Checklist of Potential Risks - goods and services ...



Checklist of potential risks - goods and services procurement process

(Version 3.1 – april 2017)

1. Identifying the need and planning the purchase

2. Developing the specification

3. Selecting the purchasing method

4. Purchasing documentation

5. Inviting, clarifying and closing offers

6. Evaluating offers

7. Selecting the successful tenderer

8. Negotiations

9. Contract management

10. Evaluating the procurement process

11. Disposals

1. Identifying the need and planning the purchase

|Risk |Likely consequences |Action |

|Understatement of the need |Purchase of unsuitable product or |Analyse need accurately |

| |service | |

| |Money wasted | |

| |Need not satisfied | |

|Overstatement of the need |Greater expense |Analyse need accurately |

| |Poor competition |Use functional and performance |

| | |requirements |

|Misinterpretation of user needs |Totally unacceptable purchase or not |Improve consultation with users |

| |most suitable product or service |Obtain clear statement of work and |

| |Time lost |definition of need |

| |Increased costs | |

| |Possible downtime | |

|Insufficient funding |Delay in making the purchase |Obtain appropriate approvals before |

| |Additional costs for re-tender |undertaking process |

| | |Improve planning |

|Impractical timeframe |Inadequate responses from tenderers |Improve forecasting, planning and |

| |Reduced competition |consultation with users |

| |Delivery schedule not met |Improve communication with potential |

| | |tenderers |

|Probity issues |Increased procurement costs |Implement best practice policies, |

| |Misuse of resources |guidelines and practices |

| |Most suitable product not obtained |Maintain ethical 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 consequences |Action |

|Narrow definition or commercial |Fewer alternatives |Define the specification in terms of |

|specification (eg. use of brand name) |Most suitable product or service may |required outputs |

| |not be obtained |Use functional and performance |

| |Increased costs |specifications |

|Definition of inappropriate product or |Need not satisfied |Ensure specification is consistent with|

|service |Time lost |needs analysis |

| |Increased costs |Improve market knowledge |

| |Possible downtime |Use functional and performance |

| | |specifications |

|Biased specification |Inadequate responses from tenderers |Use functional and performance |

| |Claims of unfair dealings |specifications |

| | |Implement a control mechanism to review|

| | |specification before release |

|Inadequate statement of requirements |Variety of offers |Be familiar with requirements |

| |Insufficient responses |Use functional and performance |

| |Products offered not 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 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 |Improve implementation of procurement |

| |Possible cost variations |policies, guidelines and practices |

| |Failure to obtain value for money |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 |Loading of costs in offers |Use standard documentation prepared by |

|tenderers |Having to modify tender terms and |Crown Law |

| |conditions |Select appropriate documentation for |

| |Disruption |purchase type (ie. goods, services, |

| |Low response |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 |Ensure staff have appropriate tender |

| |Variations in offers |planning and documentation training and|

| |Having to provide clarifying |experience |

| |information, causing delays in tender |Improve tender planning and preparation|

| |closing |Review tender documents before issuing |

| |Additional costs |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|Claims of unfair practices |Implement standardised procedures for |

|from tenderers |Offers with qualifications by tenderers|responding to enquiries |

| |Withdrawal of offers |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 |Complaints from tenderers |As above |

|providing information |Withdrawal of offers |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 |Complaints from tenderers |Establish formal 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 responses |Need to undertake process again |Use appropriate tender advertisement |

| |Increased costs |strategy to increase competition (eg. |

| |Delayed delivery to the client |consider advertising tenders in other |

| |Poor value for money due to limited |publications as well as the local |

| |competition |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 |Reduced competition |Actions as above for insufficient |

|suppliers |Increased costs of products or services|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 |Inconsistent evaluations |Provide staff with appropriate tender |

|procedures |Possible complaints from tenderers |assessment and evaluation training and |

| |Subjective not objective evaluation of |experience |

| |offers |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|Maintain, audit and review security |

| |Loss of faith with tenderers |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 |Improve market knowledge |

| |Additional costs |Improve tender documentation |

| |Delay in delivery |Conduct market research |

| | |Develop functional and performance |

| | |specifications |

|Failure to identify a clear winner |Claims of unethical and unfair |Ensure evaluation criteria contain the |

|Decision made on subjective grounds |behaviour |critical factors on which the |

| |Complaints from tenderers |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 |Contract disputes |Improve communication, including |

|and tenderer |Delivery delays |ensuring that Conditions of Contract |

| |Cost variations |form part of the Request for Tender |

| |Reduction in value for money |Provide staff with training in contract|

| |Purchase of less suitable product |planning and management |

| |Inefficient use of resources |Define terms carefully |

| | |Record each party’s obligations |

| | |Clarify all ambiguities before signing |

| | |the contract |

|Deadlock on details of agreement |Delays in delivery |Look at alternatives to share risk |

