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Thursday, May 31, 2012

Scoring integrity

Prefacing the following article by Honolulu Civil Beat, I'd note that Guam is not mentioned in the study by State Integrity org, nor any US Territory, which is a frightful shame. We'd all be interested, and we're all part of the US communal body.

Is the Public Procurement Process in Hawaii Effective?
The state got a B+, or 88 percent score for Procurement. Hawaii tied for 12th place with four other states: Rhode Island, California, Indiana and Tennessee. Iowa came in first while Maryland was last.

Hawaii scored a 100 percents for having laws addressing conflict of interest and competitive bidding. But Hawaii got a 0 percent for not having any prohibitions against sole sourcing or no-bid contracts.

Overall, the State Integrity Investigation ranked Hawaii 10th after Civil Beat reporters researched 330 “Corruption Risk Indicators” across 14 categories of government. (Click here to learn more about the methodology used for the project.)

Bottom line: This is another area in state government where what's written in the law doesn't always match what happens in reality on the ground. Every "in practice" score in this category scored a 50 percent or less.


The rest of the story, in great detail you will have to read, answers, or at least addresses the question, Is the Public Procurement Process Effective? It is full of useful tips for evaluating your own jurisdiction's procurement "integrity". Indeed, the State Integrity website contains a clickable page to look at the 50 states.

The Honolulu Civil Beat says it intends to print a different question each day, and the criteria used to come up with a score for each question. I hope I can remember to follow along. And I hope you follow again as well.

Tuesday, May 8, 2012

Sacramento buys local

In an era when many state and local governments are abandoning control and outsourcing the spending of taxpayer dollars to other states and localities, Sacramento, California is trying to funnel the money back home. Not all of it, nor blindly nor dogmatically, but purposefully, at the margin, with a mind to increasing the tax base and providing a return to local taxpayers.

Sacramento is a large city with a small town feel to it. I remember first going there over 50 years ago to visit relatives who had transplanted there from the farms of Tennessee. It is the center of gravity for a constellation of neighboring towns that spread out across the valley between the Sierras and the Pacific in north-central California.

According to this article, "the Sacramento region is ranked No. 26 on a list of the most populous metro areas in the nation. The official U.S. Census Bureau count as of April 2010 was 2,149,127, which instead would put the region at No. 24 for population."

Sacramento County considers strengthening local bid preference
The goal of enhancing its procurement and contracting program would be to spur the local economy and streamline the process for vendors. The program has been in place for a number of years — three years in its latest iteration.

“The county purchases more than $100 million each year in goods and services with about half of that expenditure directed to small and/or local businesses,” board chairman Don Nottoli said in a news release. “Expanding the opportunity for additional businesses to participate in the program will have a positive impact on our business climate and help create more jobs.”

Program changes the board will consider include:

... Increasing the contract limit for goods and non-professional services to $1 million from $250,000

... Increasing the local business preference percentage from 3 percent to 5 percent

... Continuing to give small businesses in Sacramento County a 2 percent bid preference, and allow local businesses in the county a 5 percent preference

... Allowing the 2 percent and 5 percent preferences to be combined for a total preference of 7 percent for local small businesses in the county, with a preference of $50,000 per vendor for any single solicitation

Antidote to impulse shopping

We have all been impulsive shoppers. You are bombarded every day every where to increase your reflexivity to impulsive shopping ads and opportunities. The reflex is so often repeated that it becomes habit. Impulsive shopping is habit forming. And the marketing people with a bunch of stuff to move know that and love you for it.

If there is an opposite word for "impulsive shopping", it is procurement. If you engaged in procurement rather than impulsive shopping, your retirement stash would be a whole lot bigger than it is. And if governments diligently, objectively, fairly, transparently and professionally paid heed, our taxes would go a long way further. And, perhaps even, decrease the rot of influence that corrupts governance, if that's not too much to hope for.

Procurement is a process, not a whim, an antidote to impulse shopping disease.

That is my take-away from reading an excellent skeletal outline of the procurement process. Note that this article discusses US federal procurement, so specifics will vary with jurisdictions. But it illustrates the essential road markers.

The article is actually a blog post by Lindley Ashline, and one of many similar posts shes done: lindleyashline's blog. I've provided the skeleton. Click the link and read her post for the meat.

Note, this article is about the "source selection" process. That is, it is focused on the buying process. One thing impulse buying marketers do is rush you past the antecedent decision making process: do I really need this? What exactly do I need? Given multiple and alternative needs, what priority do I give this with respect to other demands for my money (and time)?

A hallmark of impulsive buying is the untested assumption you have a need, and more to the point, a need for this particular item, right now, above all others. Before you ever even begin to consider the "how" question, engage in a rigorous discussion with yourself about "why" and "what" and "when" questions.

First Year in Contracting: The Procurement Process
1. Determine the Required Resources.
2. Assign a Program Manager and Contracting Officer.
3. Develop an Acquisition Strategy.
4. Develop an Acquisition Plan.
5. Develop a Plan of Action and Milestones.
6. Obtain Approval and Funding.
7. Establish the Source Selection Authority.
8. Develop the Final Statement of Work.
9. Conduct Market Research.
10. Finalize the RFP.
11. Send Out Draft Documents.
12. Conduct Bidders' Conference.
13. Review Requested SOW Changes.
14. Review and Approve Final RFP
15. Release RFP
16. Finalize the Source Selection Plan.
17. Answer Contractor Questions.
18. Finalize Source Selection Approach.
19. Receive Company Proposals and Begin Evaluation.
20. Receive Company Responses to Clarifications and Deficiencies.
21. Evaluate Companies’ Price Proposals.
22. Initiate Audits.
23. Make Competitive Range Determination.
24. Conduct Live Test Demonstrations.
26. Prepare for Discussions with Companies.
27. Call for Best and Final Offers.
28. Negotiate Final Contract.
29. Make Contract Award.
30. Ramp up Contract.
31. Perform Contract.
32. Close out Contract.

