Showing papers on "Procurement published in 2011"

Sustainable procurement in the public sector: an international comparative study

Abstract: Purpose – Public bodies are being encouraged to procure sustainably, to reduce their social and environmental footprint and in order to stimulate sustainability in the private sector. However, little is known about how public sector organisations internationally are responding to this encouragement or of the conditions that are most conducive to sustainable procurement (SP). The purpose of this paper is to address these gaps in our knowledge so as to inform policy development at the government and organisational levels. Design/methodology/approach – The authors report the findings of a survey of SP practices within a sample of over 280 public procurement practitioners from 20 countries and with collective responsibility for expenditure totalling $45bn p.a. Findings – The authors' analysis shows that some SP practices are evident in public sector procurement practice and that the extent and nature of SP practices varies significantly across regions. In addition, the authors highlight the main facilitators of, and barriers to, engagement with SP and investigate their importance for engagement with particular dimensions of SP. Research limitations/implications – Survey respondents are volunteers and may to some degree be more interested in, or engaged with, SP than other public sector organisations. The analysis is cross-sectional and therefore provides only a snapshot of SP practice in the public sector organisations studied. Practical implications – The paper identifies how policy and practice in SP vary across regions, providing practical insights into whether and how government policies are being implemented around the world. Originality/value – The paper provides the first systematic and comprehensive insight into how public bodies are implementing SP internationally and of the major situational factors that are shaping engagement with SP. The authors evaluate the current effectiveness of policy initiatives regarding SP and highlight the organisational catalysts and inhibitors of greater involvement in SP. Design/methodology/approach – The authors report the findings of a survey of SP practices within a sample of over 280 public procurement practitioners from 20 countries and with collective responsibility for expenditure totalling $45bn p.a. Findings – The authors' analysis shows that some SP practices are evident in public sector procurement practice and that the extent and nature of SP practices varies significantly across regions. In addition, the authors highlight the main facilitators of, and barriers to, engagement with SP and investigate their importance for engagement with particular dimensions of SP. Research limitations/implications – Survey respondents are volunteers and may to some degree be more interested in, or engaged with, SP than other public sector organisations. The analysis is cross-sectional and therefore provides only a snapshot of SP practice in the public sector organisations studied. Practical implications – The paper identifies how policy and practice in SP vary across regions, providing practical insights into whether and how government policies are being implemented around the world. Originality/value – The paper provides the first systematic and comprehensive insight into how public bodies are implementing SP internationally and of the major situational factors that are shaping engagement with SP. The authors evaluate the current effectiveness of policy initiatives regarding SP and highlight the organisational catalysts and inhibitors of greater involvement in SP.

Barriers and drivers for sustainable building

Abstract: What are the actual barriers and drivers for sustainable building? A literature review, interviews and case studies are presented to address this question. Sustainable building is not hindered by a lack of technologies and assessment methods, but is instead beset with organizational and procedural difficulties entailed by the adoption of new methods. New technologies are resisted because they require process changes entailing risks and unforeseen costs. These hindrances can be reduced by learning what kind of decision-making phases, new tasks, actors, roles and ways of networking are needed. The barriers are outlined as steering mechanisms, economics, a lack of client understanding, process (procurement and tendering, timing, cooperation and networking), and underpinning knowledge (knowledge and common language, the availability of methods and tools, innovation). The most important actions to promote sustainable building are the development of the awareness of clients about the benefits of sustainable bui...

Bid Preference Programs and Participation in Highway Procurement Auctions

Abstract: We use data from highway procurement auctions subject to California's Small Business Preference program to study the effect of bid preferences on auction outcomes. Our analysis is based on an estimated model of firms' bidding and participation decisions, which allows us to evaluate the effects of current and alternative policy designs. We show that incorporating participation responses significantly alters the assessment of preferential treatment policies.

