PROCUREMENT AND SUPPLIES PROFESSIONALS AND
TECHNICIANS BOARD (PSPTB)
5 th PROCUREMENT AND SUPPLIES PROFESSIONALS ANNUAL
CONFERENCE. (2 nd to 3 rd DECEMBER, 2014), AICC, ARUSHA.
THEME: “VALUE FOR MONEY PROCUREMENT AND SUPPLY: A
CRITICAL CHALLENGE FOR PROCURING ORGANISATIONS.”
TOPIC: “Procurement and Supply Professionalism in the urge to Create Value in the
Public Service.”
ABSTRACT: This paper will try to analyze the following issues: the concept of Value for
Money (VfM) procurement including the general concepts and background, essential salient features, recent developments and changes, and critical look of its applicability in Tanzania.
The value for money procurement is the core principle underpinning any procurement. It will be argued that vfm is enhanced in an organization procurement by encouraging competition; promoting the use of resources in a efficient; effective and ethical manner and making decisions in an accountable and transparent manner in order to be in the best position to determine value for money when conducting a procurement process. The paper will argue that cost is not the only determining factor in assessing vfm, rather, other factors need to be considered, viz: having adequate knowledge and skills also required in vfm procurement. This section will discuss the requisite skills and knowledge which are required throughout the whole procurement process. It will be shown how having proper skills and knowledge for procurement professionals and behaving ethically results in value for money procurement.
Challenges and the role of Professionals towards vfm procurement will also be discussed in a
Tanzanian legal context, i.e. the PPA No. 7 of 2011; and its Regulations GN no.446 of 2013, requires that procurement professionals should ensure that the procurement process complies with all other Government policies that interact with the procurement process. Likewise, apart from having the above, this paper is to discuss the importance of ethical conduct and in particular analyze the existence of relevant codes of conduct public for officials and private sector suppliers and service providers in carrying out vfm procurement. It will conclude by showing what needs to be done in order to achieve vfm in any procurement transaction.
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1.0 INTRODUCTION: Procurement encompasses the whole process of acquiring goods and services. It begins when an organization has identified a need and decided on its procurement requirement and it goes through the processes of risk assessment; seeking and evaluating alternative solutions; contract award; delivery of and payment for goods and or services and where relevant, the ongoing contract management and consideration of options related to the procurement contract. Procurement also extends to the ultimate disposal of property at the end of its useful life. Procurement function is now-days a core strategic function across both public and private sectors and is undergoing dramatic changes and continues to evolve. It is now widely recognized as fundamental in improving public service delivery and achieving better value for money (vfm) outcomes.
Best value is defined as basis for awarding contracts which optimizes quality, cost and efficiency. Procuring Entities (PEs) are now required to build their strategic procurement capability through professionalization of the procurement professionals. These changes require procurement professionals to adapt quickly and improve their procurement skills and capabilities to support the business.
Procurement professionals training and education are core activities required to up-skill and professionalize professionals to meet challenges of valued service delivery to the public sector; to successfully implement a strategic vision for the
PEs’ procurement activities to realize broader organizational objectives; to influence broader organizational and Government’s objectives; to influence PEs’ corporate culture to recognize procurement as a critical business function which contributes to the delivery of Government’s priorities and to integrate and interface with other core functions. Therefore, to successfully deliver organization’s procurement objectives, procurement professionals are required to apply a broad spectrum of skills, knowledge and expertise including:- effective risk management; sophisticated market and supply chain analysis; effective stakeholder engagement in particular with suppliers; prudent contract management based on the procurement risk profile that is certain, enforceable and achievable; vfm assessment and delivery; identifying opportunities to implement economies of scale through aggregation and volume share arrangements;
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providing advice, assistance and services across the procurement life cycle and increasing opportunities to develop and implement innovative solutions.
1.
2.0 Adoption of Value for Money (VfM) Procurement Concept: All public procurement of goods, services and works must be based on value for money; having due regard to propriety and regularity. Value for money is not about achieving the lowest initial price; it is defined as the optimum combination of whole life costs and quality. Goods, services and works should be acquired by competition unless there are convincing reasons to the contrary. Better value for money from procurement can be achieved in many ways by: getting an increased level of quality of service at the same cost; avoiding unnecessary purchases; ensuring that user needs are met but not exceeded; specifying the procurement requirements in output terms so that suppliers can recommend cost-effective and innovative solutions to meet that need; sharpening the approach to negotiation to ensure organizations get a good deal from suppliers. Organizations should act as intelligently by discussing with suppliers all the elements of the contract price, including level of service, timescale of the assignment, skill mix of the supplier’s team and how costs can be remunerated; optimizing the cost of delivering a service or goods/works over the full life of the contract rather than minimizing the initial price; introducing incentives into the contract to ensure continuous cost and quality improvements throughout its duration; aggregating transactions to obtain value discounts from bulk buying; developing a more effective working relationship with key suppliers to allow both the buyers and suppliers to get maximum value from the transaction by identifying opportunities to reduce costs and adopt innovative approaches; reducing the cost of buying goods or services, by streamlining procurement and finance processes and reducing the level of stocks held.
