LGA PROCUREMENT CAPACITY BUILDING STRATEGY FORMULATION ... · authorities project (epc – lgap) lga procurement capacity building strategy formulation workshop ... deliberate splitting,

ENHANCEMENT OF PROCUREMENT CAPACITY OF LOCAL GOVERNMENT AUTHORITIES PROJECT (EPC – LGAP)

LGA PROCUREMENT CAPACITY BUILDING

STRATEGY FORMULATION WORKSHOP

PROCUREMENT COMPLIANCE & PERFORMANCE

AS PER THE AUDIT RESULTS

Dodoma, 11-13 June 2013

1

PMO-RALG

OUTLINE OF PRESENTATION

Introduction

Volume of Awarded Contracts in LGAs

Procurement Audit Results and LGA Weaknesses

Value for Money Audit Results and LGA Weaknesses

New Procurement Audit Indicators

Concluding Remarks

2

SITUATION DURING FY 2011/12

122 procuring entities for procurement carried

out in FY 2011/12.

• 41 MDAs,

• 46 PAs, and

• 35 LGAs.

Special audit to Kinondoni Municipal Council

and TANROADS – Singida Region

3

CONTRACTS AWARDED BY LOCAL GOVERNMENT

AUTHORITIES (FY 2011/12)

4

GOODS24.96%

WORKS65.90%

CONSULTANCY SERVICES

2.70%

NON-CONSULTANCY

SERVICES6.34%

DISPOSAL OF ASSETS0.10%

VOLUME OF AWARDED CONTRACTS BY 106 OUT OF 134 LGAs (TSHS. 395.7 BILLION)

COMPARISON OF CONTRACT VOLUMES OVER TIME (LGA)

5

-

50,000

100,000

150,000

200,000

250,000

300,000

Goods Works Consultancy Non-Consultancy Disposal of Assets

Mill

ion

Tshs

.

FY 2007/08 FY 2008/09 FY 2009/10 FY 2010/11 FY 2011/12

PROCUREMENT AUDIT COMPLIANCE AND PERFORMANCE

INDICATORS (1) Ind. No. Indicator Compliance Data

1. Appropriate establishment and composition of tender boards

Existence of a tender board in accordance with the requirements of the Act and Regulations

2. Appropriate establishment and composition of PMUs

Existence of a PMU in accordance with the requirements of the Act and Regulations

3. Independence of functions Percentage of tenders in which there was no interference between individual functions

4. Appropriate preparation and implementation of procurement plan

Prepared and properly implemented annual procurement plan

5. Complying to compulsory approvals

Percentage of tenders/contracts which received all compulsory approvals in various processes

6

PROCUREMENT AUDIT COMPLIANCE AND PERFORMANCE

INDICATORS (2) Ind. No. Indicator Compliance Data

6. Appropriate advertisement of bid opportunities

Percentage of open bidding procedures publicly advertised

7. Complying with publication of awards

Percentage of contract awards disclosed to the public

8. Adequate time for preparation of bids

Percentage of tenders complying with the stipulated time in the Act and regulations

9. The use of appropriate methods of procurements

Percentage of tenders using authorized methods of procurement in accordance with their limits of application

10. The use of standard tender documents

Percentage of tenders using standard/ approved tender documents

11. Proper keeping of procurement records

Percentage of tenders with complete records

12. Availability of quality assurance and control systems

Percentage of tenders with adequate quality assurance and control systems

13. Appropriate contract implementation

Percentage of contracts which have been implemented as per the terms of contract 7

GENERAL PERFORMANCE ASSESSMENT CRITERIA

8

Good performance: ≥ 80 percent

Fair performance: > 60 percent but < 80 percent

Poor performance: ≤ 60 percent

NOTE

The average per PE is calculated from the scores

achieved in each of the 13 indicators.

