Embed Size (px)
Citation preview
ASSESSMENT OF EFFECTIVENESS OF PROCUREMENT
PROCESS IN PUBLIC SECTOR:
A CASE OF TEMEKE MUNICIPAL COUNCIL - DSM
ASSESSMENT OF EFFECTIVENESS OF PROCUREMENT
PROCESS IN PUBLIC SECTOR:
A CASE OF TEMEKE MUNICIPAL COUNCIL - DSM
By
Lynne Nuru Mshamu
A Proposal Submitted to Mzumbe University, Dar es Salaam Campus College in
Partial Fulfillment of the Requirements for the Award of the Degree of Master
of Science in Procurement and Supply Chain Management (MSc-PSCM)
of Mzumbe University.
2013
i
CERTIFICATION
I undersigned certifies that I have read this research and hereby recommends for
acceptance by the Procurement and Supplies Professional and technical Board this
research paper titled “ Assessment of Effectiveness of Procurement Process in Public
Sector”: A Case of Temeke Municipal Council” in partial fulfillment of the
requirements for the Award of Certified Procurement and Supplies Professional and
Technical Board.
……………………………………
Major Supervisor
Date………………………………..
………………………………………
Internal Examiner
………………………………………
External Examiner
Accepted for the Board of ………………………………
.......................................................................................................
DEAN/DIRECTOR, FACULTY/DIRECTORATE/SCHOOL/BOARD
ii
DECLARATION AND COPYRIGHT
I, Lynne N. Mshamu, declare that this research paper is my own original work and
has not been presented anywhere or will not be presented to any other institution for
any award.
Signature …………………………………
Date ………………………………………
©
Copy Right
This paper should not be produced by private study, critical scholarly review or
disclose with acknowledgement, without written permission of Executive Director,
Procurement and Supplies Professionals and Technicians Boards on behalf of both
the authors and the any means, in full or in part, except for short extract in fair
dealings, for research or Board.
iii
ACKNOWLEDGEMENT
I wish to take this opportunity to thank the Lord for having brought me this far.
May honor and praise be unto Him.
My sincere gratitude goes to my supervisor Professor Shumbusho for his invaluable
guidance and assistance. His patience, availability and immense knowledge have
made a great impact in my career path. Thank you for your time and interest in this
work.
I’m greatly indebted to my beloved brother Boniface for his moral support and
understanding and the family at large for the support they gave me.
A lot of thanks go to all my friends for being an encouragement throughout my
academic life. I would especially wish to thank Nyakato, Legga, Fredric, Ally,
Maggie, Davie and all my colleagues in Msc. Procurement and Supply Chain
Management at Mzumbe University for the support they gave me.
I further wish to extend my gratitude to my immediate Supervisors Dr. Marzouk and
Jacintha and other staff members at Kigamboni hospital for their understanding,
encouragement and giving me time to pursue my studies.
To you all, thank you and God bless you abundantly.
iv
DEDICATION
To my beloved brother Boniface for whom without his love, understanding, support
and encouragement I would not have gone this far. To the entire family and friends
for their prayers and continued support.
.
v
LIST OF ABREVIATIONS
CTC Competitive Tendering and Contracting
et al and others
JIT Just in Time
NHS National Health Services
PPA Public Procurement Act
PPRA Public Procurement Regulatory Authority
UK United Kingdom
URT United Republic of Tanzania
PMU Procurement Management Unit
vi
ABSTRACT
Effectiveness of procurement process is the key issue in the procurement
performance which is fundamental to guarantee cost-effective delivery of goods and
services in any organization(Public or Private). Regardless of its importance;
assessing procurement process effectiveness seems to be a challenge task especially
in government entities since it relates with the personnel target performance. This
study provides thoroughly assessment of effectiveness of procurement process in a
public sector considering Temeke Municipal Council as a Case of the study.
The study adopted a qualitative case-study design. A purposive sampling technique
which is a non-probability or judgmental sampling procedure was used to determine
sample unit of 20 respondents. Data were collected by the use survey and interview
method through structured questionnaire. Data analysis was done manually and
results presented in a form of percentages and tabulations form.
The findings revealed that; the procurement process was effective at Temeke
Municipal council with the tendering being the best method comparing to quotation.
But there was lack of proper knowledge and skills, accountability and corruption
which affected the procurement process to the greater extent.
The report concludes that: given the impact of procurement activities on the
operation and effectiveness of public sector, it is essential that these activities be
performed by qualified staff with high professional and ethical standards and using
sound procedures anchored in appropriate policies and regulations.
Moreover the study recommended that; specialized training programs should be
employed to procurement personnel with the skills to achieve procurement
objectives. Key issues such as employment of qualified procurement practitioners,
training and employment of leadership programs, development of an effective
monitoring and evaluation tool, and the creation of incentive programs to motivate
good performance should be employed.
vii
TABLE OF CONTENTSCERTIFICATION ........................................................................................................ iDECLARATION AND COPYRIGHT........................................................................ iiACKNOWLEDGEMENT .......................................................................................... iiiDEDICATION ............................................................................................................ ivLIST OF ABREVIATIONS......................................................................................... vABSTRACT................................................................................................................ viTABLE OF CONTENTS...........................................................................................viiLIST OF TABLES ....................................................................................................... xLIST OF FIGURE........................................................................................................ x
CHAPTER ONE ........................................................................................................ 1INTRODUCTION...................................................................................................... 11.1Overview................................................................................................................. 11.2Background Information of the Study..................................................................... 11.3 Research Problem................................................................................................... 81.4Research Objectives ................................................................................................ 81.4.1General Objective................................................................................................. 81.4.2Specific Objectives............................................................................................... 81.5Research Question................................................................................................... 91.5.1General Question.................................................................................................. 91.5.2Specific Questions................................................................................................ 91.6Scope of the Study .................................................................................................. 91.7 Limitations ........................................................................................................... 101.8Significance of the Study ...................................................................................... 101.9Organization of the Study ..................................................................................... 10
CHAPTER TWO ..................................................................................................... 12LITERATURE REVIEW........................................................................................ 122.1Overview............................................................................................................... 122.2Theoretical Part ..................................................................................................... 122.2.1Definition of Key Concepts ............................................................................... 122.2.2Legal Public Procurement Procedures ............................................................... 132.2.3Public Procurement Approach ........................................................................... 162.2.4Procurement Governance ................................................................................... 232.3.1General Empirical .............................................................................................. 272.3.2The Case of Abroad ........................................................................................... 292.3.3The Case of Tanzania......................................................................................... 302.4Variable and Conceptual Framework.................................................................... 322.5Measurement of Variables .................................................................................... 33
viii
CHAPTER THREE ................................................................................................. 34RESEARCH METHODOLOGY ........................................................................... 343.1Overview............................................................................................................... 343.2 Research Strategy................................................................................................. 343.3 Description of the Case Studied........................................................................... 353.4 Location of the Study........................................................................................... 363.5Nature of the Data Required ................................................................................. 363.6 Measurement of Variables from Conceptual Framework .................................... 373.7 Quality of Data Measurement .............................................................................. 373.8Data Collection Methods and Instruments............................................................ 383.9Sampling Procedures............................................................................................. 403.10 Field Work ......................................................................................................... 413.11Data Processing and Analysis ............................................................................. 41
CHAPTER FOUR.................................................................................................... 43FINDINGS AND ANALYSIS ................................................................................. 434.0 INTRODUCTION ............................................................................................... 434.1 Effectiveness of Procurement Process ................................................................. 434.1.1 Participation in procurement process ................................................................ 434.1.2 Difficulties in Procurement Process.................................................................. 434.1.3 Effectiveness of Procurement Process .............................................................. 444.1.4 Cost Efficiency.................................................................................................. 444.1.5 Lead Time Performance.................................................................................... 454.2.1 Procurement methods Used............................................................................... 464.2.2 Processing Speed............................................................................................... 464.2.3 Effectiveness of processing criteria .................................................................. 474.2.4 Effectiveness of Tendering Method .................................................................. 474.2.5 Effectiveness of Quotation method................................................................... 484.3 Personnel Performance ........................................................................................ 494.3.1 Performance of Procurement Personnel............................................................ 494.3.2 Information Coordination Performance ............................................................ 494.3.3 Decision making in the Procurement Process ................................................... 504.4 Problem Facing the Procurement Management ................................................... 504.4.1 Bureaucracy....................................................................................................... 504.4.2 Lack of proper knowledge, skills and capacity................................................. 504.4.3 Lack of Capacity Building in Public Procurement Act and Regulation ........... 514.4.4 Poor Specifications............................................................................................ 514.4.5 Delay in Payments............................................................................................. 514.4.6 Taking Too Long to Take Decision .................................................................. 524:4:7 Non-compliance with policies and regulations................................................. 524.4.8 Improper planning and linking demand to the budget ...................................... 52
ix
4.4.9 Inadequate measures for monitoring and evaluation ........................................ 52
CHAPTER FIVE...................................................................................................... 54DISCUSSIONS ......................................................................................................... 545.1 Introduction .......................................................................................................... 545.2 Effectiveness of Procurement Process ................................................................. 545.3 Best Procurement Method and its Effectiveness.................................................. 555.4 Procurement Process Problems ............................................................................ 57
CHAPTER SIX ........................................................................................................ 58SUMMARY, CONCLUSION AND RECOMMENDATIONS............................ 586.1 Introduction .......................................................................................................... 586.2 Summary .............................................................................................................. 586.3 Conclusion ........................................................................................................... 596.4 Recommendations ................................................................................................ 616.5 Recommendations for Further Studies................................................................. 63REFERENCES ......................................................................................................... 64APPENDEX .............................................................................................................. 68
x
LIST OF TABLES
Table4.1 Participation in Procurement Process ......................................................... 43
Table4.2 Difficulties in Procurement Process............................................................ 44
Table 4.3 Procurement Process Effectiveness ........................................................... 44
Table 4.4 Cost Efficiency........................................................................................... 45
Table 4.5 Lead Time Performance............................................................................. 45
Table 4.6 Best Procurement method .......................................................................... 46
Table4.7 Processing Speed......................................................................................... 47
Table 4.8 Processing Criteria Effectiveness .............................................................. 47
Table 4.9 Effectiveness of Tendering Method........................................................... 48
Table 4.10 Effectiveness of Quotation Method ......................................................... 48
Table 4.11 Performance of Procurement Personnel................................................... 49
Table4.12 Information Coordination Process………………………………………43
Table 4. 13 Decision making Performance ................................................................ 50
1
CHAPTER ONE
INTRODUCTION
1.1 OverviewThis chapter presents an overview of the study. It outlines key issues while
introducing the kind of the problem that a study is going to undertake. It provides
clarifications on the background of the study, statement of the problem, objectives
and research questions, as well as significance of the study.
1.2 Background Information of the StudyProcurementencompasses the whole process of acquiring property and/or services. It
begins when an agency has identified a need and decided on its procurement
requirement. Procurement continues through the processes of risk assessment,
seeking and evaluating alternative solutions, contract award, delivery of and payment
for the property and/or services and, where relevant, the ongoing management of a
contract and consideration of options related to the contract. Procurement also
extends to the ultimate disposal of property at the end of its useful life (Waters
2004).
Procurement has direct and indirect costs that clearly affect the organization
effectiveness. The organizational structure, division of work and operation
efficiency; are components that modify the effectiveness of procurement function.
The procurement processes and procedures have a close relation to other functions
on the organization and on their efficiency as well. As an example, improvements in
quality issues and on the delivery times reflect to the total costs on the logistics and
production side. Reducing the total costs can be perceived as reduced quality of
products. Cost efficient procurement doesn’t imply that the quality of products would
decrease. (Iloranta 2008, 105.)
According to Thai (2001), the basic principles of good procurement practice include
accountability, where effective mechanisms must be in place in order to enable
procuring entities spend the limited resources carefully, knowing clearly that they are
accountable to members of the public; competitive supply, which requires the
2
procurement be carried out by competition unless there are convincing reasons for
single sourcing; and consistency, which emphasizes the equal treatment of all bidders
irrespective of race, nationality or political affiliation.
The process should also uphold integrity by ensuring that there are no malpractices;
informed decision-making, which requires public bodies to base decisions on
accurate information and ensure that requirements are being met. More still, the
Procurement practice should be responsive to aspirations, expectations and needs of
the target society. Finally, there is need for transparency to enhance openness and
clarity on procurement policy and its delivery (World Bank, 2003).
