AKP FERROCAST PVT LTD.

RISK AND OPPURTUNITIES RELATED TO PURCHASING PROCESS.

Ref: F/PUR/P/05
(

Rev : 01 / 15.06.2019

1. Identifying the need and planning the purchase

Risk Likely Action
consequences
Understatement of the Purchase of unsuitable Analyse need
need product or service accurately
Money wasted
Need not satisfied
Overstatement of the Greater expense Analyse need
need accurately
Poor competition
Use functional and
performance
requirements
Misinterpretation of Totally unacceptable Improve consultation
user needs purchase or not most with users
suitable product or
Obtain clear statement
service
of work and definition
Time lost of need
Increased costs
Possible downtime
Insufficient funding Delay in making the Obtain appropriate
purchase approvals before
undertaking process
Additional costs for re-
tender Improve planning
Impractical timeframe Inadequate responses Improve forecasting,
from tenderers planning and
consultation with users
Reduced competition
Improve communication
Delivery schedule not
with potential tenderers
met
Probity issues Increased procurement Implement best
costs practice policies,
guidelines and
Misuse of resources
practices
Most suitable product
Maintain ethical
not obtained
environment
Unethical conduct
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 Action
consequences
Narrow definition or Fewer alternatives Define the specification
commercial in terms of required
Most suitable product
specification (eg. use of outputs
or service may not be
brand name)
obtained Use functional and
performance
Increased costs
specifications
Definition of Need not satisfied Ensure specification is
inappropriate product consistent with needs
Time lost
or service analysis
Increased costs
Improve market
Possible downtime knowledge
Use functional and
performance
specifications
Biased specification Inadequate responses Use functional and
from tenderers performance
specifications
Claims of unfair
dealings Implement a control
mechanism to review
specification before
release
Inadequate statement Variety of offers Be familiar with
of requirements requirements
Insufficient responses
Use functional and
Products offered not
performance
meeting needs
specifications
Difficult to evaluate
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 Action
consequences
Failure to identify Lack of offers from Improve procurement
potential sources suitable tenderers planning processes
Improve market
knowledge
Seek industry
participation
Selecting inappropriate Need to seek offers Improve
method again implementation of
procurement policies,
Possible cost variations
guidelines and
Failure to obtain value practices
for money
Risk Likely Action
consequences
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 Action
consequences
Terms and conditions Loading of costs in Use standard
unacceptable to offers documentation
tenderers prepared by Crown Law
Having to modify
tender terms and Select appropriate
conditions documentation for
purchase type (ie.
Disruption
goods, services, goods
Low response 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 Loading of costs in Ensure staff have
information offers appropriate tender
planning and
Variations in offers
documentation training
Having to provide and experience
clarifying information,
Improve tender
causing delays in
planning and
tender closing
preparation
Additional costs
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 Action
consequences
Failure to adequately Claims of unfair Implement
address enquiries from practices standardised
tenderers procedures for
Offers with
responding to enquiries
qualifications by
tenderers Provide staff with
appropriate tender
Withdrawal of offers
management training
and experience
Respond in a timely
manner to enquiries
Allow adequate time for
tenderers to respond
Actual or perceived Complaints from As above
favouritism in providing tenderers
Answer queries in
information
Withdrawal of offers writing and provide
copies to all potential
tenderers
Ensure that all potential
tenderers are provided
with any addenda
Actual or perceived Complaints from Establish formal
breach of tenderers security procedures
confidentiality
Mistrust by tenderers Train staff in their
obligations
Perform regular audits
and reviews of security
processes
Advise tenderers of
security measures
Insufficient number of Need to undertake Use appropriate tender
responses process again advertisement strategy
to increase competition
Increased costs
(eg. consider
Delayed delivery to the advertising tenders in
client other publications as
well as the local paper)
Poor value for money
due to limited Provide potential
competition tenderers with advance
notice of tender
requests
Improve tender
documentation and
specifications
Allow sufficient time for
tenderers to respond
No response from Reduced competition Actions as above for
known quality suppliers insufficient number of
Increased costs of
responses
products or services
Improve your market
knowledge
Risk Likely Action
consequences
Review specifications or
conditions
Seek feedback from
known suppliers on
their non-response

6. Evaluating offers
Risk Likely Action
consequences
Failure to follow Inconsistent Provide staff with
effective evaluation evaluations appropriate tender
procedures assessment and
Possible complaints
evaluation training and
from tenderers
experience
Subjective not objective
Improve tender
evaluation of offers
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 Maintain, audit and
unfair practices review security
procedures
Loss of faith with
tenderers Provide staff with
appropriate training
and experience and
monitor performance
Ensure that Evaluation
Committee members
understand and sign
Confidentiality
Agreements
Offers fail to meet Need to call tenders Improve market
needs again knowledge
Additional costs Improve tender
documentation
Delay in delivery
Conduct market
research
Develop functional and
performance
specifications
Failure to identify a Claims of unethical and Ensure evaluation
clear winner unfair behaviour criteria contain the
critical factors on which
Decision made on Complaints from
the assessment of
Risk Likely Action
consequences
subjective grounds tenderers 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 supplier