Sustainable procurement practice

Abstract: Procurement has a key role in sustainability as policies and practices need to extend beyond organisations' boundaries incorporating their whole supply chains. Guidelines on sustainability encourage procurement to make decisions that encompass the environmental, economic and social elements of the Triple Bottom Line (TBL). Taking a supply chain perspective, procurement also need to analyse how decisions impact on the TBL in respect of suppliers. The results of a survey of sustainable procurement practices in 44 English-based UK Housing Associations (HAs), who are responsible for the provision of social housing, confirms prior research of other sectors that suggests 1) a failure to overcome inertia in relation to sustainable procurement; and 2) in the few examples where practices have been established, only the environmental element of the TBL is considered. The organisations surveyed have sustainability-related issues in their missions and external and internal pressures to embed sustainability, yet this has not translated into widespread establishment of sustainable procurement. Recommendations to neutralise inertia are: firstly, take the experiences from other areas, e.g. innovation management, which stress the importance of inter-organisational relationships; secondly, develop a small number of sustainable development indicators for procurement and, to take advantage of the relatively more-advanced environmental practices to show how these elements have socio-economic impacts; and finally, rather than focus on just the pressures and drivers of sustainability (as suggested in strategic models of sustainability), emphasise the triggers that overcome inertia and lead to changes in behaviour amongst procurement staff i.e. the establishment of ethical pricing models. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.

Procurement Contracting With Time Incentives: Theory and Evidence

Abstract: In public procurement, social welfare often depends on how quickly the good is delivered. A leading example is highway construction, where slow completion inflicts a negative externality on commuters. In response, highway departments award some contracts using scoring auctions, which give contractors explicit incentives for accelerated delivery. We characterize efficient design of these mechanisms. We then gather an extensive data set of highway projects awarded by the California Department of Transportation between 2003 and 2008. By comparing otherwise similar contracts, we show that where the scoring design was used, contracts were completed 30--40% faster and the welfare gains to commuters exceeded the increase in procurement costs. Using a structural model that endogenizes participation and bidding, we estimate that the counterfactual welfare gain from switching all contracts from the standard design to the efficient ApB design is nearly 22% of the total contract value ($1.14 billion). Copyright 2011, Oxford University Press.

Procurement issues in Malaysia

Abstract: Purpose – This study was undertaken with the aim of surveying the perception of the two main stakeholders in procurement system; the contractors and the procurement officers on issues such as accountability, transparency, corruption, integrity and cronyism pertaining to the public procurement system in Malaysia.Design/methodology/approach – Interviews were conducted over a nine‐month period in 2007 to gauge the perception of the procurement officers and contractors on procurement issues in Malaysia. The interview data were then transcribed and grouped according to six main themes; transparency, procurement policies and procedures and its implementation, personnel involved in the procurement system, estimation/budget/pricing, professionalism and ethics and timeliness.Findings – One of the common complaints made by the contractors was prevalence of interference from outside parties and cronyism, which affects the awarding of contracts. The procurement officers were blamed for malpractice and non‐compliance ...

Electricity Auctions: An Overview of Efficient Practices

Abstract: This report assesses the potential of electricity contract auctions as a procurement option for the World Bank's client countries. It focuses on the role of auctions of electricity contracts designed to expand and retain existing generation capacity. It is not meant to be a 'how-to' manual. Rather, it highlights some major issues and options that need to be taken into account when a country considers moving towards competitive electricity procurement through the introduction of electricity auctions. Auctions have played an important role in the effort to match supply and demand. Ever since the 1990s, the use of long-term contract auctions to procure new generation capacity, notably from private sector suppliers, has garnered increased affection from investors, governments, and multilateral agencies in general, as a means to achieve a competitive and transparent procurement process while providing certainty of supply for the medium to long term. However, the liberalization of electricity markets and the move from single-buyer procurement models increased the nature of the challenge facing system planners in their efforts to ensure an adequate and secure supply of electricity in the future at the best price. While auctions as general propositions are a means to match supply with demand in a cost-effective manner, they can also be and have been used to meet a variety of goals.