Can you cut corners, you ask, or make exceptions?

Sure, unless someone has a gun to your head.

But let me ask, at what point did your last diet fail?

~~~~~~~~~~~~
And now, something new for this blog, and likely not to be repeated. Bound to offend someone, probably someone who hates a bad joke, but others as well, maybe. I was led to this by an odd "search" result on my blog that searched for "procurement act jokes". I tried the search myself, not expecting much there, and found exactly that.

But, in the spirit of the (intended) message this post, I did find the following procurement joke(s) here:
4. Why is it better to have a woman as the buyer? Because a male buyer will pay $2 for a $1 item he needs.

5. Why is it better to have a man as the buyer? Because a female buyer will pay $1 for a $2 item she doesn’t need but is on sale.

Friday, May 4, 2012

Uncooperative purchasing

Army procurement switch puts boot into Afghan dream
When it opened, inside huge white sheds that once held PVC piping machinery but is now home to high-tech German injection molding and boot-making equipment, Afghan and U.S. generals were keen to be photographed alongside a local success story.

Saffi's Milli Boot Factory, in Kabul's sprawling industrial hinterland, was a model for Afghanistan, showcasing local manufacturing while giving jobs to hundreds of people who may otherwise have picked up insurgent guns.

But a U.S. decision to hand procurement to the Afghan government has left Saffi with something of a developed world problem - local officials opted for cheaper boots made in China and Pakistan, killing off Milli's contracts after a year.

"The U.S. government told me when I started I would have contracts for five years, until at least 2014," he told Reuters. "The Afghan government gave me only three months notice of cancellation and now I have $30 million worth of raw material I can't use."

Saffi sold his leather boots, which underwent a rigorous quality testing process in the United States, for $62 a pair, while Chinese-made boots with imitation leather cost the Afghan government $22 in a contract for up to 700,000 pairs a year.

"The Afghan government is just looking for the lowest price," he said, surveying a room piled high with rolls of leather and raw material bought from Taiwan.

"They asked me to sell for $15 a pair, but the leather alone cost me $40. The Chinese boots use fake leather and quickly fall apart, but they are cheap."

NATO-led forces, who have mostly handled purchasing for the Afghan security forces in the decade-long war, have since 2010 operated under "Afghan First" rules requiring them to buy where possible from local companies, boosting the economy and employment while underpinning anti-insurgent strategies.

Contracts for Afghan businesses included 100 percent of Afghan uniforms and boots, textiles, furniture, tents, software and transformers, according to NATO data.

Those contracts spawned 15,000 jobs, while making savings on imports for combat-related spending worth $650 million - still a fraction of the estimated $200 million spent on the war a day.

U.S. military officials say the decision to hand a large slice of procurement to the Afghans was made in March, with responsibility handed over to the Defence and Interior Ministries.

Milli is not the only company to fall foul of the switch to local procurement, with several uniform and equipment suppliers either nervously eyeing soon-to-expire contracts, or having already lost orders to cross-border competitors.

A rival company executive, who asked not to be named because his firm fears retribution from Afghan military buyers, said, like Milli, he had invested millions of dollars into his business, but his supply contracts were now in limbo.

The Afghan First Policy backs anti-insurgency efforts by ensuring that people employed locally with better jobs and incomes aren't tempted to join the estimated 25,000 Afghan Taliban fighters in the country, often called the '$10-a-day Talib', referring to the payment offered to would-be fighters.

Workers at the factory earned between $400 and $900 a month, well over the average wage in a country where up to a third of the 30 million population live under the poverty line.

Lieutenant-General Abdul Basir Asafzari, who heads logistics and procurement in the Ministry of Defence, said only 30 percent of supply currently was coming from Afghan companies, and President Hamid Karzai had also ordered the military to choose local firms where possible.

The reason Milli had contracts cancelled was because it was importing low-quality boots from China and other countries and relabeling them, he said.

"Milli boot company did not fulfill its commitments. There were some complaints from soldiers about the quality," Asafzari said.

But Mohammad Akbar Ahmadzai, from the NGO Building Markets, which helps build jobs and investment in developing countries by supporting entrepreneurs, said Milli's boots had been genuine and met U.S.-based quality tests.

Other business experts, who would only comment anonymously, said Milli and others may have fallen foul of Afghanistan's labyrinth of bribe and patronage payments, with better-connected competitors maneuvering to kill them off.

NATO's Kakiel said Milli and others may also have misunderstood complex contract provisions which stipulated only one year of guaranteed sales.

But an audit by the U.S. government's Special Inspector General for Afghanistan Reconstruction, or SIGAR, released in January, said the Afghan First Initiative (AFI) had been marred by inadequate contract solicitation and vetting, while data on claimed employment benefits had been limited.

Read more of the story at the link for the article above.

It seems to me that there is an obvious trade-off in recycling dollars back into a local economy, and labor pool, and buying cheaper products elsewhere. Where along the cost benefit graph the lines exactly cross is unclear, but the basic pattern is too simple to dismiss out of hand.

Of course, I'm not an economist. But, as Bob Dylan sang, you don't need a weatherman to know which way the wind blows.