RESEARCH CONSULTANCY
2.0 INTRODUCTION
This chapter presents the views of authors on the subject of procurement law. The chapter presents the Uganda experience and the challenges faced by stakeholders in complying with the law.
2.1 Procurement in public entities
Public Procurement, as per the Public Procurement Act (2003) can be defined as the acquisition of goods, works and consultancy services with the Government appropriated fund for public use through the Ministries, Departments and Agencies (MDAs) and the disposal of government assets on behalf of the Government. These are the important awareness areas that the PE staff must be aware of while carrying out their procurement activities. These areas include planning.
2.2 The procurement law
This includes the Public Procurement and Disposal of public Assets Act, 2003, which guides Local Governments in contracting out their revenue administration functions. The law also involves the Local Governments (PPDA) Regulations, 2006, which is stipulated in the Local Government Public Procurement and Disposal of Public Assets regulations and gives detailed procurement and disposal practices, procedures, and contract management regarding the contracting and tendering of local revenue administration functions.
The public procurement and Disposal of public Assets (PPDA) Act 2003 was passed by the parliament of Uganda in December, 2002. The main purpose was to regulate the system of procuring and disposing of public assets and services in Uganda. It provides for the process, procedures and laws that govern the procurement process. Specifically, part v of the act deals with the rules that govern the Procurement and Disposal process, while part vi deals with the methods of Procurement and Disposal.
All public procurement and disposal shall be conducted in accordance with the basic principles set out in sections 44 to 54 of this Act. Accordingly, a bidder shall not be excluded from participating in public procurement and disposal on the basis of nationality, race, religion, gender or any other criterion not related to qualification, except to the extent provided for in this Act.
The law clarifies that all procurement and disposal shall be conducted in a manner which promotes transparency, accountability and fairness and to maximize competition and achieve value for money.
A procuring and disposing entity shall not, except when required to do so by an order of court, disclose any information where the disclosure would amount to a breach of the law; impede law enforcement; prejudice legitimate commercial interests of the parties; inhibit fair competition; or in any way not be in the public interest, until the successful bidder is notified of the award. The Act states that all procurement and disposal shall be conducted in a manner which promotes economy, efficiency and value for money, (Local Government Commission Report, 2010)
The procurement law is also entrenched in the PPDA Regulations, 2003. These regulations were put in place after the enactment of the public procurement law in 2003. They seek to ensure that the process is executed in accordance with the requirements of the law. The regulations provide for all the procedures and guidelines that must be complied with by the procuring and disposing entities (PDEs) in the execution of procurement and disposing processes or activities. Part III of the regulations provides for the process, procedures and guidelines that PDEs should use or follow when procuring, while part IV of the same instrument deals with the disposal rules, guidelines and procedures. The regulations also provide for other procurement processes like contract management and administration (The Annual Assessment of Minimum Conditions and Performance Measures for Local Governments, 2007/2008) for Kiruhura District.
The law is further strengthened by the Local Governments Act 1997 (and the Amendments of 2006)
This Act also contains regulations relating to public procurement especially with regard to tenders, and tender boards. This also deals with the creation of district tender boards (DTBs) in each district, the creation of Urban Tender Boards for each Urban Council. It stipulates that each Tender Board must have a secretary who should be at the rank of Assistant Chief Executive Officer.
According to the Local Government Commission Report, (2010), the Act under part IX of the Local governments Financial and Accounting Regulations 1998 also deal with; the establishment of LGTBs, ensuring their transparency and high degree of integrity, that LGTBs award all contracts for works, services and goods and decide disposal of assets, maintenance of a list of approved suppliers and establishment of Technical Evaluation Committees.
2.3 Awareness of the procurement law.
The contracts committee shall consist of five members nominated by the chief administrative officer in the case of a district contracts committee or the town clerk in the case of a municipal contracts committee from among the public officers of the procuring and disposing entity and approved by the Secretary to the Treasury (The Auditor General’s report, 2010).
The contracts committee shall seek the services of the district legal advisor in the execution of its work. In assessing a candidate for suitability for appointment to a contracts committee, the chief administrative officer or the town clerk as the case may be shall seek to establish a balance of skills and experience among members to ensure that the contracts committee consists of persons of proven track record of sound judgment; has an appropriate level of seniority and experience in decision-making; includes persons with experience in at least one recognized professional discipline, (Public Accounts Committee report, 2010 and PPDA Act,2003).
