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Procurement

The Public procurement environment and the regulating laws

Opinions of Saturday, 14 November 2020

Columnist: Samuel Saint-Ayisi

Public Procurement Authority Public Procurement Authority

Public procurement is the process by which governments and other publicly-funded entities acquire goods, works, and services needed to implement public projects. It accounts for at least 15% of the world’s gross domestic product (GDP), and even more in African countries.

The Public Procurement Authority (PPA) is the institution mandated to ensure public procurement in the country. The PPA is established by the Public Procurement Act, 2003 (Act 663) as a regulatory body responsible for the effective implementation of the Public Procurement Law in Ghana.

The Authority seeks to ensure fairness, transparency, and non-discrimination in public procurement in order to promote a competitive local industry and increase the confidence of varied stakeholders in public procurement processes in the country and beyond.

The Public Procurement Law, 2003 (Act 663) is a comprehensive legislation designed to eliminate the shortcomings and organizational weaknesses that were inherent in public procurement in Ghana.

The government of Ghana, in consultation with its development partners, had identified the public procurement system as an area that required urgent attention in view of the widespread perception of corrupt practices and inefficiencies, and to build trust in the procurement system. A study by the World Bank (2003a) reported that about 50-70% of the national budget (after personal emoluments) is procurement related. Therefore an efficient public procurement system could ensure value for money in government expenditure, which is essential to a country facing enormous developmental challenges.

Initial interventions

To ensure sanity and value for money in the public procurement landscape, the government of Ghana in 1996 launched the Public Financial Management Reform Programme (PUFMARP). The purpose of the programme was to improve financial management in Ghana. PUFMARP identified weaknesses in the procurement system.

Some of these weaknesses included: lack of comprehensive public procurement policy, lack of central body with technical expertise, absence of clearly defined roles and responsibilities for procurement entities, absence of comprehensive legal regime to safeguard public procurement, lack of rules and regulations to guide, direct, train and monitor public procurement.

The programme also identified that there was no independent appeals process to address complaints from tenderers. These findings led to the establishment of the Public Procurement Oversight Group in 1999. The aim of this group was to steer the design of a comprehensive public procurement reform programme which led to the drafting of a public procurement bill in September 2002 that was passed into law on 31 December 2003.

The Public Procurement Act, 2003, Act 663 and the PPRA (Amendment Act 2016, Act 914)

The Acts aim at ensuring that public procurement is carried out in a fair, transparent, and non-discriminatory manner using state resources in a judicious, economic, and efficient manner.

Act 663 and Act 914, apply to the Procurement financed from public funds either wholly or partly; procurement of goods, works, and services, disposal of public stores and equipment; procurement financed by funds or loans taken by the Government of Ghana, including foreign aid funds.

Objectives of the Acts are to harmonise the processes of Public Procurement in the public service; secure a judicious, economic and efficient use of state resources, thus procuring the right quantity, at the right price, from the right supplier; and to be delivered to the right place and at the right time; to ensure that Public Procurement is fair, transparent and non-discriminatory.

Exemptions are applied in the area where the Minister of Finance decides that it is in the national interest to use a different procedure, and where a loan or funding agreement specifies alternative procedures. The Act also does not apply to store management or distribution.

Procurement Methods

There are six procurement methods in the Public Procurement 2003,(Act 663). These are the National Competitive Tendering (section 44), International Competitive Tendering (section 45), Restricted Tendering (sections 38-39), Single Source Procurement (sections 40-41), Prequalification/ Two-Stage Tendering (Sections 36-37) and the Price Quotation/Request for Quotation (RFQ) (sections 42-43).

Under the National Competitive Tendering in section 44 of Act 663, locally registered suppliers, contractors, or consultants may apply for this kind of method.

In continuation of the above, Prequalification/ Two-Stage Tendering in Sections 36-37 of Act 663 applies to a situation where it is not feasible for a procurement entity to formulate detailed specifications for the goods or works. It also applies to situations where the character of the goods or works is subject to rapid technological advancement.

Finally, Price Quotation/Request for Quotation (RFQ) in sections 42-43 of Act 663 may apply in readily available goods, works, or technical services that are not specially produced or provided to the particular specifications of the procurement entity. It also applies to goods where there is an established if the estimated value of the procurement is less than GH¢100,000 of goods, GH¢200,000 of works, and GH¢50,000 of technical service

Single Source Procurement in sections 40-41 of Act 663 applies to a situation where there is no alternative or substitute for the property being purchased. It also applies to research, experiment, study, or development. In the situation of National Security procurement, the Single Source method is applied.

Restricted Tendering also applied to highly complex and specialised nature goods, works, or services that are available only from a limited number of suppliers or contractors. If the time and cost required to examine and evaluate a large number of tenders is disproportionate to the value of the goods, works or services to be procured, Restricted Tender is again, applied

Current initiatives and developments

Some important initiatives have been undertaken to improve the procurement process in the public sector. Due Diligence Unit (DDU) has been established to handle all Sole Source and Restricted Tendering. The unit is set to conduct diligence check on tenders and establish price reasonableness prior to approval for Sole Source and Restricted Tendering.

The unit is also to evaluate the report of Restricted Tendering to be sent to PPA prior to the award of the contract.

There has also been the introduction of the unit cost of infrastructure and the average price database. PPA in collaboration with the World Bank developed a Budget tool/estimator to establish the unit cost of Infrastructure for Road, Building, Water, and Sewage and Power to provide entities with more scientific estimates for projects.