How To Attain Value for Money

Abstract: Governments increasingly use public-private partnerships (PPPs) to pursue value for money. However, value for money is (or at least, should be) the driving force behind traditional infrastructure procurement. Therefore, any project, whether it is a PPP or a traditionally procured project, should be undertaken only if it creates value for money. It seems that the choice between using a PPP or traditional procurement should be simple: governments should prefer the method that creates the most value for money. However, in practice the value-for-money objective is very often blurred, and the choice between using a PPP and traditional infrastructure procurement may be skewed by factors other than value for money. Some factors skew choice towards traditional procurement, while others skew it towards PPPs. Drawing on the results of a questionnaire sent to all OECD and some non-OECD countries, this article considers the various factors that may skew this choice and thereby undermine the pursuit of value for money. The results of the questionnaire point especially to differences in the range and complexity of the ex ante and ex post value-for-money tests that some governments apply to PPPs and traditionally procured infrastructure projects. However, accounting standards, political preferences for or against PPPs, and the strength of public sector unions also play, among others, a role in skewing incentives and affecting choice in some countries. The findings of the questionnaire are augmented by four case studies setting out the procurement processes for PPPs and traditional infrastructure procurement in France, Germany, Korea and the United Kingdom. With the focus on the attainment of value for money and by exploring the issues raised in the responses to the questionnaire, this article sets out some good practices that will align the requirements for these two types of procurement and remove possible perverse incentives that favour one over the other. JEL classification: H400, H440, H540, H570 Keywords: value for money, public-private partnerships, PPPs, traditional public procurement, infrastructure, public choice

Using a Dual-Sourcing Option in the Presence of Asymmetric Information about Supplier Reliability: Competition vs. Diversification

Abstract: We study a buyer’s strategic use of a dual-sourcing option when facing suppliers possessing private information about their disruption likelihood. We solve for the buyer’s optimal procurement contract. We show that the optimal contract can be interpreted as the buyer choosing between diversification and competition benefits. Better information increases diversification benefits and decreases competition benefits. Therefore, with better information the buyer is more inclined to diversify. Moreover, better information may increase or decrease the value of the dual-sourcing option, depending on the buyer’s unit revenue: for large revenue, the buyer uses the dual sourcing option for diversification, the benefits of which increase with information; for small revenue, the buyer uses the dual sourcing option for competition, the benefits of which decrease with information. Surprisingly, as the reliability of the entire supply base decreases, the buyer may stop diversifying under asymmetric information (to leverage competition), while it would never do so under symmetric information. Finally, we analyze the effect of codependence between supply disruptions. We find that lower codependence leads the buyer to rely less on competition. Because competition keeps the information costs in check, a reduction in supplier codependence increases the buyer’s value of information. Therefore, strategic actions to reduce codependence between supplier disruptions should not be seen as a substitute for learning about suppliers’ reliabilities.

Optimal Procurement Design in the Presence of Supply Risk

Abstract: This paper analyzes optimal auction design when delivery of supply is uncertain. We consider a buyer facing multiple potential suppliers, each having an associated (exogenous) reliability that quantifies its risk of supply failure. We design optimal mechanisms that depend on the buyer's level of information regarding the suppliers' cost of production and reliability. When supplier reliability is known, we find that the optimal allocation resembles the allocation under full information, but with inflated production costs. When it is unknown, the same result is true when cost and reliability of a supplier are independent. Furthermore, the buyer does not have to pay any rent for information on suppliers' reliability. Moreover, we assess the benefits of the optimal mechanism compared to traditional auctions that ignore supply risk.

A two‐stage procurement model for humanitarian relief supply chains

Abstract: Purpose – The purpose of this paper is to discuss and to help address the need for quantitative models to support and improve procurement in the context of humanitarian relief efforts.Design/methodology/approach – This research presents a two‐stage stochastic decision model with recourse for procurement in humanitarian relief supply chains, and compares its effectiveness on an illustrative example with respect to a standard solution approach.Findings – Results show the ability of the new model to capture and model both the procurement process and the uncertainty inherent in a disaster relief situation, in support of more efficient and effective procurement plans.Research limitations/implications – The research focus is on sudden onset disasters and it does not differentiate between local and international suppliers. A number of extensions of the base model could be implemented, however, so as to address the specific needs of a given organization and their procurement process.Practical implications – Despi...

