CHALLENGES OF MANAGING PROCUREMENT CONTRACTS IN TANZANIA
D.Kirama
DeogratiasKirama is the Chief External Auditor working with the National Audit Office of Tanzania.
He is a Professional Accountant registered by the National Board for Accountants and Auditors
(NBAA) as Associate Member in Public Practice (ACPA-PP) and also Approved Professional in
Procurement and Supplies (CPSP-AP) registered by Procurement and Supplies Professionals and
Technicians Board (PSPTB). He holds a Master degree in Business Administration in Finance
(MBA-Finance), a Master of Science in Procurement and Supply Chain Management (MSC-PSCM)
and a Bachelor of Commerce in Accounting (B.COM-Accounting). He has interest in procurement
compliance challenges, extractive industry audit, financial management related controls and
reporting as well as Comprehensive audit aspects. On the areas of interest, he has prepared and
presented papers at various professional and governance forums including trainings to various
groups in the Office and other Institutions.
Abstract
The purpose of this article is to uncover the challenges experienced by procurement contract
managers while managing the agreed provisions and terms of contracts. The attention in
management of procurement contracts is catalyzed by the fact that amount of money and time
spent is pervasive to the realization of organizational objectives. Spending of inadequate public
monies, growth in civic education and democracy calls for more accountability to which the
procuring entities have to subscribe. Despite the importance of procurement in functioning of
public entities, challenges in managing contracts thereon remain a tailback. The Author
highlights challenges including contract itself, resources needed, human factors, corruption and
bribery, change in market trends, legal challenges, inadequate planning, ownership of this
function as well as natural calamities and unforeseen events. This concern over the challenges in
contract management is driven by delays and unwarranted prolong of project schedules, quality
compromise and poor relationship between the contracting parties. It is with the context
discussed in this article that further research, knowledge advancement, and experience exchange
programs such as professional forums and workshops are recommended as important
interventions for address.
Key Words:Procurement Contract, Contract Management, Challenges.
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1.0
Introduction
1.1
Background
In the recent past, Tanzania has experienced an increase in demand for accountability in
utilization of public funds and ensuring that the monies spent achieve the best value for money.
The pressure is partly following the growth of multi-party democracy where the members of
Parliament are increasingly demanding for accountability on Government revenue and
expenditures they approve1. On the other hand,thegrowing of civic education andunderstanding
of the communities have pushed the Government into various reformsto enhance such
requirements.
Among the reforms that Tanzania has undertaken is on the financial management which also
focused on public procurement proceduresin the early 1990s2. The reforms in public
procurement procedures gave birth of new public procurement regulatory frameworks through
Public Procurement Act number 3 of 2001which was however repealed in year 2004 by Act
number 21 and the regulations of 2005 (GN Number 97 and 98). This regime however, lasted for
a period of 7 years and after some researches on challenges it paused, pressures from
stakeholders for changes and impediments it caused in specific National procurements like a
debate over the purchase of Dowans Tanzania Ltd power generation turbines in year 2009 which
was not allowed by the Public Procurement Act,2004, it was necessary for reforms and the
regime was repealed by Act number 7 of 2011 and the regulations of 2013 (Government Notice
446).
Among the general objectives of the reforms in public procurement is the realization of the best
value for money from the monies spent as per Sect.47 of PPA, 2011. This can only be attained
when all activities in the procurement process including contracts entered are undertaken
effectively while protecting the interests of the procuring entity. To ensure this is happening,
Section 36(k) of the PPA, 2011 gives the Accounting Officer/Chief Executive Officer (CEO) a
1
Refer to Richmond Scandal extracted from http://www.tzaffairs.org/2008/05/report-on-richmond-scandal on
23/11/2015
2
APaper presented at the Joint WTO – World Bank Regional Workshop on Procurement Reforms and Public
Procurement for the English – Speaking African Countries held at the Royal Palm Hotel, Dar Es Salaam, Tanzania
from 14 – 17th January, 2003 by Nkinga,N
Page 2 of 18
responsibility of ensuring effective implementation of awarded contract as per agreed terms and
conditions.
It is through the administration of contract implementation where procuring entities gets the best
quality of what it paid for. At this point it is important to take note that effective contract
activities can be spilt into two distinct but interdependent phases that is upstream activities (the
pre award phase) and the downstream activities (post award phase) as categorized by Elsey
(2007). Contract management is a downstream activity but can only be effective if upstream
activities are properly carried out (Baily, 2008).The scope of this paper is confined on
preparation of contracts provisions and implementation of the agreed terms.
1.2
Definition of key concepts
i) Contract and procurement contract
The Law of Contract Act,Cap 345 R.E 2002defines Contract as a free consent agreement made
between the competent parties on a lawful object for lawful consideration. This definition
