You are the procurement manager for a large municipality who has issued a formal invitation to bid (ITB) to supply fire equipment to your municipality, which are critically needed by the growing community. The budget estimate for the equipment is $2,200,000.00 (2.2 million) and you are hoping for a high degree of competition and good bid pricing.
As is your policy with formal ITB’s, a public notice was issued for this opportunity and your agency notified directly several suppliers who sell fire trucks. The bid was “on the street” for three weeks, so you feel that all bidders had adequate time to prepare a quality bid.
On the day of the bid opening, your agency had received four sealed bids. All bids are marked in accordance with the instructions in the ITB and have been locked in a cabinet until bid opening. Bid opening is at 2:00pm, so you gather the bids that were received and proceed to the bid opening room at 1:50pm. Accompanying you is your procurement assistant who will write down the bid results as you read them aloud. Two of the bidders have elected to personally attend the bid opening, and the assistant fire chief of your agency is also in attendance.
As is your practice, you open the bids one at a time and read aloud the bidder’s name and bid amount for each piece of fire equipment (Fire engine, fire pumper and ambulance). The bid results are as follows:
After reading the bid amounts, you thank the attending bidders for their time and let them know a formal announcement will be forthcoming. Bidder C realizes that his company submitted the lowest price overall for the fire equipment. Before leaving he smiles and says “my boss is going to be very happy and he hopes to see the purchase order soon.”
When you return to the procurement offices, one of your senior buyers approaches you with an envelope. It is marked with the bid number of the fire equipment ITB and is unopened. Apparently, a procurement staff member placed it in the wrong cabinet. The assistant fire chief is with you and anxious to open this bid. It is from a company he is familiar with and knows they provide quality equipment and services.
The wording in the ITB regarding the formal bid opening read as follows:
“All bids must be submitted in a sealed envelope and received by the Office of Procurement by 2:00pm (EST) on the date listed in the Invitation to Bid. Late bids will not be accepted. Bids received after the date and time will be returned to the bidder unopened.
After the deadline for receipt of bids, the procurement official will open each bid and read aloud the name of the bidder and the bid amount(s). The bid will be evaluated at a later time and then the winning bidder will be announced by a Notice of Intent to Award. This notice will be provided to all bidders”
During the bid evaluation the next day, the agency determined that Bidder C is non-responsive. They took exception to two material requirements of the ITB dealing with on-board computers and safety lighting.
Using the information provided above answer the following questions. Provide sufficient support for your rationale/decision with your answers being a minimum of 100 words.
Whom would you consider the lowest bidder? Explain your rationale.
Lowest by individual equipment
How would you handle the evaluation of Bidder C’s response?
Do you agree with the determination that they are non-responsive? If so, how would you notify the bidder?
Would you consider the bid discovered after the bid closing to be late? Explain your rationale
The assistant fire chief wants to open the bid to see how it compares to other three bids. Would you accommodate his request? Why or Why not?
What is your assessment of how the agency handled the receipt and storage of the late bid (if it is truly late).
If you were asked to develop a new policy that would preclude such incidents from happening in the future, what would such a policy include?
What would be the most effective way to communicate your decision on the late bid to the bidders that responded to the ITB?
What do you see as the lessons to be learned in this situation?
How would you handle future bids based on what you observed and learned?
The lowest bidder would be bidder would be bidder C in terms of the overall value while bidder A would be the lowest considering the price per item.
However, considering the principles of public procurement, the bidding procedure allows only for a slight difference in value with the budget. Thus, bidder A looks more responsive and qualified.
Bidder C appears appealing but the large difference with the budget, brings a doubt on quality matters.
Bidder B, has exaggerated price thus appearing unreasonably expensive and the difference is still large and in question.
Thus, it’s simply reasonable to go for bidder A.
Yes. I would agree that bidder C is non-responsive.
This bidder does not meet the criteria after further review in the committee.
Further review involves calculations and analysis on the quality. Remember, this is not the first time our company is buying these fire equipment and we have also considered the previous prices in determining our quotation. Thus, too low vendor quotation may raise the question of quality.