Restaurant and food service life cycle assessment and development of a sustainability standard

Abstract: There is no clear guidance for responsible food service operations to reduce their environmental footprint, so the efforts put forth by a restaurant may not have the environmental impact intended. As a result, Green Seal conducted life cycle assessment research on restaurants and food service operations to define priorities for environmental improvement. This information was then used to develop a sustainability standard and certification (i.e., ecolabel) program. The life cycle assessment study focused on the day-to-day activities of running a restaurant, including direct and indirect contributions. To do this, a restaurant and food service operations model was developed by grouping the operational activities into four subsystems: food procurement, food storage, food preparation and cooking, and service/support. Data was collected from a range of restaurants in the United States. The impact categories examined included respiratory inorganics, acidification/eutrophication, fossil fuels, ecotoxicity, carcinogens, land use, and climate change. Of all the subsystems, food procurement contributed hotspots in all impact categories examined. On the contrary, the food storage subsystem contributed no hotspot in any of the impact categories examined. Normalization of the results confirmed that food procurement was the largest source of environmental impacts. In addition, it was found that the impacts of food services were dominated by land use, respiratory inorganics, and fossil fuels. The impacts could be reduced with various preferable practices. As a result, a sustainability standard for restaurants and food services was developed to include these preferable practices, the Green Seal Standard for Food Services, GS-46. This study presents an overview of the main environmental impacts from the operation of a restaurant or food service. The results provided direction in the development of a sustainability standard and ecolabel program. This standard, the Green Seal Standard for Restaurants and Food Services, GS-46, is a comprehensive framework for operations to make meaningful reductions in their environmental impact. Further, operations that meet the requirements in the GS-46 standard have demonstrated significant reduction in their environmental impact. Finally, it was found that this environmental impact reduction can be done without added cost (e.g., cost neutral, with potential for financial gains).

Urban Competitiveness and Public Procurement for Innovation

Abstract: Public procurement for innovation represents one of the least studied demand-side innovation policy tools that can be used to increase urban competitiveness. Evidence suggests that local and regional governments are becoming more involved in procuring innovative solutions, but overall knowledge remains limited regarding how they get involved and what effects this involvement has had. Based on a study of Nordic–Baltic Sea cities, the current study reveals that public procurement for innovative solutions has a positive impact on the providers and that urban authorities can act as market creators. The study also demonstrates that public procurement is not seen as an inherent part of innovation policy. A lack of awareness exists among city officials about the connection between procurement and innovation, and local authorities tend not to be willing to take risks when promoting innovation through public procurement. Due to the positive effects, however, further development of related policies is recommended.

Barriers to addressing sustainable construction in public procurement strategies

Abstract: There is an increasing demand on public clients in the UK to address sustainability in construction procurement. This paper presents the results of an investigation into the barriers facing these clients in attempting to address sustainable construction in procurement strategies and the parties most capable of removing such barriers. The investigation draws on interviews conducted with sustainability professionals and experts working in a variety of professional and public sector organisations in the UK. Twelve main barriers were identified, namely: lack of funding, restrictions on expenditure and reluctance to incur higher capital cost when needed; lack of awareness, understanding, information, commitment and demand; insufficient/inconsistent policies, regulations, incentives and commitment by leadership; insufficient/confusing guidance, tools, demonstrations and best practice; vagueness of definitions and diversity of interpretations; separation between capital budget and operational budget; lack of suf...