underlines that the parties contracting have a consideration in the contract and for the procuring
entity the consideration is always the goods, works or services as defined in the specification,
statement of works or terms of reference. From Section 3 of PPA, 2011, the definition of
procurement contract is given and principally it agrees with definition of the law of contract but
here showing a relationship between the procuring entity and a supplier, contractor or consultant
on carrying out works, supply of goods or offering services which is a result of procurement
proceedings.
ii) Contract life cycle management
Contract life cycle management:Institute of procurement and supplies(CIPS),3definescontract
life cycle management as the process of systematically and efficiently managing contract
creation, execution and analysis for maximizing operational and financial performance
whileminimizing risk.There are a number of other definitions of contract managementwhich
most of them focuses on post-award activities. It is imperative to note that a successful contract
management begins with the creation of a fair contract which represents the interests of
contracting parties. This, without doubt implies effective mechanisms of ensuring upstream or
3
See www.cips.org/.../CIPS_KI_Contract%20Management%20Guidev2.pdfvisited on 13/8/2015
Page 3 of 18
pre-award activities are properly carriedout including crafting the provisions of a contract
document.Contract life cycle management continues throughout the life of a contract and
involves managing proactively to anticipate future needs as well as reacting to situations that
arises.
iii) Contract Management
This is the term which is used to refer to activities of the buyer during a contract period to ensure
that all parties to the contract fulfil contractual obligations (Baily, 2008). Baily adds that the most
important aspects in management of contracts is managing the relationship between the
contracting parties in the most effective way so as to ensure the contract meets the optimum
combination of cost, time and quality.
1.3
Pre Requisites for Effective Procurement Contract Management
As it is clearly understood, contract represent interests of more than one parties, because of that it
becomes imperative for the contractual relationship to be well managed. In effectively managing
contracts, there are subjects that need a close follow up to ensure they are right on track and
contracting parties remain composed.
Nashikkar (2009)4 noted that many organizations are increasinglydeparting from traditional
methods of contract management and moving towards building constructive relationships with
contractors. In that direction, Nashikkar considers the following factors as essential for good
contract management:
i) Good preparation of bid document: this is an important stage where a procuring entity will
communicate a detailed project, create a clear output-based specification, communicate
eligibility criterion which will determine effective evaluation procedures and selection. These
preparations will ensure that the contract is awarded to the contractor with qualifications and
resources to meet contract obligations.
ii) The right contract form: The contract is the foundation for the project implementation. For
the contract to serve the purpose of a good foundation in managing the contractual
relationship,it should include aspects such as obligations of the parties, the procedures on
4
See www.indiaurbanportal.in visited on 13/8/2015
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quality assurance for the items required, the defect liability period as well as procedures for
variations and dispute resolution.
From Nashikkar, it is learnt that, contract management should not wait until when the supplier or
contractor has been appointed i.e the downstream activities but the focus should as well be
placed on the activities duringsupplier/contractor’s selection process(upstream activities)
To ensure that contracts are well managed, the Office of Government Commerce-UK5 (2002),
suggest the following factors as essential ingredients:
i) Good preparation. An accurate assessment of needs helps create a clearoutput-based
specification. Effective evaluation procedures and selectionensures that the contract is
awarded to the right provider.
ii) The right contract. The contract is the foundation for the relationship and thereforeit should
include clear details on allocation of risk, the quality of servicerequired, value for money
mechanisms as well as procedures forcommunication and dispute resolution.
iii) Single business focus. Each party needs to understand the objectives andbusiness of the
other.The customer must have clear business objectives,coupled with a clear understanding
of why the contract will contribute tothem; the provider must also be able to achieve their
objectives, includingmaking a reasonable margin.
iv) Service delivery management and contract administration. Effectivegovernance ensures that
the customer gets what is agreed, to the level ofquality required.The performance under the
contract must be monitored toensure that the customer continues to get value for money.
v) Relationship management. Mutual trust and understanding, openness,and excellent
communications are as important to the success of anarrangement as the fulfilment of the
formal contract terms and conditions.
vi) Continuous improvement. Improvements in price, quality or serviceshould be sought and,
where possible, built into the contract terms.
vii) People, skills and continuity. There must be people with the rightinterpersonal and
management skills to manage these relationships on apeer-to-peer basis and at multiple levels
in the organization. Clear roles andresponsibilities should be defined, and continuity of key