In 2008, the World Bank reformed its internal procurement procedures by adopting the “Principles Based Approach Policy” which focuses on managing risks; reinforcing ethical behaviour through training and working directly with
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suppliers, measuring their performance and assessing success on the basis of outcomes. These principles are fairness; transparency and competition, with procurement decisions based on best value defined as the best optimal combination of lowest total cost of ownership, technology innovation, efficiency, assurance of supply and quality.
This methodology is used for the procurement of complex goods and services where it is imperative to evaluate factors rather than costs. Others include Framework Contracts (which involve frequent, repetitive procurements i.e. common use items) 2. The World Bank has also pioneered and incorporated social corporate responsibility that calls for the expanded use of environmentally preferable products (green procurement); environmentally and socially responsible procurement and diversity in hiring and fair working conditions by Suppliers.
2.1 Use of Technology Public Procurement (PP): The use of electronic tools and platforms in procurement is vastly changing the way PP is executed and constitutes a key part of modern PP. This includes public use of e-tendering; eauction; e-sourcing; e-procurement and measures to improve category and demand management and sustainability 3.
With the advancement of technology, e-procurement should become a standard way of PP of routine and non-strategic goods and services, since it offers the potential of faster purchasing and more reliable up to date information to secure better prices. (e.g. using PPRA’s PMIS).
It also enables better compliance of rules and regulations as a basis for good practices. The basic principles of PP include: competition; transparency; economy and efficiency; equity – equal treatment and non-discrimination; probity or integrity and value for money.
The benefits of e-procurement are much more improved efficiency through computerization of processes since it represents a powerful information and management tool that underpins the strengthening of public procurement systems and that can transform the provision of public services. This results in the lowering transaction costs, time and prices mainly for high volume, low value
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items that are particularly amenable to the use of framework contracts. In some cases, these have shown to increase competition and may even be more reliable in terms of integrity than other methods. The use of information technology such as e-procurement has become another feature of making procurement more transparent and cheaper, and allowing improved management of procurement systems.
Value for money overlaps with the concepts of economy and efficiency so that procurement procedure is carried out with the least waste (in terms of cost and time) and as much benefit as possible. It recognizes that goods and services are not homogeneous i.e. they differ in quality; durability; longevity; availability and other terms of sale. In seeking vfm, PEs’ should purchase the optimum combination of features that satisfy their needs. Hence, the different qualities, intrinsic costs; longevity; durability of the various products on offer will be measured against their costs. It may be preferable to pay more for a product that has a low maintenance costs than a cheaper product with a higher maintenance costs. It is emphasized that, PEs’ should adopt vfm methods in order to make procurement decisions on the basis of “Whole-Life-Cycle” costs and benefits.
Interacting and knowledge sharing between suppliers and users is important for innovations in public procurement.
2.adb
Many PEs’ are searching for savings, faster and simpler procurement, better value overall and flexibility, while reinforcing integrity and accountability for the use of public funds. There is a need to modernize public procurement systems, treating public procurement as a strategic function that directly affects the quality and quantity of services provided to the public. PEs need also to adopt modern management concepts and tools such as contract management and performance management instead of focusing on rules and procedures as per Procurement Act and its Regulations which aim at regulatory compliance rather than performance and outcomes. The procurement reform efforts should entail a rebalancing along a continuum of compliance against performance; rules against principles and
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transactions against systems. Private sector procedures have been adopted in pp with great success in enhancing vfm such as framework contracts and supply chain management.
2.2 Merits of a Good Public Procurement: A good pp framework rewards innovative processes and solutions; identifies best fit for purpose outcomes; promotes supplier development and competitiveness; strengthens public confidence in Government and delivers optimal vfm and “best-fit for purpose”, i.e. procurement decisions made on the basis of “whole-life-costs and benefits” instead of “least-cost basis” only hence, there is need for collaboration with private sector in order to find the best fit through dialogue with potential suppliers in order to generate the best overall results for the contracting agency and the users of the goods and services. Notions of vfm; “whole-life-cycle” evaluation and “merit points” concept attempt to go beyond mere costs. Value for money entails accurately measured dimensions such as reasonable procurement lead times; market cost and quality. More sophisticated approaches require a detailed understanding of market structures and delivery and actual end use; a conscious effort to standardize; rationalize and simplify; a focus on “whole-life-cycle” costs rather than just the purchase price; a well defined and enforceable planning cycle at various levels; viable mechanisms to protect competition and manage corruption risks and a multi-pronged strategy to engage stakeholders frequently, openly and equitably. Strong capacity is required to implement the full concept of vfm since it reflects that price alone need not be the sole criterion for making a procurement decision, but the determining factor is the optimum combination of whole life costs and benefits.
Whole life cycle costs include maintenance management; operating costs and disposal and the implications of risks and flexibility throughout the entire procurement cycle. This takes into account risks such as quality, performance of the supplier; failure to deliver and not being realistic as to what is expected or missing out on alternatives. The idea is that higher costs may be translated via
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better quality into lower whole-life costs due to longer useful life and or higher residue value or increased benefits in terms of greater user satisfaction or ease of use.
