Research consultancy
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter reviews available literature on effects of procurement methods on the public programs / projects’ performance.
2.1 Theoretical frame work:
The General Systems Theory modeled by Ludwig Bertalanfy in 1950 relates the functioning of organizations with how living organisms function. The theory states, from a biological point of view, that an organism is an integrated system of interdependent structures and functions made up of cells, and a cell contains molecules, which must work in harmony. Each molecule must know what others are doing, must be capable of receiving messages and must be sufficiently disciplined to obey. Due to the complexity and instability of the external environment, the survival and effectiveness of an Organization will depend on how well it scans and adapts to its internal environment (Githinji, & Moronge, 2009). Von Bertalanffy was reacting to reductionism and attempted to revive the unity of science. He emphasized that real systems were open to interact with their environments and that they can acquire qualitatively new properties through emergence, resulting in continual evolution. He argued that rather than reducing an entity or organization to the properties of its parts or elements, systems theory focused on the arrangement of and the inter-relations between the parts which connect them into a whole. Such an organization determined a system that is independent of the concrete substance of the elements (for example, the various departments such as finance, accounting, human resources, research and development). Thus, the same concepts and principles of organization underlie the different disciplines, providing a basis for their unification (Keraro, 2014).
Hanson, & Holt, (2014) observed that, the systems theory provides a leader with a tool for analyzing organizational dynamics without providing a specific theory about how an organization should be managed. He also observed that with the recognition of systems theory, all organizations consist of processing inputs and outputs with internal and external systems and subsystems helpful in providing a functional overview of any organization. The effect of the systems theory in management is that managers look at the organization from a broader perspective. Systems theory has a new perspective for managers to interpret patterns and events in the workplace. They recognize the various parts of the organization and in particular the interrelations of the parts, e.g. the coordination of central administration with its programs, supervisors and workers, among other variables. In traditional management practices, managers typically took one part and focused on it. They then moved all attention to another part. The problem was that an organization could, for example, have a wonderful central administration and wonderful set of teachers, but the departments didn’t synchronize at all (Young, Nagpal, & Adams, 2016).
2.1.2 The Contingency Theory
The contingency theory, developed by Joan Woodward in the 1950s, is a class of behavioral theory which claims that there is no best way to organize an organization, to lead a company or to make decisions. Instead, the optimal course of action is contingent upon the internal and external situations. Several contingency approaches were developed concurrently in the late 1960s. The authors of these theories argued that Marx Weber’s bureaucracy and Fredrick Taylor’s scientific management theories had failed as they neglected environmental influences and that there is not one best way to manage enterprises. These influences shape the individual behavior in a certain situation
2.1.3 Different procurement methods
Domestic competitive bidding
Domestic competitive bidding also known as national competitive tendering (NCT) is the tendering procedure normally used for public procurement opened to only national suppliers, contractors and consultants. According to Arrowsmith and Quinot (2013) this is a procurement proceeding wherein the procurement entity or the government decides that only the domestic suppliers or contractors may participate in the tenders. The bidding process may then employ National Competitive Bidding procedure. NCT may be the preferred method of public procurement where foreign bidders are unlikely to be interested as a result of low/small contract values, nature and scope of the works or where the works are considerably scattered geographically or spread over time or where the works are labor intensive or where the contract value falls within the threshold for NCT and/or where the goods or works are available locally at prices below the international market. NCT procedures may also be used where the administrative or financial burden of the requirement outweigh the advantages of inviting tenders beyond national boundaries (Gbogr, 2017).
According to the World Bank NCT procedures would only be acceptable for use in the Bank’s financed procurement, if these procedures guarantee efficiency, economy and transparency and in line with other appropriate guidelines of the Bank (in Gbogr, 2017). NCT begins with a limited advertisement to the national press and PPA official gazette and website. The tendering documents are usually in the national official language of the country and their local currency is used in the processes of tendering and payment (Kinyua, 2015).Tenders are expected from suppliers and contractors whose companies are fully owned or have majority ownership by nationals and is registered in the country (Akuffo, 2014). The national open competitive tender practices are often preferred by diverse public entities and are often advocated for by procurement entities across the world. Muraguri (2013) notes that all the public procurement must be undertaken on an open competitive basis except in few allowed circumstances.
