Success Story

How to successfully organize purchases of budget funds managers and turn your city into a leader in the Transparency International Ukraine rating? What strategy will help the organization reach its first framework agreement? We talked about this and many other things with Yulia Dudenkova, Chief Specialist of the Department of Competitive Processing and Market Analysis of Tender Management of the Executive Committee of the Mariupol City Council.

How long have you been working in the field of procurement and why did you decide to choose this specialty?

I started my professional activity with the department of commerce and sales of one of the Mariupol industrial enterprises. In 2015, I headed the logistics department at the same company.

Even then, I understood that there are significant differences between the organization of the procurement process in a commercial enterprise and the organization of the procurement process in the budget sphere, although they are similar in basic principles. I wanted to understand these differences and add a new experience to my professional activity, so in 2019 I started to work with procurement in the budget sphere. Thus, I became the chief specialist of the department of competitive processing and market analysis of the tender management of the Executive Committee of the Mariupol City Council. I came to the company of people who see the goal of improving and bringing to a qualitatively new level of organization of procurement activities of utilities, organizations, and other managers of budget funds of Mariupol.

From July 2020, in parallel with my main job, I began to perform the duties of the authorized person for procurement of the Executive Committee of the Mariupol City Council.

How do you use in practice the knowledge gained from studying at KSE?

During my training on the course “Procurement Manager”, I gained a lot of new knowledge on business process management, learned new analytical methods and buyer's tools. I primarily used this knowledge when developing a category strategy project and still use it in my daily work.

From the concept of project management, to solve a certain problematic issue, I use in practice the Ishikawa Diagram (fish skeleton), which allows us to visually determine the cause-and-effect relationship between factors and consequences. Once the root causes have been identified, it is easy to identify the initiatives to address them and prioritize the initiatives using the Initiative Prioritization Matrix tool.

From the category management, I noted for myself "7 steps in procurement" taking into account the specifics of procurement in the public sector:

1. Formation of a category profile (volumes, prices, suppliers), highlighting a priority focus in a category using ABC analysis and Cost Cube.
2. Determining the needs of the internal customer. The main thing is to form an adequate technical specification and inform the internal customer about the duration of the purchase.
3. Market analysis, including analysis of the current market situation, pricing components, compiling a list of suppliers, determining the strength of supply and demand.
4. Definition of procurement strategy (there are 4 basic strategies) and methods within the category.
5. Implementation of procurement strategy: communication with suppliers through pre-tender market processing, use of new legal market consultation tools, request for quotations. Open tendering through the Prozorro electronic procurement system.
6. Cooperation with selected suppliers – contractual work based on the results of the tender.
7. Ensuring sustainable development – constant assessment of suppliers for the timeliness and quality of deliveries, the formation of a database of unscrupulous suppliers is an effective tool, since, according to the current legislation on public procurement, if there is a complaint, the customer may reject the offer of such an unscrupulous supplier.

The study on the basics of contract law allowed me in August 2020 to take part in the development of the Regulation on the organization of contractual work, which is now in force in Mariupol for managers of budgetary funds and contains standard forms of contracts drawn up by the Civil Code of Ukraine and Commercial Code of Ukraine.

In general, the acquired knowledge allowed me to start thinking much broader than an ordinary procurement specialist.

How does the City Council's Tender Office carry out market analysis?

To organize a more efficient and transparent procurement process in the Mariupol City Council, a Tender Department was created with two departments: a procurement department and a competitive processing and market analysis department.

The Tender Department considers the procurement process in the city both from the side of customers and from the side of controllers to timely respond to possible problems, be able to professionally analyze them, and give advice on an effective solution. For this, the practice of decisions of the AMCU and the State Audit Service of Ukraine is constantly monitored and analyzed.

The Tender Office is also responsible for the following:

1. Supervises the implementation of quarterly procurement plans of local administrators of budgetary funds, motivates them to plan their purchases. After all, when there are no plans, the customer does not physically see the date and numbers, and as a result, the goods are not purchased on time or the tender is announced a month before the required delivery.
2. Coordinates terms of reference and tender documents for key positions. We have an order from the mayor with recommendations on how to properly analyze the market to form a high-quality technical specification. Our customers process proposals from several suppliers and define typical characteristics and requirements that will be specified in the future technical specification. For convenience, we have developed examples of universal technical specifications for the purchase of goods, works, and services.
3. Examines, registers, and analyzes all concluded contracts for compliance with market prices.