The indicators carry equal weight

CHALLENGE: STAGNATING PERFORMANCE

9

Audit Results 2011/12

8074 74

58

7885

65

90

81 82

63

55

71

0

10

20

30

40

50

60

70

80

90

100

1 2 3 4 5 6 7 8 9 10 11 12 13

SCO

RES

(%)

COMPLIANCE INDICATORS

74

63

72

47

7177

60

83

7368

54 55

68

0

10

20

30

40

50

60

70

80

90

1 2 3 4 5 6 7 8 9 10 11 12 13

SCO

RES

(%)


14 PEs (40%) – Poor Performance;

16 PEs (46%) – Fair Performance;

5 PEs (14%) – Good Performance

Hai District Council – 86%

Mbozi District Council – 53%

0

10

20

30

40

50

60

70

80

90

100

1 2 3 4 5 6 7 8 9 10 11 12 13

SCO

RES

(%)


OVERALL MDAs PAs LGAs

ESTABLISHMENT AND COMPOSITION OF TENDER BOARD

Average level of compliance: 74 percent

9 out of 35 audited LGAs: unsatisfactory

performance in this indicator

Weaknesses:

Failure to inform PPRA on the composition of TB

and the qualification of its members pursuant to

Section 29(1) of PPA 2004;

Tender board members have limited knowledge on

application of PPA and its Regulations.

13

ESTABLISHMENT AND COMPOSITION OF PMU


18 out of 35 PEs (51%): unsatisfactory

performance in this indicator

Weaknesses:

PMU established as a committee rather than a fully

fledged and staffed unit;

Limited knowledge on application of PPA and

Regulations;

Staff of PMU lack the necessary qualifications;

Inadequate office space and working tools.

14

Major Weaknesses

MDAs PAs LGAs OVERALL

Series1 78% 80% 63% 74%

78% 80%

63%

74%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AV

ERA

GE

CO

MP

LIA

NC

E

Inappropriate establishment of Procurement Management Units

ANNUAL PROCUREMENT PLAN


26 out of the 35 audited (74%) had unsatisfactory performance, 9 PEs scored 20 percent and less;

Weaknesses:

Not using appropriate APP template;

Incorrect tender numbering and referencing;

APP hardly followed during implementation;

TB meetings not properly planned;

Requirements not properly aggregated;

Tender processing times not properly allocated.

16

Major Weaknesses Inappropriate preparation of annual procurement plans


Series1 68% 57% 47% 58%

68%

57%

47%

58%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AV

ERA

GE

CO

MP

LIA

NC

E

PUBLICATION OF CONTRACT AWARDS

Average level of compliance: 60 percent;

17 out of the 35 audited (49%) had

unsatisfactory performance, 5 PEs scored 0

(zero) percent in this indicator.

Weaknesses:

Failure to disclose to the public (newspapers, notice

boards) the awarded contracts;

Sometimes unsuccessful bidders are not notified;

Failure to notify PPRA;

18

Major Weaknesses Failure to publish contract awards


Series1 65% 68% 60% 65%

65%68%

60%65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AV

ERA

GE

CO

MP

LIA

NC

E

KEEPING OF PROCUREMENT RECORDS (1)


22 out of the 35 audited (63%) had

unsatisfactory performance, 16 PEs scored

below 50 percent;

Weaknesses:

Lack of a comprehensive list of records for all tenders

managed by PMU;

Tender records had not been systematically filed, but

scattered in many different files, audit trail made difficult;

Failure to maintain a register of all awarded contracts;

20

KEEPING OF PROCUREMENT RECORDS (2)

Weaknesses:

Project files miss: Annual Procurement Plan (APP) or General Procurement Notice (GPN)

Tender Board approval for draft advert and bidding document

Bids submitted by bidders

Minutes of tender opening: Tender Opening Register, read out prices, tender opening checklist, etc

Letters of appointment of evaluation committee

Signed personal covenants forms for TB as per Section 86(6) and Reg. 101(6) of GN No.97,

Negotiation plan

Names and appointment of negotiation team

Handing over report

Progress Reports;

Final certificates;

Inspection and Acceptance Reports.

Drawings

Complaints register

Claim management and

Payment records.

