PUBLIC PROCUREMENT AND DISPOSAL OF
PUBLIC ASSETS AUTHORITY
PROCUREMENT AND DISPOSAL COMPLIANCE
CHECK REPORT FOR
NATIONAL ENTERPRISE CORPORATION (NEC)
AUGUST 2007
1
TABLE OF CONTENTS
ACRONYMS..................................................................................................................................3
1.0
INTRODUCTION .........................................................................................................4
1.1
OVERVIEW OF THE PROCURING AND DISPOSING ENTITY ........................4
1.2
BACKGROUND.............................................................................................................5
1.3
COMPLIANCE CHECK OBJECTIVES ....................................................................5
1.4
SCOPE OF COMPLIANCE CHECK ..........................................................................6
1.5
COMPLIANCE METHODOLOGY ............................................................................6
2.0
FINDINGS AND RECOMMENDATIONS ON GENERAL IMPLEMENTATION
OF THE LAW................................................................................................................8
3.0
AGREED ACTIONS FOR FOLLOW-UP ................................................................22
2
ACRONYMS
PPDA Act
Public Procurement and Disposal of Public Assets Act, 2003
PPDA Regulations
Public Procurement and Disposal of Public Assets Regulations,
2003
PPDA
Public Procurement and Disposal of Public Assets Authority
PDE
Procuring and Disposing Entity
PDU
Procurement and Disposal Unit
NEC
National Enterprise Corporation
3
1.0
INTRODUCTION
1.1
OVERVIEW OF THE PROCURING AND DISPOSING ENTITY
The name of the Procuring and Disposing Entity is National Enterprise Corporation
(NEC) and its Headquarters are located in Kampala. This Entity has subsidiaries which
include; NEC Construction Works and Engineering, Luwero Industries which is engaged
in manufacturing hardware and is located in Nakasongola and NEC Farm Katonga. There
are two (2) new subsidiaries being considered by the Board for possible establishment
namely; NEC Tractor Project and NEC Shoe Manufacturing Plant. NEC Construction
was delegated powers to handle its own procurements and disposal while Luwero
Industries is considered a classified area by the Board.
Legal Status and Mandate
NEC was established by an Act of Parliament Cap 312 Vol.12. as a commercial
enterprise. Its mandate is to own and hold property and carry out business to earn a profit
to be used to improve the welfare of the members of the Uganda Peoples Defence Forces
(UPDF).
The Governing body of NEC is a Board of Directors which was recently appointed and
comprising of 13 members. They are:
1. Eng. Andruale Awuzu
-
Chairman
2. Eng. Ivan Mbabazi Batuma
-
Member
3. Dr. Pascal Odoch
-
Member
4. Mr. Baalwa Isabirye Daniel
-
Member
5. Mr. Mulindwa Birimumaaso
-
Member
6. Ms. Gertrude C. Kulany
-
Member
7. Hajjat Aphwa K. Sebyala
-
Member
8. Prof. Foster E. Byaruhanga
-
Member
9. Prof. Victoria Mwaka Nakiboneka -
Member
10. Mr. George Willy Odwong
Member
-
4
11. Mrs. Rosettie K. Byengoma
-
Member
12. Brig. Robert Rusoke
-
Member
13. Col. (Rtd) Fred Mwesigye
-
Managing Director
Number of Staff:
The entity has approximately 30 members of staff at its Headquarters, 100 at Luwero
Industries and 100 at NEC Construction. The Managing Director, Col. (Rtd) Fred
Mwesigye is the Accounting Officer.
Source of Funds: The entity’s source of funding is the Government through the
Consolidated Fund as well as funds generated by the above mentioned subsidiaries.
Volume of expenditure on procurements: The entity’s budget is Ugs. 1.5 billion of
which, approximately 60% is spent on procurement. The entity’s biggest procurement
budget is spent in the engineering and construction sector.
1.2
BACKGROUND
The Public Procurement and Disposal of Public Assets Authority (PPDA) is the
regulatory and oversight agency that advises Government on matters relating to public
procurement and disposal. Under Section 6 (d) and 7 (r) of the Public Procurement and
Disposal of Public Assets Act (PPDA Act) and Regulation 6 (e) (iii) of the Public
Procurement and Disposal of Public Assets Regulations (PPDA Regulations) of the
Public Procurement and Disposal of Public Assets Regulations, the Authority is mandated
to monitor compliance of Procuring and Disposing Entities, administer and enforce
compliance with all the provisions of the Act, Regulations, Guidelines, solicitation
documents and specification standards issued by the Authority. To this end, the Authority
embarked on a compliance check on NEC on 13th and 14th August 2007.
