The risk are susceptible through the stages in the procurement:
- Identifying the need and planning the purchase
- Developing the specification
- Selecting the purchasing method
- Purchasing documentation
- Inviting, clarifying and closing offers
- Evaluating offers
- Selecting the successful tenderer
- Negotiations
- Contract management
- Evaluating the procurement process
- Disposals
1. Identifying the need and planning the purchase
| Risk | Likely consequences | Action |
| Understatement of the need | Purchase of unsuitable product or service
Money wasted Need not satisfied |
Analyse need accurately |
| Overstatement of the need | Greater expense
Poor competition |
Analyse need accurately
Use functional and performance requirements |
| Misinterpretation of user needs | Totally unacceptable purchase or not most suitable product or service
Time lost Increased costs Possible downtime |
Improve consultation with users
Obtain clear statement of work and definition of need |
| Insufficient funding | Delay in making the purchase
Additional costs for re-tender |
Obtain appropriate approvals before undertaking process
Improve planning |
| Impractical timeframe | Inadequate responses from tenderers
Reduced competition Delivery schedule not met |
Improve forecasting, planning and consultation with users
Improve communication with potential tenderers |
| Probity issues
|
Increased procurement costs
Misuse of resources Most suitable product not obtained Unethical conduct |
Implement best practice policies, guidelines and practices
Maintain ethical environment Improve training of personnel Put suitable controls and reviews in place Consider using a probity adviser Improve communication with potential tenderers |
2. Developing the specification
| Risk | Likely consequences | Action |
| Narrow definition or commercial specification (eg. use of brand name) | Fewer alternatives
Most suitable product or service may not be obtained Increased costs |
Define the specification in terms of required outputs
Use functional and performance specifications |
| Definition of inappropriate product or service | Need not satisfied
Time lost Increased costs Possible downtime |
Ensure specification is consistent with needs analysis
Improve market knowledge Use functional and performance specifications |
| Biased specification | Inadequate responses from tenderers
Claims of unfair dealings |
Use functional and performance specifications
Implement a control mechanism to review specification before release |
| Inadequate statement of requirements | Variety of offers
Insufficient responses Products offered not meeting needs Difficult to evaluate |
Be familiar with requirements
Use functional and performance specifications Use an Expression of Interest or Request for Information to clarify requirements (be careful not to infringe intellectual property rights or copyright) |
3. Selecting the purchasing method
| Risk | Likely consequences | Action |
| Failure to identify potential sources | Lack of offers from suitable tenderers | Improve procurement planning processes
Improve market knowledge Seek industry participation |
| Selecting inappropriate method | Need to seek offers again
Possible cost variations Failure to obtain value for money |
Improve implementation of procurement policies, guidelines and practices
Improve tender documentation and clearly identify the evaluation criteria in Request for Tenders Provide staff with appropriate training and experience |
4. Purchasing documentation
| Risk | Likely consequences | Action |
| Terms and conditions unacceptable to tenderers | Loading of costs in offers
Having to modify tender terms and conditions Disruption Low response |
Use standard documentation prepared by Crown Law
Select appropriate documentation for purchase type (ie. goods, services, goods and services, or information technology related) Improve tender planning Assess and allocate risks appropriately Consult with Crown Law Use commercially acceptable terms Provide staff with appropriate tender planning and procurement skills |
| Providing inadequate information
|
Loading of costs in offers
Variations in offers Having to provide clarifying information, causing delays in tender closing Additional costs |
Ensure staff have appropriate tender planning and documentation training and experience
Improve tender planning and preparation Review tender documents before issuing them and ensure evaluation criteria contain the critical factors on which assessment of tenders will be based |
5. Inviting, clarifying and closing offers
| Risk | Likely consequences | Action |
| Failure to adequately address enquiries from tenderers
|
Claims of unfair practices
Offers with qualifications by tenderers Withdrawal of offers |
Implement standardised procedures for responding to enquiries
Provide staff with appropriate tender management training and experience Respond in a timely manner to enquiries Allow adequate time for tenderers to respond |