Merit point concept is a system under which the additional points are awarded to bids based on qualitative dimensions such as quality; past performance and technical aspects. All these aim at going beyond price as a way to capture performance and quality. There are economic benefits in the form of efficiency gains from incorporating whole-life-costing into the procurement decision making process. Improvements in value for money fall into:- those aimed at reducing the cost of purchasing and the time it takes, e.g. the administrative effort in processing an order, seeking and evaluating tenders, and taking delivery of the goods ordered; i.e. procurement overheads, and typically add between 10% to
50% of the cost of buying goods and services; those aimed at getting more value from money by negotiating improved deals with suppliers (reduced cost and/or between quality) or aggregating demand to get greater beverage on suppliers and those aimed at improving project, contract and asset management.
2.3 Complexity of Procurement Needs: This requires that the procurement approach to be carefully thought through. The complexity of the procurement needs can make it more difficult to measure whether value for money is being achieved.
Services such as the development of IT related services and professional advice can be difficult to define precisely or may require considerable feasibility work before a reliable specification can be drown up. The work may be specialized with only one or two potential suppliers, making competition impracticable and of the service is delivered over a long term there is a need for regular monitoring of the quality in order to get value for money in the long as well as the short term. In the case of goods and services which have a longer working life, there is a need to ensure they are cost effective, over the whole working life. This means taking a long term view and not focusing on the lowest purchase price at the expense of
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long term value for money. Long term procurement commitments also need to be able to deal with change, i.e. PEs should take advantage of changes in technology.
Value for money procurement depends on combining competition with innovative ways of procurement while managing risks effectively. Buying goods and services through competition remains the best way of ensuring that the best combination of whole life costs and quality is achieved. But it is not always appropriate or cost effective for low value items, or sufficient on its own for complex goods and services or where well developed market is non-existent.
The wide diversity in the value and type of goods and services which organization procure, mean that no single procurement method is appropriate to promote value for money in all transactions.
2.4 The Need for Knowledge and Skills: From the above it can be seen how procurement function has become an extremely complicated function requiring the use of interdisciplinary skills and knowledge (i.. multiple disciplines) such as economics, political science, public administration, accounting, marketing, law operations research, engineering, business management) to enable procurement professionals to manage strategic long term complex agreements among stakeholders. Knowledge is a complex process of remembering, relating or judging an idea or abstract phenomenon (i.e. cognitive abilities). Knowledge statement refers to an organized body of information usually of a factual or procedural nature which if applied, makes adequate performance of the job possible; a body of information applied directly to the performance of a function such as procurement. On the other hand, skills are the proficient manual, verbal or mental manipulations of data or things that allow for the execution of well specified task (psycho-motor abilities). Skills can be readily measured by performance tests where quality and quantity performance are tested usually within an established time limit, e.g. proficient manipulation of things; skills in typing or driving a vehicle; proficient manipulation of data; skills in computation using decimals; skills in editing transposed numbers.
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New skills and knowledge are acquired through training and capacity building.
The right combination of knowledge and skills will depend on the level of procurement decision making. Procurement professionals managing strategic procurement activities require more high level strategic analytic skills than those managing the tactical and operational activities. Acquiring procurement knowledge and skills requires a strategy of building the capacity of the procurement professionals by relevant bodies such PSPTB; PPRA, Training institutions, colleges and universities which need and require for integrated, sequenced and well coordinated approach to succeed. Procurement professional with the requisite skills must able to reason, communicate, be able to use knowledge, personal experience, analyze problems and argue effectively.
No single skill and knowledge can be adequate to manage the procurement portfolio of great complexity in public procurement because procurement transactions demand professionals with high level strategic, tactical and operational skills, also, they also must have the ability to perform the duties effectively. Ability refers to the power to perform an observable activity at the present time, i.e. abilities which have been evidenced through activities or behaviors that are similar to those required on the job e.g. ability to plan and organize work. Abilities are different from aptitudes, since aptitudes are only the potential for performing an activity. Therefore, a procurement professional must have ability to: understand the policy and political environment and how it impacts on procurement; implement appropriate governance and probity arrangements; understand end-user needs and be able to describe outcomes and terms of contract succinctly; lead and manage commercial activities; perform scenario analysis and planning demonstrate business acumen and take sound commercial decisions based on an understanding of motivations of suppliers; identify, evaluate and take controlled risks, analyze, synthesize, interpret financial data, understand Government procurement policy, guidance and legal framework; determine and deploy a negotiation strategy, use core negotiation skills and
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techniques; perform supplier management development of effective contractual relationships.
Aptitude is the ability to make decisions using multidisciplinary thinking. They also need to have the right attitude in performing their duties. Attitude represent a state of mind, feelings or beliefs about a particular matter (affective abilities) which: ensure that procurement meets the organization’s business and financial needs; ensure fitness for purpose for the end user and by meeting one set of requirements; procurement doesn’t undermine other priorities; critically weigh short/long term business and financial interests and enable vfm procurements to occur.