In order to enhance change, an increased understanding of how different procurement procedures affect different aspects of project performance in different types of projects is therefore vital. In spite of procurement procedures being important for project success, earlier research on this topic is limited to a few investigations focusing on how only one or a few procurement aspects affect a few project outcomes. Examples are bid evaluation effects on cost and schedule growth (Assaf and Al- Hejji, 2006, Wardani et al., 2006), and partnering tools’ effect on partnering success (Chan et al., 2004, Eriksson, 2008). In order to achieve successful governance of construction projects a holistic and systemic approach to procurement procedures is crucial (Cox and Thompson, 1997, Eriksson, 2008). The purpose of this investigation is therefore to increase the understanding of how a broad range of procurement procedures affect various aspects of project performance.
Several researches have already been carried out on procurement methods and procurement performance. However, these studies are limited in scope because they were conducted in different national culture. According to Cobra, (2010) in the study on a comparative analysis of procurement methods used on competitive tendered office projects in UK, the study mainly compared the empirical information related to the successful tender for procurement methods used in competitive tendering of office projects in the United Kingdom (UK). It used numeric/quantitative indicators such as construction costs, construction speed, construction time and intensity of construction. This study did not look at how the procurement method selected affects the projects performance economically. Because without procurement, output is down, national income is affected thus everything will be affected.
Kakwezi and Nyeko, (2013) asserts that the proliferation of procurement methods used for construction projects has inevitably resulted in comparisons being made between the performances associated with each of them. The challenge for researchers in this field has been largely to do with how to compare procurement systems on a like-for-like basis. The procurement function has not been given the recognition it deserves in developing countries, in most public entities, regardless of the effort by the partners like the World Bank, the International trade organization, the United Nations on trade and development, the world trade organization and others. The need to have coherent methods of performance of the procurement function in the public entities, particularly in the developing countries, has never been as sound as it is now.
As part of the ASR, organizations were able to report on the extent to which sustainability considerations have been integrated into their procurement processes.
Sustainable procurement practices integrate requirements, specifications and criteria that are compatible and in favor of the protection of the environment, of social progress and in support of economic development, namely by seeking resource efficiency, improving the quality of products and services, and ultimately optimizing costs.
Sustainability considerations can be incorporated into different stages of the procurement process. Consistent with the methodology used in the 2016 report, organizations reported on how sustainability considerations have been integrated into their procurement processes in 2017 in three key areas: embedding sustainability criteria into the requirements definitions of tenders using total cost of ownership in the financial evaluation of tenders and including sustainability aspects in contract terms.
The general purpose of a requirements definition was to identify the precise needs of the requisition and to determine the best solution to meet those needs, in a way that will facilitate the procurement process. In the 2016 report, the term “whole life costing” was used. In 2017, this term was replaced with the term “total cost of ownership” which was considered to be more widely applied throughout the UN system. Total cost of ownership was defined as the sum of all recurring and one–time costs over of a good, service, structure, or system while in one’s possession. It included purchase price, installation cost, operating costs, maintenance and repair/ upgrade costs, and remaining residual or salvage volume at the end of ownership or the product’s useful life.
Zou, Fang, Wang and Loose more (2007) observed that the Chinese Government requires project clients (owners to enhance on site supervision). On site project supervision process is essentially the responsibility of the supervisory company which is usually appointed by the competitive selection process. That as organizations mature the nature of on-site supervision reduces but in the initial stages site supervision is necessary to ensure that service delivery is efficient.
Musanzikwa, M. (2013) asserts that professionals and researchers recognize the need for proper training and widening experience in providing proper services to the customers in a competitive business environment. A successful contract quality assumption system needs an adequate supply of conscientious workers. Kulu, (2017), observed than any out sourcing contract should include clause confining, dispute procedures; who has responsibility for write and the lines of reporting. When entering a contract there is need to ensure the parties interpret the contract in the same way to achieve the desired quality levels (Will cocks & lester 1997).
Boroughs and Edgar (2008) argue that service delivery is more than simply meeting specification and that the customer’s point of view is very important because the quality is what the customer says it is and it’s the customer who set the quality and value of service but not company. The author further says that customers consider reliability and ability and service effectiveness as indicators of service delivery.
Ghauri, (2004) contented that if service delivery is to be achieved, every employee should get involved in the decision making that makes them feel they are part and own the company, Other than leaving the responsibility to one department with management taking the lead. They add that participatory work style and the change in the thinking that makes every employee responsible for service delivery is critical in sustaining organization process of the organization.