Procurement is a noble activity in the organization. Its central role is to make the
activities of the firm successful. Without successful procurement activities the
organization cannot achieve its full potential goals.
In order to ensure that, the procurement activities are performed successfully,
sufficiently and effectively, the procurement and supplies personnel should observe
all proper procedures required to be followed.
Professional ethics refer to moral principles that govern a professional’s behavior
when performing a given duty.
Professionals have specialist knowledge and skills and always strive to acquire more.
The specialist knowledge and skills give them authority, power and additional moral
responsibility over the ones held by the general public. Professionals are also
entrusted with resources such as inventories, finance and staff. These give them
additional powers and authority. They make decision on how to utilize resources on
behalf of their organizations. In this case they must be trustful.
Professionals, therefore, must be governed on how they apply the specialist
knowledge and skills when performing their duties. Moreover they must be governed
by on how they utilize resources made available to them for the benefits of their
organizations.
Professionals play a very critical role in preserving the integrity of their
organizations. Procuring entities through their professionals must ensure fair
treatment to bidders, suppliers, contractors and stakeholders in general. Failure to
3
treat them fairly will compel them to lose confidence in the respective organizations.
Unfair treatment could as well lead to civil or criminal offences against the
professionals and or their organizations. The consequences of civil and criminal
offences could be grave.
Procurement Ethics prohibits professional from having financial interest when
performing their duties relating to suppliers of goods and services. Apart from
financial interest, professionals must avoid any acts which may cause their
impartiality be questioned. This may include dealing with procurement activities
involving their former employers, friends, relatives and potential employers.
Professionals must refrain from accepting and soliciting gifts from suppliers or their
employees. The supplier here includes the current and potential ones. It should be
noted that gifts affects professionals’ impartiality. However, gifts of promotional
items such as pens, calendars and diaries may be accepted.
Professionals must bear in mind that if they are required to refrain from accepting
and soliciting gifts, then they must repel bribes and corruption.
In their daily activities, professional obtain data and information from various
sources including their organizations. Some of the data and information are
classified. Disclosure of information without proper authority is unethical.
Professionals must therefore ensure that they perform their duties free from
impropriety. This is possible. Given by Ahmed S. K. Kilima - PSPTB Journal pg 1
issue No. 2 Jan-June 2010
Public Procurement
Public procurement is the process whereby public sector organisations acquire goods,
services and works from third parties. It includes much that supports the work of
government and ranges from routine items (e.g. stationery, temporary office staff,
furniture or printed forms), to complex spend areas (e.g. construction, Private
Finance Initiative projects, aircraft carriers or support to major change initiatives).
4
It also includes a growing spend where the private and third sectors provide key
services directly to citizens in areas such as welfare-to-work, further education,
social care and health. Such services may also be provided by the public sector
directly, and in some cases even this public provision can be handled through
procurement mechanisms. A public body may bid for government work against
private sector firms through a formal competitive process.
Public procurement is the buying of goods and services on behalf of a public
authority, such as a government agency. Governments spend public monies to secure
inputs and resources to achieve their objectives and by doing so, create significant
impact on key stakeholders and wider society. In addition, government purchasing
impacts both domestic and international trade given that governments spend
approximately 10 to 15 percent of their GDP in the procurement marketplace. Hence,
public procurement plays a significant role in the global economy.
In public procurement the goals of fairness, competition and economic value are
paramount. To achieve these goals, effective and efficient procurement processes
must be established. This includes incorporating adequate controls to promote
competition and minimize the risk of fraud, corruption, waste, and the
mismanagement of public funds. In this context, transparency is considered to be one
of the most effective tools to deter corruption and ensure value for money.
Transparency in procurement takes form in a variety of practices, such as: publishing
procurement policies; advance publication of procurement plans; advertisement of
tender notices; disclosure of evaluation criteria in solicitation documents; publication
of contract awards and prices paid; establishing appropriate and timely complaint/
protest/dispute mechanisms; implementing financial and conflict of interest
disclosure requirements for public procurement officials; and publishing supplier
sanction lists.
5
Public Procurement Law
Procurement law was drawn to make the public procurement more effective and cost
efficient. It also improves the process of purchasing quality products and increases
fair competition between different companies and organizations in the market.
The main principles in public procurement include organizing the procurement
operations in such a way that they produce the most cost efficient and well-planned
results and taking into ac-count the environmental issues. The procurement process
has to be implemented on a fair basis openly without discriminating any of the
participants. Framework agreements and joint procurement can be used as a tool for
reducing administrative work. (Act on Public Contracts 2007/348.)
The different variations of public contracts such as public works contracts, public
supply contracts and public service contracts are defined in detail in the procurement
law. Also other definitions such as “supplier” and “tenderer” are specified to avoid
the possible misunderstandings. Restricted and negotiated procedures are examples
of procurement procedures that need to be taken into account when organizing public
procurement. Technical standards and specifications have been set up to define the
technical requirements that need to be met. (Act on Public Contracts 2007/348.)
Contracting authorities including state and municipal authorities, the Evangelic
Lutheran Church, state enterprises and bodies that are governed by public law are
determined in the procurement law. (Act on Public Contracts 2007/348.)
Measuring procurement effectiveness has always been an interesting topic for
organisations and corporations. The pressure of reporting the effects of the
procurement function to the management is high and in many cases related to the
personal performance targets of procurement staff. It is not that easy to determine
the numerical estimation of cost savings produced. That’s why it is crucial to take
into account all the other factors that might influence the effectiveness of
procurement. These factors may include issues such as a new service model, better
payment terms or a de-creased number of suppliers.
6
The Temeke Municipal Council, like other public institutions has been operating
following the rules and regulations establishment by the government. In the case of
procurement activities the Council has to comply with the Public Procurement Act of
2004. Before the Public Procurement Act 2004, there was no tender body at the
Municipal Council. However, after the Act, tender body was established.
However, some of the regulatory requirements have been met: there are issues that
indicate inadequacy performance of the Municipal council in the procurement
processes. It has been observed that the municipal council over several years has
been faced with the following challenges: poor procurement records where it has
been sometime difficult in retrieving procurement information and some files and
important documents, and in most cases, tenders are floated for shorter period than
what is allowed in the Regulations.
Moreover, the results of tender awards are not published in the PPRA’s website or
advertised in the newspapers. There are some cases in which notification of contract
awards are beyond the tender validity period. There are also delays in project
completion and project reports are not prepared.
It has been also noted that the Municipal procured goods mostly through quotations
on the basis of allowable threshold as stipulated in the Public Procurement
Regulations of 2005. However, the procedures for procurement under the quotations
methods are not properly followed. Furthermore, a number of small quotations could
have been combined for competitive tendering.
Generally the performance of the Municipal in complying with PPRA 2004 and its
Regulations according to the procurement performance indicators has been assessed
to be low. Therefore all these issues have been happening in the existence of Public
Procurement Act 2004, apart from several recommendations from the CAG; the
situation has continued to remain almost the same. Therefore, the problem is
probably on the actual procurement process effectiveness, which is the purpose of
conducting this study.
Historically, procurement capacity development efforts have focused on improving
procurement techniques (the means of achieving the acquisition of goods and
7
services), with less emphasis on integrating this work into broader development or
reform activities in the public sector.
Initiatives and policies such as market testing, contracting out, private finance
initiative, competing for quality, National Health Service (NHS) internal market,
facilities management and partnering all affect how equipment, goods and services
are procured within government and the public sector. They help to shape that
approach to the market, the preparation of the specification and evaluation of the
most economically advantageous tender followed by pertinent relationships in order
to meet the requirement (Baily et al, 2008).
The government of Tanzania applied a competitive tendering for public procurement.
Competitive tendering and contracting (CTC) has embraced alternative mends of
procuring public sector facilities to the traditional reliance upon an in-house team
delivery approach. This is believed to provide greater in both procuring facilities and
managing them. CTC is a “process of selecting a preferred supplier from a range of
potential contractors by seeking offers (tenders) and evaluating these on the basis of
one or more selection criteria”
Effectiveness is a key of the procurement practice in the organizations and
corporations. Measuring procurement effectiveness has always been an interesting
topic fororganizations and corporations. The pressure of reporting of the effects of
the procurement function to the management is high and in many cases related to the
personal performance targets of procurement staff.
In order to increase efficiency and effectiveness of procurement, the government has
taken several efforts. These are enactment of procurement act, 2004 and
procurement regulations. Moreover the government established the Regulatory
authority entitled for supervision and monitoring public procurement activities in the
public sector. But, apart from all these efforts; there are evidences or misprocurement
practices. It is due to this, the study has aimed at evaluating the effectiveness of
procurement practices in the country.
8
1.3 Research Problem
The performance of procurement process in the public sector depends on the players
in the field. Public officials use enacted laws and regulations for achieving
organization’s goals. It has been noted that some of the public goals are not met
because of inadequate implantation of procurement process. The public procurement
requires effective implementation of imposed procedures in order to get qualified
suppliers and eventually quality products and services. However the current
situation has some deficiencies.
Though there are outlined laws, regulations, rule and procedures for public
procurement; there are some problems such as inability for suppliers to take
advantage of other investment opportunities since they wait for a long time for the
approval and award of tender, suppliers failing to meet the criteria needed, and
biasness of the people in the tender board which leads to selection of unqualified and
inexperienced bidders which results in poor performance in procurement activities of
the Municipal. Therefore, it is from the above factors the researcher needs to
evaluate the effectiveness of procurement process in the public sector basing at the
Temeke Municipal Council in Dar es Salaam.
1.4 Research Objectives
1.4.1 General Objective
The overall objective of this study was to examine the procurement process
effectiveness in the public sector, a case of Temeke Municipal Council.
1.4.2 Specific Objectives(i) To examine the effectiveness of procurement process as applied at Temeke
Municipal Council.
(ii) To find out the best method of procurement process at Temeke Municipal
Council.
9
(iii) To identify the problems facing the procurement process and procurement
department at Temeke Municipal council.
1.5 Research Question
1.5.1 General QuestionThe general question of the study was; Is the procurement process effectively
conducted in the public sectors?
1.5.2 Specific Questions(i) To what extent is procurements process effective at Temeke municipal
council?
(ii) Which is the best method of procurement process at Temeke municipal
council?
(iii) What are the problem facing the procurement process and procurement
department at Temeke municipal council?
1.6 Scope of the Study
The study only covered the effectiveness of procurement process in the public sector
basing at Temeke Municipal Council in Dar es Salaam. The researcher primarily
examined the effectiveness of procurement process in the public sector basing at the
Temeke Municipal Council in Dar es Salaam.
The outcomes of the study was limited only on the data gathered from the books and
journal and from the primary data gathered from the results of questionnaire survey
and interview conducted by the researcher.
Since the research had to be completed in a relatively short period of time, other
factors and variables were not considered. This might have brought an impact on the
results of the study.
10
1.7 LimitationsAmong the limitations are;
(i) Financial
Since the employer did not have any financial support to the researcher, financial
constrain had been one of the limiting factor in conducting this study.
(ii) Time
Due to limited timeframe to handle over the report, it was difficult then to compile
data from user departments.
(ii) Data Accessibility
Sometimes it is very dangerous those interviewee/respondents are not willing to
disclose their information.
1.8 Significance of the StudyGenerally the importance of any study is either for acquisition or addition of new
knowledge or sometimes can be a problem solving. This study therefore has the
following importance.
Firstly: To the researcher as it is the partial fulfillment for the award of Masters
Degree in Procurement and Supply Chain Management.
Secondly: This study is important to the University as it may be a point of reference
to others Students who will conduct the research on a related topic.
Thirdly: The recommendations and conclusions drawn from this research may be
useful to the Temeke Municipal Council if the conclusions and recommendations
drawn could be taken into considerations.
1.9 Organization of the StudyThe study consists of six chapters. The first one consist of overview of the study
which was concerned with the presentation of the background of the study, statement
of the problem, research objectives, research questions, and significance of the study.
Chapter two presents literature review that is theoretical and empirical literature
11
review. Chapter three presents methodology of the study which is concerned with
presentations of type of the study, area and population of the study, unity of analysis,
sample and sampling techniques, types and sources of data, data collection tools and
data analysis. Chapter four discovered facts, findings and analysis which is
concerned presentation of facts found during the study as per study objectives.
Chapter five presents discussions based on the findings presented in chapter four.
Chapter six presents summary, conclusions, recommendations and areas for further
studies whereby it summarises the whole work, answer the research questions and
provides recommendations and suggestions for areas for further studies.