1.3
1.
COMPLIANCE CHECK OBJECTIVES
To establish whether NEC conducts procurement and disposal in a competitive,
transparent, fair and non-discriminatory manner in accordance with the PPDA Act and
5
Regulations.
2.
To establish whether NEC uses the Standard Bidding Documents and Guidelines issued
by the Authority.
3.
To ascertain the level of compliance with the PPDA Act and Regulations.
4.
To report on the performance of the key players in the procurement cycle in the entity.
1.4
SCOPE OF COMPLIANCE CHECK
The assignment covered procurements and disposals conducted in the period July 2006 to
May 2007. Specifically, this exercise entailed:
i.
Reviewing the whole procurement process of sampled activities from requisition to
contract management.
ii.
Reviewing the internal control system as regards the procurement and disposal
processes.
iii.
Ascertaining the use of standard bidding documents and observance of the bidding
thresholds and periods.
iv.
Assessing whether procurements and disposals are conducted in a transparent, fair
and non-discriminatory manner.
1.5
COMPLIANCE METHODOLOGY
The compliance check team reviewed the following documents:
1.
Minutes of the Contracts Committee for the period July 2006 to May2007.
2.
Procurement and disposal reports for the period July 2006 to May 2007.
3.
Records of contract management for the period July 2006 to May 2007.
6
4.
List of pre-qualified providers for the Financial Year 2006 – 2009.
5.
Contract documents.
The compliance team met the following:
•
Colonel (Rtd.) Fred Mwesigye
-
•
Mr. Peter Rukasi
-
Chairman, Contracts Committee
•
Mr. J.B. Suuza
-
Member, Contracts Committee
•
Mr. Daniel Mukombozi
-
Member, Contracts Committee (Lawyer)
•
Ms. Ann Zawedde
-
Secretary, Contracts Committee
•
Mr. George Odongo
-
Marketing Officer
•
Mr. Ijoot Eric
-
Chief Accountant
Accounting Officer,
The compliance team met members of the Procurement and Disposal Unit which consists
of 2 persons namely:
•
Ms. Alice Zahura
-
Assistant Procurement Officer
•
Mr. C. Twinamatsiko
-
Procurement Clerk
7
2.0
FINDINGS AND RECOMMENDATIONS ON GENERAL IMPLEMENTATION
OF THE LAW
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
1.
Procurement
•
Structures
Accounting
Officer:
The
Managing
Director, Colonel (Rtd.) Fred Mwesigye is
the Accounting Officer.
•
Contracts
Committee: The Contracts
Committee has four (4) members and was
approved by the PS/ST on 24th December
2004 and expires on 24th December 2007.
•
The following members currently comprise •
The Accounting Officer
the Contracts Committee:
should
i. Mr. Peter Rukasi
ii. Mr. J.B. Suuza
ensure
composition
Chairperson
of
full
the
Contracts Committee in
Member
iii. Mr. Daniel Mukombozi
Member
accordance with Third
iv. Ms. Ann Zawedde
Secretary
Schedule of the PPDA
Act by appointing a fifth
member
on
the
Committee and forward
the name to PS/ST for
approval.
•
In its response, the entity
communicated a new list
8
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
of Contracts Co mmittee
members as follows:
•
Mr.
Peter
Rukasi
Chair man
•
Mr. Daniel Mukombozi
Secretary
•
Mr.
Joshua
Abaho
Member
•
Mr.
Herbert
Kaawa
Member
•
Mr.
Ishmael
Katamanywa Member
•
The entity should avail
PS/ST’s approval of the
above
Contracts
Committee.
•
The
Contracts
Committee
meets
on
average once a month. A file comprising of
signed
minutes
was
availed
to
the
compliance team.
•
The Contracts Committee minutes are •
however not detailed and indicate only the
Committee
best evaluated bidder. There is no reference
should be detailed so that
to other bidders that participated in the
it is clear as to how and
Detailed
Contracts
minutes
process.
9
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
why decisions are arrived
at.
The
subject
of
procurement, procurement
method used, number of
bidders invited, summary
of the evaluation process
and the best evaluated
bidder’s
contract
price
should be included in the
minutes.
