Empirical Study on Procurement Planning Practices and

The Importance of Procurement Planning in Achieving Value for Money

Procurement planning is a critical component of the procurement process, as it establishes the framework for all subsequent activities. An effective procurement plan should outline the steps involved in engaging suppliers, including need assessment and identification, procurement method selection, acquiring required approvals, funding determination, and timeline scheduling. Whether organizations have incorporated these practices into their procurement plans can significantly impact their ability to achieve value for money (VFM).

The Link Between Procurement Planning and Procurement Performance

Research has demonstrated the strong connection between procurement planning and procurement performance. According to a study on the impact of procurement planning on the performance of the Agricultural Development Corporation in Nairobi, Kenya, there is a significant positive correlation between procurement planning and procurement performance. The study found that having a well-developed procurement portfolio, effective logistics management, and adherence to procurement plans are key factors that positively impact procurement performance.

Similar findings were reported in a study on the impact of procurement methods on the procurement performance of public sugar production companies in western Kenya. The study emphasized that organizations should improve their planning processes and ensure that the procurement strategies are properly followed to enhance procurement performance and achieve value for money.

Institutional Pressures and Procurement Practices

The institutional theory provides a useful framework for understanding the various pressures that can shape an organization’s procurement practices. According to this theory, organizations may adopt certain procurement practices due to coercive, normative, or mimetic pressures from their external environment.

Coercive pressures can come in the form of government regulations or requirements that mandate the use of specific procurement practices. In the case of Kenyan state corporations, the Public Procurement and Asset Disposal Act (PPADA) of 2015 and the accompanying regulations provide the legal framework for their procurement activities.

Normative pressures can arise from professionalization and related networking within the procurement field. The Supplies Practitioners’ Management Act of 2007 in Kenya, for instance, assigns the Kenya Institute of Supplies Management (KISM) the responsibility of ensuring professionalism through membership and licensing. Organizations may feel the need to comply with these normative standards to be perceived as legitimate by their peers.

Mimetic pressures, on the other hand, can stem from the desire to emulate successful procurement practices of other organizations, particularly in the face of uncertainty. Public institutions in Kenya, for example, may compete with one another for ISO certification and performance contracting ratings, which can influence their adoption of certain procurement techniques.

The Role of Supplier Sourcing and Supplies Management

Procurement planning is just one aspect of the broader procurement process. Supplier sourcing and supplies management practices also play a crucial role in achieving value for money.

Supplier sourcing involves the selection and evaluation of suppliers based on a range of criteria, including price, quality, delivery, and reliability. Research has shown that the use of global, green, and multiple sourcing strategies can positively impact procurement performance, while single-source approaches may have a negative effect.

Effective supplies management, including quality control, timely delivery, and cost management, is also essential for ensuring value for money. Studies have highlighted the importance of having a well-functioning inspection and acceptance committee to ensure the delivery of high-quality products and services.

The Impact of E-Procurement

The adoption of e-procurement, the use of electronic systems and technology to support the procurement process, has also been shown to contribute to improved value for money. E-procurement can enhance transparency, promote competition, and reduce the potential for corruption, all of which are crucial for achieving VFM.

Research in various contexts has demonstrated the positive impact of e-procurement on institutional quality, procurement performance, and the control of corruption. By automating and streamlining procurement procedures, e-procurement can help public entities like Kenyan state corporations to better manage their procurement activities and resources.

Empirical Insights from Kenyan State Corporations

The current study on Kenyan state corporations provides valuable empirical evidence on the impact of procurement practices on value for money. Using a sample of 87 state corporations, the researchers examined the effects of procurement planning, supplier sourcing, supplies management, and e-procurement on the organizations’ procurement performance and achievement of VFM.

The findings of the study revealed the following:

1. Procurement Planning and Value for Money: The study found a positive and significant correlation between procurement planning and value for money in Kenyan state corporations. Organizations that had well-developed procurement plans, including need assessment, procurement method selection, and timeline scheduling, were more likely to achieve better procurement performance and VFM.

2. Supplier Sourcing and Value for Money: The research also demonstrated a positive and significant relationship between supplier sourcing practices and value for money. State corporations that employed strategies such as global, green, and multiple sourcing were able to secure better price-quality ratios, ultimately leading to improved VFM.

3. Supplies Management and Value for Money: The study’s findings indicated a positive association between supplies management practices and value for money. Effective quality control, timely delivery, and cost management were identified as key factors in ensuring that state corporations received the expected value for their procurement expenditures.

4. E-Procurement and Value for Money: The research further revealed a positive and significant correlation between the adoption of e-procurement and value for money in Kenyan state corporations. By automating and streamlining procurement processes, e-procurement was found to enhance transparency, competition, and the overall control of corruption, all of which contribute to the achievement of VFM.

The study’s results highlight the critical role that procurement practices play in the success of state corporations in Kenya. By emphasizing the importance of procurement planning, supplier sourcing, supplies management, and e-procurement, the findings offer valuable insights for both policymakers and procurement professionals within these organizations.

Recommendations for Enhancing Procurement Performance and Value for Money

Based on the study’s findings, several recommendations can be made to help Kenyan state corporations improve their procurement practices and achieve better value for money:

1. Strengthen Procurement Planning: State corporations should prioritize the development of comprehensive procurement plans that align with their strategic objectives. These plans should involve key stakeholders, assess procurement needs, identify appropriate sourcing methods, and establish clear timelines and budgets.

2. Implement Effective Supplier Sourcing Strategies: Kenyan state corporations should adopt a multi-criteria approach to supplier selection, considering not only price but also factors such as quality, delivery, and reliability. The use of global, green, and multiple sourcing strategies should be encouraged to ensure the best value for money.

3. Enhance Supplies Management Practices: Organizations should establish robust quality control mechanisms, including inspection and acceptance committees, to ensure the timely delivery of high-quality goods and services. Effective contract management practices should also be implemented to monitor cost, time, and quality throughout the procurement process.

4. Embrace E-Procurement: State corporations should continue to invest in and utilize e-procurement systems to automate and streamline their procurement procedures. The adoption of e-procurement can help enhance transparency, promote competition, and reduce the potential for corruption, all of which are critical for achieving value for money.

5. Strengthen Procurement Governance and Compliance: Policymakers and regulatory authorities should work closely with state corporations to ensure compliance with existing procurement laws and regulations, such as the PPADA. This can involve providing training, guidelines, and oversight to support the effective implementation of procurement practices.

By implementing these recommendations, Kenyan state corporations can improve their procurement performance, enhance value for money, and better serve the needs of their stakeholders and the broader public.

Conclusion

The empirical study on Kenyan state corporations highlights the pivotal role of procurement practices in achieving value for money. The findings demonstrate the positive and significant impact of procurement planning, supplier sourcing, supplies management, and e-procurement on the procurement performance and VFM of these organizations.

As public entities entrusted with the responsibility of managing taxpayer resources, state corporations in Kenya must prioritize the optimization of their procurement processes. By strengthening their procurement planning, adopting strategic sourcing strategies, enhancing supplies management, and embracing e-procurement, these organizations can unlock greater value for money and better serve the public interest.

The insights from this study provide a valuable roadmap for policymakers, procurement professionals, and other stakeholders involved in the public sector procurement landscape. By implementing the recommended strategies, Kenyan state corporations can enhance their procurement efficiency, ensure transparency and accountability, and ultimately deliver better services to the citizens they serve.