5
The purpose of the OGC was to support the procurement and acquisition process of public sector organizations in
the UK through policy and process guidance and the negotiation of overarching service and provision frameworks.
Page 5 of 18
staff should beensured as far as possible. A contract manager (or contract managementteam)
should be designated early on in the procurement process.
viii)
Knowledge.Those involved in managing the contract must understand thebusiness fully
and know the contract documentation inside out (‘intelligentcustomer’ capability). This is
essential if they are to understand theimplications of problems (or opportunities) over the life
of the contract.
ix) Flexibility. Management of contracts usually requires some flexibility onboth sides and a
willingness to adapt to new terms of the contract due torapidly changing world because
changes are bound to arise that could not have beenforeseen when the contract was awarded.
x) Change management. Contracts should be capable of change (to terms,requirements and
perhaps scope) and the relationship should be strong andflexible enough to facilitate it.
xi) Proactivity. Good contract management should not be reactive but one that aims
atanticipating responding to business needs of the future times.
2.0 Challenges for Effective Management of Procurement Contracts in Tanzania
Contracts management is likely to be challenged when all factors identified as pre requisites to
effective management are missingor inadequate in the process. If that is the case, procurement
contracts are likely to be mismanaged and the contracting parties might end up experiencing
contractual conflicts, termination of contract and even abandonment of the contracted subject
matter.
The factors that are challenging management of procurement contract are diverse and vary from
entity to entity and contract to contract. In this article, the author discussesnine (9) factors
challenging contract management in Tanzania. The factors stems from contract itself,
resourcesneeded, human factors, effects of corruption and bribery, changes in market trends and
legal factors.
i. Challenges of Contract Document
Contract is a document (for written contracts) that presents an agreement between the contracting
parties. The contract must be an accurate reflection of the terms and conditions nominated in the
request documentation and must take account of any matters of significance emanating from the
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post-evaluation negotiation process. In this document, the parties agree on the rights and
responsibilities of each and the parameters of measuring delivery of the subject matter,
authorities or responsibilities relating to key decisions, defining performance measurement or
benchmarks and process for monitoring and managing retained risks (statutory, political and
commercial. In short, this document guides the relationship of contracting parties.
Although contracts are entered by procuring entities, there still exist challengesand conflicts,
quality disagreement, timing complaints and unacceptable abandonment of sites. These
occurring, results into various contractual court cases which on judgement underlines causes to
be bad process of selecting the contractor, bad provisions which allows ambiguities of
interpretation in the contract document and sometimes the conflicting provisions. At this juncture
it is important to note that the management of contract is only as good as the contract itself.
Poorly drafted contract are likely to result in poor contract management because of the exact
requirements of the contract not being known at the outset or from a badly written specification.
On 30th December 2014, The Citizen Newspaper in Tanzania reported a Parliamentary Accounts
Committee (PAC) order for an arrest of Tanzania Petroleum Development Corporation (TPDC)
top executives including the Board Chairman and the Managing Director for the controversy
over the Confidentiality clauses in oil and gas contracts called the Production Sharing
Agreements (PSAs)6. The PAC wanted to scrutinize the contracts and follow up on its
management but due to such clauses it was not possible and its management by PAC mandate
was challenged.
On the other context, conflicting provisions if not well looked at renders implementation of
contract difficult and when referred to the Court of law, remedies may not be easily obtained.
This situation once revealed in the case of International Engineering Services, Inc. v. Scherer
Const. & Engineering of Cent. Florida, LLC, 74 So.3d 531 (Fla. 5th DCA 2011)as it was
presented before the Court of appeal in Florida
It was stated in Florida that despite of enforceability of the pay-if-paid clause that shift the risk
of the Employer non-payment from the Main contractor to the subcontractors, the court
6
www.thecitizen.co.tz/oped/Confidentiality-clauses-in-Tanzania-s-oil--gas-agreements on 27/8/2015
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considered a subcontract that contained a clear and enforceable pay-if-paid clause but also the
subcontract contained another standard clause that incorporated the terms of the main contract
into the subcontract stating that the Employer was not obligated to make final payment to the
main contractor until the main contractor had fully paid all of its subcontractors. This created a
classic Catch-2 scenario: no subcontractor was entitled to be paid until the main contractor was
paid, but the main contractor was not entitled to be paid until all subcontractors were paid. The
Florida Court of Appeal held that these provisions created an ambiguity sufficient to render the
pay-if-paid clause of the contract unenforceable.