•
The Contracts Committee has not been •
In its response, the entity
trained by PPDA. There is need to train
requested PPDA to fix
them on the roles and responsibilities of the
training within the last
Committee as well as the different players
two weeks of February
in the procurement process since these are
2008
not clear for example, the Accounting
Accounting Officer, User
Officer
Departments
nominates
the
evaluation
committee, the Assistant Procurement
Officer
signs
PP
Form
20
as
for
training
the
and
Contracts Committee.
the
authorising officer.
•
Contracts
• PPDA Regulation 169
Committee is also the Chairperson of the
(7) states that in order to
Evaluation Committee.
maintain independence
The
Chairperson
of
the
of
functions
and
powers, a member of a
contracts
committee
10
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
shall not be a member
of
an
evaluation
Committee. This should
be strictly adhered to in
future procurements.
•
The Accounting Officer appoints members
of the Evaluation Committee.
• PPDA Regulation 169
(2) provides that the
membership
of
Evaluation
the
Committee
shall be recommended
by the Procurement and
Disposal
Unit
and
approved
by
the
Contracts
Committee
using PP Form 40 in the
Ninth
should
Schedule,
be
this
strictly
adhered to in future
procurements.
• Procurement and Disposal Unit: The
• The Accounting Officer
PDU is manned by two (2) persons who are
should
not qualified in procurement and disposal.
Procurement
They have received training from PPDA on
Disposal Unit at
an
the
appropriate
in
new
procurement
and
disposal
establish
a
and
level
framework. They are :
accordance with Section
•
30 of the PPDA Act and
Alice Zahura – Procurement Assistant
11
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
•
Regulation 57 of the
Twinamatsiko C – Procurement Clerk
PPDA Regulations.
• In
its
response,
the
Entity
informed
the
Authority that the PDU
had
been
with
an
reinforced
experienced
member of staff in the
names
of
Lt.
Eric
Bazarwangye.
•
2.
Procurement
•
Reporting
User Departments:
(i)
Works
(ii)
Information Technology
(iii)
Finance and Administration
At the time of the compliance check the •
The entity should submit
entity had submitted monthly reports up to
timely monthly reports
June 2007.
in accordance with the
Fifth Schedule of the
PPDA Regulations.
•
In
its
response,
the
Entity pledged to submit
timely monthly reports.
•
Wrong Procurement Reference Numbers •
The Entity is advised to
were observed in some procurements.
use
correct
reference
12
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
numbers in accordance
with Guideline 2/2003
of
the
PPDA
Regulations.
•
The monthly reports reviewed indicate •
The
splitting of procurements particularly in the
aggregate
its
procurement of stationary.
procurements
in
entity
should
accordance with PPDA
Regulation 99.
•
The entity had not submitted the report on •
The entity should submit
Contracts in excess of USD 200,000 for the
reports on contracts in
period July 2006 to December 2006.
excess of USD 200,000
as soon as possible.
•
There were no reports submitted by the •
PPDA Regulations 66-
subsidiaries of NEC and the procedure for
72
delegation to the subsidiaries had not been
procedure for delegation
followed.
to a sub-division of the
provides
the
Entity and this should be
followed.
•
•
Monthly
reports
procurement
on
and
disposal submitted to the
Authority should include
13
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
those from the NEC
subsidiaries.
3.
Procurement
•
Planning
The entity did not ha ve a procurement plan •
The
for the current FY 2007/08 consequently,
prepare a procurement
all procurements are adhoc.
plan in accordance with
entity
should
Regulation 96 of the
PPDA Regulations and
submit it to the Authority
in accordance with the
Circular
to
all
Accounting Officers.
•
In
its
response,
the
submitted
a
Entity
procurement plan for FY
2007/08.
4.
Pre -
•
The document used to solicit for bids under • PPDA Regulation 128
qualification of
Prequalification
Providers
Bidding Document issued by the Authority
of
and therefore it is not clear what evaluation
documents issued by the
criteria was used and whether the terms
Authority
were clear.
mandatory.
was
not
a
Standard
(1) provides that the use
standard
Regulation
solicitation
shall
be
PPDA
128
(2)
further provides that a
procuring and disposing
entity
shall
appropriate
use
the
standard
14
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
solicitation
documents
issued by the Authority
for
each
procurement
requirement.
