Copyright is owned by the Author of the thesis.  Permission is given for 
a copy to be downloaded by an individual for the purpose of research and 
private study only.  The thesis may not be reproduced elsewhere without 
the permission of the Author. 
 
 
 
 
 
 
Application of Theory of Constraints concepts and Lean tools as an 
innovative approach to the Timor-Leste public procurement process 
 
 
 
 
 
A thesis presented in partial fulfillment of the requirements for the degree of: 
 
 
 
 Master of Logistics and Supply Chain Management 
 
 
 
 
at Massey University, Manawatu 
 
 
 
 
New Zealand 
 
 
 
 
 
Deonisio Dos Santos 
 
 
 
 
 
 
 
 
2012 
  
i 
ABSTRACT 
At a time when public resources are very limited and while demand for better 
services is continuously increasing, the public procurement function can 
have clear benefits from ?doing more with less?. This thesis has sought to 
explore the mechanisms and practices that inhibit the ability of the Timor-
Leste procurement (TLS-P) services to make better use of available 
resources. It also sought to investigate the viability of usage of the Theory of 
Constraints concepts and Lean tools (TOC-L) towards ongoing improvement 
processes within such a system. 
The Theory of Constraints (TOC) concepts and Lean tools have been 
developed and intensively used within profit organisations: especially in 
production and distribution systems, in addition to service industries, such as 
health care services. Although applications of the Theory of Constraints 
concepts and Lean have been successful within the service sector, the 
literature is predominantly reporting cases where the concepts were applied 
separately, rather than as an integrated concept and the researcher has not 
identified any literature that discusses the application of both concepts within 
a public procurement process. 
This study demonstrates that TOC-L can provide TLS-P services with a 
systematic framework for identifying problems that limit their ability to 
maximise budget execution effectiveness. The TOC analysis shows several 
policies and practices exist within the TLS-P which, whilst seeming to be 
intuitively logical and efficient for each agency, actually tend to focus these 
agencies on sub-optimal local performance. This approach means that the 
system?s agencies do not have a clear agreement to coordinate and 
synchronise their activities, measurements and schedules ?and therefore, 
budget execution effectiveness suffers in this situation. The results of the 
analysis suggest that all agencies must realign their local performance focus 
to one of a system-wide performance, in order to achieve desired benefits.  
In order to facilitate this realignment, the researcher proposes a modification 
of the drum-buffer-rope methods for goods and services into a hybrid model, 
which can work for the TLS-P dynamic environment. This ?Dynamic-DBR? 
ii 
(DBRD) model provides the system with the ability to adjust capacity 
resources to meet service levels and due dates. The aim of this DBRD is to 
fill the gap in the literature of reported adaptations of drum-buffer-rope 
methods, in order to suit the synchronisation of scheduling within public 
procurement processes.  
The study also develops recommendations for the improvement of this 
approach, which is intended to facilitate future research.   
iii 
ACKNOWLEDGMENTS 
The endeavour of completing this thesis has been a challenge and without 
the support and help of others it would never have eventuated.  Therefore, I 
have had the pleasure and honour to be surrounded by brilliant people, who 
have supported me along the way to finalising this thesis, especially Mr. Alan 
Wright (1st supervisor) and Dr. Norman Marr (2nd supervisor), who have both 
provided a great impact on my work.  
Mr. Wright taught me how to use the TOC and Lean for supply chain 
optimisation and for ongoing improvement of processes within production 
and distribution systems. He stimulated my thinking and interest on how both 
concepts could be applied to the public sector ? and especially to improve 
the TLS-P process. His ability to provide scientific freedom and 
encouragement to find my own way, together with his offered guidance and 
feedback has added considerable value to the quality of this writing. Dr. 
Norman Marr deserves special recognition for his role in showing me how to 
use research methods in supply chain management, in addition to providing 
valuable feedback on both the structure and quality of the writing in this 
thesis and their valued contribution has raised the level of this thesis.  
I also would like to express my gratitude to the National Procurement 
Commission (NPC) and the National Development Agency (ADN) of Timor-
Leste. Special thanks must go to the heads of both agencies: H.E. Mr. 
Xanana Gusmao, the Prime Minister of Timor-Leste, Mr. Aniceto (NPC 
commissioner), Mr. Hermingardo (NPC Commissioner) and Mr. Samuel 
(Director of ADN), who have all provided me with valuable data during my 
fieldwork at their offices. I also would like to express my thanks to New 
Zealand Aid for funding this research and especially to the staff at the 
International Support Office, Massey University (ISO).  
Finally, I thank my beloved wife Diva and my daughter Divania for being here 
in New Zealand to support and encourage me during this difficult and 
sometimes frustrating time. 
  
