Manage risk in procurement

Risks associated with procurement projects can threaten a project’s completion. That is why one needs project controls to ensure that a project is completed well.

Ms Ritah Nakayiza, a procurement officer at the ministry of Internal Affairs, describes a risk as a possibility of something that happens and has either a positive or negative effect on any procurement process.
She says to manage risks, a procurement officer should first identify the risks involved in the procurement process and find ways of managing them.

Some of the major risks involved in procurement include: contracting a supplier who will fail to deliver, ensuring that one supplies according to the given specifications of time and quality among others.

She says a good risk manager should ensure simple, timely, achievable and measurable supplies to control risks.
Mr John Silver Mukasa, another procurement expert, says ranking the risks involved before you embark on any procurement process helps the procuring entity and risk managers to develop the best risk management strategy.
He says using frame work contracts, for instance, helps in managing procurement risks. This is because such contracts bind the suppliers to supply once they are called upon as long as the contract stands.

A framework is an agreement with suppliers to establish terms governing contracts that may be awarded during the life of the agreement. It is a general term for agreements that set out terms and conditions for making specific purchases or call-offs such as stationery, medicines, office furniture among others.

“With such contracts, quality, price fluctuations and storage risks are minimised since suppliers come when they are required depending on the earlier contract,” Mr Mukasa adds.
The other way to minimises risks is prequalification of suppliers as it is done under the Public Procurement and Disposal of Public Assets Authority where government entities are required to prequalify suppliers at the beginning of three financial years.

This involves selecting potential contractors, suppliers or vendors basing on experience, financial ability, managerial ability, reputation and work experience. This is helpful in avoiding risks associated with quality because they must be prequalified basing on ability to perform.

Tips on minimising procurement risks

The procurement process means the successive stages in the procurement cycle including planning, choice of procedure, measures to solicit offers from bidders, examination and evaluation of those offers, award of contract and contract management.

According to the PPDA Act 2013, what can help procurement officers overcome risks is following the PPDA procurement cycle.w It states that before awarding a contract, the procuring entity should ensure that there is effective supply of funds. This helps minimise risks such as failure to complete the project due to lack of funds.
It also indicates the procurement methods that should be used and calls for evaluation of bids and everything that must be followed before the accounting officer awards the contracts, among others.

“If this cycle is effectively followed risks such as lack of funds, failure to complete on time, poor and shoddy projects, breach of contracts can be minimised,” adds Mr Mukasa.
Joseph Bahingwire, Monitor