21

Major Weaknesses Poor Records Keeping


Series1 68% 66% 54% 63%

68% 66%

54%

63%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AV

ERA

GE

CO

MP

LIA

NC

E

CONTRACT MANAGEMENT (1)

Average level of compliance: 55 percent on Quality Cotrol and 68 percent on Contract Management

25 out of the 35 audited (71%) had unsatisfactory performance, 9 PEs scored 20 percent and less;

Weaknesses: Inspection and acceptance committees not appointed;

No quality assurance plan for works, consultancy and non-consultancy services;

Lack of supervision of consultancy services;

Interim and contractual certificates not issued properly;

Variation orders issued without following proper procedures;

Extension of time granted without justifiable reasons;

Most of the payments to service providers not made on time; and

Payments for work not undertaken or substandard work.

23

Major Weaknesses Weak contracts management


Quality Contr 56% 55% 55% 55%

Contracts Man. 72% 74% 68% 71%

56% 55% 55% 55%

72% 74%68% 71%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%A

VER

AG

E C

OM

PLI

AN

CE

LEV

EL

VALUE FOR MONEY AUDITS

Total: 137 Contracts for

Mainly Buildings and Roads

25

SAMPLING OF PROJECTS FOR VFM AUDIT

89 contracts audited in LGAs with a total value of Tshs. 19,186,353,909.50 (8% by value)

20 contracts audited in Public Authorities (PAs) with a total value of Tshs. 69,969,468,937.80 (29%) and

28 contracts audited in MDAs with a total value of Tshs. 150,112,803,252.54 (63%).

OVERALL PERFORMANCE

Performance criteria: > 75 percent: Good

50 - 75 percent: Fair

< 50 percent: Poor

Average PEs performance indicated

14 of the audited 36 PEs performed well (above 75%);

Remaining 22 entities performed fairly (between 50% and 75%);

LGAs performed fairly at a score of 70% while

PAs performed fairly at score of 71%; and

MDAs performed fairly at score of 74%.

OVERALL PERFORMANCE

Road-works management in LGA’s and TANROADS indicated a significant difference in performance.

LGA’s Performance was rated fair at 71% while in TANROADS it was rated good at 80%.

LGAS TAN

ROADS

Planning 74 86

Procurement 74 86

Contract Administration 61 82

Quality of Works 73 78

OVERALL PERFORMANCE

Building contracts management in LGAs, PAs and MDAs indicated a slight difference in performance. LGAs 68%

PAs 72%

MDAs 82%

LGAs MDAs PAs

Planning 70 74 74

Procurement 70 77 81

Contract

Administration

54 77 69

Quality of Works 72 87 70

PLANNING

The overall score

for planning was

assessed to be

fair at 73%.

LGAs 73%

while

PAs 72% and

MDAs 73%

Performance in Terms of PEs

PLANNING

Major weaknesses:

Poor packaging of works contracts;

Inadequate designs;

Unrealistic pre-tender estimates;

inaccurate computation of quantities in the bills of quantities

due to inadequate or lack of assessment of site locations;

incomplete and ambiguous drawings;

The deficiencies in the designs, drawings and bills of quantities

caused unnecessary variations to the works thus increasing

projects costs.

Unrealistic contract period established by the PEs;

contract durations were not estimated based on the nature and

complexity of the works as well as location of the site.

Needs assessment, planning and budget

Is our needs assessment adequate?

How do we budget ? Is it realistic, or is it deficient?

Is our procurement planning proper? Is it aligned

with the PE’s overall investment/spend decision

making process?

Any interference in the decision to procure? By

whom, and whether authorized?

Do we have formal contracts? Checked and

Validated by Legal Officer?

PRE-BIDDING STAGE OF PROCUREMENT (1)

The way we define our requirements

Technical specifications:

Are they vague or not based on performance or

functional requirements?

Targeting a particular brand or economic operator?

Selection and award criteria:

Are they clearly and objectively defined?

Are they established/announced before the closing of

the bid?

PRE-BIDDING STAGE (2)

PRE-BIDDING STAGE (3)

Choice of procurement method/procedure

Procurement strategy: do you consider the value,

complexity and administrative costs?

