Cost-effective Procurement Research Articles

Effect of Cost Accounting Techniques on Financial Performance of Small and Medium Enterprises in Kigali, Rwanda

The global economy’s highly advanced period has an impact on the increasingly harsh economic competition that happens. Cost accounting, with its marginal costing technique, assists management in profit planning. Despite the cost accounting processes put in place for a majority of manufacturing organizations, commercial success is slow and insignificant. As a result of poor performance, several industrial enterprises have even gone bankrupt. The general objective of this study was to examine the effect of cost accounting techniques on financial performance of small and medium enterprises in Kigali, Rwanda. The study used descriptive research design. The target population consisted of 393 small and medium enterprises operating in the industry sector in Kigali City. A sample size of 393 was. Descriptive and inferential statistics was used to analyze the data. Results of the study were that there was a statistical significant effect of cost accounting techniques (absorption costs, marginal costs, budgetary control costing) on financial performance of SMEs as evidenced by findings strong positive correlation coefficients additionally multiple linear regressions measured how much variability in the dependent variable (that is, Financial Performance of SMEs in Kigali City) the predictors (absorption costing, marginal costing, and budgetary control) accounted for. This implied that use of cost accounting technique explained about 88.2% of the variation of financial performance of SMEs in Kigali City.It was therefore concluded that continual use of cost accounting techniques (absorption costing, marginal costing and budgetary control) helps in decision making, to achieve high standard of accounting procedure, leads to cost effective procurement, save cost, increase profit margin, increase business growth and among others. The study therefore recommends that SME’s owners are encouraged continual use of cost accounting techniques. The SMEs owners also have to provide special training to the employees on cost accounting and accounting to enhance the employees’ performance. Government of Rwanda should also encourage SMEs to work professionally so that even those which left behind of keeping accounting records they can adapt them.

Data-Driven Decision Making: Financial and Risk Analysis on Equipment Procurement at PT ABC Using Predictive Data Estimation, NPV Analysis, Owner Estimate, and Monte Carlo Simulation

This research delves into strategic financial management solutions for PT ABC during the COVID-19 pandemic, concentrating on the procurement of vital airport equipment. It examines the feasibility of securing essential equipment such as ARFF vehicles, X-ray machines, ambulances, and narcotics & explosive detectors amidst financial challenges. Utilizing financial models like predictive data estimation, Net Present Value (NPV) analysis, owner estimates, and Monte Carlo simulations, the study evaluates risk probabilities and distributions linked to different procurement strategies. The research underscores the pandemic’s profound impact on the global aviation sector, notably the steep decline in passenger traffic and resulting financial strains on PT ABC. Facing stringent regulatory obligations and the urgent need for equipment upgrade, the study investigates cost-effective procurement avenues, weighing the benefits of leasing against purchasing, given the company’s constrained cash flow. The study navigates through the challenges of limited RFI data and internal corporate regulations that restrict leasing durations. It provides a detailed financial analysis to pinpoint the most economical vendors and procurement approaches, leveraging owner estimates as a negotiation tool. Risk evaluation is conducted via Monte Carlo simulation, offering insights into the likelihood and impact of procurement-related risks. Concluding, the research finds that PT ABC can best manage its procurement needs by opting for leasing over buying. This approach aligns with the company’s financial strategy amidst the crisis, allowing for the acquisition of necessary equipment within financial limits. The study identifies Vendor A for ARFF vehicles, Vendor D for X-ray machines, Vendor E for ambulances, and Vendor G for narcotics & explosive detectors as the most cost-effective choices. Leasing, particularly on a 3-year term, emerges as the most viable financial option, in compliance with PT ABC’s internal regulations and operational requirements. Utilizing owner estimates for negotiations ensures more cost-effective procurement. The Monte Carlo simulation proves invaluable in evaluating procurement risks, indicating a higher risk associated with buying than leasing. This research aids PT ABC in strategic decision-making for equipment procurement, offering lessons for the broader aviation sector navigating post-pandemic recovery.

On the trade-off between supplier diversity and cost-effective procurement

The COVID-19 pandemic has highlighted the need to rely on a diverse pool of suppliers, besides achieving cost effectiveness. Common wisdom, however, holds that these two aims are in conflict. We explore a model of dual sourcing and propose complementing a share auction with affirmative action to create an endogenous set-aside for a high-cost supplier. In our model more intensive affirmative action strengthens the targeted provider. This has the potential to level the playing field, inducing more competitive procurement overall. Our main result provides a condition under which the endogenous set-aside not only guarantees a very substantial share for the high-cost supplier, but also reduces the buyer's provision cost compared to a standard auction. We also illustrate how our approach can help reducing the severity and likelihood of health product shortages, such as those occurred during the COVID-19 outbreak.