According to the PPDA, Act, (2003) the composition and tenure of contracts committee requires that it does not have more than two members from one department; includes experience in the procuring and disposing entity; and includes experience in public procurement and disposal. The tenure of the members of the contracts committee shall be three years and a member may be reappointed for only one further term. When reappointing members to a contracts committee, the accounting officer considers the need for both continuity and rotation of personnel in the membership of the contracts committee.
According to Doyle, (1988), the accounting officer may appoint a temporary member of the contracts committee, with the prior approval of the Secretary to the Treasury, to replace a permanent member who may be absent for a prolonged period, the head of the procurement and disposal unit of the procuring and disposing entity, shall be the secretary to the contracts committee, the letter of appointment to be issued to a member of the contracts committee and all members of a contracts committee shall, on appointment, sign the Code of Ethical conduct for Public Officers.
The contracts committee acts independently in relation to its respective functions and powers. It shall consist of five members nominated by the chief administrative officer in the case of a district contracts committee or the town clerk in the case of a municipal contracts committee from among the public officers of the procuring and disposing entity and approved by the Secretary to the Treasury (Gordon, 2001).
The appointing authority can terminate the appointment of a member of the contracts committee for abuse of office; for corruption, incompetence; and for physical or mental incapacity which renders the member incapable of performing his or her duties.
Termination can also be based on the member’s failure to attend three consecutive scheduled meetings without reasonable grounds; conviction of an offence involving moral turpitude; the member has been adjudged or declared bankrupt under any law in force in Uganda; or an any other reasonable ground Gordon, (2001).
According to other sources, the authority can also remove and substitute any member of the contracts committee, prior to the expiry of tenure if the structure or status of the procuring entity has changed; or the post of an incumbent contracts committee member has changed. In either case, the action will require the prior approval of the Secretary to the Treasury (NAPM publication, 1992).
The contracts committee is responsible for the following;
Adjudicating the recommendations from the procurement and disposal unit and award of contracts, approve the evaluation committee and bidding and contract documents as well as procurement and disposal procedures. It also ensures that best practices in relation to procurement and disposal are strictly adhered to by procuring and disposal entities; ensures compliance with the Act; and liaises directly with the Authority on matters within its jurisdiction (Local Governments Act 1997).
The committee authorizes the choice of a procurement and disposal procedure; solicitation documents before issue; the technical, financial or combined evaluation reports contract documentation in line with the authorized evaluation reports and any amendment to an awarded contract, (Ministerial policy statement, 2009). Besides it will recommend for the delegation of procurement function whenever the necessity arises and award contracts in accordance with applicable procurement or disposal procedures as the case may be.
In addition the committee is tasked to approve any amendments to bids before issuing them to bidders, nominate evaluation committee members to attend and witness pre-bidding meetings and bid openings and closings, approve negotiation teams and evaluation reports for bidders, as well as the amendments of contract documents. It is also responsible for receiving and considering micro procurement reports; and ensures compliance with the regulations (Auditor General’s Reports, 2010).
The committee is expected to raise a quorum of three members at any meeting including the chairperson and at every meeting, all members present and the secretary sign the record of attendance of contracts committee meeting. Attendants are expected to consider each submission made and approve or reject the submission made. The decisions of a contracts committee are by consensus and in the absence of this; decisions are made by simple majority of the members present. The Secretary to the committee has no right to vote on any question at a meeting of the contracts committee, while the chairperson does not have a second or casting vote and where there is a tie of votes on any submission the submission is to be rejected and reasons specified in writing for rejecting a submission (The Leadership code act, 1992)
The committee has powers to co-opt an adviser to assist it in the discharge of its functions that should not take part in the decisions of the contracts committee and only attends the meeting which considers the matter on which the advice is required. The adviser signs the record of meetings but does not vote at the contracts committee meeting.
The members present at a committee meeting and all persons in attendance should sign the record of meetings and declare any pecuniary or personal interest which may impinge on a member’s impartiality. Members of the contracts committee and other statutory bodies of a council are prohibited from being bidders or providers to the council either directly or indirectly.
