extraneous costs.
  1. Requirement Analysis: Value Analysis applied to the writing of specifications to eliminate products or services that are not cost effective. It is one tool to achieve cost avoidance.
  2. Audit: The detailed review and examination of records, documents, and the busi- ness processes with the confirmation by outside experts of a situation or condition concluding with a detailed report of findings. A formal examination or verification of financial accounts or other business operations.
  3. Financial and Compliance Audits: Normally performed by an independent accounting firm to determine whether financial transactions are recorded and to verify their accuracy.
  4. Economy and Efficiency Audits: Management and operation audits. These audits examine a governmental unit's managerial and administrative practices for economy and cost efficiency and strive to identify the cause of any cost inefficien- cies.
  5. Program Audits or Evaluations: Monitor results to determine the extend to which a governmental unit has achieved program objectives. They also evaluate the cost effectiveness of the alternatives that were employed.
  1. 3 Phases of Evaluation Process: 1. Planning 2.Data Collecting 3.Decision making based on findings and recommendations
  2. Intradepartmental Reports: Designed to inform the management concerning departmental matters.
  3. Interdepartmental Reports: For distribution to other departments on a need-to-know basis.
  4. Higher Level Management Reports: Issued to senior management and other key personnel.
  5. Electronic Procurement (eProcurement): Conducting all or some of the pro- curement functions over the internet. Implies that point, click, buy, and ship internet technology is replacing paper-based procurement and supply management busi- ness processes.
  6. Electronic Commerce (eCommerce): The integration of electronic data inter- change, electronic funds transfer, and similar techniques into a comprehensive electronic-based system of procurement functions; could include postings of IFBs and RFPs on electronic bulletin boards, the receipt of bids via electronic data interchange, notification of award by email and payment via electronic funds transfer. Also referred to as

Electronic Sourcing (eSourcing).

  1. Electronic Sourcing (eSourcing): The process of obtaining bids from different supplies via a single online portal. The benefits include streamlining the sourcing process, reducing prices by maximizing supplier competition, and creating a repos- itory for sourcing information.
  2. Preferance: An advantage given to bidders/offerors in a competition for contract award which may be granted based on pre-established critera such as ethnicity, res- idence, business location, origination of product or service, business classification, or other reasons.
  3. Post-consumer: Materials have been used by consumers, recycled, and processed back into a consumer product.
  4. Pre-consumer: Materials are left over in manufacturing processes and then reused in a consumer product.
  5. Express Authority: Authority explicitly given in direct language rather than inferred from conduct.
  6. Implied Authority: Authority that is not defined expressly but is only determined by inferences and reasonable deductions arising out of the conduct of the principal toward the agent and the agent's actions.

outcomes measures.

  1. Budget Cycle: Planning, formalization, implementation, evaluation
  2. Procurement Card (pCard): A payment method whereby internal customers are empowered to deal directly with suppliers for purchases using a credit card issued by a bank or major credit card provider.
  3. Smart Card: Similar to credit cards or pCards, but have embedded computer chips that store data for a variety of uses. Can be pre-loaded with a certain amount and serve as an "electronic wallet".
  4. Benchmarking: The act of measuring a process, service or product against the characteristics of the recognized leaders in the given area of review.
  5. Standardization: The adoption of a single product or group of products to be used by different organizations or all parts of one organization.
  6. Values and Guiding Principles of Public Procurement: Accountability, Ethics, Impartiality, Professionalism, Service, Transparency
  7. Leader: Responsible for moving the team to accomplish its task.
  8. Facilitator: Not a member of the team so they can remain

neutral in team decision making.

  1. Recorder: Responsible for writing down the team's key points, ideas, and deci- sions.
  2. Time Keeper: Monitors how long it takes to complete tasks, how well or poor team is using its time, and determines if agenda needs to be adjusted.