Interrogating The Absence of The National Council on Public Procurement: Bidders and Contractors Perspectives

Despite the concerted commitment of numerous government entities to a transparent, efficient and cost-effective procurement process since the passage of the PPA in 2007, the National Council on Public Procurement, created by the PPA in 2007, has not yet been constituted. The objective of this study was to examine how the government's failure to establish the National Council on Public Procurement (NCPP) affected the due process mechanism and the public procurement system. This investigation employed a survey methodology. The study was conducted in the South-East geopolitical zone of Nigeria. The population for the study was, 205 contractors engaged in the Federal Government's minor works procurement process within the South East Zone since the enactment of the PPA. A sample of 117 contractors was drawn using both the purposive/judgmental and random sampling methods. Data gathering sources included both primary and secondary sources. The primary data collection instrument was a structured questionnaire with both closed- and open-ended questions, while books, journals, and other papers served as secondary data sources. Data analysis utilized descriptive and inferential statistics in particular. Ironically, the results demonstrated that the government's unwillingness to establish the NCPP in compliance with the articles of the PPA (2007) had no adverse effect on the public procurement system.

On the Trade-Off between Supplier Diversity and Cost-Effective Procurement

On the Trade-Off between Supplier Diversity and Cost-Effective Procurement

Electrification Planning for Healthcare Facilities in Low-Income Countries, Application of a Portfolio-Level, Multi Criteria Decision-Making Approach

This study presents a multi-platform analysis for accelerating the deployment of distributed renewable energy (DRE) systems for the electrification of healthcare facilities (HCFs) in low-income regions. While existing tools capture national and regional scale planning for DRE deployment in HCFs, there are limited tools for facility level energy needs and no existing data-driven approach for systematic decision-making and resource allocation across a portfolio of HCFs. We address this gap by utilizing decentralized data collection, and multi-criteria decision-making to evaluate each HCF against a set of weighted decision criteria. We applied the approach presented in this research in a case study across 56 HCF in Uganda. Results present current and future energy needs for each individual clinic and the prioritization of HCFs for allocation of resources for DRE deployment. Additionally, results provide insight for best practices for reliability of services that are specific to each HCF. For example, failures in the existing solar photovoltaic (PV) systems are approximately up to 60% due to a lack of proper operation and management (O&M) strategy, and 40% is attributable to improper system design and installation. Thus, this study enables decision-makers to better understand the electrification needs of different HCFs, prioritize DRE deployment, financial investments, cost-effective procurement, and long-term O&M.

Centers for Disease Control and Prevention as a Strategic Agent in the Pediatric Vaccine Market: An Analytical Approach

Problem definition: Pediatric vaccine markets in the United States are vulnerable to the development of monopolies due to few manufacturers and high research and development costs. This work addresses how the government can ensure the cost-effective procurement of pediatric vaccines by all U.S. children from private manufacturers. The Centers for Disease Control and Prevention’s (CDC) significant patronage of pediatric vaccines affords them leverage in negotiating public-sector prices that prevent the formation of monopolies, but existing vaccine pricing literature excludes the CDC as a rational player. Academic/practical relevance: We combine optimization and game theoretic techniques to address cost-effective immunization of all U.S. children. Methodology: Our optimization model from the CDC’s perspective minimizes negotiated government costs while ensuring adequate national vaccination levels, linking dynamics in public and private sectors, and incorporating competitive manufacturer behavior. The optimization model embeds an extant game theoretic price model to capture competitive interactions among manufacturers in the private sector, where they compete independently of the CDC. The model is validated in an extended case study of the Infanrix–Daptacel vaccine duopoly. Results: The study indicates that dissimilar products advantageously segment markets with asymmetric manufacturers. Furthermore, markets are at lower risk when high-capacity manufacturers have moderate target profits, especially in cases of high demand and asymmetry. We demonstrate that our model can help restabilize a market that experiences a vaccine shortage and that the CDC might mitigate the same shortage using strategies that depend on which manufacturer is limited. We also underline scenarios in which the CDC may be able to prevent monopolies through financial incentives to manufacturers. The results support a paradigm shift from annual contracts to ongoing negotiations, which would enable the CDC to exercise control over high-risk markets. Managerial implications: Our study demonstrates an analytical approach for managerial government officials to influence pediatric vaccine prices via the procurement of public-sector goods.