In general, procurement professionals require a complex set of managerial and technical professional skills and competencies which could include: strategic planning skills, technical skills; effective communication skills, financial business skills, legal skills, tactical, operational and behavioral (personal attributes) skills these include social skills, networking and knowledge, communication skills of presentation, public speaking, listening and writing which are critical for the success in managing almost every step of the procurement cycle which include: strategic sourcing (demand analysis; supply market analysis; supply strategy development); logistics and warehousing management; contract management ( contract administration, buyer/supplier management) and performance management. According to Errigde and Mcllory,
2002, procurement professionals should strive to achieve three competing demands of meeting: i) commercial interests with key themes of Value for Money
(VfM), economy, efficiency and effectiveness; ii) regulatory interest with key themes of competition, equality and compliance and iii) social interests whose key themes include public interest, employment concerns, economic development and environment policy. Hence PEs should strive to employ procurement professionals who have a multiplicity of skills necessary to deal with wide variety of tasks they face. It is the behavior ( i.e. things that people do in real world -
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performance) of the procurement professional which provide strategy for value management that improves procurement decision making, increases effectiveness and enhances competitiveness of the procurement transaction.
According to Guinipero, Handfield and Eltantawy (2006), procurement professionals need transactional skills required to manage activities such as executing transanctions with suppliers, bid evaluations; strategic analytic skills to develop strategic supplier relationships, strategic planning (i.e. procurement scoping, goal setting and execution), ability to negotiate effective procurement contracts and enforcement skills. Tactical/technical procurement skills, skills necessary for abiding to ethical code of conduct and compliance laws, ability to design and implement procurement planning. Other skills include managerial skills which include verbal communication, entrepreneurial spirit, an inquisitive mind, managerial and administrative skills; analytical/operational skills i.e. total life cycle thinking approach, customer focus care skills.
Kolchin and Guinipero,1993 proposed three important skills for procurement professionals: i) Business skills such as marketing analysis, negotiation managing internal/external relationships, change management, organizational skills ii)
Interpersonal skills such as risk taking, written and oral communication, conflict resolution, influence and persuasion, group dynamics, leadership, problem solving, interpersonal and cultural awareness, iii) Technical skills such as cost analysis, product knowledge, computer literacy, total quality management and regulatory (legislation), and broader financial skills.
2.5 Knowledge and Skills Acquisition: How can procurement professionals acquire these different skills and knowledge? By enhancing their personal attributes: i) their abilities; (through written and oral expression and comprehension, problem sensitivity, speech clarity and recognition, information ordering, mathematical reasoning and inductive; and deductive reasoning); ii) work values ( to be able to work independently and are comfortable making decisions, thrive in a
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collaborative work environment and to adhere to a code of ethical conduct) iii) work styles (to be detail oriented, dependable, cooperative, stress tolerant, independent, initiative, persistent adaptable/flexible, multi-tasking, of integrity and of self control) and their thinking skills in problem solving; job task planning and organizing; significant use of memory; decision making consistent with organization’s guiding policies; significant use of their memory to remember policies and procedures relevant to procurement activities; to remember applicable and regulatory requirements; to remember what goods and services were ordered in order to respond to possible queries.
3.0 Ethics in Public Procurement: Ethics is the study of moral judgement of right and wrong conduct. Ethics need to be trained, as a knowledge, and as a skill to incalculate ethical behavior. Ethics are moral boundaries or values that guide officials in all aspects of their work. Ethical behavior encompasses the concept of honesty, integrity, probity, diligence, fairness, trust, respect and consistency.
Ethical behavior includes avoiding conflict of interests and not making improper use of an individual’s position. A procurement conducted in an ethical manner will enable purchasers and potential suppliers to deal with each other on the basis of mutual trust and respect. Ethical behavior is important in public procurement as it involves the expenditure of public money and is subject to public scrutiny and is part of public sector governance which covers how public sector entities are controlled at the highest levels. Pillars of good governance are transparency, accountability, integrity and participation. Ethical behavior supports openness and accountability in a procurement process and gives suppliers confidence to participate in the public procurement. Ethical behavior can also reduce the cost of managing risks associated with fraud, theft, corruption and other improper behavior, and enhance confidence in public administration. Adopting an ethical, transparent approach enables business to be conducted fairly, reasonably and with integrity. A specific aspect of ethical behavior relevant to procurement is an overarching obligation to treat all participating potential suppliers as equitably as possible. For example, when providing further information to potential suppliers
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during the course of procurement, organizations need to ensure that procedures are in place to treat all potential suppliers fairly. The procurement process rules should be clear, open, well understood and applied equitably to all by all procurement professionals and consider seeking advice where probity issues arise.
Organizations must not seek to benefit from supplier’s practices that are objectionable, dishonest, unethical or unsafe, hence procurement of goods, services and works should be conducted in a way that imposes as far as practicable the same level of accountability and responsibility, that recognizes that organizations are accountable for the delivery of the services in the same way as if the organization carried out the service itself. PPRA and PSPTB have developed a Code of Good Conduct (10) which should be effectively enforced by an independent agency such as the PCCB (11) in order to bring in greater accountability in PP.