iv 
Table of Contents 
CHAPTER 1 ? INTRODUCTION ................................................................. 1 
1.1. Introduction .......................................................................................... 1 
1.2. Background of the Case Study ............................................................ 1 
1.3. Research Objective ............................................................................. 2 
1.4. Scope and Limitation of Research ....................................................... 3 
1.5. Significance of the Research ............................................................... 3 
1.6. Theoretical Framework ........................................................................ 3 
1.7. Thesis Outline ..................................................................................... 4 
CHAPTER 2: LITERATURE REVIEW......................................................... 7 
2.1. Introduction .......................................................................................... 7 
2.1.1. Public Procurement....................................................................... 7 
2.2. Timor-Leste Procurement Process ...................................................... 8 
2.3. Application of TOC and Lean in the Public Sector ............................. 13 
2.4. Theory of Constraints (TOC) ............................................................. 13 
2.4.1. TOC Five Steps (TOC-FS) .......................................................... 14 
2.4.2. TOC Thinking Process (TOC-TP) ............................................... 18 
2.4.3. TOC Drum-Buffer-Rope (TOC-DBR) .......................................... 29 
2.4.4. TOC Performance Measurement ................................................ 36 
2.5. Lean Tools ......................................................................................... 37 
2.5.1. The Five-S (Sort, Straighten, Shine, Standardize, Sustain) ........ 38 
2.5.2. Value Stream Map (VSM) ........................................................... 39 
2.5.3. Just in Time: Pull Production ...................................................... 42 
2.5.4. Continuous Flow Processing ...................................................... 44 
2.5.5. Prevention of Quality Defects and Equipment Breakdown .......... 45 
2.5.6. Continuous Improvement ............................................................ 45 
2.5.7. Worker Involvement (Team Work) .............................................. 45 
2.5.8. Standardised Work ..................................................................... 46 
2.6. Compatibility between Lean and TOC-DBR Approach ...................... 46 
2.6.1. Step One: Identify the Constraints .............................................. 48 
2.6.2. Step Two: Exploit the Constraints ............................................... 48 
2.6.3. Step Three: Sub-ordinate Everything Else to the Above Decision
 .................................................................................................... 49 
2.6.4. Step Four: Elevating the Constraints .......................................... 51 
2.6.5. Step Five: If the constraint has been broken - repeat Step One, 
but do not allow inertia to become a systems constraint ............. 52 
2.7. Potential Contradictions between Lean and TOC-DBR ..................... 52 
2.8. Conclusion ......................................................................................... 54 
CHAPTER 3: RESEARCH METHODOLOGY AND DESIGN ................... 57 
3.1. Introduction ........................................................................................ 57 
3.2. Qualitative versus Quantitative Research .......................................... 57 
3.2.1. Develop an initial understanding of an issue or problem ............. 57 
v 
3.2.2. Understand the process and dynamic nature of reality ............... 58 
3.2.4. Improve findings from quantitative study ..................................... 58 
3.2.5. Flexible procedures for subject selection .................................... 59 
3.3. Research Methods and Design ......................................................... 61 
3.2.1. Type of data collection ................................................................ 61 
3.4. Data Collection Process .................................................................... 66 
3.4.1. Staff opinion survey of UDEs ...................................................... 66 
3.5. Data Analysis Process....................................................................... 67 
CHAPTER 4: ANALYSIS AND DISCUSSION .......................................... 68 
4.1. Introduction ........................................................................................ 68 
4.2. The TLS-P Process ........................................................................... 69 
4.2.1. Agencies Involved ....................................................................... 69 
4.2.2. Current State of Value Stream Map (CS-VSM) ........................... 73 
4.2.3. The Procurement Cycles ............................................................ 74 
4.2.4. Planning and Budget Stage ........................................................ 75 
4.2.5. Specification Requirements and Commitment to Funding .......... 77 
4.2.6. Tendering and Contract Establishment ....................................... 78 
4.2.7. Contract Management, Completion and Hand-over .................... 82 
4.2.8. Problem Identification ................................................................. 84 
4.2.9. Conclusion .................................................................................. 93 
4.3. Applying TOC?TP ............................................................................. 94 
4.3.1. Current Reality Tree: What to change? ....................................... 94 
4.3.2 Conclusion ................................................................................. 112 
4.4. TOC-L: Towards a TLS-P System Improvement Process ............... 113 
4.4.1. Introduction ............................................................................... 113 
4.4.2. TLS-P system improvement ...................................................... 114 
4.4.3. Future Reality Tree: What to change to? .................................. 117 
4.4.4. Solution for TLS-P System improvement .................................. 144 
4.4.5. Prerequisite Tree (PRT) ............................................................ 151 
4.4.6. Application of TOC-L for TLS-P system improvement .............. 154 
4.4.7. Conclusion ................................................................................ 161 
CHAPTER 5 - CONCLUSION AND RECOMMENDATION FOR FURTHER 
RESEARCH ............................................................................................. 163 
5.1. Conclusion ....................................................................................... 163 
5.1.1 Research Question One: ?How does the system work?? ........... 163 
5.1.2. Research Question Two: ?What are the constraints in the system 
that limit the throughput value and why?? .................................. 165 
5.1.3. Research Question Three: ?How can the system be improved??
 .................................................................................................. 165 
5.1.4. Research Question Four: ?Can TOC-L help towards system 
improvement?? .......................................................................... 167 
5.2. Limitations and Recommendations for Future Research ................. 168 
 
