“THE EXPERIENCE OF THE PUBLIC SECTOR ON THE PERFORMANCE OF SUPPLIERS-KENYA”

1. PRESENTATION TO FOURTH EAST AFRICAN PROCUREMENT FORUM14TH – 16TH NOVEMBER, 2011BY:Ruth WamaeSenior Assistant Director of Supply Chain ManagementMEAC, KENYA

2. “THE EXPERIENCE OF THE PUBLIC SECTOR ON THE PERFORMANCE OF SUPPLIERS-KENYA”

3. PRESENTATION OUTLINE • Introduction • Type of contracts • The role of the Procuring Entity • Why manage and monitor supplier’s performance? • At what stage of the purchasing process do we measure supplier performance? • Dealing with poor performance • Supplier performance management checklist • Supplier performance measurement: KEMSA case study • Conclusion

4. Ladies and gentlemen, in accepting to represent Mr. Charles Juma of KEMSA at this Forum, I knew I was putting on oversize shoes. Should I stumble please don’t let me fall. It might be painful Intro

5. INTRODUCTION: • Public buyers are operating in an increasingly dynamic commercial and technological environment. • Effective procurement planning and monitoring of supplier performance is critical to controlling the risks and costs involved in purchasing. • Buyers must develop a contract management plan.

6. Types of Contracts in the Public Sector There are four types of Public Procurement Contracts: • Goods Contracts • Works Contracts • Service Contracts • Consultancy Contracts

7. The Role of the Procuring Entity • Procuring entities are responsible for ensuring that the contracts are delivered in accordance with • the specifications • the terms of the contract, • All associated risks are identified and managed • Effective communication is maintained between the parties. • PEs arrange for the routine contract administration activities such as:- • variation to the contract, • bank guarantees and security deposits • processing claims for payment.

8. Why Manage and Monitor Suppliers’ Performance? Sound supplier performance monitoring and management strategies offer the following opportunities: Assist Organizations to:- • reduce internal transaction costs associated with purchasing. • manage risks • develop of strategic relationships with suppliers. • Develop supplier capability. • develop supply chain management strategies. • Improve supplier and purchaser performance.

9. At what stage of the purchasing process do we measure suppliers’ performance? • supplier measurement will commence at the Contracting Stage of the procurement process. • Actual monitoring and managing performance takes place during the implementation phase • However, effective supplier performance management relies on integrating performance monitoring and management approaches throughout the whole purchasing process. Namely:- • Procurement Planning, • Tendering & • Contract Management

10. Dealing With Poor Performance There are a number of strategies for dealing with a supplier’s poor performance. These include: • Progress meetings and reviews. • Agreed problem-solving mechanisms and dispute resolution processes. (e.gNegotiation, Mediation, Expert Appraisal and Arbitration) • Enforcing the terms of the contract, including through legal action. • As a last resort, terminating the contract and seeking damages from the supplier.

11. SUPPLIER PERFORMANCE CHECKLISTS The following checklists are not exhaustive. They are intended to provide a starting point for the types of issues that should be monitored if a supplier’s performance is to be effectively managed. Delivery Consider whether the supplier: • Delivers on time. • Meets due date without expediting. • Offers a competitive lead time. • Delivers correct items and quantities. • Provides accurate documentation and information. • Responds to emergency delivery requirements.

12. SUPPLIER PERFORMANCE MANAGEMENT CHECKLISTS Pricing: Consider the following factors: • Competitiveness. • Price stability. • Volume or other discounts. • Manner in which price changes are introduced. Product: • Meets specifications. • Reliability/durability. • Product or contract service quality. • Quality and availability of documentation, instructions, technical manuals. • Packaging suitability, environmental aspects.

13. SUPPLIER PERFORMANCE MANAGEMENT CHECKLISTS Customer Service: Consider the following factors for each supplier: • Compliance with contract terms and conditions. • Supplier representatives have sincere desire to serve. • provides feedback to the purchasing organization from manufacturer. • Effectiveness of sales support. • Market insight. • Training provided on equipment or products. • Support on professional or technical matters. • Administrative efficiency (including order acknowledgment and accurate invoicing). • Adherence to their company policies. • Adherence to their company quality systems.

14. SUPPLIER PERFORMANCE MEASUREMENT:KEMSA CASE STUDY • Supplier performance measurement is done from the tendering stage to contract administration stage. • Assessment of supplier’s capability is incorporated into the Tender Document, through use of third party accreditation (Global Fund & WHO Pre-Qualification & ISO Standards) • Delivery lead times are measured & late deliveries penalized at 0.05% per week

15. SUPPLIER PERFORMANCE MEASUREMENT:KEMSA CASE STUDY • The World Bank procedures also provide penalty for the same. • Inspection of the quality of medical commodities is done both at Pre-Delivery, Delivery & Random field quality assessment of the Drugs is done to ensure effective performance of the drugs. • Recall of batches that fail the quality test.

16. Conclusion • Most Kenyan PEs don’t plan for supplier performance evaluation due to capacity challenges except in a few procurement units that are fully professionalized. • We are in process of developing a supplier performance evaluation tool • There are cases of errant suppliers that are get away with it Scott free. • The culture of supplier performance should be entrenched in the respective EAC procurement laws

17. THANK YOU Asante Sana!