3.1 Code of Good Conduct sets out the core values and behavior for all members of a supply chain, buyers and suppliers. It encourages all participants to work together openly and cooperatively. It also represents a commitment that they are serious about wanting to be better customers and better suppliers within relationships that can bring mutual reward. Suppliers play an important role in delivering organization’s core business and contribute to their aim of providing high quality, efficient responsive and customer focused services. In its turn, PEs contribute to the business and aims of suppliers. Therefore the way in which PEs and suppliers throughout the chain work together and the relationships that are developed are critical. By establishing the code of good practice for the procurement professionals, it is hoped that they can jointly achieve the creation of true and effective partnering relationships, more careful delivery, reduced procurement timescales, a reduction in the costs of competing for organizations business and better value for money.
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Code of Good Conduct is required to ensure that procurement professionals will act fairly during the competitive process and throughout the business relationship, they will be honest and open when conducting business with each other, they will contribute to improving the efficiency and effectiveness of organizations commercial activities and lastly they must work to a highly standard of professionalism. Part IV, Section 36 of PPA No.7 of 2011 requires Accounting
Officer to promote the efficient, effective and ethical use of resources for which they are responsible by ensuring that the organizations have appropriate, policies, procedures and guidelines in place to achieve value for money is procurement processes.
3.2 Standards of Ethical Behavior: This principle includes the concepts of probity, honesty, integrity, diligence, fairness, trust and consistency. Probity is the evidence of an ethical behavior in a particular process. It is defined as a complete and confirmed integrity, uprightness and honesty. It contributes to sound procurement processes that accord equal opportunities for all participants. A good outcome is achieved when probity is applied with common sense. Probity should be integrated into all procurement planning and should not be a separate consideration. Procurement must be conducted with probity in mind to enable purchasers and suppliers to deal with each other on the basis of mutual trust and respect. Adopting an ethical, transparent approach enables business to be conducted fairly, reasonably and with integrity. Ethical behavior also enables procurement to be conducted in a manner that allows all participating suppliers to compete as equally as possible. The procurement process rules must be clear, open, well understood and applied equally to all parties to the process. Conflicts of interest may arise in the course of business operations, especially during the procurement process. Possible conflicts are extremely varied but include pecuniary interests, legal interests, associations with external associations, and non-direct personal interests. In carrying out one’s duties, officials must not allow themselves to be improperly influenced by family, personal or business relationships.
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3.4 Probity in Procurement: A process that conforms to the expected standards of probity is one in which clear procedures are established, understood and observed from the outset. These procedures need to be consistent with the legitimate interests of tenders and the Government’s policies and legislation as specified in the PPA No.7 of 2011. All potential tenderers must be treated consistently and equitably in accordance with these procedures. Good probity management aims to minimize problems; avoid the potential for corrupt practices to occur and to produce better outcomes against stated objectives and maintain public sector integrity. Ways of maintaining probity in the procurement process include the separation of duties and responsibilities. For example, different officials are responsible for spending approval, evaluation of tenders and authorization of payment, also organizations should try to ensure that they have a sufficient pool of trained officers who can manage the tender process. According to Mlinga
(2013) a good probity management aims at minimizing conflicts/problems and the potential for litigation; avoiding the potential for corrupt practices to occur; produce better outcomes against stated objectives and maintain public sector integrity. One way maintaining probity in the procurement process include the separation of duties and responsibilities. (6)
3.4 Management of Probity Issues: Perceptions should not be overlooked when considering probity. It is important not only to do the right thing, but also to be seen doing the right thing. The public should be confident that officials conducting procurement will maintain a professional relationship that stands up to public scrutiny. Appropriate documentation, particularly of decision making is extremely important in any procurement process, Section 36 of PPA No. 7 of 2011 makes it clear that Accounting Officers/Chief Executive Officers are responsible for ensuring adequate systems for recording decisions and reasons are maintained.
A process that is well documented and visibly sound may reduce the likelihood of challenges and in fact minimize the potential for legal liability. provide fairness
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and maintain the willingness of suppliers to do participate in public procurement.
A good process maximizes effectiveness by producing quality outcomes against stated objectives, it also increases efficiency by reducing conflicts and the potential for litigation. Organizations should actively manage and promote ethical and probity issues as integral elements of procurement process.
The management of probity issues should be tailored to each individual procurement process. However, procurement should not only be driven by probity, as a focus purely on probity could limit the achievement of value for money. Instead probity should be applied to each aspect of the procurement process with common sense and flexibility. Specific organizational requirements may be identified in the operational guidance that should be the primary reference for probity processes. These organizational requirements may be contained in all other supporting documentation. The following are the principles that underpin ethics and probity; fairness and impartiality; consistency and transparency of process; use of an appropriately competitive process; appropriate security and confidentiality arrangements; identification and management of actual and potential conflicts of interest and compliance with legislative obligations and
Government policies.
3.5 Ethics and Probity are a consideration throughout the entire process of procurement. Value for money (VfM) is the core principle for any procurement, incorporating ethical behavior and ethical use of resources. The application of the highest ethical standards will help ensure the best achievable procurement outcome. Value for money(VfM) entails more than just getting the best price, ethics are important when considering value for money ethical behavior and good probity practices enhance the organization’s reputation in the market place. This increases business confidence in procurement processes and is likely to maximize the number of suitable responses for future organizational work.
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A good ethical conduct requires that officials involved in procurement not to make improper use of their position. Officials may have access to very confidential information provided to the organization as part of the tendering process, either for the materials benefit of the official or for another person.
