Procurement Process in Networking Lecture o7 Advanced Computer Networks (ACN) 545

1. Mr. Thilak de Silva. BSc. Eng., MSc, CEng, FIE(SL), FIET(UK), CITP(UK), MBCS(UK), MIEEE (USA) ProcurementProcess in NetworkingLecture o7Advanced Computer Networks (ACN) 545 M.Sc. in IT - Year 1 Semester II - 2012

2. Today's Agenda • Expenditure • Beget • Tender Document / Bidding Document • Request for proposal – RFP • Stakeholders of Procurement Process • Contents of Tender Document • Calling for Tender Document • Contract Document M.Sc. in IT - Year 1 Semester II - 2012

3. Session Outcomes • At the end of this session you will understand about the entire Procurement Process of an organization and about related artifacts such as Tender document, Request for Proposals, Contract document etc. M.Sc. in IT - Year 1 Semester II - 2012

4. Expenditure • In an organization there are two main types of expenditure • Capital Expenditure • Buying equipments, cost for a new building etc. • Operational Expenditure • Maintenance, paying salary etc M.Sc. in IT - Year 1 Semester II - 2012

5. Expenditure – for a NETWORK • If a new network will be implemented every thing falls under Capital expenditure. • If expanding an existing network buying new equipments falls under Capital expenditure. • Equipments for maintenance falls under Operational expenditure. M.Sc. in IT - Year 1 Semester II - 2012

6. Budget • Annual budget • Any budget that is prepared for a 12-month period. An annual budget outlines both the income and expenditures that are expected to be received and paid over the coming year. • Monthly budget • Any budget that is prepared for time period of a month. A monthly budget outlines both the income and expenditures that are expected to be received and paid over the coming month. M.Sc. in IT - Year 1 Semester II - 2012

7. Annual Business Plan • Almost all the companies prepare this. • The allocated budget for operational and capital expenditures are specified. Capital Operational M.Sc. in IT - Year 1 Semester II - 2012

8. Annual Business Plan • When requesting a new investment requester should convenience the need, ROI, benefit etc. • If it is accepted requester should provide a detailed analysis of expenses. • After series of discussions if it is needed it is placed under budget. • Once the annual business plan is approved, the procurement process starts. M.Sc. in IT - Year 1 Semester II - 2012

9. Tender Document • Includes specifications of equipments. • Includes Bill for Quantity. • Well defined. • Problem – If there are more adequate equipments vender can not suggest because everything is well defined M.Sc. in IT - Year 1 Semester II - 2012

10. Request for Proposals - RPF • Includes specifications of equipments. • Includes Bill for Quantity. • Well defined. • Problem – If there are more adequate equipments vender can not suggest because everything is well defined M.Sc. in IT - Year 1 Semester II - 2012

11. Procedure • A tender document or a RFP has two parts. • Technical proposal and • Financial proposal • We first analyze the Technical proposal and then we do a technical evaluation. By looking at that the suppliers will be shortlisted. • Then the Financial proposal of those suppliers will be opened and shortlist from them again. • Then cost will be analyzed and the least cost supplier will be selected. M.Sc. in IT - Year 1 Semester II - 2012

12. Procedure • When doing the technical and financial evaluations we can assign a weight for each, like, • 60% for Technical evaluation • 40% for Financial evaluation • By looking at the final percentages we can select the most weighted supplier. • But this should be done prior to the calling of tenders. M.Sc. in IT - Year 1 Semester II - 2012

13. Stakeholders of Procurement Process • User Department • Finance Department • Procurement Department • Tender Board • Technical Evaluation Committee M.Sc. in IT - Year 1 Semester II - 2012

14. Stakeholders of Procurement Process M.Sc. in IT - Year 1 Semester II - 2012

15. Stakeholders of Procurement Process • After selecting the suppliers, • Procurement department send a letter of intension to supplier • Supplier submits the reply. • Supplier submit the performance bond. • Sign the contract.

16. Contents of Tender Document/Bidding Document • Section 01 : Instructions to bidders. • Section 02 :Tender Conditions. • Section 03 : Scope of work. • Section 04 : Technical specification • Section 05 : Compliance schedule • Section 06 : Price schedule M.Sc. in IT - Year 1 Semester II - 2012

17. Calling for Tender Document/Bidding Document M.Sc. in IT - Year 1 Semester II - 2012

18. Contract Document • Contains payment terms (advanced payment, percentage wise) Eg:- • Advance – 10% • Delivery – 20% • Installation – 30% • Provisional testing – 30% • Generally after provisional testing 90% of the payment is done. M.Sc. in IT - Year 1 Semester II - 2012

19. Contract Document • 10% is kept until warranty period expires. • Once the warranty period expires Final testing is done and if it is fine the rest of the payment is also done. M.Sc. in IT - Year 1 Semester II - 2012

20. Thank You… M.Sc. in IT - Year 1 Semester II - 2012