In the context of this case, the management of contract becomes challenging and more
challenging when even the Court of law that would have settled the differences is also
challenged.
ii. Challenge of NecessaryResources
The allocation of resources for contract management activities affords the procuring entities an
opportunity to manage the contract by assigning funding, staff, facilities, and/or tools to a given
contract, based on the size, complexity, and time frame established. Resource allocation ensures
that the plans of the procuring entity are integrated and sustainable within the resources
available, based on the contract management metrics that have been established. The employer
and contractor need to work together to determine how resources will be allocated to manage a
particular procurement contract schedules and deliverables. When allocating resources for any
contract, it is important to identify the types of resources needed. Depending on the nature of
contract, there are five categories of resources that need to be assessed namely funds, people,
facilities, technology and other resources7
To obtain flawless requirements of the procuring entity and ensure that the contractual
relationship is maintained, there are processes of management that are to be instituted in place.
These processes need resources for facilitation or movement and compensation. In that case a
financial muscle makes the difference in contract management. It takes funds to pay allowances
while conducting site meetings, traveling to projects for inspection and funds to cover for
7
http://about.usps.com/manuals/spp/html/spp3_031.htm (USPS-is United States Postal Service)
Page 8 of 18
unexpected events and ensuring the projected budget remains within the controllable range. Also
items like motor vehicles are needed to facilitate the movements of project managers between the
procuring entity and the project sites in course of their contract management activities.Contract
management is a two tier business between the employer and contractor, thereforesupplier’s
financial standing deterioration is also likely to affect performance of the contract8.
Availability of resources is needed to support a continuous audit of the contract performance
benchmarks. If due to lack of resources performance of the contract is not monitored and
reported upon, how can it be possible to tell whether the supplier/contractor is performing to the
standardsrequired?It is worth noting that standard of performance is not necessarily obtained
from a previous contract since a new/unique contract can have benchmarking criteria established
in that unique contract documentation prior to going out to tender and suppliers/contractors
needto be monitored against these. Important to remember therefore that once the contract is
signed, resources have to be allocated to ensure the contractor is held on toes to ensure quality
service.
iii. Challenges of Human Factors
Contract document state the consents of the contracting parties. These consents need a tight
follow up from the beginning till end of the contract period and completion of the contract
subject. In this case, it is evident that human interactions are important and a back-born of the
contract management. Human factor is not used to refer just to human being but the nitty grittyof
the individuals. To have a good contract management team you need to have a consideration of
team composition in terms of age, sex, knowledge and skills of subject matter, flexibility and
adaptability to new ideas and also pro activity. If the team capacity cannot help in understanding
context, complexities and the dependencies of a contract, it is impossible for them to be
effectively managed by anyone.
8
This fact is recognized by Contractors Association of Tanzania (CATA) to the extent of recommending joint
ventures or Consortiums for them to succeed in Contracts Implementation
(http://www.crbtz.org/documents//newsletter/10th-Anniv/Safety.pdf on 23/11/2015)
Page 9 of 18
Further, team members need to be checked for their dedication on the project, their capacity to
build good working relationship without ego clashes as well as continuity to the assignment. The
Australian National University (ANU) recognizes the importance of human factors of skills and
experience on contract management. In ANU’s contract management manual, it is stated that in
the instances, where the University does not have a licensed architect and engineers, the
University would contract out for that expertise to ensure contracts are effectively managed9. In
Tanzania, human factors challenging contract management is also evident. Shortage of staff in
quantity and quality to undertake the assignment is evidenced by decisions of procuring entities
to contract out the legal activities including contract management taking an example of Tanzania
Electrical Supplies Corporation (TANESCO)tender no PA/001/14/HQ/C/025 of 2013/2014.
iv. Challenges of Corruption/bribery and vested interests
Corruptionand bribery kills sense of justice and fairness. Where individuals are involved in
certain decisions and unfortunately corrupted, they are likely to turn alphabets upside down to
read dissimilar interpretation. In contract management, this applies. Where the procuring entity
unfortunately and may be due to bad process of selecting the contractor,enters into a contract
with unscrupulous dealer who would prefer bribing contract management team to compromise
quality of goods, works or services, it is running a risk of not getting the best value for money.
Corruption in this case may be of two fold, one pushed by the contractor and another pushed by
the employer side.From the Contractor corruption is that of bribing contract management team
and sometimes the top management to get them accepting compromised quality.