Criminal sanctions apply to such behavior. Officials involved in public procurement should be mindful of potential conflicts of interest that might arise and must not use their position to gain or such to gain a benefit for themselves or any other person. They must also strive to avoid perceptions of conflicts of interest or of undue influence, as well as avoiding them in fact. It is important that businesses and the general public are confident that officials involved in procurement are impartial and are professional in their approach, and that their activities will withstand public scrutiny. Officials conducting procurement need to be able to demonstrate that their decisions are fair and equitable, and are made in accordance with the law, organization’s rules and guidelines and conditions of contract. Awareness of an understanding of their ethical obligations will assist procurement officials to avoid any accusations of real or perceived conflict of interest, fraud, theft or corruption.
3.6 Effects of Unethical Behavior: Unethical behavior in procurement include inter alia, conflict of interest, embezzlement, fraud, bribery, political corruption, nepotism and extortion resulting to mis-procurement, etc. Unethical behavior increases the systemic financial risk; it is destructive to the economic and sustainable development and free market systems particularly in this era of globalization. When unethical behavior takes precedent over vfm procurement, it results in shoddy construction and poor infrastructure management since it wastes money, bankrupts countries and costs lives. For example, procurement of counterfeit drugs facilitated by unethical behavior, kills en-masse and anybody can be a victim! [Dr. Mlinga (2005), defines and enlists different contexts of unethical behavior that it can be a corrupt and or fraudulent practice and can occur at any stage of a project cycle/procurement process. At design stage, ( overstating physical requirements, over-dimension project components, project design
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manipulation, weak oversight and supervision mechanisms, unnecessary alteration of project timings, etc) ; at procurement stage, [(PE side): insufficient or inadequate advertising, excessively short bidding time, bidding time not apparent/not real, misuse of legal and administrative requirements, inappropriate bidding procedures and procedures that violate the secrecy of bidding, etc); at procurement stage, [(Bidders’ side): unjustified complaints, collusion schemes, misleading bids, malicious front loading, etc.]; and at implementation stage; corrupt contract amendments, unjustified complaints, over-billing/overpayment, lower than specified quality, fraudulent justification of delays, fragrant theft and manipulation of alternative dispute resolution procedures, etc).
An important and effective way to maintain ethics awareness in organizations is to provide training for public officials. Ethics training and seminars can be provided along with training in more specific areas such as procurement procedures, record keeping, records management and accountability and administrative law. Public officials should seek to develop and maintain levels of knowledge and skill commensurate with their responsibilities. Organizations must also ensure ethics and accountability are appropriately addressed in procurement processes and that they maintain a good record keeping and records management system. Regular reviews or audits of procurement processes can be done to ensure probity is being considered and achieved.
3.7 Efficiency and Effectiveness: Efficiency relates to productivity of the resources used to conduct an activity in order to achieve the maximum value for the resources used. In relation to procurement, it includes the selection of a procurement process that is consistent with Government policy and is the most appropriate to the procurement objective under the prevailing circumstances.
Efficiency in procurement is enhanced by conducting transparent, fair and appropriately competitive processes of a scale commensurate with the size and risk profile of each particular project.
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Effectiveness relates to how well outcomes meet objectives. It concerns with the immediate characteristics of an organization’s output, especially in terms of price quality and quantity, and the degree to which outputs contribute to specified outcomes. Effectiveness can be achieved by ensuring that the property or service being sought will make the maximum possible contribution to the relevant outcome. This entails correctly identifying the need, accurately drafting functional specifications, rigorously assessing responses and negotiating the final contract, and then diligently managing the contract. Comprehensive monitoring and assessment at all stages of the procurement process further contributes to effectiveness.
3.8 Procurement Risk Management: Value for money procurement can be enhanced by risk management in the contract, since risk is part of the environment with which organizations operate. It involves the systematic identification, analysis, treatment and where appropriate acceptance of risks, it is integral to efficiency and effectiveness enabling organizations to proactively identify, evaluate and manage these risks, opportunities and issues arising out of procurement related activities. Risk management should be built into an organization’s procurement processes. The extent of risk management required will vary from following routine procurement processes, to a significant involving the highest level of planning, analysis and documentation. Variety of risks may arise from each stage of the procurement cycle. Organizations should ensure appropriate procedures are in place to identify and consider all relevant risks throughout the procurement cycle. As a general principle, risks should be borne by the party best placed to manage them and organizations should generally not accept risks which another party is better placed to manage, and they need to carefully monitor the terms and conditions, including pricing, on which risk allocations are determined, to ensure that they reflect value for money.
3.8 Regulatory Compliance: The basis for Government procurement policy is PPA
No.7 of 2011, and Section 36 specifies that Accounting Officer/ Chief Executive
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Officer of a procuring entity (PE) are responsible for ensuring the ethical use of resources, including in relation to public procurement. Section 73 of the Act provide a description of ethics in procurement, providing key guidance for officials when managing public resources. It provides a guide on ethics and states the obligations of procuring entities in maintaining ethical behavior in procurement. Under the ACT, PEs are obliged to ensure officials involved in procurement, particularly those dealing directly with suppliers, recognize and deal with any conflict of interest, deal with suppliers even handedly, not accepting inappropriate gifts or hospitality, are scrupulous in their use of public property and comply with all duties and obligations including confidentiality and security of all documents involved in the procurement process. 10
3.9 Fairness and Impartiality: Fair and open competition is the best and the most transparent way of achieving value for money in public procurement since it is often prone to fraud and corruption. Tendering process is the most affected by unethical behavior, hence the need to be fair and impartial. This can be addressed by strengthening accountability framework in PP. Accountability is at once a key deterrence to collusion and corruption and a prerequisite for procurement credibility.