Improving public works’ value for money: a new procurement strategy

PurposeThe purpose of this paper is to propose a new procurement strategy with the aim to achieve higher value for money (VFM) in public works delivery. Its main innovation lies in the possibility of optional submission of cost-efficient design variants by any interested contractor within the context of an open procedure. The final scope of works incorporates the variants approved, and all contractors are invited to submit a bid for the revised scope and budget.Design/methodology/approachThis paper is a piece of applied research presenting the development of a new, cost-effective procurement strategy for public works, geared at the European Union (EU) legal framework. The strategy’s feature compilation has been based on comprehensive literature review while numerical data from a real world project were used to demonstrate its financial advantages.FindingsThe proposed strategy enables the delivery of the best value project at the lowest cost possible. This is achieved through ensuring high competition among competent contractors, improving the cost efficiency of technical solutions, discouraging future scope changes and establishing objectivity, fairness and transparency in the process of contract award.Practical implicationsThe use of the proposed strategy results in public projects of enhanced VFM, reduced constructability issues and less scope changes during the construction stage.Originality/valueThe proposed strategy marks a new approach in procurement which enables the delivery of best VFM in public works. Therefore, it makes a valuable contribution towards the achievement of the overarching EU target for efficient public spending.

Government Procurement Contract Design with Unobservable Productivity and Moral Hazard

This study investigates the optimal incentive structure for a government procurement contract in the field of defense. Optimality implies that the government achieves efficient and cost-effective procurement through incentives that encourage the contracting firm to reduce costs in the presence of both moral hazard and adverse selection. To investigate the optimal contract scheme when moral hazard and adverse selection occur simultaneously, we employ a hybrid model of moral hazard and adverse selection. Our analysis shows that a low--powered incentive is optimal when the firm's productivity is unobservable and that the incentive rate is lower in the hybrid case than in the pure moral hazard case. This is because the government must pay informational rent to the firm to ensure that the firm is honest. We also find that the optimal incentive rate increases as the degree of information asymmetry decrease.

Procurement and Supply Chain Management in Government Institutions: A Case Study of Select Departments in the Limpopo Province, South Africa

The current state of the South African (SA) government's Supply Chain Management (SCM) is fraught with malpractices which include lack of good governance, fair, equitable, transparent, competitive and cost-effective procurement process. In light of the aforementioned, this paper reports on a study which examined SCM performance, more specifically, procurement management in select provincial government departments in SA. The aim of this exploratory study on which this paper is written, is to determine how procurement planning, execution, control, and monitoring affect SCM performance. Data was collected using self-administered questionnaires which were personally distributed and collected by the primary researcher, from four Limpopo Provincial government departments which were purposively selected. The Statistical Package for Social Sciences (SPSS) was used to analyse the data.Generally, SCM performance in the various surveyed government departments is effective, although it became evident that the departments experience obstacles during the implementation of SCM processes and procedures. Furthermore, procurement planning is inadequate and needs improvement when the departments procure goods, services or works. Procurement execution was also found wanting, especially with regards to procurement governance.The results of this study may assist the participating departments to align their SCM and procurement practices to prescribed legislation in order to increase SCM performance, as well as achieve the objectives of good governance in terms of the Green Paper on Public Sector Procurement Reform in South Africa.

A cost-effective method for femoral head allograft procurement for spinal arthrodesis: an alternative to commercially available allograft.