In another instance the bribery may be pushed by the contract management team or in a broad
sense the employer side. Corruption may emerge with officials from employer threatening to
withhold payment unless they are remunerated by a percentage of the contract or any other
amount. In such cases, officials delays due payment in view of bribe payments, creating serious
liquidity problems for the contractors that have adequately executed the contract (this qualifies as
‘solicitation’; if in addition the supplier is physically threatened it qualifies ‘extortion’). The
OECD report (2007) registers the World Bank experience which was given by Mr. Françoise
Bentchikou, Chief Counsel, procurement and Consulting Services of the World Bank that:9
https://policies.anu.edu.au/ppl/download/ANUP_001212 seen on 27/8/2015
Page 10 of 18
Payments extorted during contract implementation have become increasingly common and
significant, thus displacing opportunities for corruption from the procurement selection process
to the contract stage. …….. these payments, which can be seen as corrupt payments or large and
repeated "facilitation" payments of a very significant aggregate amount, may be required against
the provision/delivery of permits, licenses, approvals or other authorizations (for example,
licenses to use explosives or for delivery of goods, permits to import/re-export contractor's
equipment, etc.) or simply to receive timely payments that are properly due. ………the
reasonable assistance to the contractor provisions is inadequate and I suggest revision to
contracts to make all such authorizations, permits and licenses the responsibility of the
employer/client or to introduce payment conditions involving invoice tracking systems or
revolving advances.
v. Challenges of Change in Market Trends
One of the key ingredients of the contract is the contract price. The price is determined during
the bidding process by looking at various market trends and if it is a relatively longer period, the
contract price will take into account some other influencing factors like inflation trends, risks
involved and credit period. Other factors likely to be considered in pricing include availability of
raw materials in terms of distance and abundancy as well as a consideration for continuous
improvement and after sale service or extent of defective liability period. In many contracts, once
the price has been determined, might be hit bychanges in market dynamics which cause the
contract price to be unable to suffice the contract input requirements. According to CAG (2010),
contractors started to implement projects with a design conducted several years passedwhich
attracted agreater cost due to the fact that it is obvious those older designs got more expensive
than originally planned, due to the long processing time from having time of the design ready
and time of starting the actual construction work. In such cases, the parties to the contract must
be ready to re-negotiate failure of which result into instabilities.
vi. Challenges of Legal Requirements and Presence of Legal Lacunae
Laws give direction and guidance on how things must be done. On the contracts for example
things are guided by the law of Contract Act, Cap 345 R.E 2002. In the situation where laws are
clear about the subject matter, things are likely to move smoothly but in presence ofconflicting
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provisionsin a law or presence of more than one relevant law for the subject matter but with
conflicting directives, then activities for contract management are likely to stuck and result into
contractual conflicts. The conflicts may emanate from the requirements of the Acts of Parliament
against another Act, the Act against Regulations or the Act against procuring entity’s internal
guidelines such as financial regulations.
Another area of legal challenge that affect contract management is where there is a change of law
which renders the subject matter illegal or the new legal requirement makes a contract unimplementable in its current status unless some amendments are made. Such amendments may
be on unit costs, scope of work or re-design of the object.
Lack of contract ownership paused by legal conflicts or lacunae does not become a problem until
the contract goes wrong and result into loss. At that point no one wants to be responsible for the
blunder so it continues to fail until someone steps in to claw back what they can of the contract
and has to make the best of a bad job which should never be an option. If a contract is to be
tendered it must have an owner to ensure its successful discharge.
vii.
Inadequate planning
Planning clarifies the specification, scope of engagement and all resources needed to complete
the contract. Inadequate planning challenges the continuity of the projects as contractor’s
dissatisfaction on the lack of predicted work requests due to off-contract spend may lead to
contractor pulling out of the contract due to financial implications. Also plans address the
requirement of user department failure of which causes endless complaints and refusal to use the
contracted supplier/contractor. Planning is meant to accommodate the context, complexities,
dependencies of the contract and provider assumptions of which inadequate planning is likely to
skip and challengecontract implementation.
viii. Challenge of Ownership over the Management of Procurement Contracts
Contract management is an important aspect and need to be given an attention it deserves to
ensure that all that have been paid for are realized by the procuring entity. However, ownership
of the responsibility has been a challenge and procuring entities struggle with the question of