12
CHAPTER TWO
LITERATURE REVIEW
2.1 OverviewThe literature review deals with the theoretical basis of the study, empirical studies,
conceptual definitions and conceptual framework. It concentrates more on what
same different authors have said about effectiveness of procurement practise in
public sector.
This is a theoretical pan, which focuses on how authors explain on various issues,
terms and key element on effectiveness of procurement in public sector.
2.2 Theoretical Part
2.2.1 Definition of Key ConceptsBailey et al, (2008) define procurement as that function dealing with buying
materials of the right quality, at the right price, time and the right source of supply.
Bally (1999) argues that, the Procurement process is composed of several elements,
namely: deciding what to purchase, deciding who to purchase from, negotiating an
exchange rate and exchanging resources for goods or services.
Morris (2003) define procurement as the complete action or process of acquiring or
obtaining personnel material, services or property from outside a military service by
means authorized in pertinent directives. This is procurement is more specifically the
action or process of acquiring or obtaining materials, property or services at the
operational level.
Public procurement Act (PPA No. 21 of 2004) section 3 “procurement” means
buying, purchasing, renting, leasing or otherwise acquiring any goods, works or
services by a procuring entity spending public funds on behalf of a ministry,
department or regional administration of the Government or public body and
includes all functions that pertain to the obtaining of any goods, works or services,
13
including description of requirements, selection and invitation of tenderers,
preparation and award of contracts.
Pienaar (2005) argued that; “Every business enterprise purchases its materials,
services and assets such as Machinery and equipment, Motor vehicles, Furniture and
Fittings from other Firms. These materials, services and assets are used in the
production, marketing, logistics and other operations of the enterprises”. The process
of purchasing these items is known as procurement.
According to Farmer and Weele (1995), “Procurement is a broader term, which
includes all activities required in order to obtain the product from the supplier and
get it to the place where it actually used. It encompasses the purchasing function,
stores, traffic and transportation, incoming inspection, and quality control and
assurance”. The process of procurement must ensure that, materials to be procured
should be based on five R’S (5R’S) which in general states that purchasing
responsibility to buy material of the right quality, in the right quantity, at the right
time, at a right price, from the right source with delivery at the right place.
In the context of procurement the public has its own direction of meaning especially
on for the ownership. According to Paul et al, (2008) argue that countries vary in
their preferences for public ownership of national infrastructure and services. For
example from 1945 until the late 1970s in the UK, the telephone health gas
electricity water rail bus and coal industries were publicly administered either by
civil servants or by managers characterized as having lie sector mentally such public
services are called utilities in addition utilities there were other organizations such as
parts of the automotive factoring industry and the national airline that were in public
owners variety of historical reasons.
2.2.2 Legal Public Procurement ProceduresIn order to ensure effective public procurement is conducted various laws regulations
have been enacted and established worldwide. Tanzania like other countries has been
14
using such legal guidelines. There are two main legal documents that are used in
Tanzania for public procurement which are the guidelines procurement under IBRD
loans and IDA credits and the public procurement Act 2004 and the public
procurement regulations 2005
The Procurement Act 2004 provides that a procuring entity may procure from the
Government stores any item included in me approved current stores catalogue where
such item is available at lower prices than current market prices; the Government
Stores Department shall arrange for procurement of common use items by the
procuring entities through framework contracts and the government stores
department shall publish any quarterly year basis in the gazette the authority website
and in the local newspapers of wide circulation the names of items available on the
stores catalogue and names of suppliers awarded the framework contracts (URT,
2005).
According to World Bank (2006), the procedures outlined in the guidelines
procurement under IBRD loans and IDA credit apply to all contracts for goods and
works financed in whole or in part from bank loans. For the procurement of those
contracts for goods and works not financed from a Bank loan, the borrower may
adopt other procedures. In such cases the bank shall be satisfied that the procedures
to be used will fulfill the borrower’s obligations to cause the project to be carried out
diligently and efficiently and that the goods and words to be procured are of
satisfactory quality and are compatible with the balance of the project will be
delivered or completed in timely fashion and are priced so as not to affect adversely
the economic and financial viability of the project.
Public procurement policy in Tanzania elaborates several issues that ensures fair and
honesty conduction of public procurement. According to URT (2005) the public
procurement policies are based on the need to make merest possible use of public
funds, whilst conducting all procurement with honesty and fairness. It is further
stated that the purpose of the World Bank guidelines is to ensure funds granted
through grants loan or credits are effectively used in public projects as targeted and
15
not mis-procured. The Bank does not finance expenditures for goods and works
which have not been procured in accordance with the agreed provisions in the loan
agreement and as further elaborated in the procurement plan. In such case, the bank
will declare mis-procurement and it is the policy of the Bank to cancel that portion of
the loan allocated to the goods and works that have been mis-procured. The Bank
may in addition exercise other remedies provided for under the loan agreement. Even
once the contract is awarded after obtaining “no objection” from the Bank, the Bank
may still declare mis-procurement if it concludes that the “no objection” was issued
on the basis of incomplete, inaccurate or misleading information furnished by the
Borrower or the terms and conditions of the contract has been modified without
Bank’s approval (World Bank, 2006).
The other purpose of curbing fraud and corruption problem as outline by the (World
Bank, 2006) that it is the Bank’s policy to require that borrowers (including
beneficiaries of the bank loan), as well as bidders, suppliers and contractors and their
subcontractors under bank financed contracts, observe the highest standard of ethics
during the procurement and execution of such contracts. Therefore the guidelines
provided definitions for corrupt practice, fraudulent practice, collusive practice,
coercive practice and obstructive practice.
In the cases of procurement Act 2004, URT (2005) demands public officers and
members of tender boards when undertaking or approving procurement or disposal of
public assets by tender shall choose appropriate procedures and causes the
procurement or dispose assets to be carried out diligently and efficiently so that the
prices or received by the procuring entity represent the best valve or net outcomes
that can reasonably be obtained for the funds applied.
At international procurement tendering the specifications shall be based on relevant
characteristics and/or performance requirements. References to brand names, catalog
numbers or similar classification shall be avoided. If it is necessary to quote a brand
name or catalog number of particular manufacturer to clarify an otherwise
incomplete specification, the words “or equivalent” shall be added after such
reference. The specification shall permit the acceptance of offers for goods which
16
have similar characteristics and which provide performance at least substantially
equivalent to those specified (World Bank, 2006).
In national competitive tendering otherwise known as national competitive bidding a
procuring entity shall invite suppliers, service providers, contractors or asset buyers
regardless of their nationality by means of a tender notice advertised only in the
United Republic of Tanzania to submit priced tenders for goods services works or
purchase of public assets. Such form of tendering may be used in cases where
payment may be made wholly in Tanzanian shillings; the goods, works or services
are available locally at prices below the international market and the estimated cost
of the goods, works or services is small and does not exceed the threshold for open
international tendering prescribed in the second Schedule to those regulations works
or services are scattered geographically or spread over time works are labor
intensive. the advantages of international competitive tendering are clearly
outweighed by the administrative or financial burden are involved, the estimated
value of assets is small and does not exceed the threshold for open international
tendering prescribed in the Second Schedule to these Regulations (URT, 2005).
In payment of the contract price shall be made in the currency or currencies in which
the bid price is expressed in the bid of the successful bidder. When the bid price is
required to be stated in the local currency but the bidder has requested payment in
foreign currencies expressed as a percentage of the bid price the exchange rates to be
used for purposes of payments shall be those specified by the bidder in the bid so as
to ensure that the value of the foreign currency portions of the bid is maintained
without any loss or gain (World Bank, 2006)
2.2.3 Public Procurement ApproachConsiderable sums of money are spent annually in the public sector on goods and
services. The procurement of these is for good of the population at large and the
expenditure that is incurred is in effect the taxpayers’ money. Public sector buyers
are accountable to the public whose money is being spent including disappointed
tenders and potential suppliers. They must produce procedures and practices which
17
will stand either to scrutiny during government audits or to the challenge through the
courts of any purchase decision that has been made. A primary purpose of public
accountability prevents abuses of taxpayers’ money. A secondary purpose is to let it
be that any such abuses have been prevented (Bailey et al, 2008)
The approach that has been taken for many years within the public sector can be
summarized as follows: purchasing should be based on value for money, competition
should be used to acquire goods and services (unless there are convincing reasons to
the contrary); there should be clear definition of the roles and responsibilities of
personnel involved in specifying the need giving financial authority making
procurement commitments; there should be a separation of the financial authority
and the purchase authority; there should be a separation of duties between personnel
who makes the contracts, those who receive goods or services and those who oath
payments; and requirements which are above a certain financial threshold are
normally required to be advertised in accordance with regulations on public
procurement (Bailey et al, 2008).
Public sector purchases have taken on the procedures without major upsets and in
general they appear to work well. Within the utility sector, it is possible for an
organization to have its in-house procedures inspected for compliance with the
procedures so that, provided they are always followed the organization will be
viewed as having followed the correct path. This process originally contained in the
Utilities Compliance Directive and not included in the public sector legislation is
called ‘attestation’. It enables organizations to develop acceptable (and thus ‘owned’)
procedures that make sense in local terms (and perhaps terminology) while also
ensuring that the requirements of the Directives are met (Cousins et al, 2008)
There are five sets of procedures and having decided that a contract is caught a
purchaser must choose one of them to follow: open procedure; restricted procedure;
competitive dialogue; negotiated procedure (without a call for competition (including
urgency procedure), and negotiated procedure with a call for competition); and
dynamic purchasing system (Cousin et al, 2008).
18
Morris (2003) emphasizes that, when buying on very short demand or developing a
tight performance specification, the first move to a purchase is to define the product
or service required whereby several factors are examined including quality, cost,
availability, familiarity with the supplier, etc. Ultimately, the decision to buy is based
on how well the purchased item or service meets with expectations. Notably, the
specification can be developed for a ready-made item or for yet-to-be-designed
items. A specification may include the parameters for delivery, such as routine
periodic shipments or on as needed basis.
Cousins et al, (2008) argue that strategic supplier selection involves four main stages:
initial supplier qualification; agree measurement criteria obtain relevant information
and make selection. Supplier qualification is the first step towards supplier selection.
The goal is to identify suppliers who meet the requisite product and process
standards and are capable of supporting the buyer’s long-term objectives. Because
organizations are resource constrained, qualification helps to reduce the pool of
potential suppliers to a more manageable number for detailed evaluation and
selection (Cousin et al, 2008).
Morris (2003) emphasizes that, once the item or service being purchased has been
identified purchase specifications, a purchasing manager must identify from who to
purchase. That is, purchases can be made between individuals’, organization or
collectives of these. Purchasing managers, buyers and purchasing agents make up a
key component of a firm’s supply chain. Wholesale and retail buyers purchase good
for resale such as clothing or electronics and purchasing agents buy goods and
services for use by their own company or organization such as raw materials for
manufacturing or office supplies. Procurement agents and buyers of farm products
purchase goods such as grain, Christmas trees, and tobacco for further processing or
resale.
Johnson (2002) emphasizes that procurement professionals consider price, quality,
availability, reliability, and technical support when choosing suppliers and
merchandise. Those procurement professionals try to get the best deal for their
19
company, meaning the highest quality goods and services at lowest possible cost to
their companies. In order to accomplish these tasks successfully, purchasing
managers, buyers, and procurement agents study sales records and inventory levels
of current stock, identity foreign and domestic suppliers and keep abreast of changes
affecting both the supply of, and demand for, needed products and materials.
The strategic selection process continues with identifying relevant and appropriate
selection criteria. Unfortunately, far too many businesses throw measures at supplier
selection and evaluation without considering why the measures are necessary and
what value they will add. Apart from price and delivery, quality is probably the most
common criterion used in the supplier decision and in some circumstances is given
primary importance. Furthermore buyer firms may also visit supplier plants to
ascertain the general altitude of management and workers to quality. Criteria used
here may range from the use of quality circles and continuous improvement
techniques through to very simple checks of the state of the plant floor and amount of
rework (Cousins et al, 2008).
Love et al (2008) put identified nine criteria that clients could use to select their
priorities for projects. These are: time certainty of cost price competition, flexibility,
quality responsibility and risk. It can be seen the criteria identified are different in
nature. The major challenge for clients when selecting a procurement method is
identifying the criteria for the project but the question is that if projects are different
in nature and clients’ needs are constantly changing due to internal and external
demands, would the same criteria be applicable for all projects? The weighting for
criteria will invariably change as would the criteria type.