•
The entity had a pre-qualified list of • The entity should use the
providers for three financial years i.e. FY
Standard
Bidding
2006/2007- 2008/2009 however, PPDA
Document
was not satisfied with the evaluation
PPDA
process since it was not done in accordance
qualification
with the law.
quality providers for the
issued
for
by
Pre-
and
pre-
next three financial years.
•
The following categories had only one • PPDA Regulation 142
provider:
should
be
used
in
-
Uniforms
developing shortlists. At
-
Animal Drugs
least
-
Fuel and Lubricants
should be invited for
-
Office Furniture
each
-
Stationary
accordance with PPDA
-
Engraving
Regulation 117 (3).
-
Telephone repairs & accessories
-
Air Ticketing
three
providers
procurement
in
- Fire Equipment
•
Firms which are not on the Entity’s pre- • Only
qualified list are invited to bid e.g M/s
pre-qualified
providers should be used to
Kengrow Industries Ltd for computers and provide
various
goods,
15
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
telephone sets
works and services. PPDA
Regulation 142 should be
used
in
updating
the
providers register.
5.
Procurement
• The compliance team
noted that the •
Contracts
Committee
methods and
Contracts Committee minutes do not state
minutes should clearly
use of PP
the approved Procurement method.
state
Forms
the
procurement
method approved and
any
other
relevant
details.
• The Entity uses the direct procurement •
Clause 6 (1) of the
method without sufficient justification as in
Fourth Sche dule of the
the case of procurement of consultancy
PPDA Act provides the
services from M/s Arch Tech Consults and
circumstances
under
procurement of consultancy services for
which
direct
NEC
M/s
procurement
Associated Surveyors at a cost of Ushs
may be used.
Farm
at
Katonga
from
the
method
10,000,000.
• The compliance team observed that the •
The entity was informed
estimated cost on PP Form 20 is the one
that this was an irregular
which is always quoted by the best
practice which had to be
evaluated bidder. The entity explained that
stopped and the proper
the cost on the PP Form is that of the best
procedure
evaluated bidder since they first obtain
establishing
quotes and then prepare the PP Form based
estimated
of
the
price
and
16
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
on the best evaluated bidder’s quote.
method of procurement
before
soliciting
for
quotes
should
be
followed in accordance
with the law.
• The entity uses PP Forms especially PP
•
The balance remaining
Form 3, 20, 209, 51 e.t.c. However, PP
on PP Form 20 should
Form 20 is not duly filled in some
be
procurements and the balance remaining is
accordance with PPDA
not indicated.
Regulation
indicated
in
104
to
ensure that the entity
does
not
commit
government
without
adequate funding.
• The Assistant Procurement Officer signs on •
PP Form 20 should be
PP Form 20 as the authorising officer in
duly
signed
by
the
some procurements contrary to PPDA
authorised
Regulation 105 (3).
namely, the originating
officials
officer
(user),
authorising
officer
(some one in charge of
finance)
and
confirmation of funding
(Accounting officer).
• The entity uses PPDA’s evaluation report
formats.
17
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
• The entity uses PPDA standard bidding
documents in some procurements namely
Construction of a similar house in Karama
Training house.
6.
The entity does not use the Standard forms •
The entity should use the
award of
of Contracts issued by the Authority.
Standard
contracts
However, the compliance team noted some
Contract issued by the
contract documents signed betwe en the
Authority.
Procedure for
•
forms
of
entity and providers for example, in the
Procurement of Architectural Consultancy
Services
for
building
structures
at
Namanve by M/s Arch Technical Consults
Ltd.
•
The Local Purchase Orders are managed by
the PDU.
•
The entity conducts negotiations on price
as
shown
in
the
above
•
mentioned
PPDA Regulation 219
(3)
(c)
states
under
that
procurement where prices were negotiated
negotiations
a
from Ushs.8,378,000 /= to 4,720,000 /=.
competitive procurement
methods shall not be
conducted primarily for
the purposes of reducing
prices.
•
Retrospective approvals were noted i.e. for •
Retrospective approvals
18
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
fumigation services at Ug.shs 28m from
are not permitted under
M/s T & K Commercials.
the law. The Contracts
Committee
should
approve
the
Procurement
and
method
Solicitation
Documents
in
accordance with Section
28 (c) of the PPDA Act.
•
The entity does not use PPDA standard
•
notices in the Notification of Award.
PPDA standard notices
as provided for in the
Seventh
Schedule
should be used in the
Notification of Contract
Award.
7.