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who should own contract management function to ensure contractors deliver goods of desired
quality and continues to deliver innovative solution. This depends highly on who owns this
function and the tension that exists on ownership need to be addressed (Baily, 2008). Baily
shows that, the tension of who owns the function has resulted into a lack of cooperation and
about 20% of procuring entities do not involve procurement officers in contract management
phase or do not have a contract management strategy.
Contract managementin most cases lack ownership and in some entities there are different
guidance on how this role should be undertaken. In some entities this role is for legal department,
others put it under user department while others puts it under procurement management unit.
Section 38 (j) of PPA, 2011 tasks the Procurement Management Unit (PMU) to prepare contract
document but Section 39 (k) of the Act requires the user
department to oversee the
implementation of the contracts. In this view, the challenge that remains is for the procuring
entities to harmonize the internal regulations in line with PPA, 2011.
ix. Force Majeure (Natural calamities/unforeseen events of God
There arevarious definitions of the force majeure event which challenges management of
contracts. According to the case law, a case of Atlantic Paper Stock Ltd v St Anne-Nackawic
Pulp and Paper Co, [1976] 1 SCR 580, Dickson J in the Supreme Court of Canada, force majeure
was determinedto bean act of God or forces beyond the foreseeability. It was determined that
this clause generally operates to discharge contracting parties when a supervening, sometimes
supernatural, event, beyond the control of either party, makes performance impossible. This term
is frequently used in construction contracts toprotect the parties in event that a segment of the
contract cannot be performed due to such circumstances that could not be evaded through the
exercise of due care10.
Force majeure clause is another challenge that faces the contract management in Tanzania as it is
for other Countries. This clausemust be clearly defined given the fact that in the common law
meaning, the term force majeure is not certain and is open to interpretation of the courts, it is in
the interests of both parties to ensure that the term force majeure is clearly defined(McNair,
10
http://legal-dictionary.thefreedictionary.com/Force+Majeure on 29/8/2015
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2012). Apart from defining the force majeure events, the clause need to set out the effect on the
parties’ rights and obligations if a force majeure event occurs. The challenge that faces the
procuring entities is on defining what constitutes force majeure events and the remedial
conditions in events falling under force majeure definition. Failure to define these events always
results into contentions.
3.0 Effects of Procurement Contract Mismanagement
Contracts are vehicles through which the procuring entities get goods, services and works from
others. If contracts are mismanaged, there are numbers of occurring that will hit the procuring
entity.
First is a delay of contract subject. Nashikkar (2009) associates the contract delays with Parties
failure to understand their obligations and responsibilities, misinterpretation and trepidation at
the implementing level, with too many issues being escalated to top management for decisions
and slow progress due to inability to move forward before top decision. Since the contract
provisions need to be well stated on the delivery timing, it goes clearly on responsibilities of all
parties.
Second effect is on implementation of remedial measures. If contracts are mismanaged and the
remedial interventions are clearly stated, then blames for non-implementation rests with contract
implementation team. In this case the failure where there is no any explainable reason is a flaw
and need to be looked at it critically as it might be relating with other challenges like corruption,
bribery and vested interests. PPRA annual audit report for the year 2013/14 indicated negligence
of enforcing remedies for delays stipulated in the contracts ata score of 61%.
Third effect of mismanaging contract is on unwarranted extension of contract period. PPRA
annual audit report for the year 2013/14 indicated extending contracts duration without
justification and without following appropriate procedures at a score of43%and in this regard
PPRA recorded a general level of performance at 48% score.
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Fourth effect is on surety and liability. Procuring entities have found themselves uncovered due
to weakness in crafting the contract provisions related with performance bonds or insurance.
Although the provisions on the entities’ protection in some instances have been well framed and
strongly presented in contracts, implementing the same has not got enough attention. As a result,
procuring entities are found fixed to act on performance bond or insurance when the contractor
fails to perform as per contract. This on one hand might be contributed by lack of responsibility
spirit on the public servants, corruption and briberyamong responsible officers or fear in taking
relevant decisions. In its audit report for year 2013/14,PPRA reports:Out of Tshs. 8,266,141,185 which was to be collected and remitted to District Councils by the
contracted collectors, only Tshs. 5,565,549,115 (67%) was remitted to the audited councils.
Although Tshs. 2,700,592,069(33%) was not remitted by the contracted collectors, the councils
did not take any measures which were stipulated in the respective contracts with the collectors
including enforcement of performance securities clauses, charging interests for delayed