Any such procurement begins with planning decision to make the purchase and this
will involve in the first place, deciding whether there is a need for the particular
goods or services, ensuring that the purchaser has the legal powers to undertake the
transaction, obtaining any relevant approvals within the government hierarchy and
arranging the necessary funding (Arrow smith et al, 2000).
20
In fact, Thai, (2004), maintained that forums and procedures may be convenient and
useful tools, but the planning effort will succeed only with complete commitment
and involvement of top management, along with appropriate personnel that have a
stake. This implies that without thorough procurement planning, the subsequently
procurement process will not yield substantial benefits. The consequences of poor or
lack of procurement planning can never therefore be amusing.
Poterba (2001) emphasizes that evaluating suppliers is one of the most critical
functions of a purchasing manager, buyer, or purchasing manager, buyer or
purchasing agent. Many firms now run on a lean manufacturing schedule and use
just-in-time inventories so as nay delays in the supply chain can shut down
production and cost the firm its customers and reputation. Purchasing and
procurement professionals use many resources to find out all they can about potential
suppliers. The internet has become an effective too in searching catalogs trade
journals and industry and company publications and directories. Notably, purchasing
and procurement professionals are important to make certain that the supplier is
capable of delivering the desired goods or services on time, in time correct quantities
without sacrificing quality.
JIT is concerned with reducing safety stock and lot sizes. This will impact
significantly on how delivery from suppliers is structured. Buyer firms using JIT will
require suppliers to deliver exactly to their build schedule and more frequently with
smaller lot sizes. This should be reflected in the original supplier selection criteria,
creating the need to measure on-time delivery performance and minimum lot size
(Cousins et al, 2008)
Procurement of equipment, goods and services for the government and the public
sector generally is complex. On one hand there is a need to ensure best value for
money on behalf of the tax payer and the need to ensure that the processes to achieve
this are fair and open to scrutiny. On the other hand there is considerable pressure to
make savings (especially in the light of constantly reducing budgets) and to utilize
some or all of the best practice philosophies mentioned earlier. This has led to many
challenges for those undertaking procurement. Many observers will comment that
21
procurement in the public sector is about following procedures and yet, many say,, if
the procedures are followed then innovation and improvement in cost performance
(in line with commercial best practice) can be stifled (Bailey et al, 2008)
Cousins et al, (2008) highlight that it is important that the information is comparable
across suppliers so that for example information on quality from supplier A can be
compared to information on quality from supplier B. information should also be
timely and accurate. The supplier selection procedure relies on having up-to-date
information that provides an accurate representation of suppliers. Supply Strategists
can obtain information from a variety of sources, including information from
suppliers, supplier visits and supplier performance measures.
The selection of a procurement method is more than simply establishing a
contractual relationship. It involves creating a unique set of social relationships
where by forums of power within a coalition of competing or cooperative interest
groups are established. The selection of a procurement method is more than simply
establishing a contractual relationship. It involves creating a unique set of social
relationships where by forms of power with in a coalition of competing or
cooperative interest groups are established (Love et al, 2008).
The one credible complaint about procedure is that, as all applicants that meet the
purchaser’s minimum standards must be invited to bid, large numbers of bids must
be sought for some contracts, which can be expensive for both purchasers and
suppliers. The advantage of the open procedure is that the contracting time scales are
shorter than for the others procedures. However, the open procedure is not suitable
for contracts where the costs of bidding and assessment of bids are high unless there
are only few suppliers in the market. Thus, whereas using the open procedure
(properly) should ensure that a purchaser is safe from subsequent attack, it may be
preferable to opt for less open procedure, bearing the burden of justifying the
restricted invitation. The directives present a number of ways of doing this: the first
is called the restricted procedure (Cousins et al, 2008).
22
For the European Union Public Contracts directive provides the following main
features to the coordination of procedures for the award of public service contracts.
Provision is made, however, for a range of exclusions, including: rent of land,
existing buildings or other immovable property; development of programmer
material by broadcasters; contracts for broadcasting time; contracts for certain
telecommunication; contracts for arbitration and conciliation services; central bank
services; certain other financial services contracts; employment contracts and certain
research and development service contracts (Bailey et al, 2008).
The rules in relation to the use of the negotiated procedure without a call for petition
are very restrictive and apply to both the public and utility sectors, include urgency
for reasons not due to the purchaser or reasons which were seeable by the purchaser,
in other words urgency due to reasons outside the control of the purchaser. Other
reasons include that contracts have been advertised under the open and restricted
procedures and no responses have been receive that there is only one supplier
available or the requirements are additions to existing contracts where to change
suppliers would result in major technical problem (Cousins et al, 2008).
The negotiated procedure with a call for competition may be by the public service
sector when they have advertised under the open and restricted, procedure and
received only non-compliant or unacceptable bids or when the purchaser unable to
define their requirements to the level that would allow to award the contract under
the rules applicable to the open and restricted procedures (Cousin et al, 2008).
Just like a purchase decision, the selection of a management consultancy is complex
and is considered to be difficult. This is because it requires the purchaser to assess a
supplier’s ability to deliver an intangible product, the consultancy. Add to this that
consultancy cannot be realistically tested prior to purchase and that the buyer
typically has limited experience with purchasing such a service, and the level of
associated difficulty becomes apparent. It is important that purchasers have sufficient
access to information to be able to select management consultancies (Corocan and
McLean, 1998)
23
Whilst price is becoming an increasingly important factor in these days of cutbacks,
in the private as well as in the public sector, it is widely recognized that competitive
tendering on price alone is rarely a suitable means of selection as the professional
approach of firms can vary widely (Wimmer, 2003). Therefore, companies in the
private sector use a variety of criteria to judge the suitability of a consultant: the
previous experience of the supplier; the image or reputation of the consultant: the
buyer’s interaction with the consultant and recommendations by others.
These selection criteria are however not common for the public sector, because of the
European legislation prohibiting or at least impeding, this type of selection criteria
within the public sector. Although it is recognized that the value for money is “not
the lowest price’ and it involves some elements of the balance – that is – weighting
what was provided against price (Wimmer, 2003), the lowest price is one of the few
selection criteria supported by the European Public Tendering Process (PTP)
legislation. And even if the price criterion is not rated as a dominant attribute in the
selection process, it nevertheless plays an important role if the selection is based on
the most “economically advantageous” tender, the other selection criterion permitted
by PTP legislation. The price criterion is also important because of its capacity to
discriminate among a shortlist of similar proposals.
2.2.4 Procurement GovernanceThe Governance refers to how an institution is managed. It includes how a set of
activities in a given institution are undertaken in order to meet objectives of the
institution. It involves how resources such as human, materials, assets and money are
optimally utilized. Governance includes also how in institution relates and interacts
with its various stakeholders such as customers, suppliers, creditors and the general
public.
Procurement Governance as a subset on the other hand refers to how a set of
activities in a procurement cycle are performed according to laws, policies,
regulations and rules governing operations of a given institution.
24
Salient elements of good governance principles include; commitment and dedication
to the institutions, honesty, and integrity responsibility, accountability, transparency,
selflessness and mutual respect. These elements may form core values of some
procurement entities in general and procurement units in particular.
Good Procurement Governance has a number of benefits as it;
i. Facilitates optimal utilized of scarce resources
ii. Enables the institution to acquire goods and services of the right quality as
and when required
iii. Facilitates establishments and operation of best practices
iv. Minimize or eliminate stakeholders’ complaints
v. Improves the image of the institution
vi. Enables competitive and wise procurement
vii. Minimize the risk of buying of inferior goods and associated costs
In order to undertake such as task they should establish performance indicators and
benchmarks. It is however worth mentioning that Public Procurement Regulatory
Authority (PPRA) have developed some indicators and compliance indicators
(Procurement Journal Vol. III No. 9).
i. The compliance indicators are of five groups:
ii. Organization set up and functioning
iii. Procurement planning
iv. Tender process
v. Records Management
vi. Contract Management
Public institutions are required to work according to the indicators and the set
benchmarks. Private sectors may make use of theme as they are very beneficial. Thus
the importance of good procurement governance requires no overemphasis as its
benefits outweigh its costs by far. . Given by Ahmed S. K. Kilima - PSPTB Journal
pg 3 issue No. 3 July-Dec. 2010
25
Poor governance has been one of the major stumbling blocks to the economic
development of Africa and it has been clear that a number of African countries have
not paid adequate attention to the proper management of public resources. An
efficient public procurement system is vital to the advancement of African countries
and is a concrete expression of the national commitment to making the best possible
use of public resources (Kabaj, 2003)
It is an issue of concern in both developed and developing countries but many
developing countries have increasingly realized that a well-organized procurement
system contributes to good governance by increasing confidence that public funds
are well spent (Arrowsmith et al, 2000). Good governance is accountable,
participatory and transparent and it ensures that political social and economic
priorities are based on board consensus in society and that the voice of the poorest of
the poor and the most vulnerable are heard in decision making over the allocation of
resources.
The management of public procurement process is one of the functions that have
probably a wider implication in ensuring good governance because all government
departments charged with providing services are dependent on this process.
Reforming and strengthening systems of public procurement must be given a high
priority in the efforts to improve systems of governance in the African Countries
(Kabaj, 2003).
Planning both as a concept and function is probably one of the extensively talked
about concepts in the management literature. It is a function that forms the
foundation for the rest of management functions. When planning is properly
conceived and implemented, it can serve as an important mechanism for extracting
distributing and allocating resources (James, 2004). Planning generally enhances the
gathering, evaluating and interpreting of essential data and information in order to
produce knowledge relevant to good policy making.
26
The planning function encompasses defining an organization’s goals, establishing an
overall strategy for achieving those goals, and developing a comprehensive hierarchy
of plans to integrate and coordinate the activities. Procurement planning is the
primary function that sets the stage for subsequent procurement activities. It ‘fuels
and then ignites’ the engine of the procurement process (James, 2004).
In order to ensure public accountability, yet to gain optimum impact through the use
of commercial best practice, there is a need for professional training and education of
those personnel responsible for strategic direction and practical application of
procurement action. Professionalism can only come from a full understanding of all
the issues involved a sound knowledge, a sound knowledge of legal and commercial
aspects and the confidence to make decisions that effectively balance these tensions
(Bailey et al, 2008).
The internal regulatory mechanisms of government-accounting, procurement and
personnel have long received sustained attention as the centerpiece of reforms to
promote accountability (World Bank, 2000). Accountability of public officials is
critical in deterring corrupt practices and it creates an enabling environment for
vibrant private sector activity (Kabaj, 2013). 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 complex or unspecified that it is difficult to identity who is
responsible for what, activities are underfunded so that implementation is very
difficult or impossible (Therkildsen, 2001).
Perceptions which appear anecdotal, view politicians as only being engaged in
discussions on the conditions of contract, contract awards and purchasing initiation,
while concerned about image; together with public accountability being viewed as a
hindrance, present a negative and very narrow perspective, yet there does not
actually appear to have been a balance of empirical research into the actual roles and
potential roles of politicians in public procurement strategy and management. Indeed
such perceptions of politicians’ engagement with public procurement may undermine
the very democratic process so fundamental to public procurement and highlight the
27
need for a wider understanding of how public procurement fits within democratic
governance (Soudry, 2007).
2.3 Empirical Studies
2.3.1 General EmpiricalPooler (1997) emphasizes that; Materials Management sets itself the tasks of
understanding why materials needed, stored and or developing new methods of
making them available all activities concerned with material locomotion. That is, the
science and Technology of managing materials is more important because all areas
of applications are prudently included, that is from purchasing to warehouse, from
production control to inventory control, from transportation to physical distribution.
Pooler (1999), argue that Material Management is a managerial process that goes far
of beyond simply buying materials and warehousing whereby includes tactful
planning policy and procedures that cover a wider range of related activities,
including research and development as required for the proper selection of materials
and sources, ascertainment of delivery, inspection of documents on incoming
shipments to ensure quality and quantity compliance, development of procedures to
implement buying policies and stores policies, coordination or purchasing activities
with other internal division of the concern such as engineering, production, and
accounting, and development of effective communication with top management in
order to ensure a complete appraisal of the performance of the Materials
management function.
Romano (2000) argue that material management is concerned with the input process
of manufacturing and includes the flow of raw materials, spares, components and
finished goods to supply the sales and marketing functions with a final product. The
input process (Suppliers and Product) is separated from the output (Distribution and
marketing to consumers) because in a manufacturing concern the function involves
28
in the input process finally change the physical state of the product, and the functions
involved in the output process chance the location of the product, and the functions
involved in the output process change the location of the product in its same state.