Mariupol is the leader in the Transparency rating of Ukrainian cities in 2020. How did your team manage to achieve this result?

Such a high award is the result of a comprehensive and well-coordinated work of all structural divisions of the city council. Among the factors that made Mariupol the most transparent city in Ukraine, I would like to note the following:

1. Using a systematic approach in all areas, including procurement. Thanks to this, each structure clearly understands the expected result and measures to achieve it.
2. Improving services for people. An example of high-quality services are three centers for the provision of administrative services, one of them is the largest Multicenter in Ukraine.
3. Implementation of modern instruments of transparency and e-democracy to ensure a constructive dialogue with society. The digitization of all services was carried out: the website of the city council was updated, subsidies were automated, a system of local petitions, a unified information system of the city, a contact center, and an electronic cabinet of Mariupol were created. The use of the Prozorro system allowed to save more than UAH 1 billion of budget funds. Also, with the help of transparency and e-democracy tools, we involve residents in the development of the city. Examples are the Condominium Support Program, Public Budget, Parents' Fund, and others.
4. Motivational component – transparency opens up new opportunities for the development of Mariupol, namely, attracting investments in the development of the city. For Mariupol, the leading positions in the rating, the presence of a development strategy, competent budget management, openness, and transparency of work have become important arguments in negotiations with international partners.

Success Story

Openness and transparency became the foundation of changes in Mariupol. The first place in the rating is not the result we stop at, it is an impetus to work further to improve the transparency and development of our city.

How is your categorical strategy implemented?

While studying at KSE, I developed a categorical strategy for the procurement of materials using the example of my reporting enterprise CPU "Mariupolavtodor" of the Mariupol City Council. This category of goods is key and extremely important in the activities of the enterprise. Based on the results of supplier assessments and analysis of the strength of supply and demand, a combination of cost management and supplier competition strategies was selected. To implement the strategy, a team was created under my chairmanship. We have consolidated procurement volumes and improved the tender process. As a result, the company was the first in Ukraine to purchase bulk materials by concluding a framework agreement. The total savings on the first selections held in March 2021 amounted to more than UAH 2 million. Thanks to framework agreements and selections, products are purchased at market prices, and the failure rate of tenders is reduced.

We plan to replicate a similar categorical strategy in the future to other key categories of the enterprise: curly paving elements tiles, borders, etc.

As for the use of a categorical approach in procurement in the executive committee, due to the diversity of procurement, it is impossible to single out priority ones. It is more expedient to replicate the categorical approach at large utilities in the city. Thus, over the past two years, strategies have been developed and implemented in the purchase of fuel and electricity. These are difficult purchases because prices are constantly fluctuating, market volatility is high. Therefore, to carry out such purchases with quality and on time, it is necessary to look for individual optimal solutions.

We analyzed previous years and decided to work on framework agreements. We have carefully worked out the delivery mechanism – we have decomposed the cost of electricity into its components: the cost of transportation and distribution of electricity. Also, we have completely moved away from prepayment – now we have a payment with a deferred payment on the fact of electricity consumption monthly. Previously, electricity was sold only on a prepaid basis.

As for fuel, in the analysis of 2016-2017, we found cases when suppliers dumped at tenders, won tenders, and then, by additional agreements, even surpassed their competitors in price. Therefore, we introduced a formula-based pricing mechanism that did not allow suppliers to dump. This is an effective mechanism, but now we have started using framework agreements with certain most advantageous timing of the selection.

Also, today we are following the path of centralizing purchases in Mariupol based on the main manager and are working out the possibility of centralizing certain categories of purchases of the city's customers, which will make it possible to use the category management tools more widely in practice.

What are your TOP-5 personal tips for the effective work of a buyer?

For effective work, I would advise buyers the following:

1. Constantly learn and improve your professional level, because the world is changing and you need to keep up with the changes.
2. Be responsible, understand the importance of your actions, and evaluate their possible result (avoid the concept “my house is on the edge, nothing depends on me”).
3. Analyze and use the experience of others – this way you can avoid many mistakes and save time.
4. Do not be afraid to express and defend your own opinion, including on the introduction of something new, because your ideas and thoughts can be of great value.
5. Plan your time by developing your prioritization skills.

How to become a professional buyer?

If you also want to improve the organization of tenders in your company, learn how to apply category management, and analyze data on made purchases, we suggest you the course “Purchasing Management” from the CEP KSE. Click the button below for more details.

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Read the previous Success Story within the joint special project SmartTender and KSE here.

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