A study by Shoquist, et al., (1994) found that, monitoring quality enabled organization ensure they are supplied with quality products at the same time reduced the cost of acquisition of purchases. Monitoring quality by the contracting institutions helps to reduce costs in the service delivery process while ensuring active commitments to continuous improvement to attainment of quality (Cho, et al., 2008).
Whereas there is an increase in the total amount of funds available to government bodies in Uganda, their economic and financial profile is still poor as compared to the development programs expected to be carried out. Ahmed (2005) noted that many government bodies in Uganda, however, are unable to deliver services to residents. He said this might be because of lack of finances or lack of capacity to provide a good service at an affordable price. So government entities should find other ways to ensure that the services are improved and reach the people most in need of them.
Johan, (2006) argues that hard-earned and limited resources allocated to government entities are always misused. Priorities are misdirected; projects are done without due consideration of the demands of their stakeholders but based on selfish motives and exaggeration of the political leadership in collaboration with the senior administrators at the government entities’ level of administration. This situation is similar to the mismanagement and embezzlement of these funds by the councils, Beukers, et al., (2006). Further asserts that corruption has been rampant among the senior government bureaucrats to whom public funds meant for developmental purposes are entrusted.
At every stage in public procurement, there are risks of integrity right from procurement planning through to contract management (OECD, 2007). All these affect service delivery at the end of the day. If government parastatal bodies fail to manage these risks, accountability and eventual service delivery is greatly endangered.
International competitive bidding
International Competitive Tender International Competitive Tendering can be used whenever open/competitive tendering is used and effective competition cannot be obtained unless foreign contractors are invited to tender as well as, when items to be procured are not available locally or cannot be provided on account of technical and other competencies together with financial constraint (Jacob, 2010).
International competitive bidding (ICB) is the most appropriate method of procurement in most cases. This provides an executing agency with a wide choice in selecting the best bid from competing suppliers and contractors. It gives prospective bidders from eligible source countries equal opportunity to bid on goods and works that are being procured (Ferwerda, Deleanu, & Unger, 2017).
According to Hensher & Stanley (2008) this is one of the most appropriate methods of competitive bidding in public procurement. The process entails the procurement entity to internationally advertise their requirement of goods and services. In an internationally acceptable language. The contract is then awarded to the bidder with the best bids and contract terms. The procurement entity in such kind of arrangements enjoys a certain amount of freedom in selecting winning bids for its projects. ICB procedures are normally employed for contracts with estimated values that exceed thresholds set at the time of procurement plan preparation (Tetteh, 2014).
Procurement department should observe procedural transactions for the good of the population given the fact that expenditure incurred is the taxpayer’s money. This implies that public sector purchasers are accountable to the public whose money is spent, including those who tender and potential suppliers who may be disappointed. They must produce procedures and practices which will stand up either to scrutiny during government audits or to the challenge through the courts of any purchasing decision that has been made. The chief purpose of public accountability is to prevent abuses of taxpayer’s money. Planning scope refers to the period in which the budget will cover. The planning scope will be crucial in how the budget is drawn that is if they are budgeting for long term project or short term. It will assist in planning for activities and ascertain how next year might change and steps to be taken to respond to the changes. Purchasing budgeting procedures involves various steps before the final budget is arrived at. The process usually starts at various departments depending on the department needs for the coming financial year. The budgeting process is then developed to a minister’s budget that is developed by the management. This process must be followed to make the employees own the purchasing budget allocation (CIPS, 2012).
Aputo, (2017) indicated that needs assessment encourages innovation through procurement. They further found that need assessment provides transparency and clarity during procurement process and guarantee the product quality by the third-party certification. They further pointed out in their report that most countries which included Spain, UK, Denmark, Portugal and Sweden that participated in procurement assessment have a Green/ Sustainable Public Procurement (GPP/SPP) strategy or action plan
Song, Landrum and Chernew (2013) noted that ICB has several advantages in that it promotes competition between suppliers, resulting in best “value for money” for purchasers and users; offers a kind of transparency and help avoid corruption and favoritism; and gives all suppliers the opportunity to win the business that is advertised. Takano, Ishii and Muraki (2014) added that International Competitive Bidding also enables effective country and their local currency is used in the processes of tendering and payment (Kinyua, 2015).Tenders are expected from suppliers and contractors whose companies are fully owned or has majority ownership by nationals and is registered in the country (Akuffo, 2014). The national open competitive tender practices are often preferred by diverse public entities and are often advocated for by procurement entities across the world. Muraguri (2013) notes that all the public procurement must be undertaken on an open competitive basis except in few allowed circumstances.