The results of the reduction analysis have been applied to a larger body of research,
which has developed a best value tender analysis support tool that has the capability
to enable the identified attributes to be assessed on a project specific basis using a
combination of the analytic hierarchy principle, multi attribute utility theory and
whole life costing. The methodology underpinning the support tool has already been
used by RSL’s to assist them in best value decision making processes and as the
support tool has been produced as window based software it is anticipated what it
can be used to assist RSL’s in evaluating the high volume of best value tenders in a
more effective and efficient manner (Phillips et al, 2007).
In February 2004, the European Union adopted a set of new rules simplifying and
modernizing the Directives that outline EU law on public procurement. The new
Directives were published in the UE Official Journal on 30 April 2004. Member
States now have 21 months in which to amend national laws to implement them.
This means that the new rules will come into force on 31 January 2006. The main
themes of the reform were the simplification and modernization of the legal
framework and its adaptation to modern administrative needs, by for example
facilitating electronic procurement and improving the flexibility of certain
purchasing solutions (Pourbaix, 2004)
While recognizing the importance of a clear procurement process, guided by public
tendering, publication of winning bidder and mechanism for appeal for aggrieved
parties, various countries insert in their law provisions that are intended to protect
their national ‘sovereignty’. Such provisions usually take into account the country’s
industrial policy (e.g. protection of the country’s local industries), social policy (e.g.
protecting the role of women or the physically disabled) or protection of a country’s
strategic economic objectives such as regional integration. These provisions
although deemed desirable, especially for developing countries, have serious
29
connotations in as far as promoting free trade is concerned. These discriminatory
tendencies constitute a subtle protectionism to trade (Arrow smith et al, 2000)
Discrimination refers to a government’s tendency to favour its own domestic
industry’s supplies and disregard foreign firm supplies. There are two classical
forms of discrimination against foreign bidders in public procurement; explicit and
implicit. Explicit forms of discrimination can take various forms, two of which are
the “preferential price margin” and “domestic content requirement.” Under
“preferential price margin”, purchasing entities accept bids of domestic suppliers
over foreign suppliers as long as the difference in price does not exceed a specific
margin of preference. The price preference margin can result from an explicit “buy
local policy” e.g. ‘Buy America Act’. The United States government offered a 6%
preference for domestic suppliers. The preference can be raised to 12% in case of
small business and firms in regions of high unemployment and 50% of military
equipment. Explicit domestic preferences have also been applied in Canada,
Australia, New Zealand and Turkey (Naegelen and Mougeot, 1998). Under the
“domestic content requirement”, government purchases from foreign sources only if
the latter commit to purchase some components form domestic firms.
2.3.2 The Case of AbroadGershon, (2003) found that too much public procurement is undertaken without
professional support which results in sub-optimal value for money and unnecessarily
high prices being paid for goods, works and services. Most procurement is not
carried out by designated procurement staff, the procurement staffs are often
consulted too late in the procurement process and the majority of procurement staff
do not hold professional qualifications. Simply advising organizations to take up
“best practice” is impractical and unlikely to lead to achieving high performance
unless continuous support is provided.
Jones and O’Brien, (2002) found that the procurement problems are further
exacerbated by the fact that value for money must also be considered in parallel with
30
collaborative working. Present criteria used to evaluate the performance of
contractors often include: the quality of products and services, cost predictability,
time predictability, and their health and safety record. However, in longer term
relationships the RSL also needs to be as clear as possible with respect to its
corporate policies and strategies so their contractors can be assessed on new factors
such as: their willingness to work collaboratively and synergistically as partners;
their understanding of RSL objectives and cultures; and their openness and
willingness to share information and their ability to manage supply chains.
Murray (2007) demonstrated, form a small number of action learning research
projects, that, within UK local government, politicians, in collaboration with chief
officers, exhibited an enthusiasm and appeared to have the capabilities to be engaged
in strategic procurement management, specifically, determining the corporate
procurement strategy and mapping the procurement portfolio; challenging the desired
procurement outcome; challenging procurement delivery options; supplier selection
and contract award; and post contract management and review.
Romano (2000) emphasized that; Purchase decentralization is always associated with
purchase freedom, employee growth and task fulfillment, high delegation of
purchase decision making, authority and all purchasing efficiency and effectiveness.
However, he continues to emphasis that, the importance of efficient management of
material resources in any economy, need an efficient management of material not
only effect a particular industry or a particular organization but indeed the whole
economy of a national may easily be bogged if sound and acceptable principles
managing materials are not observed.
2.3.3 The Case of TanzaniaPPRA (2007) found that Public Procurement Act 2004 complies to a large extent
with applicable obligations deriving form national and international requirements. It
provides for competitive tendering procedures and access to complaints and
procurement appeals mechanism. From the interview, it was revealed that most of
the stake holders are not familiar with the PPRA of 2004. Only 30% are familiar with
31
the Act and 85% do not have a copy of the PPRA 2004. The associations
interviewed showed that out of five associations, only three indicated that their
members were familiar with the Act.
URT (2003) found that a number of weaknesses were observed in the
implementation of the current regulations including: lack of procurement planning in
government financed procurements; weaknesses in the advertisement of tenders;
non-compliance of contract award procedures and criteria; and weak complaints and
administrative review process. One of the most critical issues in the current practices
is the lack of procurement planning in government financed projects. Procurement
planning is essential for public procurement to achieve one of its major goals of
providing value for money.
PPRA (2007) reported that the PPA 2004 and its Regulations contain adequate
provisions emphasizing the use of the Standard Tender Documents and the use of
neutral specifications in any public procurement. Assessment revealed that technical
specification for 73.7% of the tenders assessed were developed by internal staff,
17.76% were developed by the responsible Ministry 5.4% were developed internally
and approved by the responsible Ministry while 3% of the samples data were not
available to reveal the source of the specifications.
The assessment has revealed that 5.56% of the tenders received form bidders were
rejected due to failure to comply with technical specifications, 23.36% were rejected
due to failure to comply with other requirements. By summing up the above analysis
we can conclude that 29% of bidders don’t know how to prepare responsive bids.
This indicates that there is a need to build capacity on how to prepare responsive
bids. It was also recommended that pre-bidding meeting with bidders to be
mandatory. In the pre-bid meeting PEs will debrief and clarify to the bidders their
requirements which will enable them to prepare responsive bids (PPRA, 200).
URT (2003) observed that for those tenders that use the open competitive process, it
was observed that there is no central media for advertisement of tenders or awards.
32
As a result, the notices are scattered in local and East African papers which might
explain why the same set of contractors (including foreign) have been participating
in most of the works contracts. The CPAR team was also informed that the rules and
procedures for bid submission and opening are often not adhered to. Instances
reported include breaches of confidentiality and collusion between the procuring
entity and bidders leading to competitors’ bids being revealed before the official
opening and bidders being allowed to replace their bids based on this information.
2.4 Variable and Conceptual Framework
The public procurement is an important function for national development. It is
through public procurement the government may efficiently use its funds (whether
own revenue or donor based revenue) for development activities. However, effective
public procurement depends on the various practices; procurement procedures,
procurement methods and procurement management. The performance of all these
may entail effective public procurement. However, the current situation does not
reflect better performance of procurement in the public sector. Moreover, there is
limited information in this area of concern. Due to this, the study is interested to fill
the gap.
It is envisaged that the use of a smaller number of named core attributes could
increase the efficiency of the tender analysis procedure and may assist the non-
professional support staff in their understanding of the process. However, as there is
no single authoritative and comprehensive listing of the different quality attributes
considered by all the stakeholders during a best value tender analysis.
Therefore, public procurement management includes the broad management
functions of planning, organization, and leadership, staffing, controlling, and
communicating procurement processes and activities across the spectrum of the
‘upstream’ supply chain activities of both public and organizations. A supply chain;
is a network of activities involving the suppliers on one hand and the customers on
the other hut being linked by an organization. Procurement; and its management, is
33
one of the activities of the supply chain. Two broad sectors of the economy do exist-
public and private sectors; and procurement take place in both sectors.
Public procurement is different form private procurement because in public
procurement, the economic results must be measured against more complex and long
term criteria and it must be transected with other considerations accountability, non-
discrimination among potential suppliers and respect for international obligations- in
mind besides the economy. The basic tenet of public procurement is to acquire the
right item at the right time, and at the right price, to support government actions but
although the formulae is simple, it involves questions of accountability, integrity and
value with effects far beyond the actual buyer\seller transactions at its center.
As government departments operate within a framework of public accountability and
cost effectiveness, considerable emphasis is placed on the fair treatment of suppliers,
compliance, competitive tendering and procedures for ensuring propriety and
regularity, hindering the development of collaborative procurement arrangements.
2.5 Measurement of VariablesThe measurement for the study involves the dependent variables and independent
variable. The dependent variables are compliance to procedures, benefits and of
tendering and quotation methods and procurement management. Therefore they will
be measured against independent variables. Compliance to procedures will be
measured against effectiveness of procedures, cost saving, reduction of lead time.
The benefits of tendering and quotation methods will be measured against speed of
processing, accuracy of documentation, quality of criteria used, acquisition of needed
supplies; and procurement management will be measured against information
coordination, proper decision making, flow.
34
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 OverviewResearch methodology is systematic approach through which research is undertaken.
The research methodology include research paradigm, design[strategy], description
of the case study, location of the study, nature of data required, measurement of
variables from conceptual framework, quality of data measurement, data collection
methods and instruments, sampling procedures, field work, data processing and
analysis, expected results.
3.2 Research StrategyResearch Approaches
Is a systematic way of dealing with a research problem. Solution for the research
problem will be found through methodology, methods and techniques which will
help the researcher to answer the research questions which address the research
problem. Primary data from the field and secondary data from various documents
will be collected and analysed in order to identify factors affecting effectiveness of
procurement process in public sector.
According to (Churchill et al 1984), there are two paradigms of doing research
namely positivism and phenomenological approach. The research used
phenomenological approach for qualitative research
Research paradigm is a way of examining social phenomenon from which particular
understandings of these phenomenon can be gained and explanations attempted
(Sounders et al, 2009). Therefore, for this study, a regulatory perspective paradigm
will be followed as a research philosophy. This is a perspective that seeks to explain
the way in which organizational affairs are regulated and offered suggestions as to
how they may be improved within the framework of the way things are done at
present (Sounders et al, 2009
35
Research Design
This is a plan that specifies how data were collected and analysed from the study. In
case of this study, the research design used was a Case study. A cases study is in
depth study of limited number of events/conditions and their interrelations. It deals
with the process that takes place and their interrelationships. It is a behavior –
patterns of the given unit as an integrated totality.
The case study was chosen because it will enable the researcher to obtain information
needed for the study, also it specifically helped the researcher to focus on a single
unit of study due to limited time and fund and also intensive investigation for the
study. The Temeke Municipal Council was selected as a case study due to the
following reasons:
(i) It is flexible in respect to data collection methods, it permit the use of
different data collection methods like observation, interview and documentary
review.
(ii) It can be used jointly with other designs example survey design.
3.3 Description of the Case Studied
The study was carried out at the Temeke Municipal Council in Dar es Salaam. It was
chosen because it enabled the researcher to obtain information needed for the study,
it also helped the researcher to focus on a single unit of study due to limited time and
fund and also intensive investigation for the study. The Temeke Municipal Council
was selected as a case study due to the following reasons:
(i) It is flexible in respect to data collection methods, it permit the use of
different data collection methods like observation, interview and
documentary review.
(ii) It is the place where a researcher is working, thus somehow somewhere it
will increase the accessibility of data during the process of data collection.
36
3.4 Location of the Study
Temeke Municipal Council headquarters’ office is located along Mandera and Taifa
road. Temeke Municipal council is one among other Municipal councils in Tanzania
which was established under District Act No 7 of 1982.And the Local Government
Authority Act which makes provision for city authorities and provides the related
matter.
TMC is formed by councils which operates a political organ and major is the Head of
the council; he is appointed by members of the council (Councilors) from 41 wards
of the TMC. Temeke Municipal council has all the responsibility of planning,
coordinating, supervising, and implementing all Development projects in the city of
Arusha as provided by LGA and Registration.
To ensure effective performance in management of these projects the Municipal
Organization structure is composed of three Directorate commeets which are;
planning, statistics, and Economics, internal Audit Legal and Security services.