| Actual or perceived favouritism in providing information | Complaints from tenderers
Withdrawal of offers |
As above
Answer queries in writing and provide copies to all potential tenderers Ensure that all potential tenderers are provided with any addenda |
| Actual or perceived breach of confidentiality | Complaints from tenderers
Mistrust by tenderers |
Establish formal security procedures
Train staff in their obligations Perform regular audits and reviews of security processes Advise tenderers of security measures |
| Insufficient number of responses
|
Need to undertake process again
Increased costs Delayed delivery to the client Poor value for money due to limited competition |
Use appropriate tender advertisement strategy to increase competition (eg. consider advertising tenders in other publications as well as the local paper)
Provide potential tenderers with advance notice of tender requests Improve tender documentation and specifications Allow sufficient time for tenderers to respond |
| No response from known quality suppliers | Reduced competition
Increased costs of products or services |
Actions as above for insufficient number of responses
Improve your market knowledge Review specifications or conditions Seek feedback from known suppliers on their non-response |
6. Evaluating offers
| Risk | Likely consequences | Action |
| Failure to follow effective evaluation procedures | Inconsistent evaluations
Possible complaints from tenderers Subjective not objective evaluation of offers |
Provide staff with appropriate tender assessment and evaluation training and experience
Improve tender assessment and evaluation processes Maintain, audit and review evaluation procedures Ensure that Evaluation Committee members declare any conflicts of interest |
| Breaches of security | Claims of unethical or unfair practices
Loss of faith with tenderers |
Maintain, audit and review security procedures
Provide staff with appropriate training and experience and monitor performance Ensure that Evaluation Committee members understand and sign Confidentiality Agreements |
| Offers fail to meet needs | Need to call tenders again
Additional costs Delay in delivery |
Improve market knowledge
Improve tender documentation Conduct market research Develop functional and performance specifications |
| Failure to identify a clear winner
Decision made on subjective grounds |
Claims of unethical and unfair behaviour
Complaints from tenderers |
Ensure evaluation criteria contain the critical factors on which the assessment of tenders will be based and that they are clearly identifiable to tenderers in tender documents
Ensure evaluation criteria are appropriate and measurable Ensure that Evaluation Committee members sign Declaration of Conflict and Confidentiality Agreements |
7. Selecting the successful tenderer
| Risk | Likely consequences | Action |
| Selecting an inappropriate supplier
|
Failure to fulfil the contract | Provide staff with appropriate tender evaluation, financial and technical skills training and commercial expertise
Improve evaluation procedures Improve evaluation criteria and clearly identify them to tenderers in tender documents Reject unacceptable offers Perform financial, technical and company evaluations before awarding contract Procurement Review Committee to review tender and selection process prior to awarding contract |
| Selecting inappropriate product | Failure to meet the client’s need | Ensure users are involved in the evaluation/selection process
Improve technical evaluation procedures and train staff as appropriate Procurement Review Committee to review tender and selection process prior to awarding contract |
8. Negotiations
| Risk | Likely consequences | Action |
| Not matching the expectations of buyer and tenderer | Contract disputes
Delivery delays Cost variations Reduction in value for money Purchase of less suitable product Inefficient use of resources |
Improve communication, including ensuring that Conditions of Contract form part of the Request for Tender
Provide staff with training in contract planning and management Define terms carefully Record each party’s obligations Clarify all ambiguities before signing the contract |
| Deadlock on details of agreement | Delays in delivery
Need to restart procurement Possible cost of legal action |
Look at alternatives to share risk
Distinguish between essential and non-essential goals and requirements |
| Failure to secure mandatory conditions
|
Inability to finalise contract
Delays in delivery Variations in cost Inefficient use of resources
|
Establish baseline before negotiations
Distinguish essential goals from others Consider variations to contract Provide negotiators with adequate training |
| Failure to secure agreement in relation to Crown Contracts Confidentiality Policy | Inability to finalise contract
Delays in delivery Inefficient use of resources Requirement to negotiate with other ranked suppliers |
Ensure potential suppliers aware of Policy requirements before submitting responses