Abuse of non-competitive methods/procedures:

deliberate splitting, emergency, and running

contracts

Time given to bidders

Is the timeframe consistently applied to all bidders

or some get information earlier than others?

Is the timeframe provided sufficient to ensure a level

playing field

PROCUREMENT

The overall score for

procurement was

assessed to be fair

in LGAs and PAs

and good in MDAs:

LGAs - 73%

PAs – 74%

MDAs – 80%


PROCUREMENT

Major weaknesses:

Inappropriate procurement planning causing delays

in implementing PE’s plans, ad-hoc procurements,

and use of inappropriate procurement methods

(excessive use of direct contracting/single source

procurement);

Improperly prepared tender and contract documents

- Standard tender/contract documents were not

used for of the reviewed tenders contrary to

Regulation 83(3) of GN. No. 97/2005.

BIDDING STAGE

Invitation to bid

Is information on the procurement opportunity provided in a consistent manner (public notice)?

Is sensitive or non-public information disclosed?

Is there adequate competition?

Are collusive bidding or illegal price fixing prevalent?

Award of contract

How is the evaluation process free of conflict of interest and corruption?

Is there sufficient access to record on the procedure used?

Can unsuccessful bidders challenge a procurement decision?

CONTRACT ADMINISTRATION (1)

The overall score on

contract

administration was

assessed to be fair at

60%;

4 LGAs which

performed poorly.



The situation is alarming in LGAs where only 18

out of 89 projects (20%) with a total value of

Tshs 3,409,676,109.15 (18% by value) had

good performance in contract administration.

That means, 80% of the audited contracts with

a total value of 15,766,677,800.35 (82% by

value) were assessed to have unsatisfactory

contract administration.


Major Weaknesses:

Performance securities were not submitted as per

terms and conditions of the contract leaving the

PEs with no leverage in cases where contractors

failed to perform;

Extension of times were granted without extending

the Performance Securities;

Performance securities expired without extending

them.

Site possessions were not given as per terms and

conditions of the contract which led to extension

of time for most of the contracts.


Major Weaknesses:

Delayed payments of contractors and consultants

caused by erratic cash flows from the government

or donors;

Weak monitoring of contracts characterized by lack

of project progress reports, lack of site

management meetings, and lack of project

completion reports;

Non-enforcement of liquidated damages clause.

CONTRACT ADMINISTRATION (5) Major Weaknesses:

Issuing variation orders without following appropriate procedures; There were cases where the supervising

engineers/technicians issued instructions to vary the works without getting prior approval of the tender board and Accounting Officer.

Issuing extension of time without justifiable reasons and without following appropriate procedures;

Incomplete and inadequately prepared payment certificates; they lacked measurement and take-off sheets to justify the

quantities paid, and in some cases certification was made for works which did not exist.

Poor records keeping.


Major Weaknesses:

Variations orders not sanctioned by the appropriate

Tender Boards as per Regulation 117 of G.N. No. 97

of 2005;

Advance payments without guarantee although it

was stipulated in the contracts;

Non-enforcement of performance securities and

insurance covers although they were stipulated in

the contracts;

Site management meetings were not held as per

terms and conditions of the governing the contracts.

CONTRACT ADMINISTRATION (7) Major Weaknesses:

Delays in contracts execution; small contracts were executed for three years; resulting in huge cost overrun;

Final inspection reports prior to issuing practical completion reports were not done to prepare a snag list of the works to be rectified during Defect Liability Period;

Inadequate supervision of the consultant contracts;

Consultants failure to produce complete designs and specifications;

Consultants not mobilizing all key personnel earmarked for the assignment and PEs not taking any action as per provisions of the contract;

Consultant not submitting reports on time or not submitting the report at all.

QUALITY OF WORKS (1)

The overall

score on quality

of works was

assessed to be

fair at 73%.



Major Issues

Lack of/or inadequate quality control system in

checking and approving the designs, drawings,

specifications, bills of quantities, payment

certificates, pre-tender estimates , etc; and

Weak / Inadequate supervision of construction

contracts and consultancy services caused by

inadequate qualified staff and inadequate

supervision vehicles/ motorcycles.