Analyses and evaluation of irregularities in public procurement in India

Abstract: Public procurement is prone to corruption, which in the global construction market alone accounts for an estimated US$340 billion per year There is a growing need for procurement systems to be able to fight corruption and improve the effectiveness, efficiency, fairness and transparency of public procurement A comprehensive list of irregularities in public procurement is derived from irregularities observed during technical vigilance inspections by experts and reported cases The research involved a questionnaire survey, Delphi method and an empirical investigation of the dynamics of irregular practices in public procurement The survey revealed the top 15 most frequent irregularities The irregularities have been classified under five categories: transparency, professional standards, fairness, contract monitoring and regulation and procedural irregularities The ranking of these categories reveals that transparency is the key factor requiring prime attention The other categories are of nearly equal imp

Public-Private Partnership Projects in Infrastructure: An Essential Guide for Policy Makers

Abstract: Infrastructural investment is critical to economic growth, quality of life, poverty reduction, access to education, health care, and the achievement of many of the goals of a robust economy. But infrastructure is difficult for the public sector to get right. Public–private partnerships (PPPs) can help; they can provide more efficient procurement, focus on consumer satisfaction and lifecycle maintenance, and provide new sources of investment, in particular through limited recourse debt. But PPPs present challenges of their own. This book provides a practical guide to PPPs for policy makers and strategists, showing how governments can enable and encourage PPPs; providing a step-by-step analysis of the development of PPP projects; and explaining how financing works, what contractual structures look like, and how risk allocation works in practice. It includes specific discussion of each infrastructure sector, with a focus on the strategic and policy issues essential for successful development of infrastructure through PPPs. This second edition includes new sections on institutional frameworks, mechanisms for leveraging public financing, small scale PPP projects and more.

Graduate entrepreneurs are different: they access more resources?

Abstract: – The purpose of this paper is to investigate whether, and in what areas, graduate entrepreneurs are significantly different from non‐graduate entrepreneurs, both generally and in terms of external resources (advice, finance and public procurement contracts)., – The available literature was evaluated to identify issues affecting enterprise generally, and external resource access and use and educational attainment specifically. The data used were generated from the 2008 UK Federation of Small Businesses Survey, providing over 8,000 usable responses for this analysis. Quantitative analysis identified significant general characteristics of graduate entrepreneurs compared with non‐graduate entrepreneurs. Factor analysis was then used to identify the sets of advice, finance and public procurement customers of greatest interest, with independent samples t‐tests used to compare graduate and non‐graduate use thereof., – Graduate entrepreneur‐owned firms were statistically significantly more likely (than non‐graduate‐owned firms) to have younger owners, be younger and more export‐oriented businesses, in high knowledge services, to have intellectual property, make more use of web sites and be of high growth potential. In terms of external resources, graduate‐owned businesses were more likely to have received beneficial business advice from informal networks/trade associations, government business services, friends and family, customers and suppliers, and to have public procurement customers at the national/international level., – The study provides important empirical baseline data for future quantitative and qualitative studies focused on the impact of enterprise education specifically.

The effects of procurement policies on ‘downstream’ corporate social responsibility activity Content-analytic insights into the views and actions of SME owner-managers

Abstract: The majority of businesses are small and medium-sized enterprises (SMEs), and yet the main thrust of research into corporate social responsibility (CSR) to date focuses on the practice and behaviour of large organizations. The present study is based on the content analysis of free-flow narrative responses to a survey by 68 SME owner-managers. Insights are gained into the environmental and social criteria these firms face when tendering contracts and opinions are sought on issues such as voluntary versus imposed CSR standards. Evidence provided in the survey suggests that there are many examples of positive CSR practice among the SME community. However, we find that the burden of imposed standards, with related increases in bureaucracy and costs, can create frustrations for such firms, resulting in a potential ‘ceiling effect’ and lower overall engagement with CSR.