Display of
The compliance team noted that the entity •
The
Statutory
has a Procurement Notice Board outside
advised
Notices on
the PDU where all Procurement Notices
ensure
Notice Board
are displayed.
Procurement Notices are
compliance
the
PDU
that
displayed
team
on
Procurement
to
only
the
Notice
Board.
9.
Ethical Code
•
Members of the Contracts Committee do
•
PPDA Regulation 53
by Contracts
not sign the Code of Ethics prior to
(2) (b) states that the
Committee
meetings consequently, they are not bound
minutes
to act ethically.
contracts
of
each
committee
19
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
meeting shall include
the
code
of
ethics
signed by all members
and
other
persons
attending the meeting
using PP Form 210 Part
This should be strictly
adhered to.
10.
Contract
•
Management
No contract management records were •
Contract
availed to
the compliance team and
records should be kept
therefore it was difficult to ascertain
by the User Department
whether procurements are implemented
in
according to contractual obligations.
Regulation 260 of the
management
accordance
with
PPDA Regulations.
•
The
Procurement
and
Disposal Unit should get
involved
in
contract
monitoring
in
accordance
with
Regulation 258 (3) of
the PPDA Regulations
2003.
11.
Record
Keeping
•
The entity keeps procurement records in •
The entity was advised
separate files.
to
ensure
that
all
documents listed under
20
NO ISSUE
FINDINGS AND OBSERVATIONS
RECOMMENDATIONS
& ENTITY’S RESPONSE
PPDA Regulation 90 are
kept on file by the PDU.
12.
Complaints
•
The compliance team was informed that
the entity had not handled any complaints
from bidders on procurement or disposal.
13.
Suspension of
•
Providers
The team was informed that the entity had
not considered suspension of any provider
for breach of the PPDA Act, Regulations
and best practices.
14.
Disposal
•
The compliance team was informed that no The
items had yet been identified for disposal.
compliance
team
informed the entity of a new
circular by the Permanent
Secretary/Secretary to the
Treasury on the powers of
the Accounting officer to
appoint Board s of Survey,
issued July 2006.
21
2.2
GENERAL OBSERVATIONS
2.2.1 There is need to conduct training for the Accounting Officer, the Contracts Committee,
Procurement and Disposal Unit and User Departments particularly on the following:
•
Preparation of procurement plans
•
Format for Procurement Reference Numbers
•
Initiation of Procurements using PP FORM 20
•
Independence of functions and separation of powers by the Procurement Structures
•
Delegation of powers
2.2.2 The Best Evaluated Bidder’s prices are identical to the estimated costs indicated on PP
Form 20 which indicates that there may be collusion between staff within the Entity and
the bidders as evidenced in the procurement of Insurance Services from NIC at a cost of
Ushs 7,025,000/= and printing of Freedom Fighters Magazine by M/s TTB Investments at
a cost of Ushs. 2,800,000/=.
2.2.3 The compliance team noted that it required clearance to visit Luwero Industries. The
Accounting Officer informed the team that clearance should first be sought by the team
from the Permanent Secretary, Ministry of Defence.
3.0
AGREED ACTIONS FOR FOLLOW-UP
3.1
The Accounting Officer should nominate the fifth member of the Contracts Committee in
accordance with the PPDA law and submit the name to the Permanent
Secretary/Secretary to the Treasury for approval by January 2008.
3.2
The Accounting Officer should establish a Procurement and Disposal Unit at an
appropriate level in accordance with the PPDA law by June 2008.
3.3
The Accounting Officer should delegate procurement and disposal to NEC subsidiaries in
accordance with the PPDA law by January 2008.
22
3.4
The entity should communicate to PPDA and request for training for the Accounting
Officer, Contracts Committee, Procurement and Disposal Unit and User Departments by
December 2007.
3.5
The entity should use the Standard Bidding Document issued by PPDA for Prequalification and pre-quality providers for the next three financial years by March 2008.
3.6
The entity should prepare a procurement plan for the Financial Year 2007/08 and submit
it to the Authority by December 2007.
3.7
The Authority is considering preparing a Guideline for Commercial Entities to add ress
their peculiar operations that require them to comply with the PPDA Act while at the
same time competing with providers in the private sector by the end of the Financial
Year.
3.8
The Authority will write to the Permanent Secretary, Ministry of Defence requesting for
clearance to visit Luwero Industries as part of the Compliance Check exercise by
December 2007.
23