According to the Inspector General of Government report, (2008), a contracts committee acts only on the request of a user department approved by the accounting officer to procure goods, services or works as approved by the procuring and disposing entity at the time of approval of the budget. Each contracts committee member receives records of all details of proceedings of the committee including particulars of bids examined and decisions reached, copies of minutes to each member of the contracts committee, the accounting officer, the chief finance officer, head of internal audit, user department, council’s standing committee responsible for finance, Auditor General, Inspector General of Government, the ministry responsible for local governments and the Authority.
2.4 Impact of level of awareness on fraud detection
The impact of awareness can be seen in a number of areas including transparent and accountable procurement that translates into value for money.
Transparency is integral to governance. Higher transparency reduces the information asymmetry between a firm’s management and stakeholders, from mitigating the agency problem. (Richardson, P.C. 1988)
Transparency is defined as the widespread availability of relevant, reliable information, about the periodic performance, financial position, investment opportunities, governance, value and risk of publicity traded firms. Thus, transparency involves not only concepts related to reliability, that is to say representational, faithfulness and neutrality, but also understandability (Robert, 1986).
According to Burt (2005), transparency is an approach to procurement management that emphasizes as much information disclosure as possible to regulators and other stakeholders. He refers to awareness as the extent to which regulations, agreements and practices affecting procurement are followed, clear, measurable and verifiable. Also awareness is the clarity with which a regulation, policy or institution can be understood and anticipated. (Ministerial Policy Statement 2009). It is based on openness, predictability and comprehensibility, as well as intensity of sensitization through avenues like seminars and workshops.
According to World Bank report (2004), awareness is defined as the impartial and understandable use of procurement procedures for all stakeholders involved. Awareness comes with application of expected procedure and implementation of expected procurement outcomes.
The Institute of Procurement Professionals of Uganda (IPPU) notes that the degree of awareness impacts on effectiveness of public procurement system with a level playing ground as opposed to the unleveled ground that would be the subject of ignorance of the procurement law. There is associated accountability which improves service delivery in the procurement process (World Bank Report, 2oo4). In the same report, it was noted that it increases the resource allocation to the public by appointing responsible personnel to perform specific roles.
Once contracts committee members are in the know about non involvement in conflict of interest situations, they will avoid favouring their relatives and friends participating in the bidding process. They will understand the implications of bribery, embezzlement and extortion because they are aware that they can be dismissed and prosecuted (Luber, 2002).
Awareness impacts on organizational benefits of Just in Time Deliveries, with satisfied employees and customers. Accounting officers, the contracts committees, the procurement and disposal units and user units will identify the right needs at the right time for the right prices. This then would guarantee detection in fraud as the avenues lead to value for money procurement (Michael, 1986).
According to Drury (2002) awareness of the procurement process is a sure way of getting the lowest responsive bidder. He adds that losses in money value are high for operations that inflate prices, under declare, and disregard thresholds on procurement. Awareness of these loop holes means they can be avoided there by reducing fraud.
2.5 Procurement phases which are prone to fraud
Procurement phases are the recommended steps that public procurement goes through in order to satisfy the legal requirements. These are, reflected in the PPDA chart which details them as Bidding process, prequalification, invitation for bids, preparation of bid documents, advertising for tenders/bids, pre-bid meetings, receipt of bids, awareness of Bid Opening, awareness of Bid evaluation, notification of contract award, and contract administration.
According to the Inspector General of Government, (2010), there is rampant misuse of contract information at the pre qualification stage.
The Public Procurement and Disposal Authority (PPDA) out lines the principles governing public procurement and disposal, emphasizing their application for effective public procurement entities (PPDA Training Manual, 2007).
Bidding process
According to Turner, et al, (1994), conflict of interest is rife at this stage where a competent bidder is eliminated at the pre-qualification stage in favour of their friend bidders. Procurement entity staff shall see the actual blank bid documents or full specifications issued to the bidders. There must be records or registers, also, of all returned bids and amendment to bids, if any. In order to establish that there was no conflict of interest in the procurement, the procurement staff must see a document to that effect, if any (PPDA Act, 2003).