Philly, Were and Nkirina (2017) defines purchasing performance evaluation as the quantitative or qualitative assessment over a period of time towards the achievement of corporate or operational goals and objectives relating to purchasing economies, efficiency and effectiveness. Quantitative objectives are measurable using such measures as number of orders placed, reduction in lead times, price savings and reduced administrative costs and will tend to be used when purchasing is regarded mainly as a clerical and transactional activity (Ahmadi, Pishvaee & Torabi, 2018).
An obvious performance measure of the success of any purchasing department is the amount of money saved by the company. Some common areas of measurement of operational procurement performance according to Baily et al. (2008) are; qualities which can be viewed into performance quality where supplies staffs are concerned with quality of design or specifications. They are interested in specifying the right material for the job, and communications to the supplier in clear and unambiguous manner. Conformance quality is concerned with the supplier providing materials in accordance with the specifications which are usually inspected to evaluate the procurement performance. Further, on quality one would seek to know the percentage of rejects in goods received, percentage of goods rejected in production and percentage of raw materials rejected in production (Amayi & Ngugi, 2013).
To evaluate procurement performance using quantity one would seek to know the quantity percentage of stock that has not moved over a specified period, number of stock outs and the number of small value orders, number of emergency orders, and comparison of stock with the target stock (Amemba et al., 2013).
Direct Procurement
Acquiring goods, services and construction works from only one source is referred to as: sole-source procurement, single-source procurement, sole source selection, direct procurement, among others. Silwimba (2017) noted that direct or single sourcing is used where circumstances do not allow for competitive bidding. It is used for small quantities in case where time may not allow for competitive bidding. Kiruja (2014) states that direct procurement method is only applicable on ground of urgency or emergency when life and property are threatened and other methods are not practical. According to Section (74) of the Kenyan Constitution, a procuring entity may use direct procurement if the following are satisfied; there is only one person who can supply goods, works or services or there is no reasonable alternative or substitute or there is urgency (life and property threatened) and other available procurement methods are impractical. This is clearly a non-competitive procurement method, and it should be used only under exceptional circumstances, namely: for emergency situations; when only one firm or individual is qualified to fulfill the requirement; for the continuation of previous work, or additional work, that cannot be acquired from another firm or individual due to patent, compatibility issues, or exclusive rights; the use of this method represents a clear advantage over the use of a competitive method; the total cost is within the threshold set for this method of procurement; for the procurement of related items that are available only from one source for other situations contemplated in the procurement legal and regulatory framework (Mbae, 2014).
There are diverse reasons under which the use of the direct procurement tendering practices is allowed in Kenya. The direct procurement tendering method is applicable in Kenya when a public entity procures services or goods from a service provider without competition (Public Procurement Oversight Authority, 2016). According to Public Procurement Oversight Authority (2016) direct procurement tendering processes is applicable when the purchase is for urgently needed remedial works, provided this is restricted to the minimum requirement to meet the urgent need until procurement by other methods can be fulfilled. The other acceptable scenario for direct procurement is when the work can only be provided by one source for physical, technical or policy reasons e.g. requiring the use of proprietary techniques that are obtainable only from one source
The public procurement Act requires all stakeholders to assess the processes involved in the procurement and to know the efficiency and reliability in the procurement processes. Importantly is to recognize the flaws and challenges inherent in the system of procurement in order to correct them. These can be achieved through a formal procurement audit, among others. An official procurement inventory is carried out to inform management of whether the core procurement objectives are being realized. It brings to bare flaws and makes sure that compliance to the Public Procurement Act 663 is achieved. An official audit equally assists in execution of monitoring activities and improves in the execution of the rules and regulations and successive trial of those culpable of not complying with the Act (Public Procurement Act, 2003). Adjei (2006) indicates that professionalism in the processes of procurement is defined as people with procurement ideas who have the required educational background, the experience and are able to make informed decisions as regards the procurement of works. He contends that the part played by procurement professionals in the procurement system of the Ghanaian economy is important for the economy to develop. Against this background, the need to promote professionalism as an important element in the procurement board cannot be over emphasized .There is also the need for professional development and assistance for individuals and MDAs involved in public procurement. It behooves on The Board is to guarantee compliance to ethical standards by trained personnel in procurement processes. Selecting a proficient and dependable contractor is one of the greatest problems consumers who wish to achieve project success face (Fong and Choi, 2000; Kumaraswamy and Anvuur, 2008).