remittance, and timely termination of contracts.
PPRA report further indicated weak management of performance securities, advance payment
securities, and insurance covers and gave an example of advance payment of Tshs. 44,500,202
paid by Bagamoyo District Council to M/s Lonagro Tanzania Ltd for the supply of tractor and
trailer without any guarantee.
Firth effect of contract mismanagement hits Schedule of activities under contract. Schedule of
activities fall victim once the contract is mismanaged and in that case the contract is likely to go
beyond the agreed period. The Controller and Auditor General (CAG) audit report for year
2013/2014 mentioned non observance of contract schedule as it was associated with delays in
release of funds from the Ministry of finance. The CAG alerted that delays in paying contractors
not only challenges contractual relationship but also result into increased cost due to inflationary
trends and escalated cost of materials.
Another hutted area is the contract performance and the quality assurance controls. The CAG
report on the Central Government audit for year 2013/2014, among other procurement findings
noted the goods and works worth TZS 857,879,731 paid for but not delivered. This is a failure in
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contract management and an avenue for Government losses. PPRA annual audit report for the
year 2013/14 indicated weak quality control and quality assurance procedures by scoring 44% of
the assessment and also noted making of payments to service providers without following
procedures of inspections and measurements which scored 38% of assessment. The average
score on this criterion of quality control was 56% (PPRA, 2014)
In public procurement contracts, the consideration for the contractor is a contract price. This is a
volatile factor and need a critical look to ensure that appropriate price is paid.PPRA report
2013/14 gave a score of 66% on the management of scope and cost control. Further, the report
revealed unjustifiable payments amounting to Tshs 1,685,100,527 equivalent to 3% of the total
value of audited works contracts paid to contractors for works not done (exaggerated quantities
of works) and/or for shoddy works11.
Contract management needsstrong accountability to ensure all obligations are fully discharged as
agreed. On this concern, it has been noted by Professor Richard Mulgan of the Australian
National University (ANU) that contracting out inevitably involves some reduction in
accountability through the removal of direct departmental and Ministerial control over the day to
day actions of contractors and their staff. Lack of accountability might render to works
uncompleted or other subject of procurement undelivered. In August 2015, PPRA issued a notice
of debarment of contractors who failed to complete their constructions and abandoned the sites.
The companies debarred includes M/s Intersystem Holdings Co. Ltd employed by Kongwa
District Council, M/s Jv - VAAJ Co. Ltd and Nyalinga Investment Co. Ltdemployed byMpanda
employed by Mpanda Urban Water Supply and Sanitation Authority as well as M/s PEMA
TECH Co.Ltdemployed by Rungwe District Council12
4.0 Suggested Interventions to Address Contract Management Challenges
Contract brings together two or more parties with different institutional culture and business
motives, in that casepublic procurement practitioners should never get bored as they continue to
11
http://www.ppra.go.tz/index.php/news-archive/391-1-7-bn-overpaid-to-contractors
12
http://www.ppra.go.tz/index.php/top-services/442-intention-for-debarment-of-firms on 27/8/2015
Page 16 of 18
face challenging situations, contradictory requirements and unexperienced procurement
practices.
There are many ways to help public procurement practitioners cope with the myriad challenges
they must face. They include increased efforts in research, knowledge advancement, and
experience exchanges through various programs such as professional forums and workshops.
It is important for Professional body (PSPTB), the Regulatory body (PPRA) together with other
key stakeholders to have a collaborative capacity building strategies to ensure that Public
procurement practitioners are on their toes. Also, there is a need for these bodies to raise concern
to ensure other relevant controls are in place to ease the burden of procurement practitioners. The
Controls include effectiveness of internal audit, external audit and efficient governance
structures. In ensuring these organs functions effectively, consideration is needed on adequate
staffing, quality control, equipment and technical skills.
5.0 Conclusion and Recommendations
This article has provided highlights of contract management andsome of prevailing challenges in
effectively managing those contracts. The article has also indicated the pre-requisites for
effective contract management, effects of mismanagement and has suggested remedial
interventions. Procurement contract management is a multi-faceted responsibilityfacing
procuring entities with diverse challenging factors. Through this article, some challenges have
been touched and it is also believed that some remains.
In conclusion, it is important to note that contract management as a process always encompasses
same stages no matter the type of contract being managed but the methodology and people for
each contract varies tremendously. This is due to the changed need and subjects of contracts
which requires methods and people to be highly adaptive. That is why for experienced managers
of contracts there would be no direct answer to various questions except that it depends on the
contract. This means also that challenges to contract management are likely to vary contract to
contract.
Page 17 of 18
6.0
References

