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- Procure to Pay –

The Introduction of an E-Procurement System to the Republic

of Kenya

by

Mathias Muehle

(former Head of the GIZ “Support to Public Finance Reforms Programme” in Kenya)

and

Jerome Ochieng

(Director of the IFMIS department of the National Treasury of Kenya)

6th International Public Procurement Conference, 14th – 16th August 2014,

Dublin City University, Dublin, Ireland

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Overview of presentation:

• Background

• Integrated Financial Management Information System (IFMIS)

• E-Procurement and the Procure to Pay (P2P) System

• IFMIS Academy

• Roll out of the system

• Way forward/resumee

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Background:

Some Challenges of the Public Finance Management in Kenya

• The development of Kenya’s economy is below its potential.

• The Government of Kenya is the biggest investor in the country.

• The planning and budgeting of government investments is not yet fully

implementing all legal requirements

• The execution of the budget and of the investments is not yet effective

and efficient.

• Control of Government spending is not sufficient and comprehensive.

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Corruption and Public Finance Management in Kenya:

• The Annual Budget of Kenya is roughly 13-14 billion EURO.

• National Treasury of Kenya estimates that 25 – 30 % (= more or less 3,5

billion Euro) is lost through corruption or poor procurement.

• According to the former Kenya Anti-Corruption Commission (KACC) 80

% of the corruption cases in Kenya are procurement related.

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Salaries & Allied 26%

Grants & Transfers (Weighted)

28%

Others 1%

Procurement 45%

About 45% of national Ministries Departments and Agencies

budget for the Financial Year 2014/2015 will be used to directly to

procure works, goods and services

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Corruption prevention through better budget planning, implementation

and execution

• A central computer-based System - Integrated Financial Management

Information System (IFMIS) - is the only avenue to incur expenditures

for the entire government. This, and the abolishment of cheques and

cash transfers as well as a sound and transparent Public Procurement

system, reduces the options for corrupt practices.

• Basis for the improvements in Good Financial Governance in Kenya are

two Public Finance Management Reform Strategies from 2005 – 2017.

The establishment of an Integrated Financial Management Information

System (IFMIS) is one important PFM reform initiative of those PFM

strategies.

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• IFMIS is an automated system that is used for public financial management

that interlinks planning, budgeting, expenditure management and control,

accounting, audit and reporting.

• IFMIS also ensures the provision of timely, accurate and quality financial

information. It enhances financial controls for improved expenditure

management, increases transparency and accountability and improves

public service delivery for economic growth and development.

• The first attempt to install an IFMIS system started in 2003. The work on the

re-engineering of the IFMIS system started in 2010 and was officially

launched in July 2012. The timeframe for the implementation of the system is

5 years. The government expects that the system is fully operational by mid

of 2017.

• The implementation of the system is conducted on the basis of a strategic

plan up to 2017.

• o

What is IFMIS?

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Intergrated Financial Management Information System Components (IFMIS)

Component Objective

Plan to Budget (P2B) Structured framework for development & deployment of a fully

functional, automated planning & budgeting system

Communicate to Change

(C2C)

Focuses on change management, capacity enhancement,

information generation and dispersion, education and

communication among IFMIS stakeholders

ICT To Support (ICT2S) Providing technical support underpinning effective and efficient

automation of all IFMIS processes

Procure to Pay (P2P) Implementing an efficient procurement and payment system by fully

automating the processes to increase control and visibility over the

entire life-cycle of a procurement

Record to Report (R2R) Transparent recording and reporting of government transactions

Re-engineering for Business

Results (RBR)

Focusing on continuous review of workflows and business

processes in line with user requirements for quality delivery of

services

Revenue to Cash (R2C) Providing functionalities for collection, recording and classification

and reporting of Government revenues

Suppliers Portal Registration/prequalification of suppliers

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• Electronic Procurement is the business to business – (B2B) or

Government to Business (G2B) purchase and sale of works,

supplies and services online.

• Automation of procurement processes from requisition, tendering,

contract management, award and payment.

What is Electronic Procurement ?