Within these Directorates committees there are eight (8) operation Departments
which are headed by heads of Departments these are;
1. Administration and Human Resource,
2. Education and culture
3. Health and Waste
4. Agriculture and Livestock
5. Works and Fire Rescue,
6. Urban planning,
7. Planning and Monitoring,
8. Finance,
9. Industries and Trade
3.5 Nature of the Data RequiredThe researcher used different types of data for the study. The researcher collected
both primary and secondary data.
37
(i) Primary data were obtained from respondents who are knowledgeable with
procurement activities at the Council. These data were obtained as first-hand
information. The primary data were obtained from respondents by interview,
and observation.
(ii) Secondary data were collected from Temeke Municipal Council operating
reports, requisitions, purchase forecasts and funds earmarked for purchase
activities. These were second hand information. Secondary data means data
that are readily available that is the data which have already been collected
and analyzed by someone else. Secondary data may either be published or
unpublished data. Usually published data is available in various publications
of the Municipal council, technical and trade journals, books, magazines and
newspapers, different reports, etc.
3.6 Measurement of Variables from Conceptual FrameworkThe measurement for the study involves the dependent variables and independent
variable. The dependent variables are compliance to procedures, benefits and of
tendering and quotation methods and procurement management. Therefore they will
be measured against independent variables. Compliance to procedures will be
measured against effectiveness of procedures, cost saving, reduction of lead time.
The benefits of tendering and quotation methods will be measured against speed of
processing, accuracy of documentation, quality of criteria used, acquisition of needed
supplies; and procurement management will be measured against information
coordination, proper decision making, flow.
3.7 Quality of Data MeasurementThe researcher makes sure that all the data obtained had the required quality. Thus
ensuring they were valid and reliable.
(i) Reliability of data
Reliability is consistency of measurement or, the degree to which an instrument
measures the same way each time are used under the same condition with the same
subjects. The collected data from different staff covered relevant information
38
required by the researcher. This means that internal estimates reliability by grouping
question in questionnaires that measure the same concept.
(ii) Validity of Data
This refers to quality of an instrument used in research to measure what is supposed
to measure. The researcher ensured that the data obtained through interview using
questionnaires were collected from authority personnel in order to maintain the
validity and reliability of data in this research.
3.8 Data Collection Methods and Instruments
(i) Data Collection Methods
The research adopted various approaches of data collection which led to obtaining
information relevant to the study, where interview, observation and survey
approaches were used.
Interview
This is a data collection technique in which an interviewer reads the same set of
questions to the respondent in a predetermined order and records his/her responses
(Saunders et al, 2007). The interview was also applied so as to collect further data.
The researcher in this study administered the questionnaire to the respondents by
asking the questions to the respondent and recording the responses as provided by the
respondent. For closed ended questions, the researcher read the questions and the
respondent was supposed to choose the best answer among the options provided by
the researcher. For open ended questions, the researcher read the question and gave
the respondent a chance to provide answer while the researcher records the answer
provided by the respondent to the respective questionnaire.
Survey
This refers to data collection using a survey strategy usually by information that has
already been analyzed for their original purpose (Saunders et al, 2007). The use of
documents as part of source for data collection is important. Secondary data were
39
collected from the documents. These were forms, reports and various reading
available related to the subject matter under the study.
Observation
This is the method or process whereby the researcher paid a personal visit on the
field ground. The researcher was involved in a day-to-day activities concerning
procurement process effectiveness. This enabled the researcher to understand clearly
about assessing the effectiveness of procurement process at Temeke Municipal
Councils, and it helped the researcher to gain high level of understanding of the
subject.
Documentation
This included the information from documentary records, published data and
internet, also various document such as store ledger, issue voucher, LPO, RV,
contract manual, procurement news, tender documents and reports from various
meeting that have been done at Temeke and Kinondoni Municipal Council
(ii) Data Collection Instruments
These are instruments normally used to gather data for the study. For the case of this
study the researcher used questionnaire as a data collecting tool.
Questionnaire
A questionnaire is data collection instrument in which a person is asked to respond to
the same set of written down questions in a predetermined order (Saunders et al,
2007). The application of questionnaire helps a researcher to collect primary data.
The questionnaires were administered by a researcher. This instrument was applied
because it was easy to use and had good impact on general data collection.
40
3.9 Sampling Procedures
(i) Target Population
As the area of interest in this research was to the measurement of effectiveness of
procurement process in a public sector, the unit of the study was employees of
Temeke Municipal Council. Allemployees who are procurement officer at PMU or
any other employees working in different departments with the procurement
activities form the population of the study.
The target population comprised of procurement personnel from the PMU and other
different user departments such as Administration and Human resource, Education
and Culture, Health and Waste, Industries and Trade, Urban planning, Work and Fire
rescue, Planning and Monitoring, Finance. The research consisted of 20
employees/respondents and this was because of the difficult to study the whole
population. Since the center of interest was procurement effectiveness at the
Municipal Council, the information was drawn from Procurement Management
Unity (PMU) office and stores departments. These departments dealt with various
transactions at the Municipal related to procurement. Therefore drawing a sample
from these departments enabled and enhanced the achievement of right respondents
and data for the study.
(ii) Sample Size
A random sample size of 20 respondents was drawn from different procurement
personnel available at PMU office (8) and stores of different user departments such
as Administration and Human resource (1), Education and Culture (2), Health and
Waste (2), Industries and Trade (1), Urban planning (2), Work and Fire rescue (2),
Planning and Monitoring (2). Basically at Temeke municipal council the sample for
the study were 20 respondents whereby all 20 were procurement personnel selected
from PMU office and other departments.
41
(iii) Sampling Technique
The non- probabilistic sampling techniques was adopted, that enabled the researcher
to select respondents with necessary and relevant information. The technique was
less costly and it was quick to select a sample. The decision as to what sampling
method to be used depends on the aim of study, the expected degree of accuracy of
the study results and the sampling cost.
In this non-probabilistic sampling, the purposive sampling was applied because it
helped to access respondents who are knowledgeable about procurement activities as
they are undertaken at the Municipal Council. Twenty procurement personnel were
obtained as respondents from different sub departments at the Municipal Council
who were expected to provide reliable data (Sounders et al, 2007)
3.10 Field WorkThe researcher began data collection at the beginning of May, 2013. For the period
of two weeks, the researcher visited the head offices of Temeke municipal council.
At the head office the questionnaires were administered to the required respondents
as sample described thus procurement specialists at different departments of the head
office.
By the end of May, 2013 data collection was accomplished and the researcher went
back and continued with other steps of data compiling and report writing.
3.11 Data Processing and Analysis
(i) Data Processing
Data management entails the whole process of handling data form their collection,
processing and analysis. Better data management leads to availability of liability and
validity of data. The researcher administered data collection tools during data
collection by providing further details (when needed) to support proper answers.
Moreover, the data were inspected and corrected form the first stage of data
collection. The inspection and correction of data was based on the measurement
criteria established. Further, the data were processed for error cleaning so as to get
42
only useful data for analysis, which was done basing on the variables and
measurement.
(ii) Data Analysis
For the matter of easy interpretation of study findings the researcher analyzed data
manually. With the use of statistics in the form of tables data were interpreted. The
interpretation was done from data presented in terms of frequencies and percentages.
However, the bases for interpretation depended on knowledge gained form the
literature review in relation to the research questions established before.
43
CHAPTER FOUR
FINDINGS AND ANALYSIS
4.0 IntroductionThis chapter present the findings found during the study. The findings are presented
in accordance to the research objectives established before.
4.1 Effectiveness of Procurement Process
4.1.1 Participation in procurement process
The procurement process requires different employees associated in order to ensure
effective procurement process. The results show that all respondent (100 percent)
reported to participate in the procurement process. Effective participation in the
procurement process is important in order to assure effective management in the
purchase of government services and materials.
Table 4.1Participation in Procurement ProcessVariables Frequency Percentage
Yes 20 100
No 0 0
TOTAL 20 100
Sources: Survey data
4.1.2 Difficulties in Procurement Process
The results show that there are difficulties in the procurement process. This was
reported by all the respondents (100 percent). This shows that while procurement is
conducted employees find some difficulties in processing the procurement in various
ways or forms and therefore in that sense the process is not conducted smoothly. This
will further be detailed in the coming chapter.
44
Table 4. 2 Difficulties in Procurement ProcessVariables Frequency Percentage
Yes 20 100
No 0 0
TOTAL 20 100
Source: Survey data
4.1.3 Effectiveness of Procurement Process
The study aimed at determining the effectiveness of procurement process as
conducted at Temeke Municipal Council. The results show that the procurement
process is effective as reported by 55.0 percent of the respondents where as 10
percent of respondents said the process is very effective. 30.0 percent of the
respondents reported that there is moderate performance of the procurement process
while 5.0percent of the respondents reported that the procurement process is
ineffective. Generally it was found that the procurement process is at better position
at the Municipal Council.
Table 4. 3Procurement Process EffectivenessVariables Frequency Percentage
Very Effective 2 10.0
Effective 11 55.0
Moderate 6 30.0
Ineffective 1 5.0
Very ineffective 0 0.0
TOTAL 20 100
Source: Survey data
4.1.4 Cost EfficiencyThe public procurement, one among other things, requires efficient use of the public
funds. Following this fact, it was important for the study to find out the performance
of the procurement process at the Temeke Municipal Council to the cost efficiency or
cost minimization. The results show that there is moderate cost reduction in the
45
process of implementing various procurement activities, as reported by 65.0 percent
of the respondent. 35.0 percent of the respondent said that the cost efficient is high.
Table 4. 4Cost EfficiencyVariables Frequency Percentage
High 7 35.0
Moderate 13 65.0
Low 0 0
TOTAL 20 100
Source: Survey data
4.1.5 Lead Time Performance
Lead time performance is the area of procurement process efficiency
implementation. From the study it was found that 55.0 percent of the respondents
agreed that the procurement process has reduced lead time at the Temeke municipal
council. But 35.0 percent of the respondents disagree that the procurement process
reduce lead time while 15.0 percent of the respondents strongly agree that the
procurement process reduces lead time.
Table 4. 5 Lead Time PerformanceVariables Frequency Percentage
Strongly Agree 3 15.1
Agree 11 55.0
Neutral 0 0
Disagree 6 30.0
Strongly disagree 0 0.0
TOTAL 20 100
Source: Survey data
46
4.2 Best Procurement Method
4.2.1 Procurement methods Used
The respondents were exposed to two procurement methods which are regularly used
at Temeke Municipal Council. These are Quotation and Tender methods. They were
requested to indicate which one among the two is the best in procurement based on
the experience.80.0 percent of the respondent reported tendering to be the best
method while only 20.0 percent of the respondents choose quotation as the preferred
method in procurement process.
Table 4. 6Best Procurement methodVariables Frequency Percentage
Tender 16 80.0
Quotation 4 20.0
TOTAL 20 100
Source: Survey data
4.2.2 Processing Speed
In the procurement process, speed is very important. Speed can help to satisfy
customers on one hand and can assist timely implementation of different activities,
programs and projects of the Municipal council. However, the results show that with
the tendering method speed is moderate as reported by 70.0 percent of the
respondents, while 20.0 percent and 10.0 percent of the respondents said the speed is
high and low respectively. In the case of quotation method of procurement, speed
was found to be high as reported by 75.0 percent of the respondent where as 25.0
percent of the respondents said that the speed is moderate.
47
Table 4.7 Processing SpeedHigh Moderate Low
Tender Frequency 4 14 2
Percentage 20.0 70.0 10.0
Quotation Frequency 15 5 0
Percentage 75.0 25.0 0
Source: Survey data
4.2.3 Effectiveness of processing criteriaThe study found that processing criteria are effective as reported by 95.0 percent of
the respondent where as 5.0 percent of the respondent reported that the processing
criteria are not effective. From those results it shows that the set criteria for
procurement process at Temeke Municipal Council are good. Thus, based on the
criteria available the procurement process can be effectively conducted.
Table 4. 8 Processing Criteria EffectivenessVariables Frequency Percentage
Yes 19 95.0
No 1 5.0
Total 20 100
Source: Survey data
4.2.4 Effectiveness of Tendering Method75.0 percent of the respondents show that the tendering method is effective where as
15.0 percent of the respondent said the tendering method is moderate. But 10.0
percent of the respondent said tendering method as conducted at the municipal
council is very effective.