On notifying the bidder, a formal communication will be done subject to the rules of the company. The bidder should know that the bid was subjected to limited bid opening criteria and thus, determination of the lowest bid did not only come from considerations of the price. It should be clear to the bidder that the committee raised the question of quality due to very low quotation from the vendor.
Yes. The last bid submitted would be considered late. In public procurement, bid opening should be public and should involve all bidders and their presence for the purpose of transparency. It is also clear that the bid should be in the committee table for discussion. This bid was not present at the start of the meeting at 2:00pm. Thus, it should be returned to the bidder unopened. It would be a breach of transparency procurement rules to allow one person open the bid for comparison.
No. the assistance fire chief is not a committee. Further, the process of opening should involve multiple responsibilities in the opening process. Each committee member has the part to check in verifying of the requirements and thus, if this late bid was considered valid, it should be opened in presence of all the other committee members. The public procurement procedure also provides that any rejected bid due to lateness should be returned to the bidder unopened. Opening of the bid would breach the transparency procedure rule.
The company did not handle the bid fairly. Determination of a late bid should involve the committee. There should be a systematic procedure on how to handle bids on arrival. This appears to be missing. That is why some committee members are not yet aware that there was a late bid. Also, the storage criteria should be universal across the whole agency. This would avoid misplacements. Such public procurement processes should be systematic and organised to prevent complains regarding transparency and breach of public procurement rules.
The policy would include the following; a systematic way of handling bids on arrival and a universal method of marking the bid on arrival; a clearly defined storage facility should be available explicitly for the storage of bids to avoid any other misplacement; a means through which the procurement agency committee members will be made aware of this policy so that the policy can receive uniform adoption and adjustments to avoid confusions like the ones noticed in the case above; another clear and systematic policy to handle miss-handled bids to prevent a creation of any room for complains from future bidders.
All the bidders that responded should be communicated to uniformly about the late bid. There should be no differences on what bidder A, B, C and the late bidder receives concerning the late bid. All the bidders should know through writing, the reason as to why the bid was rejected and the action applied in the late bid. This may include if it was rejected, if it was accepted, if it was returned to the bidder unopened according to the procurement rules etc. This would eliminate the possibility of other bidders complaining. It is a show of transparency on how the late bid was handled.
This situation teaches a lot. In any organisation whether public or private, there will always exist disparities in the manner in which policies are handled. This is because some members would want to ignore procedures and laid out rules regarding certain issues even if they know the correct thing to do. Just like the chief of the fire staff. It is also clear in this regard that also members of public including customers, suppliers, etc. will always have their way of disrespecting even the very clear, well laid systems and procedures. This incident also indicates that expectations may fail. However, there should exist a uniform procedural policy to be adopted in dealing with such disparities.
In the future, bids should be handled with strict adherence to the laid down procedures and rules. Policies should be respected and transparency should be observed. Breach of rules should not be allowed whatsoever. The respective bid committee members should carry out their roles in a clear manner to avoid confusions in the bid process. Any other partisan individuals should be aware of the code of conduct and rules regarding their dealing with the organisation. This minimise possible confusions and maintain transparency.
Module 13 – Chapters 15 & 16
Reverse Logistics and Service Supply Chains
Think about a time you needed to use the reverse logistics process. What do you think could/would/should be performance metrics for the service that you were involved with. Select up to ten that you think are important and explain why you think these should be considered as standard performance metrics for any company
Disposition cycle time: this is an important measure of reverse logistics. The amount of cycle time should be directly proportional to the level at which the processes are standardised and streamlined.
Amount of product reclaimed and resold: this refers to the percentage of the product that moves to the reverse statistics system is reclaimed and resold. This means the value of the product recaptured back to the system.
Percentage of material recycled: this metric, helps in determining the percentage of the product in the reverse logistics stream that is recycled in an appropriate manner for the benefit of the company thus maximising profit and reducing cost.
Waste: this metric tries to identify and minimise the amount of product that is directed to the waste stream. These may include materials that are moved to landfills, incinerators or just disposed of as waste.