Risk Likely Action
consequences
Selecting an Failure to fulfil the Provide staff with
inappropriate supplier contract 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 Failure to meet the Ensure users are
product client’s need involved in the
evaluation/selection
process
Improve technical
evaluation procedures
and train staff as
appropriate
Procurement Review
Committee to review
Risk Likely Action
consequences
tender and selection
process prior to
awarding contract

8. Negotiations
Risk Likely Action
consequences
Not matching the Contract disputes Improve
expectations of buyer communication,
Delivery delays
and tenderer including ensuring that
Cost variations Conditions of Contract
form part of the
Reduction in value for
Request for Tender
money
Provide staff with
Purchase of less
training in contract
suitable product
planning and
Inefficient use of management
resources
Define terms carefully
Record each party’s
obligations
Clarify all ambiguities
before signing the
contract
Deadlock on details of Delays in delivery Look at alternatives to
agreement share risk
Need to restart
procurement Distinguish between
essential and non-
Possible cost of legal
essential goals and
action
requirements
Failure to secure Inability to finalise Establish baseline
mandatory conditions contract before negotiations
Delays in delivery Distinguish essential
goals from others
Variations in cost
Consider variations to
Inefficient use of
contract
resources
Provide negotiators with
adequate training
Failure to secure Inability to finalise Ensure potential
agreement in relation contract suppliers aware of
to Crown Contracts Policy requirements
Delays in delivery
Confidentiality Policy before submitting
Inefficient use of responses
resources
Seek exemption from
Requirement to Crown Contracts
negotiate with other Confidentiality Standing
ranked suppliers Committee
Unfair or onerous Contract disputes Provide negotiators with
requirements on the adequate training and
Invalidity of contract
tenderer in the contract support
conditions Legal action
Risk Likely Action
consequences
Poor supplier/customer Negotiate commercial
relationship terms
Terms should be fair
and reasonable
Failure to reflect the Contract disputes Check final draft of
terms offered and contract with successful
Legal action
agreed in the contract tenderer
Poor supplier/customer
Keep records of all
relationship
negotiations and
agreements
Inadvertently creating a Expense of negotiating Procedure in place to
contract without the out of the contract and ensure delegate’s
delegate’s prior paying damages approval obtained first
approval
Committing to other Provide negotiators with
associated work prior to adequate training
main contract existing

9. Contract management
Risk Likely Action
consequences
Variations in price and Cost overruns Agree on prices and the
foreign exchange basis of prices
Agree on a formula for
calculating variations
Unwillingness of the Delays in delivery Seek legal redress if
supplier to accept the non-acceptance causes
Need to restart
contract loss
procurement
Negotiate but retain
integrity of the contract
Failure of either party to Contract disputes Ensure good contract
fulfil the conditions of administration and
Failure to satisfy needs
the contract performance
Delays in delivery management
Downtime Hold regular
inspections / meetings
Legal action
and ensure progress
reports
Ensure all staff know
responsibilities and
conditions
Ensure good record
keeping and
documentation
Inadequately Cost increases Maintain up-to-date
administering the agency procedures and
Failure of contract
contract practices
Full benefits not
Ensure all staff are
achieved
suitably trained and
Delivery of experienced in contract
Risk Likely Action
consequences
unsatisfactory product planning and
management
Contract/supply
disputes
Commencement of Potential liability to pay Confirm verbal
work by the supplier for unauthorised work acceptance of contract
before contract is with written advice
Possibility of legal
exchanged or letter of
action for perceived Accept all contracts in
acceptance issued
breach of contract writing
Ensure approvals are
received before
allowing work to start
Unauthorised increase Unanticipated cost Ensure all contract
in scope of work increases amendments are issued
in writing
Contract disputes
Record all discussions
and negotiations
Confirm instructions in
writing
Loss of intellectual Loss of commercial Ensure suitable clauses
property opportunity are included in the
contract
Unwarranted reliance
on supplier for product
support
Failure to meet Legal action Check that all
liabilities of third obligations are covered
Damage to the
parties (eg. royalties or in the contract
agency’s professional
third party property
reputation Agree on
insurance)
responsibilities
Implement appropriate
safety standards and
programs
Loss or damage to Delays in delivery Include appropriate
goods in transit packaging instructions
Downtime
in specification
Liability disputes
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 Maintain an ethical
environment
Legal action
Follow and maintain
Disruption to
fraud control
procurement activities
procedures
Key personnel not Progress on project Include requirement in
available disrupted specification and
ensure compliance in
Risk Likely Action
consequences
Less expertise post-tender negotiation
Know the market
Accept risk and manage
possible delay

10. Evaluating the procurement process

Risk Likely Action
consequences
Failure to evaluate Failure to improve Develop systematic
procurement and procurement and evaluation methods,
management processes management processes techniques and
evaluation criteria
Failure to identify and Procurement objectives Agree on performance
address problems not achieved criteria (with supplier
and customer)
Possible failure in the
future Develop good
relationships with
suppliers
Include evaluation
clause in the contract
Implement performance
management strategies