Why Global Focus is shifting on Organization Procurement Function
By: Adan Derrow Mursal
Logistics & Procurment Coordinator- Somalia
All organizations; private or public, manufacturing or service, have four key departments i.e. Finance responsible for the organization’s Money Management, Human Resources department responsible for personnel management, Program/project department in charge of project design and demand management and Operations department where organization Supply Chain – Procurement and Logistics are managed. Based on the size and design of the organization some of this department may be viewed under different names such as finance department for money management may be viewed as accounts department, Programs may be viewed as research & development where projects are implemented and grants are managed. Operations department are termed as production department in manufacturing organization while service industries just choose to call it Operations. In any case, the operations department supports organizations’ Logistics, Procurement, Material and Fleet Management and Asset Maintenance.
Out of the many areas operations department supports, Procurement management has over the years been the center of discussion in numerous boardrooms because of its complex nature and diversity of the managing entities. Procurement is not only complex but has also been a center for public fund mismanagement making it a favorite of Auditors and an area of focus for Donors and many organization stakeholders. A major concern today for implementing partners of Donor agencies is completing awarded projects with zero disallowed cost while the public sector struggle to be accountable to its taxpayers through an effectively managed procurement system.
Procurement is an area which is vulnerable to corruption, malpractice, and misappropriation. The Government of Kenya has, for example, failed to account for procurements made in billions of shillings causing a series of allegations and counter allegations among officials. These cases still remain unsolved. Although the loss of some public funds may be as a result of rampant corruption, a significant percentage of loss of money and its mismanagement by Public/private institutions is attributed to poor procurement management and lack of applying good procurement practices and systems that reduce such malpractices and risks.
While INGOs consider the lengthy and bureaucratic procedures of Procurement as having made aid delivery and project completion very difficult, Donors continue to exert a strong influence on procurement policy reforms maintaining that it is one of the best practices to substantiate the use of funds.
INGOs also find Donor compliance procedure as rigid and unforgiving, slowing down aid response, making emergency projects ineffective arguing that some donor policies require great flexibility to accommodate varying contexts. Procurement has attracted a lot of attention due to this compelling prospects of Donor and implementing partners and therefore to satisfy and correspond these expectations, harmonization of procedures and introduction of a well-integrated and error free technological innovation will aid both.
The future is full of opportunities and challenges for partner organizations and in order to deliver beneficiary needs effectively, adapting new technological innovations (which will manage requisitions, sourcing, contracts, invoicing, and supplier database management) as well as creating awareness on donor requirements is inevitable in this globally competitive environment. The advantage of a good procurement system is that it leaves a trail of documents and evidence for Auditor to examine and confirm.
Adeso operations involve understanding the whole supply chain flows, from Procurement, Logistics, inventory management and close-out of projects. In its policy as well as many other renowned INGOs, it acknowledges that 70% of Audit queries on compliance are as a result of the Procurement process. Besides being the model of implementing Cash for Work activities in Somalia, South Sudan Adeso applies best procurement practices in order to ensure minimum compliance with its internal procedures and that of its partners as well as to uphold value for money and to safeguard its systems to efficiently meet project objective and take resources closer to beneficiaries. Despite various unforeseen constraints, Adeso develops an inclusive Procurement plan at the same time when project budgets and project plans are made where user departments and operations analyze needs, risks, concerns, cost, lead-time and procurement regulations to follow. As well as putting risk management and internal control measures in place, Adeso has also ensured capacity building among its staff on Donor Compliance, Rules and Regulations of its partners and offered training on its internal control tools to minimize risks associated with Procurement.
Many procurement restrictions and varying requirements have prevented qualified and capable local companies from participating in tenders. Adeso has realized this and harmonized its procedures with key international donors including USAID and EU to encourage participation of local companies and enhance their capacity building to increase quality and sustainability of aid.
Operations department supports the successful implementation of projects and as the department with the overall responsibility of promoting good practices, process improvement and upholding both Donor and Organization procedures, it will increasingly call for maximum compliance with both internal and donor procedure as well as demand maximum cooperation from departments seeking procurement services.
In their effort to execute a project activity, many at times the project team expect a quick turnaround on the procurement process while operations conduct various verifications for value for money. My appreciation goes to the cross functional departments especially the Program team who work closely and cooperate with operations department which is keen to focus on what lies between a request and delivery. The processes that lie in between may look basic but doing them exceptionally is key for organization global competitiveness.