Value for money (VFM) in public procurement

 Value for money (VFM) can be defined as the most advantageous combination of price and quality that makes a product or service fit for purpose. Department for Transport, UK has proposed an interesting definition of value for money for the public sector organizations. VFM for public organizations is using public resources in a way that creates and maximises public value. Public value simply means better quality of life of common people. So the public sector should take decisions to improve quality of life of the citizens.

DRIVERS OF VALUE FOR MONEY: 

Economy, efficiency and effectiveness are popularly known as 3 E's of VFM:

Economy means minimising the cost of resources used for an activity.
Efficiency means how well the inputs are converted into outputs.
Effectiveness means achieving predetermined objectives.

WHY VFM?
The commercial organizations make decisions to satisfy their profit motive. Public sector enterprises don't have profit motive. So what should be the basis for decision making for the public institutions? Here comes the concept of VFM. The public sector organizations make decisions based on VFM principle.
The rule no. 45(2)(b) of Public Procurement Rules (PPR) 2008 of Bangladesh mentions to achieve VFM in public procurement.

VFM IN CONTRACT MANAGEMENT

• During procurement process
• During contract implementation
• Post contract implementation phase

VFM DURING PROCUREMENT PROCESS

• Use of Standard tender documents saves time and cost
• Different procedures based on contract value - simple procedure for low value contracts, robust procedure for high value procurement
• Competition to achieve economy
• Negotiation in service procurement to ensure effectiveness of service
• Enlistment save time and cost of both the procurement entity and the contractors
• Specifications ensure effectiveness
• Technically responsive lowest bid - evaluation for Technically responsiveness first to ensure effectiveness and then choosing the Technically responsive lowest bid to ensure economy

VFM DURING CONTRACT IMPLEMENTATION

• Use of standard contract terms reduces contract management time
• Contract terms proportionate to contract value (e.g. PW1 vs PW2 vs PW3)
• Different levels of dispute settlement
• Progress review meeting
• Contract amendment
• Testing and site visit
• Reporting and monitoring
• Liquidated damage

VFM FOR POST CONTRACT IMPLEMENTATION PHASE

• Retention money in works contracts
• Warranty in goods procurement
• After sales service for plants, vehicles, machinery etc.

Value for money concept is also applicable for commercial enterprises. But VFM is more important for the public sector and third sector organisations. 

Many different concepts are available to increase value for money in public procurement. Following are few contemporary concepts:

• Ensuring five rights of procurement
• Using whole life concepts in project preparation
  
• Using weighted scoring combining both technical and financial criteria for tender evaluation. This is known as Most Economically Advantageous Tender (MEAT) concept.

 So value for money (VFM) is a very important consideration for public procurement in Bangladesh. The authorities and officials involved in decision making regarding public sector should always consider VFM as the basis for their decisions.

Draft Bangla version of PW3 Standard Tender Document for Procurement of Works (OTM - National)

Central Procurement Technical Unit (CPTU) has published draft Bangla translation version of the PW3 Standard Tender Document for Procurement of Works [Open Tendering Method] [National]. CPTU has requested the Stakeholders to provide comments and feedback on the Draft PW3 Bangla version by the 30th June 2022.

PW3 document is used for procurement of works using Open Tendering Method without pre-qualification.  This is for national procurement. PW3 is the most used tender document. Most of the public procurements in Bangladesh are done using this standard document. But till now it was in English only. The contractors of Bangladesh were demanding to make it Bangla. Because many of the small contractors do not have enough expertise in English. So this is a big step towards doing public procurement procedures in Bangla instead of English. 

The document can be downloaded from CPTU wesite. The direct link to the PW3 Bangla version is https://cptu.gov.bd/upload/%20publication/2022-06-15-10-44-24-PW3(Bangla)_June-2022.docx. It has been provided in Ms Word format. 

Feel free to provide your opinion to CPTU regarding this new document. 

Thanks to CPTU for this great initiative.

Digitizing Implementation Monitoring and Public Procurement (DIMAPP) Project

 The objectives of DIMAPP project is to i) improve public procurement performance and ii) enhance capacity for implementation monitoring of development programs and projects of the government of Bangladesh.  The project is financed by the World Bank. The project has achieved the prestigious  World Bank’s Directors Award for Most Innovative, Collaborative and Impactful Governance Global Practice Operations for the year 2021.

The project is divided into four major components as described below:

1.  Restructuring CPTU and Institutionalizing e-GP,
2.  Enhancing Digitization of Public Procurement,
3.  Professionalization Procurement and Citizen Engagement (CE)
4.  Digitizing Project Implementation Monitoring.

ITCILO is managing the Capacity Development and Professionalization component on behalf of the Central Procurement Technical Unit (CPTU).

 Bangladesh Centre for Communication Programs (BCCP) is working as the communication consulting firm for carrying out the Behavior Change Communication (BCC) program of the project. Under the DIMAPPP, BCCP has developed and is implementing a comprehensive Strategic Behavioral Change Communication (SBCC) program since June 2018. Promotion and branding of e-GP under media campaign through e-GP workshops, TVC, publication, video, press and online media, social media, digital billboards, fact sheets, brochures, e-GP Flyer, success story video etc. are being implemented by the BCCP.

RAC Institute of Governance and Development (BIGD) is responsible for implementing citizen monitoring of public procurement at the local level under DIMAPPP.

The Chartered Institute of Procurement and Supply (CIPS), along with BIGD as its partner, is involved in capacity development of the procurement professionals.Seventy five government officials are studying CIPS courses under this component.

1) The first component, Restructuring CPTU and Institutionalizing e-GP aims to restructure the CPTU in order to enhance its regulatory power and institutionalize e-GP to function as a service provider with professional resources. Two major sub-components are envisaged. It has two sub-component, (i) restructuring CPTU and furthering policy reform and (ii) institutionalizing e-GP. 

2) The second component, Enhancing Digitization of Public Procurement aims to enhance the scope of e-GP for all public sector organizations across the country covering system as well as technical requirements including updating of e-GP modules with robust contract management process, fully operationalizing two data centers, and business modeling. Two major sub-components are as follows: (i) expansion of e-GP system and (ii) implementation of contract management; 

3) The third component, Professionalizing Procurement and Citizen Engagement aims to improve procurement management capacity of the SPSOs, both in terms of public procurement practices and the use of e-GP. Also, the bidding community will be included as part of the capacity enhancement program. The sub-component will encourage creation of knowledge base, analytical tasks, and research and development. Concurrently, it will attempt to create a citizen monitoring mechanism of local level contracts with specific reference to rural roads, education, and health service deliveries. Five subcomponents are as follows: (i) improving procurement management of SPSOs, IMED and CPTU; (ii) capacity building and professionalization of procurement;

New review panles formed by the CPTU

 

 CPTU has formed new Review Panels to dispose the complaints placed under PPA 2006 and PPR 2008 for Bangladesh public procurement. Each Review Panel consists of one retired Secretary / Additional Secretary, one retired District and Session Judge and one Director of Federation of Bangladesh Chambers of Commerce & Industries (FBCCI). The circular was issued on 8th February, 2022 with immediate effect. The new review panels will act for next three years.