Bid assessments can encompass many diverse factors, for example, cost, technical capability, management aptitude, previous experience, the object of reference, environmental and quality management systems, financial solidity and concerted skills (Lam et al., 2001, Eriksson and Laan, 2007; Malmberg, 2007). Conventionally, in the public sector procurement, consumers elevate weight on price and reduce weight on soft parameters, particularly amongst public clients (Fong and Choi, 2000; Eriksson, 2008a).
Currently, there has been elevated attention for a shift from low price selections to multiple benchmarks selection also putting into consideration the soft parameters (Kumaraswamy and Anvuur, 2008).Whereas the prices of bid is based on to competition, the other areas may be perceived as aspects responsible for the potential for collaboration in the project (Eriksson, 2008a). For instance, appropriate proficiencies and abilities will give a basis for better amalgamation between client and contractor. It is significant to assess how well the procurement practice has been and to find out any deficits or difficulties in order to put forward actions to avert comparable problems later. 13 In Ghana, public purchasing process is mandatory by Act 663, (2003) to do a formal procurement assessment or appraisal to determine its performance. The performance of the Procurement process within the public system may be a direct or an indirect yield of the processes depending on the objectives, goals, expectation and customer satisfaction. (Sollish and Semanik 2007).
The foremost thing for consideration during the procurement process is identifying the specific needs, how to pay for these needs and a review of the whole output. (Emmert and Crocker 2008; Baily et al 2005; Bur et al.2006). There is a direct correlation between public sector procurement procedures and the functioning of set targets to be achieved. Therefore, strict and difficult processes which are not easy to amend in order to illicit customer satisfaction as a product of responding to their requirements will not be appreciated by customers, no matter what the function achieves.
The tenets of Ghana’s Public Procurement Act 663, (2003) has laid down procedures that states that, specified amounts set planned for specific use must follow previously determined sub-processes in purchasing a product. These procedures usually provide guidance on the period, value, supply time and availability rate of the product which are crucial to the vital performance of the functions of purchasing. Public procurement according to Hiu and his colleagues is the process of acquiring things, works and services by an entity for procurement through the use of state money. These state funds are collated through taxes paid by citizens and demands that it is used in a more opened and responsible way. (Hiu et al, 2011) In order ensure transparency and accountability, the procurement laws of most countries has been restructured. Unfortunately, the problems with these laws still remain due to the fact that officers in charge of procurement activities have failed to adhere effectively to these regulations. (Lisa 2010).
A greater amount of the government’s expenditure is used on public sector procurements. Mahmood (2010) found that, 18.4% of global GDP is used on procurements of the public sector. In emergent economies, between nine to thirteen percent of the GDP is used of public sector procurements (Mahmood, 2010).
It is an undeniable fact that, public sector procurement is an indispensable process and deserves real attention given that, the bodies responsible for procurement in state institutions are guided by protocols, strategies and techniques (Odhiambo and Kamau 2003). This notwithstanding, De Lange (2011) found that, enormous funds are lost every year because public procurement policies are poorly managed. In view of this, public sector workers need to be properly managed to make sure that compliance to important regulations, policies and procedures are achieved.( De Lange, 2011).
Metcalfe (2008) defines a stakeholder as any individual or group who has a vested interest in the outcome of a body of work. A stakeholder has also been defined as any person, or group, who has an interest in the project or could be potentially affected by its delivery or outputs (Stakeholder engagement toolkit, 2007). Maintaining a good relationship does not mean that concerns of non-compliance or under-performance cannot be discussed and acted upon. It means that there is a greater likelihood that such issues can be discussed and resolved in a cooperative manner (OGC: Contract management guidelines, 2002). The approach to stakeholder involvement in service delivery vary depending on the contract, but it is important that the specific responsibilities are not neglected, even though there may not be a nominated individual assigned to the role of relationship manager.