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The E – Procurement Processes

AUTOMATED

PROCUREMENT PROCESSES

PROCUREMENT PLAN

SUPPLIERS

REQUISITIONS

QUOTATIONS & TENDERS

CONTRACTS

ORDERS

ITEMS

RECEIPTING

INVOICING

PAYMENT

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Advantages of e-Procurement

Supports an integrated approach to procurement processes across public sector agencies

Standardization of pricing for common user items, promoting prudent use of the limited resources

Promotes value for money procurements

Promotes competition among supplier

Tracking compliance of legislative provisions

Improves auditability of public procurement expenditures

Incorporates an integrated approval process

Enhances transparency and Accountability

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Overview on the legal set up of the public procurement system (and for e-

procurement) in Kenya

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Government Procurement currently…

Memo

Procurement

Manual Tendering

Physical LPO

Invoice

Payment (EFT)

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Objective of the Procure to Pay (P2P) system:

• To develop and have an efficient and streamlined procurement and

payment system in place at all government levels which fully automates

the procurement and payment process and increases control and

visibility over the entire life-cycle of a procurement transaction, from

procurement planning to payment.

• An end-to-end P2P automated process that starts at development of

procurement plans, to the actual procurement of goods and services, to

payment of suppliers for goods or services delivered.

Partners in the establishment of the P2P system:

The set up of the Procure to Pay system is a collaborative effort between:

• IFMIS Department

• Public Procurement Directorate (PPD) and the

• Public Procurement Oversight Authority (PPOA)

supported by GIZ and the World Bank.

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P2P current implementation process

The P2P implementation that is currently undergoing implementation covers

the following 8 modules:

1.Supplier Management;

2.Requisition Management;

3.Quotation Management;

4.Contract Management;

5.Purchase Order Management;

6.Receipt Management;

7.Invoicing and Payment Management; and

8.Inventory Management.

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The following functionalities of the P2P system have been identified for

activation and/or roll out within the next five (5) years:

• Procurement Planning

The plan helps procuring entities to;

- Define all procurement requirements;

- Identify all of the items to be procured in any financial period;

- Create a sound financial justification for procuring;

- Identify all the tasks involved in procuring products and schedule those tasks by

allocating timeframes and resources; and

- Create a robust project procurement process for the Government.

• Supplier management Supplier management means the registering of suppliers, the goods/services they offer,

qualification. The supplier management module is an internet based portal (i-supplier

management) that allow the following;

- Self-service registration of suppliers by departments (capturing of supplier

information);

- Categorisation of suppliers based on goods and services offered;

- Online supplier approvals;

- Online generation of statistics reports on suppliers like quotations submitted and

awarded

- Self-service supplier details change update; and

- Online collaboration on supplier inquiries.

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• Requisition Management - Means creation of purchase requisitions, identification of goods and services to be procured,

approval of these requisitions by the appropriate officers.

-Makes requisitions more efficient and enforce control by ensuring requisitions are done based

on the procurement plan.

-Will be achieved by allowing self-service requisitions, automated approvals and provision of a

web-based shopping system that will allow Government employees to create, manage and track

their orders while the procurement department retains central control.

• Quotation Management - Enables efficient management of vendor responses to Request for Quotations (RFQs),

including uploading and management of quotations, bid and tender documents and the tracking of

the selection process in the system.

-Requires development and implementation of a Document Management System (DMS). The

DMS will facilitate the scanning of paper forms, imaging and upload documents leading to

effective content and document management. This will provide a solution to effectively track hard

copies of documents including include tenders/bids, requests for proposals (RFPs) as well as

vendor contracts and store them in electronic format.

• Purchase Order (PO) Management

- Involves automation of raising Purchase Orders after supplier selection has been done and

approval of these orders. After the LPOs have been approved, suppliers will be notified through

the i-supplier portal.

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• Receipt Management - Automation of all activities involved in receiving goods, from delivery and receipt of goods,

inspection and acceptance process to recording receipts in the system. It also supports return

of delivered goods to supplier if they fail to meet the specifications.

- After goods have been successfully accepted in the store, the inventory levels will be updated in

the system. Procured items coded as assets are automatically updated in the fixed assets register.

Suppliers will then be automatically notified through the i-supplier portal to enable them to raise an

invoice.

• Invoicing and Payments Management - Matching of received invoices against Purchase Orders and processing of payments to suppliers.