48
Table 4. 9 Effectiveness of Tendering MethodVariables Frequency Percentage
Very effective 2 10.0
Effective 15 75.0
Moderate 3 15.0
Ineffective 0 0
Very ineffective 0 0
TOTAL 20 100
Source: Survey data
4.2.5 Effectiveness of Quotation methodIn the case of quotation method as applied at Temeke Municipal Council, it was
found that 55.0 percent of the respondents said the effectiveness of quotation method
is moderate. 20.0 percent of the respondents said it is effective and 15.0 percent of
the respondents said it is ineffective. 10.0 percent of the respondent said the
application of quotation method is very ineffective where as 5.0 percent of the
respondent said is very effective.
Table 4.10Effectiveness of Quotation MethodVariables Frequency Percentage
Very Effective 1 5.0
Effective 4 20.0
Moderate 10 50.0
Ineffective 3 15.0
Very ineffective 2 10.0
TOTAL 20 100
Source: Survey data
49
4.3 Personnel Performance
4.3.1 Performance of Procurement PersonnelThe results show that 60.0 percent of the respondent reported that performance of
procurement personnel is good while 40.0 percent of the respondent reported the
performance of the procurement personnel was better.
Table 4. 11 Performance of Procurement PersonnelVariables Frequency Percentage
Better 8 40.0
Good 12 60.0
Poor 0 0
TOTAL 20 100
Source: Survey data
4.3.2 Information Coordination PerformanceInformation coordination is one of the important factors in the whole process of
procurement. When coordination is well conducted, procurement can thus be
conducted effectively, the performance on information coordination as reported by
the respondents show that 65.0 percent of the respondents said it is good, 30.0
percent of the respondents said it is better and 5.0 percent of the respondent said it is
poor.
Table 4. 12 Information Coordination ProcessVariables Frequency Percentage
Better 6 30.0
Good 3 65.0
Poor 1 5.0
TOTAL 20 100
Source: Survey data
50
4.3.3Decision making in the Procurement ProcessAnother area of procurement performance is decision making. Timely and proper
decisions are key indicators to the effective procurement process. The decision
making plays a great role in facilitating the performance of the procurement process.
The results show 100percent (all respondents) said there is a proper decision making.
Table 4.13Decision making PerformanceVariables Frequency Percentage
Yes 20 100
No 0 0
TOTAL 20 100
Source: Survey data
4.4 Problem Facing the Procurement Management
4.4.1 Bureaucracy
Bureaucracy is one of the mentioned problems in the procurement process at theMunicipal Council. It was found that bureaucracy affects procurement performanceand management performance since it creates unnecessary difficulties especiallywhen documents need to be signed for further process. It was also discovered thatdelegation in procurement activities is not widely done. On the other hand it was saidthat the problem appears in the form of decision making. Some officers do not makeproper decisions as required. As a result of all these, the performance of procurementbecomes low because of unnecessary delays which then affect the implementation ofother activities.
4.4.2 Lack of proper knowledge, skills and capacity
Adequate capacity in the form of appropriate structures with fully skilled and professional
procurement personnel is a key success factor for effective procurement process
implementation. However, in the case of Temeke Municipal Council, lack of proper
knowledge, skills and capacity was found to be a problem. It was said that therelack
51
of profession skills in tender and evaluation. For this reason tender processing has
been sometimes ineffectively implemented.
4.4.3 Lack of Capacity Building in Public Procurement Act and Regulation
In addition to the stated above problems, there is a low capacity building in areas of
public procurement act and regulation. Most of the employees used to work on
customary bases. This is because, apart from establishment of new laws and
regulations in order to build awareness and application abilities, little has been done.
As a result some of employees become weak in preparing and processing
procurement activities, although they have to do them as part of their studies.
4.4.4 Poor Specifications
It was reported also there is a problem of poor specification of materials or
documents in the Municipal Council. Contradictions have been occurring in this
process. Specifications were named as causing difficulties in determining right
documents and materials. Moreover, it was learned that due to poor specifications,
there are loss occurrence because of purchasing or supplying unrelated materials. For
instance the supply of poor quality material or unrelated materials, cost the
Municipal Council to either purchase new materials or use them within a short period
of time.
4.4.5 Delay in Payments
The problem of delay was named as most paining one. Delays were found in the
document processing, decision making and delivery of materials. It was learned that
most of the time delays occurs only because of being busy for other activities.
However, decision making was the most factor causing procurement process delays
rather than other factors. Moreover, sometimes work load and inadequate personnel
have been leading to the delays.
52
4.4.6 Taking Too Long to Take Decision
As it has been pointed above decision making has been a problem in a procurement
process effectiveness at Temeke Municipal Council. Generally, the respondents
reported that senior officers have a tendency of making late decisions on account of
having many procurement activities within a short period of time. They are very
occupied therefore they cannot read and make timely decisions as required.
However, although some of these senior officers can delegate such duties to their
subordinates, they always don’t do that. The effects of all these is poor performance
of procurement process.
4:4:7 Non-compliance with policies and regulationsCompliance with Procurement policies and regulations was also found to be a
problem at the Municipal Council, some of the practices relating to non-compliance
with rules and procedures such as: the tendency not to utilize a competitive process
for both quotations and bids, and incorrect utilization of the preference points
system, use of unqualified suppliers, passing over of bids for incorrect reasons;
utilization of the incorrect procurement process in respect of the thresholds;
extensions of validity periods; and incorrect utilization of the limited bidding process
were observed.
4.4.8 Improper planning and linking demand to the budgetIt was also reported that: there is a problem of improper planning and linking
demand to budget at Temeke Municipal Council. Planning and demand management
is integral to the procurement process. It actually defines the decision-making
process that allows departments to procure at the right time, at the right place and at
the right cost but Temeke Municipal Council is still faced with this challenge of
improper planning and linking demand to budget.
4.4.9 Inadequate measures for monitoring and evaluationIt was also reported that there was inadequate measures for monitoring and
evaluation systems. Inadequate monitoring and evaluation is normally linked to the
53
absence or the poor presence of a control environment, and the government entities
are placed in a difficult position to give effect to or implement SCM as required by
the policy. Hence, deviations or non-compliance goes undetected or is identified after
the fact
54
CHAPTER FIVE
DISCUSSIONS
5.1 IntroductionThis chapter undertakes discussions of the findings which have been reported in
chapter four. It tries to make linkage of different matters as presented before. But the
discussion is based on the objectives of the study.
5.2 Effectiveness of Procurement ProcessThe study wanted to understand the procurement process effectiveness. The purpose
of examining the procurement process effectiveness was to discover the real situation
at the Temeke Municipal Council, whether the procurement process is properly
conducted. Several issues have been examined and their results presented in chapter
four.
One of the areas showing effectiveness of procurement process is employees’
participation in the whole or part of the procurement process. The results showed that
all respondents which is equivalent to 100 percent of the respondents reported to
participate in the procurement process. This is a good indication that procurement
process is effectively conducted.
Although there is good participation in procurement process, the employees have
been facing difficulties in conducting it as it was reported by 100 percent of the
respondent. It was found that some of the difficulties appear in the form of decision
making, compliance of procurement procedures, inadequate and untimely
presentation of information and inadequate knowledge on procurement activities. All
these issues have been affecting the procurement process especially during tender
preparation and evaluation. There are difficulties in evaluating the submitted tender
documents as per criteria. This is due to technical documents presented where by
some employees lack such knowledge to determine proper and qualified documents.
However, apart from all these, the general results show that there is effective
55
procurement process at the Municipal Council as reported by 55.0 Percent of the
respondents.
The effectiveness of procurement process was viewed also against cost efficiency. It
was assumed that cost efficiency in procurement is directly related to the way
procurement activities are undertaken. If the activities associated with procurement
are well considered the cost can be minimized and therefore it is possible to think
that the procurement process is effective, otherwise the vice versa can take part. The
evidence from the study shows that, as reported by 65.0 percent of the respondents,
cost efficiency is moderate. Based on this fact, the procurement at the Municipal
Council is not effective in the sense that there are some loopholes that causes further
expenses during the procurement process.
With moderate cost efficiency, it means that there are added costs whether
intentionally or un intentionally which ultimately affects the government budget.
Furthermore; the procurement process is associated with lead time. The effectiveness
in lead time signifies the better performance of the procurement process. However,
the study found that 55.0 percent of the respondents agree that the procurement has
reduced lead time at Temeke Municipal Council.
5.3 Best Procurement Method and its Effectiveness
The study aimed at determining the best method of procurement process and how
effective it was. Two methods were compered thus tendering and quotation method.
When asked to state which among the two is most effective 80.0 percent of the
respondents said tendering process is the best method than quotation. It was learned
that for the Municipal’s procurement activities to be effectively conducted should use
tendering method. It ensures perfect and proper way of purchasing government
materials or services as well as help minimizing public funds misuse. However, the
results show that with the tendering method, speed is moderate as reported by 70.0
percent of the respondents. Since processing speed is moderate it reflects that the
performance of tendering method is moderate from speed respective.
56
Tendering depends on specific criteria for assessment and selection of winners as set
by the Procurement Act 2004. The study found that processing criteria are effective
as reported by 100 percent of the respondents whereas none of the respondent
reported the processing criteria to be not effective. These results indicate that the
criteria are actually good, though their application may be inefficient in some of the
areas. But in the case of quotation, it was said that, the criteria are not good at all
because the decision for procurement remains to the few who may decide for the
organization. Therefore, the quotation is mostly leading to loss of public funds and
misuse.
Under this situation 75.0 percent of the respondents show that the tendering method
is effective. In the case of quotation method as applied in the Municipal, it was found
that 55.0 percent of the respondent said that the effectiveness of quotation method is
moderate. The results are due to the nature of methods application and the end
results. Respondents weighed the performance of these methods based on the
archiving quality materials or services and the management of public funds.
In reality the personnel were found to have good performance. The results showed
that 60.0 percent of the respondents reported that there is good performance of the
procurement personnel. Employees were found to conduct their duties in accordance
to the profession.
In addition to the information in procurement activities is very important and key to
the procurement effectiveness. The performance of the information coordination as
reported by the respondents it shows that 65.0 percent said it is good. Together with
information and personnel, decision making is the area of importance. The results
show that 60.0 percent of the respondents said the decision making in the
procurement management is proper. Thus, the performance of procurement process
is good because of proper decision making during the process from the preparations
and implementation.
57
5.4 Procurement Process ProblemsSome of the listed procurement difficulties involve; preparation of tender documents
and evaluation, bureaucracy, there are many such as poor specifications, delays in
procurement process, inadequate knowledge in procurement processing, procurement
takes long time, and payments are not done at right time.
The sustainability of Public Procurement Act No.3 2004 is at risk because there is
not a clear understanding as to its full potential as a financial and budgetary control
mechanism. The risk is increased due to stated problems, for instance bureaucracy
has undermined the procurement process where as commitment to the managing it
has been low. The tendency of most seniors’ authorizers has been working under
personal motives rather than stated guidelines.
58
CHAPTER SIX
SUMMARY, CONCLUSION AND RECOMMENDATIONS
6.1 IntroductionThis chapter presents the conclusion and recommendations of the study. These are
based on the findings of the study.
6.2 SummaryThe overall objective of the study was to examine the procurement process
effectiveness in the public sector, a case of Temeke Municipal Council. Specifically,
to examine the effectiveness of procurement process at Temeke Municipal Council.,
to identify the best procuring method at the Municipal Council and to identify the
problem facing the procurement management unit and procurement department at
Temeke Municipal Council.
The research design used was the case study. Types of data used were primary and
secondary data. The tools used for data collection were questionnaire and interview.
Samples for the study were 20 respondents. A purposive sampling technique which is
a non-probability or judgmental sampling procedure was used to determine the
sample units. Data analysis was done manually.
The study findings are put under the study objectives.
The first objective of the study covered the effectiveness of procurement process.
Several matters were examined. First: personnel participation in the procurement
process and results show that 100 percent of the respondents reported to participate
in the procurement process. Second: difficulties in procurement process and results
show that there are difficulties faced in procurement process as reported by 100
percent of the respondents. Third: effectiveness of procurement process and results
show that procurement process is effective as reported by 55.0 percent of the
59
respondents. Fourthly: cost efficiency, results show that there is moderate cost
reduction in the process of implementing various procurement activities as reported
by 65.0 percent of the respondent. Fifth: lead time performance, it was found that
55.0 percent of the respondent agree that procurement process has reduced lead time
at Temeke Municipal Council. Sixth: performance of procurement personnel, the
results shows that 60.0 percent of the respondents reported that there is good
performance of procurement personnel. Seventh: information coordination
performance, the performance of the information coordination as reported by 65.0
percent of the respondent is good. Eighth and finally: decision making in
procurement process, the results show 60.0 percent of the respondent said the
performance decision making in procurement is proper.