Stakeholder’s demand for transparency and accountability is fundamental for service delivery in parastatal bodies in Uganda, (Joshi, 2010). Joshi further argues that effective service delivery relies on commitment to engage and communicate openly and honestly with stakeholders. Stakeholders involve; politicians (e.g. not adopting appropriate policies); or of public officials/ end users (not delivering according to rules or entitlements, not monitoring providers for appropriate service levels); or of providers (not maintaining service levels in terms of access and quality).Stakeholders are used as a means to improve communications, obtain wider buy-in for projects, gather useful data and ideas which enhance public sector or corporate reputation, and provide for more sustainable decision-making for service delivery across parastatal bodies,( Tonkin, C. M. (2016).
The need to identify the necessary technical skills, knowledge and experience with the appropriate level of authority required of the members of the stakeholder team, the importance of the ability of stakeholder team members to work together effectively and the significance of the role of the contract manager should be recognized for each service delivery, (Elsey 2007).
A successful relationship must involve the delivery of services that meet requirements. The approach to managing stakeholder relationship will vary depending on the type of contract. Stakeholders vary in their impact, significance, interest, longevity and relevance in relation to the service delivery objectives (Edler, J., & Uyarra, E. (2013). For some non-strategic contracts, a more tactical approach may be suitable. For long-term strategic contracts, the emphasis on building a relationship will be much greater. In fact, the requirement for the original procurement may have been for a relationship between stakeholders and service delivery providers to be realized, rather than for a specified set of services/products to be provided. Stakeholders are diverse for each contract and may change depending on circumstances (Metcalfes, 2008).
In long term contracts, where interdependency between customer and provider is inevitable, it is in the interests of the organization to make the relationship work. The three key factors for success are trust, communication, and recognition of mutual aim. Establishing clear lines of responsibility and accountability for all decision-making is another important aspect of successful contracting and service delivery. Ensuring the necessary authorizations and delegations are in place at the beginning of the contracting cycle is an important prerequisite to ensuring that all contracting decisions and payments are valid and legally appropriate. These instruments should be periodically reviewed and kept up-to-date. It is in the contracting authority’s own interest to make the relationship work as the costs of early termination and the consequences of poor performance and unplanned changes of economic operator are highly damaging (Ambe, I. M., & Badenhorst-Weiss, J. A. (2012).
2.1.4 Effects of procurement methods on project performance
In September 1983, Harvard Business Review published a ground-breaking article by Peter Kraljic on purchasing strategy that is widely cited today as the beginning of the transformation of the function from “purchasing”, to something that is viewed as highly tactical to procurement or supply management, something that is viewed as very strategic to the business. The renewed emphasis of the new function of procurement had implications for performance of organizations including construction projects. This was on the caveat that the function was performed diligently well. In 1990s, procurement started to become more integrated into the overall corporate strategy and a broad-based transformation of the business function was ignited, fueled strongly by the development of supply management software solutions which help automate the source to settle process (Smith, 2010).
Globally more governments are placing greater emphasis on the development of infrastructure projects (Orr and Kennedy, 2008:100). This is augmented by Howes and Robinson (2005:1), who state that infrastructure is central to the social-economic development of all countries and the well-being and prosperity of society. With increased globalization, the level and quality of infrastructure has become critical for all national economies than ever before (Arrows, 2010:67). Demand for global infrastructure spending has been projected to total somewhere between $40 trillion and $50 trillion over the next two decades (Visse, 2012:8). The European Union estimates that up to $2.7 trillion in new infrastructure spending will be required through 2020 to meet the current goals (Deutsche Bank AG, 2014:4).Visse (2012:6) argued that while many developed countries face the need for substantial infrastructure improvements, the United States infrastructure is crumbling.
Hoon, Kwak and Chih (2009:51), contends that Public Private Partnerships (PPPs) have emerged as one of the major approaches for delivering infrastructure projects in recent years. Arrows, (2010:54) on the other hand argues that the experience of the public sector with PPPs has not always been positive, many PPP projects are either held up or terminated due to: wide gaps between public and private sector expectations or lack of clear government objectives and commitment This is supported by Memon, Rahman and Azis (2012:45) who established that countries such as Malaysia, where PPPs are commonly used in the road sector, they also still face poor performance, resulting in failure to achieve effective time and cost performance.
In a developing country like Uganda, having an effective procurement planning system will continue to be a challenge to many public entities (Oluka, 2013:16). Planning must become a priority for public entities. However, the Public Procurement and Disposal Authority (PPDA) must play a central role in providing training, technical guidance and ensuring compliance to all set rules (Muhwezi, 2013:45). Conceptually, this study will reveal the critical components of contract selection ranging from the process, through the expected practices, the actors to be involved, to its importance (Muhwezi, ibid). Planning is one area that needs careful attention from all stakeholders in public entities because it has a huge budget and if this budget can be managed in an accountable manner, then there will be improved service delivery and this is one way of accounting to the tax payers.
