Procurement and Contract Management

It is the process of systematically and efficiently managing contract creation, execution and analysis for maximizing operational and financial performance and minimizing risk. It consists of all administrative activities associated with handling of contracts, like

• invitation to bid
• bid evaluation
• award of contract
• contract implementation
• measurement of work completed
• computation of payments

It may also include monitoring contract, adding any change or modification in the contract, ensuring both parties meet or exceed each other’s expectations, and actively interacting with the contractor to achieve the contract’s objective(s).

Public Procurement in India is a State subject, and thereby the Regulatory Framework governing the public procurement varies from State to State. ‘General Financial Rules’ (GFR), framed by the central financial ministry acts as the guideline for public procurement, but has only subordinate legislation status.

Various states have adopted their own Legal framework, based on the best practices. Procurement funded by external donors (World Bank, ADB etc) follows guidelines by the donor in this regard.

The various stages in the procurement for the e-Governance projects are

Business Case Phase

During it, the justification for undertaking the project and its feasibility are explored. This phase usually results in a Feasibility Study Report and Detailed Project Report (DPR) and includes the following activities

• Defining Objectives, Vision and Mission for the initiative
• Study of Best Practices from similar contexts
• Stakeholder Consultations
• Understand cost components for the project
• Detailed analysis of business case
• Business justification for the project (better service levels)
• Cost Benefit Analysis
• Analysis of risks and mitigation measures

In case of transition from existing system / vendor, the analysis of benefits of continuing with the current arrangement vs. fresh procurement is carried out

Procurement Strategy Phase

It entails identifying and segregating the project components and for an IT procurement for an E-Government project will involve

• ICT Strategy and Consultancy – Defining ICT architecture, ICT security, RFP preparation for ICT vendor and procurement, contract management, and training
• Applications development / Software implementation – Custom applications development, deployment of COTS products, Project Management
• Deployment IT Infrastructure – Hosting infrastructure and storage, distributed infrastructure and LAN servers (desktop, laptops, printers, software licenses, local servers)
• Operations and Maintenance – Operations management (operations administration, database management etc.), service delivery, helpdesk support, facilities management.
• Communications – Communications infrastructure (network connectivity, PABX, videoconferencing, etc.), voice (fixed and mobile), and data/ISP

Procurement Planning Phase

Depending upon the product or service to procure, any of the various procurement modes are used, which includes

• Two stage competitive process – Expression of Interest, followed by Request for Proposal open to bidders qualified from EoI process
• Single stage competitive process – Request for Proposal open to all bidders fulfilling the qualifying criteria
• Request for Quotes – Used for standardized requirements, in which price is the only deciding factor
• Procurement from Rate Contracts – For items with standard specification, for which Rates have already been negotiated in the form of a Rate Contract by a nodal agency and economies of scale can be obtained
• Single sourcing / Nomination – In cases where the required Solution / Product is available from only one vendor and there are no suitable alternatives (strong justification required)

Request for Proposal – A Request for Proposal or short for RFP is an invitation for suppliers, to submit a proposal on a specific commodity or service. RFP usually has following requirements of the buyer

• Technical and Functional Requirements
• Bid Process and Commercial Specifications
• Contractual and Legal Specifications (including Master Services Agreement)

The final selection of the successful bidder is dependent on the method employed and which includes

• Quality and Cost Based Selection (QCBS)
• Quality Based Selection (QBS)
• Least-Cost Selection (L1)
• Fixed Budget Selection (FBS)

Development Phase

Contract is developed in this phase and during which the implications of the legal terms and conditions are crucial for successful procurement. It involves preparing a clear statement of work, drafting the specific business terms and performance criteria that will apply to a particular agreement.

Negotiate Phase

A Value Chain Analysis is usually used to negotiate. The understanding of how the project creates value for and its sources of competitive advantage will result in creating stronger value propositions and more robust evaluations of offers received from third parties.

Negotiation involves persuading suppliers or customers to reach mutually beneficial agreements. Various styles and tactics are used by a negotiator for an array of circumstances. The interpersonal skills are especially helpful during the negotiation phase.

Manage Phase

Once an agreement has been formally reached, contract managers are made responsible for being one-point contact with suppliers or customers to ensure that the products and services are delivered in accordance with the specifications, scope of work, and other terms and conditions on the contract.