Percentage of cost recovered: this metric helps the firm maximise the profitability of the product that did not sell well as intended. These includes products that were returned by customers.
Per item handling cost: this is also called cost per-touch metric. It is calculated by dividing the total facility cost per month by the number of items processed, this value also helps to compare the efficiencies of different facilities.
Distance travelled: the fewer the miles covered per item, the better the reverse logistics network. However, this is not as simple to compute as the per item handling cost computation.
Energy used in handling returns: this metric is basically used in the programs meant for sustainability. It refers to the measure of the amount of energy used in the reverse logistics process, these includes, diesel, petrol, electricity etc.
Total cost of ownership: this metric refers to the total cost of owner related to original acquisition of the product, resale, bringing it back as a return and moving it through a secondary market or placing it in a landfill.
Customer service: this metric tries to evaluate how much a company is able to gain as a result of good customer service. The more the company is able to retain customer, the better the customer service and hence more sales.
The major aim of a company is to minimise costs and maximise profit. There are no other metrics that can help achieve the major goal and aim of a business in a greater manner than how the reverse logistic metrics described above can. Thus, these reverse logistic metrics should be considered the standard measure of performance since they lead to the key benefits of any company. These key benefits derived from the above metrics include but not limited to, reduced costs, faster services, customer retention, reduced losses and unplanned profits etc.
Consider how many services you have contact with in the past week, list up to ten of them and determine if they are single level or two level bi-directional service supply chains. Justify why you identified them either one.
My home construction
Taxation accounting service
Auto repair of my car
My business consultation service
Legal representation in court service
Treatment in hospital
Repairs to my damaged garments
Single level bidirectional supply chain involves the transfer of customer inputs to the service provider, the processing of the service provider and the transfer of the processed output back to the customer. For example when I went to repair my car, I handed the car to the mechanic (transfer of customer inputs), the mechanic repaired the car (processing of the input) and handed it back to me. (Transfer of the processed output back to the customer).
Two level bidirectional supply chains is where the initial service provider is an interface between the service customer and the service supplier. The initial service provider serves as a value adding go-between in the process. For example, when I went for photographing, the photographer developed pictures in frames, he went to the film developer, exposed films to the developed pictures and then brought the filmed pictures back. That means the photographer was an intermediary between me and the film maker.
Cooperative Procurement & Shared Services
In this module we examined Co-operative Procurement and Shared Services. Your assignment is to provide your opinion on whether or not you feel that these models of procurement are good, bad or indifferent.
Explain you reasoning for this opinion, using where possible information from the module lecture/slides
The learnt cooperative procurement and shared services models are indifferent.
This is because the pooling of cash and or purchase orders to benefit from whole sale or long term prices has a variety of advantage and also a variety of disadvantages.
When two or more partners join together to procure goods and services, they are likely to benefit and also likely to face a lot of problems that even pull back the gained advantages.
Cooperative procurement or purchasing is likely to give to a particular firm, a number of benefits which includes, reduction in costs when making purchases, reduction with the overall workload associated with the bid process, achievement of a greater overall value, ability to access and provide expertise, political encouragement, networking opportunities, increased professionalism, greater strengths with supplier, standardisation etc.
These models also pose serious threats to the firms. These are the challenges and the drawbacks to the models. They include, problem of balancing between small firms and large firms, the owner of the knowledge may exploit others, inter-agency support, the source of resources to supply for many firms, difficulties in scheduling meetings, the requirements for evaluation, the change of a supplier impact, the problem of timing the renewal and the breaking of contracts, standardisation problem etc.
Looking keenly and comparing the benefits and the draw backs that cooperative procurement and shared services may have, it’s clear that these would cancel out with each other bringing the equilibrium at zero. Thus it remains indifferent especially when analysed by a different party like I.
However, decision on whether a firm should chose to apply cooperative procurement remains as a core duty of the firm itself by comparing other factors such as its size, location, the kind of partners to choose and their relationship, the size of partner firms etc. Consideration of these factors will help the firm make an informed decision.