According to recent PPRA Audit Report there was Tshs. 1.7/= Bil as dubious payments, and Tshs. 12.03/= was not properly accounted for. Poor performing areas in PEs audited shows that, there was weak management of performance securities; advance payment securities and insurance cover(47%); negligence of enforcing remedies for delays stipulated in contracts (61%); extending contract durations without justification and without following appropriate procedures (43%); making payment to service providers without following procedures for inspection (38%); delayed payment to service providers
(25%); issuing variations without following procedures (27%); failure by PEs to submit to PPRA tender advertisements and contract awards and failure to implement PIMS developed by PPRA. This indicates the extent of fraud and corruption existing in many PEs.
11 It is essential that procurement is conducted
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in a way that is fair and impartial. PPAct No.7 (2011), Part VII, Sec. 181 -241 and PP Regulations GN No. 446 (2013)
3.10 Consistency, Accountability and Transparency of the Process: Procurement processes used by organizations must be consistent and transparent. Decisions need to be made in a visible manner and appropriately documented to allow them to be understood or justified upon review The PP Act No.7 of 2011 emphasizes that transparency is primary consideration throughout the procurement process from the initial identification of need through to the final disposal of any property.
PEs must not seek to benefit from supplier’s practices that are objectionable, dishonest, unethical or unsafe, hence procurement of goods, services and works should be conducted in a way that imposes as far as practicable the same level of accountability and responsibility, that recognizes that organizations are accountable for the delivery of the services in the same way as if the organization carried out the service itself.
Accountability and transparency encourages the efficient, effective and ethical use of public resources. PEs and its officials have the responsibility of ensuring that any procurement process is open and transparent and that decisions are justified,
PEs need to have procedures in place to ensure that procurement processes are conducted soundly and that procurement related actions are documented, defensible and substantiated in accordance with Government legislations and policies.
Accountability and transparency should always be of primary consideration throughout the procurement process. A well planned, conducted and documented procurement process is more likely to withstand external scrutiny. Accountability means that officials are responsible for the actions and decisions that they take in relation to a procurement process and for the resulting outcomes, are answerable for such activities through established lines of accountability including an organization’s Senior Management, the Government and the Parliament. Each
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procurement transaction is a contract hence, the key principles of contracting are competition, fairness and transparency must be consistently incorporated. Hence there should be an effective contract review process to provide reasonable assurance that high value contracts are undertaken in accordance with established rules. Important and critical risks must be clearly identified and managed.
Procurement process in many PEs suffer from serious delays, indecisiveness and frequent change of specifications after invitation for bids, lack of accountability, inadequate competition and acceptance of goods of inferior quality. Procurement process also suffer from defective formulation of specifications resulting in frequent change of specifications after invitation of bids, inefficient system of technical evaluation which normally leads to single source selection, improper financial evaluation and frequent misuse of special procedures such as emergency procurement (12) such procurement do not provide value for money and increase cost of public services substantially.
4.0 ACHIEVING VALUE FOR MONEY IN PUBLIC PROCUREMENT:
4.1 Need develop a Skills Policy and Framework: in the public sector procurement which will identify skills required for procurement professionals to carry out their work, since this is a measure of competence (ability) and is part of performance achievement. Skills development can make a very valuable contribution to prosperity to various stakeholders: to a PE, it can result to enhanced productivity, better business performance and greater profitability; to the economy, increased productivity and competitiveness; to ensure that available skills are used effectively i.e. skilled people being employed and in jobs that utilize their skills effectively. to an individual, higher job quality and satisfaction; proper use of skills:
4.2 Need to Develop National Knowledge and Skills Strategy: It aims at increasing productivity, employee engagement and satisfaction by making better use of skills in the workplace. The strategy should cover the following skills: i)
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technical/professional skills – the competencies required to undertake specific job/occupation, ii) generic/core skills – comprising cognitive skills (literacy, numeracy and problem solving skills) and interactive skills (such as teamwork and communication) which can be applied in a range of jobs/occupations, iii)
Employability skills – the attitudes and behaviors required in the work force.
PSPTB’s syllabus should be suitably tailored to meet this requirement.
4.3 Need to Develop Capacity in Procurement and Performance Management and Measurement: An effective procurement management which ensures a value for money should be expected to: i) contribute to the continuity of the organization’s primary business objectives
; ii) control and reduce all procurement related costs, iii) reduce the organization’s risk exposures in relation to its supply markets and iv) contribute to innovation that improves service delivery. These can only be achieved by having the following capability skills: strategic procurement capability skills; operational procurement capability skills which are needed for maintaining and using the procurement the procurement systems and processes to procure goods and services; and tactical procurement capability i.e. the capacity to plan, to establish and to maintain significant supply arrangements that deliver value for money. Procurement performance management therefore, provides a basis for effective control of resources and demonstrates the value of the procurement function, hence the importance of building the skills of all procurement professionals.