-Payment schedules will be transmitted to Central Bank where payments to suppliers will be

effected. This is achieved by integrating the core IFMIS system with the CBK T24 system. The

module allows for online approvals of the payment vouchers as well as tracking the examination

and validation of the payment process.

• Inventory Management -Involves management of purchased goods once they have been accepted by the stores with an

aim of improving inventory visibility, reducing inventory levels and controlling inventory operations.

Contract Management - Facilitates the creation and negotiation of supplier contracts, formulation of service level

agreements and a process of managing change to ensure that business rules are enforced and

that the public entities get the best from the vendors in terms of rates and quality of service.

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Current modules of P2P system

Annual Budget

Annual Procurement Plan

Requisitions

RFQ

Quotation

Purchase Order

Receiving

Invoice

Payment

Su

pp

lier

Kenya Supplier Portal

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The IFMIS Acadamy for users and suppliers:

IFMIS Academy was established in May 2012 as a key capacity building

institution for the IFMIS users.

IFMIS Academy is today the leader in providing tailored training for IFMIS

users and stakeholders at the MDAs and Counties as well as suppliers.

Objectives of the IFMIS Academy are:

• Ensure training tools to support IFMIS Users are in place

• Increase the competency of existing IFMIS users

• Provide staff from both National and County Governments with personal

development plans tailored to their role, current skills and aspirations

• Develop and deliver tailored training courses and materials that equip

IFMIS Department staff with the skills to do their work effectively and

efficiently,

• Develop more IFMIS experts through capacity building,

• Foster a learning culture by providing frequent and regular professional

training opportunities.

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The IFMIS Acadamy for users and suppliers (cont.):

IFMIS Academy was established on the basis of a strategic plan

Train-the-trainer programme was developed

Curriculum and training materials developed

E-learning system

So far more than 5000 users and suppliers have been trained

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Roll out ot the system:

In a first step a pilot of Procure to Pay (P2P) Purchase Order (PO) approval

hierarchy programme was successfully launched in the National Treasury.

Four approval stages were conducted through the system which included:

• Capturing the Local Purchase Order (LPO) by a Supply Chain

Management Officer

• Verification by Head Supply Chain Management Officer (HSCMO)

• Approval by Authority to Incur Expenditure (AIE) Holder

• Final approval by the Chief Finance Officer (CFO)

The approval hierarchy was a major milestone towards the full

implementation of the P2P system.

It contains aspects of the approval stages from requisition, contract

award and issuance of LPOs and Local Service Order (LSOs).

Purchase Orders (PO) and Approval Processes (AP) normally take a

longer time when conducted manually.

However, it is now expected to take at most 15 minutes electronically once

the P2P approval hierarchy is fully implemented.

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Roll out ot the system (cont.):

After the pilot in the National Treasury the automated approval hierarchy was

rolled out to the 18 Ministries, other Departments, Agencies (Judiciary, Office of The

Attorney General & Dept. Of Justice, Directorate of Public Prosecutions, Public Service Commission, Salaries &

Remuneration Commission, National Police Service Commission, The Commission on Administrative Justice,

Parliamentary Service Commission, Judicial Service Commission, Registrar of Political Parties, Controller Of

Budget, Auditor General) of the central government of Kenya in the first half of 2014.

In a second step the procurement processes under the Quotation

Management Module were tested, namely:

• Preparation of the 7 Procurement Methods

• Invitation of Suppliers

• Approval of Sourcing Documents

• Capture Surrogate Response- Technical

• Preliminary Evaluation of quote

• Technical Evaluation of quote

• Capture Surrogate- Financial response

• Re-capture Surrogate- Financial response

• Resolution Surrogate- Financial response

• Approval, Award and Amend of Quote process

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Roll out ot the system (cont.):

Along the pilot steps a User Acceptance Testing (UAT) on internal requisition

of various processes was conducted.

Way forward/resumee:

• The roll out to the 47 Counties of Kenya will take place in the second half of

2014 (and after) which is in line with the National Treasury’s plan to have a

the system in place at all levels of government by mid 2017.

• The legal foundation of e procurement in the amended Procurement and

disposal Act will support a bigger acceptance and faster implementation

process of the P2P system.

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Asante sana!

Thank You!

Vielen Dank!

Terima Kasih!