In Sabiti, Basheka and Muhumuza (2011:23)’s study conducted in Uganda on developing public procurement performance measurement systems in developing countries: the Uganda experience, the authors note how proper planning may influence procurement performance. The key to accountability is the capacity to select the best contractors within the public sector. The internal contractor selection process of government, procurement and personnel have long received sustained attention as the centerpiece of reforms to promote accountability (World Bank, 2000:44). Accountability of public officials is critical in deterring corrupt practices and it creates 19 an enabling environment for vibrant private sector activity (Kabaj, 2003). The researcher notes that the problems of accountability arise when government ignore or transgress social ethics and constitutional and legal provisions in conducting public affairs, administrative systems are fragmented, tasks to be performed are so many.
In Oluka’s study on the challenges of procurement, she posits that restricted tendering is a procurement method that limits the request for tenders to a select number of contractors (Oluka, 2013:23). According to the PPDA Regulation 2014, the restricted procurement method is a two-stage process. The first stage the employer advertises his project and invites contractors to express interest to be placed on a selected list of contractors who will be invited to bid for the project (Oluka, 2013:42). In creating a nexus between the earlier study and the proposed study, it is imperative that when contractors applying should be given a list of information, and information got about them in order to ‘pre-qualify. Stage two the shortlisted contractors who meet the selection criteria should be invited to submit a more detailed tender submission.
According to Mbalangu (2013:56) in his study on compliance monitoring and procurement performance carried out in Uganda notes that supplier contractor monitoring has slowly become an important component for effective supplier relationship management that is directly linked to 22 securing the supply of key commodities needed for sustaining business. According to Kansiime (2014:12) in his study on the impact of public procurement reforms on service delivery in Uganda, he notes that monitoring of this formalized relationship allows an organisation a degree of control over the deliverables and performance requirements. The use of contracts in business relationships has long been the lifeblood of a business, as the contracts provide the terms, pricing, and service levels of customer, partner and/or supplier relationships (Mbalangu, 2013:43). Contracts provide a framework by which an organization manages and mitigates risk in its supplier relationships (Mbalangu, ibid).
Schmitz and Platts (2004:77) in their study conducted in Ghana did investigate the procurement reforms in Ghana. They assert that the main aim of contracting is to ensure that goods or services are delivered on time, at the agreed cost and at the specified requirements. It means developing effective working relationships with your suppliers, ensuring effective service delivery, maximizing value for money and providing consistent quality for stakeholders and end users (Schmitz and Platts, 2004:77). The primary goal for contractor monitoring within any company is to ensure that commitments and obligations to customers and suppliers are clearly visible to the relevant people in the organization and that they are executed upon (Schmitz and Platts, 2004:76). Contracts are used to control virtually every part of the trading relationship between buyers, sellers, and intermediaries, and have an impact on various functions within the enterprise. For example, the sell-side involves sales, marketing, finance, legal, sales operations and customer service. The earlier study pretested the results based on qualitative approaches, in 23 bridging the gap, this study will pretest the results using both quantitative and qualitative methodological approaches.
Agere (2009:69) in his study on the effectiveness of contract management in Austria notes that contract monitoring requires the systematic management of contract creation, execution, compliance and analysis to maximize performance and minimize risk (Agere, 2009:71). With the increase in the complexity of doing business in public entities coupled with the increase in transaction volumes and value in an ever-tightening regulatory framework has resulted in businesses taking note of the importance of proper monitoring of contractors (Bagaka & Kobia, 2010:49). The missing link on the earlier study is on the sampling techniques used. Non probability sampling techniques specifically convenient sampling was adopted to select the sample, in creating a nexus between the two studies, the proposed study will rely on both probability and non-probability sampling techniques to select the sample.
According to Hinton (2003:61) in his study on the “Best practices in government: Components of an effective contract monitoring system”, contracting involves collecting and analyzing information to provide assurance on the performance of the contractor on the agreed timeframes and towards providing the contract deliverables (Arrows, 2010:12). Key Performance Indicators (KPIs) should be clearly set within the contract and then measured, reported and monitored on a regular basis. Arrows (ibid), further observes that while significant contract monitoring occurs when the vendor is actually performing the service (contract period), preparation during the precontract period is essential to effective contract monitoring. In the proposed study, contract monitoring involves those activities performed by government officials after a contract has been awarded to determine how well the government and the contractor performed to meet the.