vi 
LIST OF FIGURES 
Figure 2.1 Cycle of procurement ?????????????????. 9 
Figure 2.2 A Systems as a ?Chain? Concept ?????.??????.... 14 
Figure 2.3 Relationship between TP tools ?????????????. 19 
Figure 2.4 Example of CRT ???????????????????.. 20 
Figure 2.5 Evaporating Cloud (EC) ????????????????. 21 
Figure 2.6 The relationship between CRT and EC ?????????.. 23 
Figure 2.7 Future Reality Tree ??????????????????. 24 
Figure 2.8 The FRT injection from EC and CRT ??????????... 25 
Figure 2.9 Example of PRT ???????????????????.. 26 
Figure 2.10 Transitions from FRT to PRT ?????????????. 27 
Figure 2.11 Simple Illustration of PRT ??????????????... 28 
Figure 2.12 The four element of TT ???????????????? 28 
Figure 2.13 Transformations from PRT to TT ???????????? 29 
Figure 2.14 Drum-buffer-rope ??????????????????.. 30 
Figure 2.15 DBR for Services ??????????????????.. 33 
Figure2.16. Buffer Sizing ????????????????????.. 34 
Figure 2.17 The TOC measurement for not-for-profit organization ??? 36 
Figure 2.18 Example of current value stream map ?????????.. 40 
Figure 2.19 Example of Future state value stream map???????.. 41 
Figure 2.20 A simple kanban systems ??????????????? 42 
Figure 2.21 using lean alongside with TOC-DBR ??????????. 47 
Figure 2.22 Cost saving result from TOC-Lean-Six Sigma (TLS) trial ?.. 54 
Figure 4.1 TLS-P cycle and agency involve ????????????.. 74 
Figure 4.2 Stage one and two of the procurement cycle ???????. 76 
Figure 4.3 Stage three and four of the procurement cycle ??????.. 78 
Figure 4.4 Stage five and six of the procurement cycle ???????.. 81 
Figure 4.5 Stage seven and eight of the procurement cycle ?????.. 83 
Figure 4.6 Filing systems of ADN and NPC ????????????.. 92 
Figure 4.7 TLS-P CRT Part One ?????????????????. 98 
Figure 4.8 TLS-P CRT Part Two ?????????????????. 100 
Figure 4.9 TLSP- CRT Part Three ????????????????.. 102 
Figure 4.10 TLS-P CRT Part Four ????????????????.. 104 
vii 
Figure 4.11 TLS-P CRT Part Five ???????.?????????.. 106 
Figure 4.12 TLS-P CRT Part Six ?????????????????. 108 
Figure 4.13 TLS-P CRT Part Seven ???????????????? 110 
Figure 4.14 TLS-P EC systems dilemma ?????????????... .111 
Figure 4.15 EC ? a with assumptions ????????????............ 115 
Figure 4.16a EC with list of possible injection ???????????... 116 
Figure 4.16b EC ? with best injection ???????????????. 117 
Figure .4.17 TLS-P FRT Part One ? Injection to the Core Problems ?? 120 
Figure 4.18 TLS-P FRT Part Two ????????????????? 122 
Figure 4.19 TLS-P FRT Part Three ????????????????. 124 
Figure 4.20 TLS-P FRT Part Four ????????????????.. 126 
Figure 4.21 TLS-P FRT Part Five ?????????????.???.. 128 
Figure 4.22 TLS-P FRT Part Six ?????????????????. 130 
Figure 4.23 TLS-P FRT ? Part seven ???????????????. 132 
Figure 4.24 TLS-P FRT Part Eight ????????????????. 134 
Figure 4.25 TLS-P FRT Part Nine ????????????????.. 136 
Figure 4.26 TLS-P FRT Part Ten ????????????????? 138 
Figure 4.27 TLS-P FRT Part Eleven ???????????????.. 140 
Figure 4.28 TLS-P FRT Part Twelve ???????????????. 142 
Figure 4.29 DBRD for TLS-P systems ??????????????? 150 
Figure 4.30 Hypothetic Gantt chart scheduling at NPC based on table 
4.4 ?????????????????????????????.? 
 
