Procurement System in the Ministry of Defence

Introduction

The agency responsible for the procurement of defence stores including capital equipments are jointly undertaken by the Ministry of Defence and the Ministry of Finance.

The decision to request for purchase is vested in the Secretary General of the Ministry of Defence. By deligation of power through the Deputy Secretary General, (Material Procurement and Research) the Supply Division working closely with the Armed Forces is tasked to administer the procurement machinery.

General guidelines and specifications are prepared for the items to be purchased. References are made to instructions and procedures issued by the relevent authorities. Adhering to national policies and guidelines, the following are highlighted:-

a. The most advantageous purchase taking into account price, quality, and usage
b. Preference would be given to local product
c. New Economic Policy
d. Transfer of Technology
e. Countertrade

Function

The Supply Division in the Ministry together with other divisions such as Logistic Services Division of the Army, Navy and Air Force would liase with the Defence Science and Technology Centre (STRIDE) for technology transfer requirements as tha Defence Production Division for possible in country production.

The Supply Division is divided into 7 sections and each is interdependent and charged to cater to the needs of the Armed Forces. The main activity is the administration of procurement involving:-

a. Market Research
b. Source Enquiry
c. Evaluation
d. Tender Process
e. Contract Process
f. Inspection
g. Post Contract Evaluation

Procurement Concept

The Division plays the role of procurement in the sense that it makes the necessary arrangements for delivery of goods, to meet the requirement of the users (Armed Forces). It acts as a 'middleman/facilitator' to the purchasing process of before and after.

Backward Action

a. The user after having confirmed their requirement would then bid for financial
allocation to the Finance Division of the Ministry for inclusion in the following
year's annual budget.
b. Finance Division would scrutinize the request and only after being satisfied with
the requirement forward in to the Ministry of Finance (Treasury Malaysia).
c. After the screening exercise, the budget would be tabled at Parliament for
approval.
d. Upon approval, the user would forward its requirement to the Supply Division for
procurement action.

Forward Action

a. After having initiated the contract, the user department is then authorised to
raise order or receive delivery.
b. The contractor/supplier would carry out technical inspection of the delivery in
accordance to specifications.
c. Delivery that meet the technical requirement would be delivered to the stores.
d. Contractor would than forward bills to Finance Division for payment.

Method of Procurement

The methods currently practised are:-

a. Local Purchase - for item the value of each item, the annual expenditure incurred
not exceeding RM10,000 Orders are normally sent to a few selected
reliable suppliers. Power to the purchase is delegated to users.
b. Quotation - for stores the value of each, the annual expenditure incurred
exceeding RM10,000 but not RM50,000.00. A minimum of five
suppliers are invited to quote.
c. Tender - for stores exceeding RM50,000. Requirements are advertised in
local newspapers, through Embassies, High Commisions or direct to
suppliers. The 'Open Tender' and 'Close Tender' system are
practised.

Procurement Process

Based on the concept of equal footing tenderers are invited to submit bids based on the requirements which are clearly spelled out in the tender documents. All information received are treated in the strictest confidence. Evaluation and decision on tender bids are made by specific committees which comprise of Government officers with right experience and expertise. Before a formal contract is signed negotiations and discussions are usually held to ensure that both parties understand fully the terms and conditions of the contract. A post contract evaluation would be done specifically for the purpose of future business dealings as well as for records.

Quatation Process

a. Supply Division would invite at least five registered (Ministry of Finance)
suppliers to participate. Those invited would send their biddings within the period of
14 days to this Division and their sample to Technical Inspectorate Branches for
appropriate services. The biddings are then vetted by a Schedulling Committee.
b. The result of the evaluation/inspection reports and schedule briefs are then
tabled before the Quotation Board Committee for consideration.
c. The successful contender is notified and invited for contract negotiation.
d. The contract is signed.

Tender Process

a. Supply Division would advertise in the local newspapers or through foreign
Embassies/High Commissions inviting suppliers to submit biddings and sample within the
period of 21 days for local tender and 56 days for international tender. Generally all
contract pre-requisites such as price, specification, deliveries, training-
requirements, countertrade, transfer of technology, and the general terms and
conditions of government contract are included in the tender forms.
b. All tender documents to be submitted to Supply Division and sample to respsctive
Armed Forces Units.
c. The tender documents are open by a Tender Schedulling Committee.
d. The result of evaluation/inspection reports and tender briefs are then tabled
before the Tender Board Committee for consideration.
e. The Tender Board is divided into two boards:-

(i) Tender Board A - RM500,000 to RM5,000,000.
(ii) Tender Board B - RM50,000 to RM500,000.

f. The successful tenderer would then be invited to negotiate the terms of contract.

Conclusion

The procurement procedure is well laid out to ensure that the Ministry implements Government policies and at the same time strive to get value for money for all its purchases.