Physical distribution is a set of activities concerned with the efficient and safe movement of goods from the end of the production line to the consumers. Meeting customer needs, is the component of customer service, companies must recognize if what level of customer service should be provided and at the same time, intended. A buyer always needs the customer service that meets his/ her satisfaction. There are instances when the buyers demand for something that is a little too hard for the company to meet, or the company is not willing to give the service due to its high-price shipping. So, in the beginning of the dealing, the company must first know whether it can meet up that standard from a customer or not and, by the time that the company determines that it will not hit a costly delivery, then it could already proceed. (forster 2004). Most organization ensure that they meet the demands of the market at all costs in order to ensure that there is efficiency and competitiveness of the business operation in an organization both form the setting of external environment and of the out domestic market, this will also ensure that there is limited communication barriers among companies, There is minimal collaboration among members in the demand chain downstream because of the barriers of logistical collaborations that have not been successfully tackled; those related to communication technologies and human beings, (Sandberg. 2007). From the above discussion therefore physical distribution efficiency leads to the achievement of customer satisfaction, (Sandberg. 2007)
Reduction of transportation costs, another important component of physical distribution that companies, whether big or small is the transportation. This part of the process may determine the probable cost that the company needs to provide to ship the goods. More or less, the shipping is not included in the fees that most of the companies present to the customers, or sometimes, shipment is already included in the prices presented. Depending on the kind of products does a company ship, it should choose among the many choices. Air freight may be fast and it provides safety especially to products which are fragile, but it is costly. Trucks deliver goods fast, but only by land. Water carriers may be economical but they are slow. Other choices of transportation of Vertical collaboration are an effort by two or more organizations to achieve results that they cannot achieve by working in isolation, (Archer, 2007). Sandberg (2007) introduces interdependence, between by creating efficiency of transport costs in order to eliminate unnecessary expenses in the transportation of goods (Oliver et al 2002). From the above discussion therefore physical distribution efficiency leads to the reduction of transport costs, and the general business expenses, Chwen, et al. (2006)
Proper storage of products, Warehousing or storage of goods should also be paid attention. There are products that are easily broken or run out over time, there are also products that demands a level of temperature in order for it to last long and do not end up useful. There are products that don’t need any of these kinds of treatment because they can go long-term. However, companies must consider that warehousing must always keep their products safe and still efficient for use until they meet their buyers. They should still consider whether they go for public warehousing, which makes them save more rather than going for a private warehouse and be able to meet short term and long run needs of customers. (zeithaml et el, 2003), Efficiency in physical distribution has in the recent times been important in the proper storage of goods for future some times for the elimination of the bullwhip effect and in other time to prevent deflation in the market, (Wee, 2003). Despite of the above benefit of storage in some organization has brought about increment in costs of the organization’s expenditure due tom the numerous storage expenses in ware houses, (Farrington et al, 2006). From the above discussion physical distribution helps to eliminate transportation costs, and also improve on the general competitiveness of the performance of the organizations, (Lysons, 2006).
Efficiency in Order processing, this is a way in which the business owner often does credit check, sale recording, making the appropriate accounting entries order, and keeping track of the item, shipping, and regulation of inventory records. With the innovation available in the industry today, it will be much easier for the companies to do the order processing. They can use Bar Code System, Electronic Data Interchange (EDI), and other technological innovations to help them in order processing. (Parasuraman et al 2002), Integrating the demand chain through vertical collaboration to reduce costs and to improve service levels is facilitated by the adoption of developments in information communication technology (ICT), (Mason, et al. 2007). The involved parties share information, synchronize decision making and align incentives (Sridharan et al, 2005) with the help of communication technologies such as Electronic Data Interchange (EDI), Radio Frequency Identification (RFID), Electronic Point of Sale (EPOS), Enterprise Resource Planning (ERP) to facilitate a smooth flow of information exchange necessary for improved collaborations in the demand chain , (McLaren, et al 2002). However order processing efficiency may require an organization to invest heavily in the technological development of its operations which may sound a little expensive for the new stating business this perhaps may be solved by an organization concentrating on tit score needs in a given period of time, to achieve efficiency in its operation, (Zhenx. et‟ al, 2001).