Finally, a Procurement Audit Unit has been established to conduct a periodic Audit of entities on the use of other methods of Procurement to ensure compliance with the Act.

Challenges of Public Procurement

The challenges to the institutionalisation of national laws are pervasive in developing countries, Ghana not being an exception. Annual reports of the Public Procurement Authority (PPA), since its establishment, have always cited inadequate funding as the leading barrier to smooth operations of the Authority. Lack of adequate office accommodation was specifically reported in the 2008 and 2007 annual reports.

Political will is the demonstrated credible intent of political actors (elected or appointed leaders, civil society watchdogs, stakeholder groups, etc.) to attack perceived causes or effects of corruption at a systemic level.

Reform efforts are oftentimes unsuccessful due to the combined influence of inadequate strategies, political resistance, failure to sustain long-term reform efforts, and the lack of knowledge about appropriate tools to establish systemic change.

Public procurement has been perceived as an area of waste and corruption (Thai, 2004) that is widespread (Jones, 2007). Wilson (2004) argued that in a situation where there are huge system loopholes coupled with laxity in legal and administrative systems, compounded by non-transparency and extensive discretionary powers at the hands of politicians, there needs to be concerted effort to ensure strict enforcement of laws to achieve the purpose for which those laws were enacted.

Ghana remains one of the most corrupt nations in the world judging from the annual Corruption Perceptions Index (CPI) released by Transparency International in 2012 (Transparency International, 2012). Though corruption is said to be present in all societies (Sahr, 1998), Lengwiler and Wolfstetter (2006) revealed that the quantum of money changing hands through corruption in public procurement is estimated between $390-400 billion per annum all over the world.

However, it is estimated that corruption in Sub-Saharan Africa exists in about 70% of public contracts and results in about 20-30% rise in contract sums. The cost of corruption in Africa is estimated at around $148 billion a year.

There is no evidence that the passage of the Public Procurement Law and its implementation has made any significant impact in curbing corruption in public procurement in Ghana. According to the 2010 and 2011 annual Corruption Perceptions Indices (CPI) released by Transparency International, Ghana ranked the 62nd and 69th most corrupt country respectively, out of 183 countries worldwide (Transparency International, 2012). With only 4.1 CPI in 2010 and a further slump in 2011 to 3.9 CPI score, corruption in Ghana remains a significant impediment to effective resource utilisation and efficient service delivery. There is no real evidence that Ghana has made serious gains through the enactment of corruption targeted legislation, thus their impact cannot be discounted completely.

Political interference with the procurement process poses a challenge to the implementation process and public procurement reforms. A good number of politicians think that they have the right to intervene in the procurement procedures thereby leading to capricious procurement decisions (World Bank, 2004).

The Country Procurement Assessment Report of Ghana produced in 2003, revealed that most staff members of Ministries, Departments and Agencies (MDAs), and District Assemblies (DAs) responsible for procurement were not procurement-proficient, even though they have been trained. The report contended that the application of the PPA and the Standard Tender and Contract Documents will not be successful without broad training and ‘refresher’ programmes for officials in charge of procurement.

Similarly, Forgor (2007) agrees that the lack of proper training of managers on the procurement process is a challenge that confronts procurement reforms. This supports the assertion that poor dissemination of procurement law is one of the challenges facing the smooth implementation of public procurement laws.

The lack of career development paths and low salaries of procurement personnel also militate against procurement reforms implementation (World Bank, 2003b). Poor record keeping (World Bank, 2003b), delays in payment of contractors, and suppliers are also cited as some of the crucial factors that challenge procurement reform implementation.

In a similar vein, a low level or absence of capacity building for service providers has been identified as one of the factors inhibiting successful public procurement reforms. Many of its bidders are limited in various capacity issues including lack of basic knowledge of the law, inadequate capacity to appreciate the standard tender documents, poor access to tender information, and insufficient technical and managerial skills to be competitive in the tendering process.

Recommendations

There are various ways to improve the procurement process; some are minor changes that focus on improving part of the process such as creating essential internal documentation. Other major changes can go as far as improving the whole process.

To start with, political will and commitment to fight corruption in the public procurement process is very important. Without political will and commitment by the leadership of a country, grand corruption is perpetuated at an alarming rate with petty corruption becoming endemic and more difficult to stop (Philip, 2002). There are tangible indications of political will by some stakeholders at the lower levels to effect change, but this cannot be achieved if those at the apex of the pyramid, lean back (Szeftel, 1998). Thus the battle against corruption should begin with a strong political will and explicit commitment to eradicate all its manifestations.

Historically, successful reform programmes around the globe indicate that the paramount success factor is strong political will demonstrated by a commitment from leadership at all levels of government (Sahr, 1998).

However, those who wield power lack the moral courage or capacity to exercise that power to ensure the needed change. Kosack (2008) argued strongly that success chalked in several countries around the world in areas of access to basic education was due to the political will of the leaders in those countries and their commitment to increasing access to education. Thus new rules and campaign gimmicks adopted by politicians alone are not enough for procurement reforms.

If procurement laws and regulations are not enforced to the letter, issues of corruption will continue to cover headlines in both the print and electronic media.

Furthermore, incorporating technological contract management systems in the procurement process is very important. This will help check every process of procurement and that corruption is mitigated to the lowest level. In other countries such as the United States of America, Russia, among others, various technological systems have been put in place to check all procurement processes.

Another important thing to consider in making an effective procurement process is by increasing employee capability through training and development. Inadequate training and development of employees in the procurement sector have contributed to huge losses. It is important, therefore, to develop the capacity of employees, to cut down the huge deficit associated with procurement.

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