Baily,P et all (2008), Procurement Principles and Management, 10th Ed, Prentice Hall, London

CAG Report on Performance Audit on Road Works for year 2009/2010

CAG report on the Central Government for year 2013/2014

Elsey,R (2007), Contract Management Guide, Chartered Institute of Procurement and supply, Uk

http://about.usps.com/manuals/spp/html/spp3_031.htm (USPS-is United States Postal Service)

http://legal-dictionary.thefreedictionary.com/Force+Majeure on 29/8/2015

http://www.ppra.go.tz/index.php/news-archive/391-1-7-bn-overpaid-to-contractors

http://www.ppra.go.tz/index.php/top-services/442-intention-for-debarment-of-firms on 27/8/2015

https://policies.anu.edu.au/ppl/download/ANUP_001212 seen on 27/8/2015

Law of Contract Act, Cap 345 R.E 2002

MacNair,D(2012), Force Majeure Clauses revisited.www.dlapiper.com

Mulgan Richard 1997, ‘Contracting Out and Accountability’, Discussion Paper 51, Graduate
Public Policy Program, Australian National University, Abstract.

Nashikkar,J (2009), Contract Management, National Institute of Urban Affairs (NIUA),
www.Indiaurbanportal.in

Nkinga,N (2003) A Paper presented at the Joint WTO – World Bank Regional Workshop on
Procurement Reforms and Public Procurement for the English – Speaking African Countries held
at the Royal Palm Hotel, Dar Es Salaam, Tanzania from 14 – 17th January, 2003

OECD (2007), Bribery in Public Procurements: Methods, Actors and Counter Measures, OECD
Publisher, USA

Office of Government Commerce-UK (2002)

Public Procurement Act 2001 and Regulations 2013, United Republic of Tanzania

Public Procurement Act 2004 and Regulations 2005, United Republic of Tanzania

Public Procurement Act 2011 and Regulations, 2013, United Republic of Tanzania

www.cips.org/.../CIPS_KI_Contract%20Management%20Guidev2.pdf visited on 13/8/2015

www.indiaurbanportal.in visited on 13/8/2015

www.thecitizen.co.tz/oped/Confidentiality-clauses-in-Tanzania-s-oil--gas-agreements on
27/8/2015
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