4.4 Need for Behavioral Change: Procurement professionals should use their professional judgement by acting in the interest of their organizations, suppliers and public; making sure that their professional judgements are not affected by personal or organizational interests, incentives, targets or similar measures. They should make the best use of available resources at their disposal; also, be prepared to challenge and be challenged by their colleagues and other professionals if they believe that their decisions could affect the ethics of their profession. PSPTB
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should ensure that the Code is thoroughly disseminated to regulate all procurement professionals.
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4.5 Need to Develop Individual Professional Knowledge and Competencies: Up to date and relevant professional knowledge and skills are essential for effective practice. Procurement professionals must ensure that their knowledge, skills and their performance is of higher standard, up to date and relevant to their field of practice at all stages of their professional working life. They should recognize the limits of their professional competence, and practice only in those areas in which they are competent to do so and refer to others if you need to; maintain and improve the quality of your practice by keeping yourself knowledgeable and relevant to your roles and responsibilities, by exploring concepts, ideas and issues, and by doing so you acquire in-depth understanding across a broad and balanced range of disciplines so that you are able to apply your knowledge and skills appropriately to your profession, hence, the importance of continuing professional development.
4.6 Need to be Honest and Trustworthy: Procurement professionals should act/behave with honesty and integrity in order to maintain public trust and confidence in their profession: i.e. by not abusing their professional position; by avoiding conflict of interest and declaring any personal/professional interest they may have; by not asking or accepting rewards, gifts or hospitality that may affect or be seen to affect your professional judgement. Procurement professionals must always meet accepted standards of personal and professional conduct and must comply with all legal and professional requirements and accepted guidance on professional practice. Likewise, they must keep their commitments, agreements and arrangements to professional services; respond honestly, openly and politely to complaints and criticism; take responsibility for their working professional decisions, working as a team is an important part of a professional practice which relies on respect, cooperation and communication between colleagues from their own and other professions. However, it should be noted that, when they working
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as part of a team, they are responsible for their own decisions; behavior and any work they supervise.
3.7 Need for Effective Internal Controls and proper Risk Assessment: A major reason for poor financial accountability is the weak internal controls in financial management. Internal controls serve to provide assurance on proper financial reporting; safeguarding of assets and achievement of organizational objectives with due regard to economy, efficiency and effectiveness. It is also the foundation of accountability, hence, a comprehensive framework need to be developed to ensure that public funds are not prone to misuse, waste and fraud, and must operate with clearly defined accountabilities, open and competitive processes and highest standards of professionalism. PPRA should strengthen their oversight activities through yearly audits and take stern actions to all PEs in contravention of their legal obligations.
4.0 CONCLUSIONS: This paper has shown that there is a correlation between procurement professionals’ level of their knowledge and skills in delivering value for money procurement. It has also shown that, PEs are a key part of the procurement process and their requirements tend to drive the process of ensuring value for money for procurement and being able to deliver signed contracts as quickly and as efficiently as possible are always key priorities. In many PEs, procurement professionals have limited direct knowledge of the post contract performance, hence it is the responsibility of the PEs to ensure contractual compliance and monitoring its performance. Maintaining best procurement practice requires continuous skills and knowledge improvements by procurement professionals. So, this should be our immediate attention and focus, in order to achieve excellence and value for money in procurement.
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REFERENCES:
1.
Business-Case: Procurement Training and Education is an Investmentpaper.
2.
World Bank: Joint Position Paper on The World Bank Procurement Review
(2008)
3.
Public Procurement ACT No.7 (2011), Part V, Section 50; Procurement of
Common Use Items; and GN. 446 Regulations (2013), Part IV, Sections 132 -133.
4.
Public Procurement ACT No. 7, Regulations 446, Part XI, Procedures for
Conducting Electronic Procurement, Sections 340 - 368
5.
ADB – Comprehensive Review of AFDB’s Procurement Policies and
Procedures,(March, 2014), pp. 1 - 11
6.
Basheka, B.C. “Public Procurement Skills Requirement Framework for Local
Government Systems in Uganda: Perceptions form Professionals.”
7.
PSPTB, GN. No. 365, (2009), Code of Ethics and Conduct.
8. PCCB: Prevention and Combating of Corruption Bureau Act. No. 1 of 2007
9. Mlinga, R.A.
“Ethics in Public Procurement; A Missing Link in the Education and Training of Construction Industry Practitioners.”
10.
PPA No. 7, (2011), Section 78 – 85.
11. PPRA Audit Report for year 2012/2013.
12. PP Act No. 7 (2011) Part X General Provision, Sec. 102; Codes of Conduct; and
PSPTB, Client Service Charter, Sec. 2.7 Code of Ethics.
13.
PSPTB ACT No. 23 (2007).
Part III, Sec 11-23; Registration; Part IV, Sec 24-
29: Control over Conduct of Registered Procurement and Supplies Professionals and Technicians.
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