157 
 
  
viii 
LIST OF TABLES 
Table 4.1 example of project to be tendered and a typical time frame  79 
Table 4.2 List Identifying Problems (UDEs) ???????????? 93 
Table 4.3 List Identifying Undesirable Effects ???????????. 95 
Table 4.4 Injections for TLS-P system improvement ????????. 144 
 
 
  
ix 
LIST OF ABBREVIATIONS 
ADN Agencia Decevolvimento Nacional (National Development 
Agency) 
BoQ Bill of Quantity 
C/O Change Over 
CAFI Conselho Administrasaun das Fundus da Infratructure 
(Council of Administration for Infrastructure Funds) 
CCR Capacity Constraint Resources 
CM Capacity Management 
CNE Commisariado Nasional das Elecoens (National Election 
Commission) 
CoM Council of Ministry 
CPV Cashier Payment Voucher 
CRD Conflict Resolution Diagram 
EC Evaporating Cloud 
CRT Current Reality Tree 
CS-VSM Current State Value Stream Map 
DBR Drum-Buffer-Rope 
DBRS Drum-Buffer-Rope for services 
DEs Desirable Effects 
EC Evaporating Cloud 
FCFS First Come First Serve 
FRT Future Reality Tree 
FS-VSM Future State Value Stream Map 
GoTL Government of Timor-Leste 
Ia Active Inventory 
IO Intermediate Objective 
Ip Passive Inventory 
L/T Lead Time 
LMs Line Ministries 
MDGs Suco Millennium Development Goals Sucos 
MoF Ministry of Finance 
MPS Major Project Secretariat 
NPC National Procurement Commission 
NVA Non-Value Added 
OE Operation Expenses 
P/T Processing Time 
PDD Pakote Desenvolvimento Decentralizado (Decentralization 
Development Package) 
PO Purchase Order 
PPP Public-Private-Partnership 
PR Purchase Requisition 
PRT Prerequisite Tree 
SBD Standard Bidding Document 
x 
SLAQ Service Level Agreements quality 
SLAs Service Level Agreements 
SLAT Service Level Agreements cycle time 
SLAU Service Level Agreements utilization 
SPP Strategic Procurement Plan  
STA Secretariado Tekniko do Approvisionamento (Procurement 
Technical Secretariat) 
T Throughput  
TLS-P Timor-Leste Procurement 
TLS-P EC Timor-Leste-Procurement Evaporating Cloud 
TLS-P CRT Timor-Leste-Procurement Current Reality Tree 
TLS-P FRT Timor-Leste-Procurement Future Reality Tree 
TLS-P PRT Timor-Leste-Procurement Prerequisite Tree 
TOC Theory of Constraints 
TOC-FS Theory of Constraints ? Five Steps Focus 
TOC-L Theory of Constraints and Lean 
TOC-TP Theory of Constraints ? Thinking Process 
TP Thinking Process 
TSDP Timor-Leste Strategic Development Plan 
TT Transition Tree  
UDEs Undesirable Effects 
VSM Value Stream Map 
WIP Work-In-Progress