Awareness of Bid Opening
Burt (2005) observes that bid opening is an important issue in procurement of which the procurement staff shall ensure that it took place. In order to authenticate this, stakeholders must be aware of the advertisement of the bid opening and ensure that the date stated therein was actually the date the bid was opened. There should be awareness of the invitation sent to representatives of the bidders, register of all the people who attended the bid opening and the comments and minutes of the bid opening. However, this is often not the case in that particular media is selected to the disadvantage of some bidders. For example not all bidders can access bid opening dates through the New vision.
Awareness of Bid evaluation
Bid evaluation is very critical in determining an award of contract. It is also extremely technical and sensitive because the fate of bidders is almost determined at this stage. However, bidder complaint may not be taken up or forwarded until after the contract has been awarded. Some public procurement entities do not present the best evaluated bidders (BEB) and award to them tenders. Although the BEB is not necessarily the lowest offer, the best bidders should present combinations of highest quality, appropriate delivery period, required quantity, longest guarantee and other competitive edges. Organizations should develop systems for publication of data on bids, awards and other information of public interest (Weele, 2005), but this is not the case sometimes.
Notification of contract award
According to Richard (1986), the Public Procurement staff is expected to know whether the lowest responsive bidder was awarded the contract or not and the reason for the decision. This information may not be availed to unsuccessful bidders who are then disabled about taking timely corrective action
Contract administration
At this stage, payments can be delayed where as actual work is on going. Public procurement staff have to be aware of what, how and when the contractor will be paid for the job executed or being executed. They are expected to be aware of progress report(s) on the contract by the consultant or supervision team, report(s) from the resident/internal auditors for payment(s) and whether payments were actually made in accordance to approved bill or stated contractual clauses (Harry R, 1980).
The Public Procurement & Public Disposal of Assets Act (2003) spells out the ingredients of the basic principles. According to the sources, non-discrimination and fairness obliges the organization to treat all providers fairly, honestly and evenly and not to exclude them from participation on the basis of nationality, race, tribe, religion, gender or place of origin. It is emphasized that the process should be fair and be seen to be so, that staff in the procurement units disclose any personal interests, reject gifts, assure confidentiality and accuracy of information to all at the same time and offer clear separation of responsibilities among players.
Transparent public procurement organizations deliberatively promote openness about activities and transactions carried out for public scrutiny. They avail all relevant information to all players consistently, timely, without unnecessary burdens or constraints through a readily accessible and widely covered medium, (Weele, 2005). He adds that such organizations ensure openness and clarity on procurement policy. According to Tersine, R.J. (1994), some organizations have not respected these principles.
Public entities involved in procurement should practice and encourage competition and accountability. The Local Government Commission Report (2010) reveals unfair competition in local government procurement. Erridge et al (2001) point out that competition should deliberately enable bidders to compete with one another under the same terms and conditions using a relevant procurement method with a view to maximizing value for money. They point out that such competition should be non-restrictive, give sufficient time for bidding, and use standard bidding document and make bid evaluation using the same criteria. The authors describe accountability to include promotion of information sharing among all the players indicating reasons for certain actions and providing written or spoken description of what has happened under ones trust.
To ensure effectiveness in public procurement, officials should promote economy and efficiency although this is often not the case. According to PPDA (Training Manual 2007) economy means controlling and managing public resources with a view to saving and achieving the desired outputs using the available and cheapest resources or means. Evidence of application of economy and efficiency principles is reflected in meeting the balance between government commercial regulatory and socio-economic goals and the procurement and disposal goals.
It is observed that most public procurement entities do not conduct ethical procurement business, more so with integrity, (Tersine, R.J. (1994). The author warms that unethical conduct impacts on performance of public officials and has promoted corruption or collusion with service providers. Ethically upright institutions and individuals adhere to the code of ethical conduct. They also do not use their offices for personal gain; maintain impeccable standards of integrity in procurement business, foster high standards of competence, comply with the law and offer optimum use of resources.
According to the U.S Army Logistics Management College (2006), the following malpractices are common: falsification or alterations of supporting data; failure to update cost or pricing data when past activity indicates price decreases; failure to completely disclose data known to responsible contractor personnel and distortion of overhead accounts or baseline information by transferring charges or accounts that have material impact on government contracts. Others are protracted delay in release of data to the government to preclude possible price detections; repeated denials by responsible contractor employees of the existence of historical records that are subsequently found; submitting fictitious documents and failing to disclose internal documents vendor discounts. It is also common malpractice not to disclose actual costs for follow-up documents (Turner et al, 1994).