A cost-effective procurement process for harvesting, storing, and using femoral head allografts is described. A brief review of the literature on the use of these allografts and a discussion of costs are provided. To describe a cost-effective method for the harvesting, storage, and use of femoral heads from patients undergoing total hip arthroplasty at our institution as a source of allograft bone. Spine fusion surgery uses a large proportion of commercially available bone grafts and bone substitutes. As the number of such surgical procedures performed in the United States continues to rise, these materials are at a historically high level of demand, which is projected to continue. Iliac crest bone autograft has historically been the standard of care, although this may be losing favor due to potential donor site morbidity. Although many substitutes are effective in promoting arthrodesis, their use is limited because of cost. Femoral heads are harvested under sterile conditions during total hip arthroplasty. The patient is tested per Food and Drug Administration regulations, and the tissue sample is cultured. The tissue is frozen and quarantined for a 6-month minimum pending repeat testing of donors and subsequently released for use. The relative cost-effectiveness of this tissue as a source of allograft bone is discussed. The average femoral head allograft is 54 to 56 mm in diameter and yields 50 cm of bone graft, with an average cost of US $435 for processing of the tissue resulting in a cost of US $8.70 per cm of allograft produced. Average production costs are significantly lower than those for other commonly available commercial bone grafts and substitutes. Femoral head allograft is a cost-effective alternative to commercially available allografts and bone substitutes. The method of procurement, storage, and use described could be adopted by other institutions in an effort to mitigate cost and increase supply. N/A.

DSL-017 Importing Medicines – Review of Five Years in a Portuguese Hospital

Background The pharmaceutical market has always faced several constraints over the years. Nowadays, more than ever, drug shortages have reached critical levels in European countries. Importing medicines usually implies more...

Cost of ownership model for spare engines purchase for the Korean navy acquisition program

Major weapon system acquisition programmes often require high initial purchase cost which can be a burden for the procurement of a highly reliable system. In order to avoid the tendency of acquiring a less expensive weapon system with lower performance, a cost of ownership (COO) model can be applied to assess the lifetime cost of the weapon system. In many existing cost estimation models for weapon systems, the failure rate of the system is assumed to be constant and the functional relationship between the initial purchase cost and maintenance cost is not well defined. In this paper, we propose a revised COO model where random effects models are employed to accommodate the variations of the system failure frequency and repair time. It is expected that our model can contribute to the cost-effective procurement of spare engines for the Korean Navy acquisition programme within the limited national defence budget.

Optimal procurement, disposal and pricing policies for managing rental goods

Consider a video rental retailer who procures DVDs or video cassettes from a distributor and rents them to the customers. To meet the time-varying rental demand, the retailer needs to develop cost-effective procurement and disposal policies. In this paper, we first present a base model in which the underlying rental demand is decreasing over time, backorders are not allowed and the disposal price is exogenous. For this base model, we show that the optimal procurement quantity is equal to the sum of effective demands (rental demand net of returns) over an integral number of periods, and the optimal disposal policy can be determined by solving a simple dynamic program with polynomial complexity. We then analyze the case of endogenous disposal prices and derive optimal disposal policies by solving a quadratic optimization problem with tree constraints. We also extend the base model to allow for backorders and to cases where the retailer has multiple procurement opportunities and a contractual period where disposals are not allowed. We show that the qualitative nature of the procurement policy is preserved in these cases and the optimal procurement and selling policies can be determined using similar dynamic programming algorithms.

Pythia and Pythia/WK: tools for the performance analysis of mass storage systems

The constant growth on the demands imposed on hierarchical mass storage systems creates a need for frequent reconfiguration and upgrading to ensure that the response times and other performance metrics are within the desired service levels. This paper describes the design and operation of two tools, Pythia and Pythia/WK, that assist system managers and integrators in making cost-effective procurement decisions. Pythia automatically buids and solves an analytic model of a mass storage system based on a graphical description of the architecture of the system, and on a description of the workload imposed on the system. The use of a modeling wizard to perform this conversion from a graphical description of a mass storage system to an analytic model makes Pythia unique among analytic performance tools. Pythia/WK uses clustering algorithms to characterize the workload from the log files of the mass storage system. The resulting workload characterization is used as input to Pythia. © 1997 John Wiley & Sons, Ltd.

Commercial grade item (CGI) dedication of generators for nuclear safety related applications

The general guidelines for the commercial grade item (CGI) acceptance and dedication are provided in US Nuclear Regulatory Commission (NRC) Generic Letters and Electric Power Research Institute (EPRI) Report NP-5652, 'Guidelines for the Utilization of Commercial Grade Items in Nuclear Safety Related Applications'. These generic guidelines are applied to the procurement, acceptance, and dedication of a commercial grade generator for use as a standby generator. The author identifies the critical characteristics of the generator, which, once verified, will provide reasonable assurance that the generator will perform its intended safety function. The author also delineates the method of verification of the critical characteristics through tests and provides acceptance criteria for the test results. The methodology presented may be used for reliable, cost-effective procurement and dedication of commercial grade standby generators. >