With efficient Procurement, Government can deliver more with less
September 22, 2012
Uganda spends over 55% of her budget on public procurement. This is equivalent to Shs.6,000 billion or $ 2.4 billion of this year’s government budget. Procurement is therefore central to achieving value for money in public expenditure and service delivery. If Government was able to achieve a 2% efficiency gain in public expenditure through procurement, this could represent $48 million annually which is sufficient to rehabilitate 10 regional referral hospitals or finance a 17% increase in teachers’ salaries.
Public procurement is also essential in promotion of the private sector through the business opportunities availed to service providers. Therefore as Uganda celebrates 50 years of its independence it is important to reflect on what has been achieved by the Government in reforming procurement and how the challenges that remain can be addressed.
Since the late 1990s, Government has been reforming procurement with emphasis on transparency and competitive bidding. Today, over 80% of government’s expenditure through procurement ($1.9 billion worth of contracts) is subject to open competitive bidding. This reform alone is a big step to achieving value for money in procurement and promoting private sector development.
Establishment of a procurement complaints handling mechanism is another achievement whereby aggrieved bidders who are unfairly denied business opportunities can seek redress from the responsible agency or the Public Procurement and Disposal of Public Assets Authority (PPDA). However, the use of this grievance mechanism is still limited, with only about 30 complaints received annually at the PPDA for fear of bidders being persecuted through denied future opportunities. Nonetheless, while there is more work to be done by Government to increase bidder confidence in the mechanism, a system exists for successfully addressing such grievances.
Government also established the PPDA to monitor the performance of procurement and set standards for improvements. PPDA has improved its monitoring systems and has to date conducted 329 audits in 221 procuring agencies since its establishment in 2003. This monitoring has been essential in identifying performance weaknesses and driving performance improvements. The task ahead is to increase monitoring and audit coverage to ensure that a substantial proportion of the budget expended through procurement is audited by both PPDA and the Auditor General.
Finally, while the several irregularities reported in procurement are often blamed on the inefficiencies in the system, the framework of the PPDA Act within which government procurement is conducted has enabled these cases to come to the fore. Without such a framework, there would not be a standard against which to evaluate them. While these achievements are laudable, challenges that constrain the achievement of value for money and efficiency in service delivery still remain. These challenges arise from the application of procurement in practice.
Corruption especially through bribery in procurement is one of the major vices that impede achievement of value for money. The Organization for Economic Cooperation and Development (OECD) (2007) reported that “public procurement is the government activity most vulnerable to waste, fraud and corruption due to its complexity, the size of the financial flows it generates and the close interaction between the public and the private sectors.”
PPDA’s 2010 Procurement Integrity Survey reports that suppliers spend 10% to 20% of the contract amount in corrupt payments, up from the 5% to 10% 2 years earlier. This when applied to the procurement budget represents about $240 million in bribes to government annually. The bribe money is in turn recovered by supplying at prices higher than the market price, by compromising quality or through incomplete deliveries. The ultimate loss is borne by Ugandans whom the Government is supposed to serve. This trend needs to be decisively addressed by punishing the culprits and putting up several deterrents. More attention should also be paid to the reasonableness of the prices at which government procures and the quality and quantity of goods and services provided.
Procurement delays also contribute to ineffective service delivery. According to PPDA, Government tenders subject to international competitive bidding delay by an average of 7 months from initiation to contract signing i.e. taking 12 months instead of the ideal 5 months. This is worsened at contract performance where only 48% of government contracts are completed on time. This translates to delayed delivery services to the public. For example it has so far taken 7 months to evaluate bids for the Karuma Hydropower project meaning that that the provision of power from the dam will suffer from an equivalent or more likely longer delay.
At contract implementation, more gaps are emerging in performance by contractors who may not always perform in terms of timeliness, quality and quantity. Auditor General’s reports highlight several such cases where contractors are paid fully for substandard or incomplete work. This is due to weaknesses in the supervision of contractors and partly in delays in payments (sometimes by over 60 days)by many government agencies. It is also linked to corruption as service providers use some of their funds to bribe to win the contract leaving less money to complete work.
Given the centrality of public procurement in efficient budget execution and quality service delivery, Government must address these challenges in order to be able to deliver more services to Ugandans with fewer resources.
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