Integrated Optimization of Procurement, Processing, and Trade of Commodities

Abstract: We consider the integrated optimization problem of procurement, processing, and trade of commodities in a multiperiod setting. Motivated by the operations of a prominent commodity processing firm, we model a firm that procures an input commodity and has processing capacity to convert the input into a processed commodity. The processed commodity is sold using forward contracts, while the input itself can be traded at the end of the horizon. We solve this problem optimally and derive closed-form expressions for the marginal value of input and output inventory. We find that the optimal procurement and processing decisions are governed by price-dependent inventory thresholds. We use commodity markets data for the soybean complex to conduct numerical studies and find that approximating the joint price processes of multiple output commodities using a single, composite output product and using the approximate price process to determine procurement and processing decisions is near optimal. Compared to a myopic spread-option-based heuristic, the optimization-based dynamic programming policy provides significant benefits under conditions of tight processing capacities and high price volatilities. Finally, we propose an approximation procedure to compute heuristic policies and an upper bound to compare the heuristic against, when commodity prices follow multifactor processes.

How procurement options influence risk management in construction projects

Abstract: Before proceeding with a project, a client has to choose an appropriate procurement option that facilitates an effective project organization in general and a thorough risk management process in particular. By identifying three procurement variables that have a major influence on risk management: project delivery method, form of payment, and use of collaboration or partnering arrangements, the effect of each variable is studied. An exploratory study and a series of interviews with clients, contractors and consultants involved in 11 Swedish construction projects, were performed in order to examine how risk management was carried out in each project. Irrespective of the procurement option, many projects suffered from variations in cost affecting one or more actors. Risk management was not carried out systematically throughout project phases. However, in the projects with early involvement of the actors, their participation throughout the project, and opportunities for open dialogue and collaboration, a more...

Impact of the Capital Market Collapse on Public-Private Partnership Infrastructure Projects

Abstract: The collapse of capital markets is having an impact of the funding arrangements for economic and social infrastructure projects in Australia. Bearing this in mind, this paper seeks to examine whether the current volatility and uncertainty in capital markets in Australia affects the feasibility of privately financed infrastructure and specifically the public-private partnership (PPP) method of procurement. This paper examines the role and dependency that capital markets play in funding PPPs, current market conditions, and how they will affect PPP viability. In addition, alternative funding and procurement mechanisms that can be used for short- and medium-term infrastructure deliveries are presented.

Risk-Based Electricity Procurement for Large Consumers

Abstract: In a competitive electricity market, consumers seek strategies to procure their energy needs from different resources (pool, bilateral contracts, and their own generation facilities) at minimum cost while controlling the risk. In this paper, a novel method is proposed to address the electricity procurement problem of large consumers using the concept of information gap decision theory. The method can be used as a tool for assessing the risk levels, considering whether a large consumer is risk-taking or risk-averse regarding its midterm procurement strategies. In the proposed method, procurement decisions are evaluated by means of two criteria. The first criterion is the robustness of the decision against experiencing high procurement costs, and the second one is the opportunity of taking advantage of low procurement costs. The pool price is considered an uncertain variable, and it is assumed that the large consumer has an estimate of the prices. In this study, two models of uncertainty are addressed for the pool price based on the concept of weighted mean squared error using a variance-covariance matrix, and the expected procurement cost is modeled using a joint normal probability distribution function. A case study illustrates the working of the proposed technique.

Collaborative implementation of e‐business processes within the health‐care supply chain: the Monash Pharmacy Project

Abstract: Purpose – The purpose of this paper is to provide insights into the implementation of e‐business processes in the procurement area of a healthcare supply chain when multiple stakeholders are involved.Design/methodology/approach – A single longitudinal case study spanning three years is presented using data collected from interviews, participant observation, and documentary analysis.Findings – This study identifies the lack of consistency and poor data quality as well as the global nature of suppliers as key issues in the e‐business implementation in the healthcare supply chain. It also points out the need for collaboration and trust for a successful implementation.Practical implications – This study provides practitioners with a useful guide to the various technology‐related, management, and business issues that can arise during the implementation of e‐business processes in the context of supply chains involving multiple stakeholders.Originality/value – This study is distinctive on two grounds: the longit...