| |Need to restart procurement |Distinguish between essential and |

| |Possible cost of legal action |non-essential goals and requirements |

|Failure to secure mandatory conditions |Inability to finalise contract |Establish baseline before negotiations |

| |Delays in delivery |Distinguish essential goals from others|

| |Variations in cost |Consider variations to contract |

| |Inefficient use of resources |Provide negotiators with adequate |

| | |training |

|Failure to secure agreement in relation|Inability to finalise contract |Ensure potential suppliers aware of |

|to Crown Contracts Confidentiality |Delays in delivery |Policy requirements before submitting |

|Policy |Inefficient use of resources |responses |

| |Requirement to negotiate with other |Seek exemption from Crown Contracts |

| |ranked suppliers |Confidentiality Standing Committee |

|Unfair or onerous requirements on the |Contract disputes |Provide negotiators with adequate |

|tenderer in the contract conditions |Invalidity of contract |training and support |

| |Legal action |Negotiate commercial terms |

| |Poor supplier/customer relationship |Terms should be fair and reasonable |

|Failure to reflect the terms offered |Contract disputes |Check final draft of contract with |

|and agreed in the contract |Legal action |successful tenderer |

| |Poor supplier/customer relationship |Keep records of all negotiations and |

| | |agreements |

|Inadvertently creating a contract |Expense of negotiating out of the |Procedure in place to ensure delegate’s|

|without the delegate’s prior approval |contract and paying damages |approval obtained first |

| |Committing to other associated work |Provide negotiators with adequate |

| |prior to main contract existing |training |

9. Contract management

|Risk |Likely consequences |Action |

|Variations in price and foreign |Cost overruns |Agree on prices and the basis of prices|

|exchange | |Agree on a formula for calculating |

| | |variations |

|Unwillingness of the supplier to accept|Delays in delivery |Seek legal redress if non-acceptance |

|the contract |Need to restart procurement |causes loss |

| | |Negotiate but retain integrity of the |

| | |contract |

|Failure of either party to fulfil the |Contract disputes |Ensure good contract administration and|

|conditions of the contract |Failure to satisfy needs |performance management |

| |Delays in delivery |Hold regular inspections / meetings and|

| |Downtime |ensure progress reports |

| |Legal action |Ensure all staff know responsibilities |

| | |and conditions |

| | |Ensure good record keeping and |

| | |documentation |

|Inadequately administering the contract|Cost increases |Maintain up-to-date agency procedures |

| |Failure of contract |and practices |

| |Full benefits not achieved |Ensure all staff are suitably trained |

| |Delivery of unsatisfactory product |and experienced in contract planning |

| |Contract/supply disputes |and management |

|Commencement of work by the supplier |Potential liability to pay for |Confirm verbal acceptance of contract |

|before contract is exchanged or letter |unauthorised work |with written advice |

|of acceptance issued |Possibility of legal action for |Accept all contracts in writing |

| |perceived breach of contract |Ensure approvals are received before |

| | |allowing work to start |

|Unauthorised increase in scope of work |Unanticipated cost increases |Ensure all contract amendments are |

| |Contract disputes |issued in writing |

| | |Record all discussions and negotiations|

| | |Confirm instructions in writing |

|Loss of intellectual property |Loss of commercial opportunity |Ensure suitable clauses are included in|

| |Unwarranted reliance on supplier for |the contract |

| |product support | |

|Failure to meet liabilities of third |Legal action |Check that all obligations are covered |

|parties (eg. royalties or third party |Damage to the agency’s professional |in the contract |

|property insurance) |reputation |Agree on responsibilities |

| | |Implement appropriate safety standards |

| | |and programs |

|Loss or damage to goods in transit |Delays in delivery |Include appropriate packaging |

| |Downtime |instructions 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 fraud control |

| |Disruption to procurement activities |procedures |

|Key personnel not available |Progress on project disrupted |Include requirement in specification |

| |Less expertise |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 |Failure to improve procurement and |Develop systematic evaluation methods, |

|management processes |management processes |techniques and evaluation criteria |

|Failure to identify and address |Procurement objectives not achieved |Agree on performance criteria (with |

|problems |Possible failure in the future |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 |Set reserve prices |

| |Claims of unethical and unfair |Deal with reputable firms |

| |practices |Include disposal clause in initial |

| | |contract |

| | |Maintain ethical environment |

|Inadequate tender management |Claims of bias and favouritism to |Sell by open tender |

| |organisations or individuals |Document reasons for decision |

| |Reduction in value for money |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.

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