Seek exemption from Crown Contracts Confidentiality Standing Committee |
| Unfair or onerous requirements on the tenderer in the contract conditions | Contract disputes
Invalidity of contract Legal action Poor supplier/customer relationship |
Provide negotiators with adequate training and support
Negotiate commercial terms Terms should be fair and reasonable |
| Failure to reflect the terms offered and agreed in the contract | Contract disputes
Legal action Poor supplier/customer relationship |
Check final draft of contract with successful tenderer
Keep records of all negotiations and agreements |
| Inadvertently creating a contract without the delegate’s prior approval | Expense of negotiating out of the contract and paying damages
Committing to other associated work prior to main contract existing |
Procedure in place to ensure delegate’s approval obtained first
Provide negotiators with adequate training |
9. Contract management
| Risk | Likely consequences | Action |
| Variations in price and foreign exchange | Cost overruns | Agree on prices and the basis of prices
Agree on a formula for calculating variations |
| Unwillingness of the supplier to accept the contract | Delays in delivery
Need to restart procurement |
Seek legal redress if non-acceptance causes loss
Negotiate but retain integrity of the contract |
| Failure of either party to fulfil the conditions of the contract | Contract disputes
Failure to satisfy needs Delays in delivery Downtime Legal action |
Ensure good contract administration and performance management
Hold regular inspections / meetings and ensure progress reports Ensure all staff know responsibilities and conditions Ensure good record keeping and documentation |
| Inadequately administering the contract | Cost increases
Failure of contract Full benefits not achieved Delivery of unsatisfactory product Contract/supply disputes |
Maintain up-to-date agency procedures and practices
Ensure all staff are suitably trained and experienced in contract planning and management |
| Commencement of work by the supplier before contract is exchanged or letter of acceptance issued | Potential liability to pay for unauthorised work
Possibility of legal action for perceived breach of contract |
Confirm verbal acceptance of contract with written advice
Accept all contracts in writing Ensure approvals are received before allowing work to start |
| Unauthorised increase in scope of work | Unanticipated cost increases
Contract disputes |
Ensure all contract amendments are issued in writing
Record all discussions and negotiations Confirm instructions in writing |
| Loss of intellectual property | Loss of commercial opportunity
Unwarranted reliance on supplier for product support |
Ensure suitable clauses are included in the contract |
| Failure to meet liabilities of third parties (eg. royalties or third party property insurance) | Legal action
Damage to the agency’s professional reputation |
Check that all obligations are covered in the contract
Agree on responsibilities Implement appropriate safety standards and programs |
| Loss or damage to goods in transit | Delays in delivery
Downtime Liability disputes |
Include appropriate packaging instructions in specification
Agree on insurance cover for supplier to provide Accept delivery only after inspection Know when title of goods is transferred to buyer |
| Fraud | Misuse of resources
Legal action Disruption to procurement activities |
Maintain an ethical environment
Follow and maintain fraud control procedures |
| Key personnel not available
|
Progress on project disrupted
Less expertise |
Include requirement in specification and ensure compliance in post-tender negotiation
Know the market Accept risk and manage possible delay |
10. Evaluating the procurement process
| Risk | Likely consequences | Action |
| Failure to evaluate procurement and management processes | Failure to improve procurement and management processes | Develop systematic evaluation methods, techniques and evaluation criteria |
| Failure to identify and address problems | Procurement objectives not achieved
Possible failure in the future |
Agree on performance criteria (with supplier and customer)
Develop good relationships with suppliers Include evaluation clause in the contract Implement performance management strategies |
11. Disposals
| Risk | Likely consequences | Action |
| Collusive bidding at auction | Not achieving best return
Claims of unethical and unfair practices |
Set reserve prices
Deal with reputable firms Include disposal clause in initial contract Maintain ethical environment |
| Inadequate tender management | Claims of bias and favouritism to organisations or individuals
Reduction in value for money |
Sell by open tender
Document reasons for decision Provide staff with appropriate training |
Acknowledgment: This checklist is based on a checklist developed by, and has been reproduced with the permission of, the NSW Department of Public Works and Services.