The second objective covered the best procurement methods as preferred by
procurement personnel and its effectiveness. Several matters were examined. First:
the best method of procurement and 80.0 percent of the respondents said tendering is
the best method. Second: processing speed, results show that with the tendering
method speed is moderate as reported by70.0 percent of the respondent. Third:
effectiveness of processing criteria, the study found that processing criteria are
effective as reported by 100 percent. Fourth: effectiveness of tendering method and
75.0 percent of the respondents reported that the tendering method is effective. Fifth:
effectiveness of quotation method, it was found that 55.0 percent of the respondent
reported that the effectiveness of quotation is moderate.
The third objective covered problems facing procurement process. The following
problems were found; bureaucracy, lack of knowledge, lack of capacity building in
procurement act and regulations, poor specifications, delays in payment, and taking
too long to make decision.
6.3 ConclusionThe conclusions are made against research questions. Therefore, these are the
answers for those research questions.
60
One of the questions was ‘to what extent is procurement process effective at Temeke
Municipal Council. The findings show the following: 100 percent of the respondents
reported to participate in the procurement process. Although the employees have
been facing some difficulties in the procurement process as reported by all the
respondent (100 percent), but general results show that there is effective procurement
process at the Municipal Council as reported by 55.0 percent of the respondent. The
evidence from the study shows that, as reported by 65.0 percent of the respondent,
cost efficient is moderate while 55.0 percent of the respondents agree that the
procurement process has reduced lad time. The results show that 60.0 percent of
respondent reported that there is good performance of procurement personnel. The
performance of the information coordination as reported it shows that 65.0 percent of
the respondent said is good and 65.0 percent of the respondent reported that the
performance decision making in procurement is proper.
Conclusion: It is concluded that procurement process is effective at Temeke
Municipal Council.
Another question was ‘which is the best procurement method at Temeke Municipal
Council and how effective it is. The findings show the following. When asked to
state which among the two methods is most effective, 80.0 percent of the respondents
reported tendering is the best method comparing to quotation. The results show that
with the tendering method, speed is moderate as reported by 70.0 percent of the
respondents but processing criteria are effective as reported by 100 percent of
respondents and 75.0 percent of the respondents show that the tendering process is
effective. In the case of quotation method as applied in Temeke Municipal Council, it
was found that 55.0 percent of the respondent said the effectiveness is moderate.
Conclusion: It is concluded that the tendering method is the best in the procurement
process at Temeke Municipal Councel and it is effective.
The final question was ‘what were the problems faced by procurement personnel
during the whole process of procurement at Temeke Municipal Council? The
61
findings show the following: bureaucracy, poor specifications, delay in procurement
process, are some of the problem affecting procurement performance. There were
many others such as procurement process takes longtime, payments are not done at
right time, lack of knowledge and lack of capacity building in procurement act and
regulations.
Conclusion: It is concluded that, there are several problems that affect the
performance of procurement process at Temeke Municipal Council.
6.4 RecommendationsThere are a number of issues that could be considered in order to enhance
procurement process in public sector specifically at Temeke Municipal Council. The
researcher has addressed the following recommendations in order to improve the
situation:-
Training to procurement staffs and Tender Board members
The organization should ensure that workers especially in PMU and Tender Board
are well trained by taking key persons to further training to increase their knowledge
and competencies on procurement process in general. Also Tender Board members
who are selected from heads of various departments should attend short courses and
seminars in order to know their responsibilities in tender process and procurement in
general. Against this background, it is evident that public procurement practitioners
require specific knowledge about the procurement objective, SCM policy, preference
procurement policies and so forth in order to manage the procurement process
effectively. Specialised training programmes are therefore required to equip actors
with the skills to achieve procurement objectives.
Key issues such as employment of qualified procurement practitioners, training and
employment of learnership programmes, development of an effective monitoring and
evaluation tool, and the creation of incentive programmes to motivate good
performance should be employed.
62
In addition, institutions of higher learning and other service providers should equip
learners and practitioners with appropriate skills and knowledge through the
development of a syllabus that ensures sustainable procurement in Tanzania.
Number of employees should be increased
Staffs in PMU are not enough and competent to handle all activities of procurement
as required. The organization should ensure that it employs competent and skilled
people who can handle procurement activities and if happen can perform contract
management activities. It should employ people with skills in contract, laws and
negotiations.
Transparent and accountable systems
Accountability constitutes a central pillar to public procurement. Without transparent
and accountable systems, the vast resources channeled through public procurement
systems run the danger of being entangled with increased corruption and misuse of
funds.
To fight the scourge of maladministration, mismanagement of finances, fraud and
corruption, government needs to strengthen and review existing internal control
systems to detect deficiencies.
Compliance with policies and regulations
Procurement process is guided by a number of related policies and regulations. It is
very important for the procurement staffs to comply with the policies and regulations
in order to enhance the whole process of procurement.
Effective policy-making requires information on whether governments are doing
things right and whether they achieve the results intended. Strong monitoring and
evaluation systems provide the means to compile and integrate this valuable
information into the policy cycle, thus providing the basis for sound governance and
accountable public policies.
63
6.5 Recommendations for Further Studies
The study reviewed that there a lot of external factors affecting the procurement
process. To this end therefore a further study should be carried to establish external
factors affecting procurement process of supplies in the public sector. Moreover, a
study should also be carried out to establish the challenges faced while carrying out
procurement process of supplies in the public sector.
64
REFERENCES
Arrowsmith, S; Linarelli j and Wallace D jr (2000), Regulating Public Procurement:
National and International Perspectives, Kluwer Law International.
Bailey Peter; Farmer David; Crocker Barry; Jessop David (2008), Procurement
Principles and Management, 10th Edition, Prentice Hall, London.
Bally P. H. (1999), Purchasing and Supply Management, 4th Edition
Corcoran J McLean F. (1998), The Selection of Management Consultants, How are
Governments Dealing with this Difficult Decision? An exploratory
study, International Journal of Public Sector Management, Vol. 11
No.1, pp. 37-54
Cousins Paul; Lamming Richard; Lawson Benn; and Squire Brian (2008), Strategic
Supply Management, Principles, Theories and Practice, Prentice Hall,
London
Gershon p. (2003), Releasing Resources to the Front Line: Independent Review of
Public Sector Efficiency, the Stationary Office, London.
James U.V (2004), Public Policy and the African Environment: An Examination of
the Theory and Practical of the planning process of the continent, In
Kalu, A.K. (E.D) Agenda Setting and Public Policy in Africa;
Ashagte, England
Johnson G. (2002), Exploring Corporate Strategy (3rd Edition), Hemel Hempstead,
UK: Prentice Hall
Jones M. O’Brien v. (2002), Best Practice in Social Housing Development, Thomas
Telford, and London.
65
Kabaj O. (2003), the Challenge of African Development, Oxford University Press
Kothari C.R. (2006). Research methodology: Methods & techniques India: New Age
International Publishers.
Love Peter E. D; Davis, Peter R, and Edwards, David J. (2008), Uncertainty
avoidance: public sector clients and procurement selection,
International Journal of Public Sector Management, Vol. 21 No 7 pp.
753-776
Morris Stephen (2003), Purchasing Principals and Management: 4th Edition.
Murray J.G. (2007), “Strategic Procurement in UK Local Government: The Role of
Elected Members.” Journal of Public Procurement, 7(2): 194-212
Naegelen F. and Mougeot M. (1998), Discriminatory Public Procurement Policy and
Cost Reduction Incentives, Journal of Public Economic 67(1998) pp.
349-367
Otieno (2004). Procurement activities in public institutions. Unpublished thesis.
Jomo Kenyatta University of Science and Technology, Kenya
Phillips S, Martin J, Dainty A, Price A.D.F. (2007), Uncertainty in best value
decision making Journal of Financial Management of Property and
Construction, Vol. 12 No. 2, pp. 63-72
Pooler David J. (1999), Purchasing and Supply Management Published by University
of Michigan, Michigan.
Poterba D. (2001), Speculative Dynamics, Review of Review of Economics Studies
58.
66
Pourbaix N. (2004), the New Public Procurement Directives of the European Union,
Business Law Review, No. November, pp. 202-205
PPRA (2007), Assessment of the country’s Procurement System, Final Report,
September 2007
Romano (2000), Supply Chain Management: Europe Journal of purchasing, Volume
6
Saunders Mark, Phillip Lewis, Thornhill, Adrian (2007), Research Methods for
Business Studies, Fourth Edition, Prentice Hall, London
Shoshanna (2004), Strategic Supply Chain Management, Published by Springer,
London
Soudry O. (2007), A Principal-Agent Analysis of Accountability in Public
Procurement, In Piga, P. & Thai, K.V. (Eds), Advancing Public
Procurement: Practices, Innovation and Knowledge-sharing, (pp. 432-
451). Boca Raton, FL: Pr Academics Press.
Thai K.V. (2004) Introduction to Public Procurement, First Edition, Florida Atlantic
University
Thai, K.V. (2001). "Public procurement re-examined", Journal of Public
Procurement, Vol. 1 No.1, pp.9-50.
Therkildsen O. (2001), Efficiency, Accountability and Implementation: Public sector
Reform in East and Southern Africa; Democracy, Governance and
Human rights programmed paper Number 3, February 2001
URT (2003), Tanzania Country Procurement Report (CPAR) Executive Summary
April 30, 2003
67
URT (2004), the Public Procurement Act, 2004 and the Public Procurement
Regulations, 2005
Waters D. (2004). Introduction To Supply Chain Management, (2rd Edition), Pal
grave Macmillan, Britain
Wimmer S. J. (2003), Purchasers strike a balance with best value Procurement,
Government Procurement, August, pp. 6-9
World Bank (2000), Can Africa Claim the twenty first century? The World Bank,
Washington D.C
World Bank (2006), World Bank Procurement Guideline, Guidelines Procurement
Under IBRD Loans and IDA Credits, Revised October 2006
68
APPENDEX
Dear Respondents
The researcher is carrying out “the research on the effectiveness of public
procurement process in public sector”. These are research questions; you are kindly
requested to answer the questions so as to make her research successful.
PERSONAL QUESTIONS
1. What is your profession? ...................................................................................
2. What is your position held? ...............................................................................
3. What level of education?
(i) Certificate
(ii) Diploma
(iii) Degree
(iv) Postgraduate
General Questions
4. Do you participate in the procurement processing?
(i) Yes
(ii) No
5. Are you experiencing difficulties in public Procurement Processing?
(i) Yes
(ii) No
If yes, what are they?
…………………………………………………………………………………
69
6. How effective are procurement procedures followed?
(i) Very effective
(ii) Effective
(iii) Moderate
(iv) Ineffective
(v) Very Ineffective
7. Do you think that the procurement procession reduce costs?
(i) Yes
(ii) No
8. To what extent is the procurement process is cost effective.
(i) High
(ii) Moderate
(iii) Low
9. Procurement process has reduced lead time. Agree or Disagree.
(i) Strongly Agree
(ii) Agree
(iii) Neutral
(iv) Disagree
(v) Strongly Disagree
10. What do you think is the best method of procuring among the two?
(i) Tender
(ii) Quotation
(iii)
11. How is the processing speed in the two procurement methods? Tick where
appropriate.
High Moderate LowTenderQuotation
70
High Moderate LowTenderQuotation
How accuracy of documentation in the procurement methods? Tick where
appropriate
13. Are the procurement criteria effective?
(i) Yes
(ii) No
14 Is the quality criteria contribute into getting of qualified suppliers?
(i) Yes
(ii) No
16. To what extent does tendering method is effective?
(i) Very effective
(ii) Effective
(iii) Moderate
(iv) Ineffective
(v) Very Ineffective
17. To what extent does quotation method is effective?
(i) Very effective
(ii) Effective
(iii) Moderate
(iv) Ineffective
(v) Very Ineffective
18. Do you have adequate procurement personnel in your department?
(i) Yes
(ii) No
71
19 Is there any relationship between procurement performance and available
personnel?
(i) Yes
(ii) No
20. How is the performance of procurement personnel at the Municipal?
(i) Better
(ii) Good
(iii) Poor
21. How is the information coordination performance for procurement
management?
(i) Better
(ii) Good
(iii) Poor
22. Is the management provides proper decision making in the procurement
process?
(i) What are the Yes
(ii) No
23. Problems affecting the effectiveness of public procurement?
…………………………………………………………………………………
…………………………………………………………………..
THANK YOU FOR YOUR KINDNESS