In the event that the forgoing principles are not upheld, public procurement entities suffer a number of consequences. The Journal of Public Procurement (2006) explains the consequences to include fraud, bribery and extortion; emergency procurement, fire fighting, wastage and cost overruns. It is also characteristic of such companies to engage in collusion and corruption, infighting among the key players and disregard for confidentiality.
2.6 Ways of controlling fraud in procurement
A number of solutions to fraud in procurement have been suggested by different scholars and institutions. Some of their views are presented here below.
Ntayi (2005) has noted that procurement operations require experts to carry out public procurement at the private and public sector levels. The PPDA as the regulatory public procurement body should provide enough personnel to carry out the function. Besides, there should be training to provide knowledge and skills of the scope and dynamics of public procurement as required by the (PPDA Act, 2003)
Procurement officers should be encouraged to maintain proper record keeping and management to provide bases for tracking fraudulent procurement. According to PAC Reports (2009-10), procurement entities should provide conducive environment that should be supported by trained skilled and professional report. The reports add that non compliant officials should be prosecuted in courts of law.
This action can be useful in identifying people, obstacles that are responsible for such ills as insider dealing or employment of non professionals in the core areas of procurement and value for money. This action should be taken by the Inspector General of Government with its full mandate to cause arrest and prosecution of offenders.
Whereas procurement is guided by the PPDA Act, the provisions of the Act are utterly ignored. Government whistle blowers should independently identify offenders and liaise with police, the media and other organs to expose non compliance through periodic reporting to ensure cautious procurement undertakings. The HR training role should be emphasized. It is believed that professionally trained people are very cautious in matters of ethic and integrity. The big number of staff involved could be doing so because they are not bound by ethical considerations. They may continue to act with impunity and therefore the need to restrain and educate them through training (IPPU, 2010).
According to (IPPU, 2010), the major obstacle to compliance should seek solutions about political influence. Sensitization on value for money arising out of flawed procurement process should be supported by management, politicians, and civil society members so that they each can be quoted when they don’t deliver. This is actionable in law courts and would probably act as a deterrent to defaulters.
The inspectorate of government has revealed that most PEs do not have good record management system that will ensure effective and efficient performance of public procurement auditing. In most cases, the records/books are not kept any how to the extent that the auditors cannot sufficiently extract required information and therefore usually frustrated. This also means that plans for performance improvement can not be easily implemented.
According to the Global integrity report 2008, it has been noted that although there are penalties, Procurement process especially big procurement contracts tend to involve high profile politicians, who influence the process & therefore usually protect the individuals who may be implicated. The regulations are in place but not effective due to the influence assumed by procurement personnel and how they manipulate the system to attain their own ends (IGG reports, 2010).
There are challenges resulting from corruption. During the tendering process, opportunities for corruption include tailoring specifications to limit competition or favour a particular bidder, abusing confidentiality, limiting advertisement and publicity. At the contract implementation stage, cases of fraud are highly noticed and abused such as false invoicing, over billing, underperforming, and failure to meet specifications, contract changes and renegotiations (Turner, et al, 1994).
The government of Uganda in its National Strategy to fight corruption and rebuild ethics and integrity in Public Office (2004–2007) launched in July 2004, recognizes that corruption in public procurement and service delivery poses a serious obstacle to economic and social development in Uganda.
The need to fight corruption is further strengthened by the Transparency International ranking that paints a gloomy picture about Uganda. The ranking Transparency International (TI) over an eight year period through the, Corruption Perceptions Index (CPI) indicate that Uganda needs to further strengthen its effort to fight corruption. At a score of only 2.8 against a clean scale of 10, Uganda is ranked among those countries that are really in a critical situation.
2.7 Conclusion
The chapter reveals the views of scholars on the subject of awareness of the procurement law and detection of fraud.
The literature shows the knowledge on bidding process, impact of such knowledge on detection of fraud, the procurement phases that are prone to fraud, and ways of controlling fraud in procurement. In spite of the knowledge and presence of actors, however, the literature does not address the specifics of districts like Kiruhura, there by presenting a knowledge gap to be filled by this study.