Major Issues

Lack of quality control tools and equipment

leading to failure to test materials and completed

works, i.e. simple tools like camber board; ditch

template, etc;

Vandalism of the road furniture i.e. road signs;

Lack of honesty/integrity among the supervising

engineers and technicians. Although poor quality

works were observed by the audit team, most of

them had already been certified by the project

supervisors and paid.

POST-BIDDING STAGE (1)

Contract management

How is the performance of the economic operator

monitored? Is there sufficient supervision?

How do we handle variations and change in

contract conditions?

Do we certify product substitution, sub-standard

works or services?

Are sub-contractors chosen in a transparent

manner, and are they kept accountable?

POST-BIDDING STAGE (2)

Contract payment

False accounting and cost misallocation;

Late payment of invoices;

False invoicing for goods or services not supplied

or for works not executed.

QUESTIONABLE PAYMENTS TO CONTRACTORS (1)

After joint site inspections and measurements

of actual works by the auditors questionable

payments were revealed:

Payments for items of works not done;

Double payment for an item;

Payments for items whose specifications were;

changed not prior approved;

Payment for inflated quantities;

Overpayments; in 2010/11 VFM audit.

NEW INDICATORS FOR PROCUREMENT AUDITS (1)

Appropriateness and efficiency of the Institutional setup (15 points);

The appropriateness of the established TB;

Appropriateness of the established PMU;

Knowledge of the TB members and PMU staff in applying the PPA and procurement regulations;

The efficiency of the AO, TB, PMU, and UD in performing their responsibilities stipulated in the PPA;

Interference of responsibilities and powers; and internal control systems.

NEW INDICATORS (2)

Appropriate preparation and efficiency in

implementing the annual procurement plan (15 points)

The use of appropriate templates;

Appropriate tender numbering;

Appropriate allocation of tender processing time;

Aggregation of requirements;

Arrangement of TB meetings;

Approvals;

Advertisement of the plan to the public;

Adherence to the plan; and

Efficiency in implementing the plan.

NEW INDICATORS (3)

Appropriateness of the tender process (30 points)

Preparation of tender documents;

the use methods of appropriate procurement methods;

Appropriate publication of bid opportunities;

adequacy of time given to bidders to prepare bids;

submission of tender adverts to PPRA;

receiving and opening of bids;

evaluation of bids;

mandatory approvals;

award communication;

publication of awards;

notification of unsuccessful bidders; and

submission of contract completion reports to PPRA.

NEW INDICATORS (4)

Appropriateness of contract implementation

(20 points)

Proper signing of contracts;

Existence and qualifications of contracts

managers;

Management of contract performance securities;

Management of time control issues;

Management of quality control issues;

Management of scope control issues; and

Management of cost control issues.

NEW INDICATORS (5)

Records keeping (10%)

Availability of complete records;

Arrangement of procurement information;

Location of procurement information;

Availability of adequate space for keeping

procurement documents; and

Availability of adequate shelves, cabinets, etc.

NEW INDICATORS (6)

Implementation of systems prepared by PPRA

(PMIS and/or CMS) (10 points)

Submission of APP;

Timely submission of APP;

Submission of procurement reports for individual

tenders;

Submission of monthly procurement reports;

Submission of quarterly procurement reports; and

Submission of annual procurement report.

NEW INDICATORS (7)

Handling of complaints and application of margin of preference (-10 points)

In addition to the above six main indicators, PEs will be assessed whether:

they have handled properly and timely complaints properly submitted by bidders; and

they have allowed and applied where applicable, margin of preference in accordance to the provisions in the PPA and Regulations.

Depending on the number of mishandled cases, PEs can be penalized to the maximum of ten points.

73

67

77

70

50

20

00

10

20

30

40

50

60

70

80

90

1 2 3 4 5 6 7

SCO

RES

(%)


Av. Compliance 65%

NEW INDICATORS

Average level of Compliance 65%

MDAs - 69%;

PAs – 67%

LGAs – 57%

Performance of PEs

37 (30%) – Poor Performance;

72 (59%) – Fair Performance;

13 (11%) – Good Performance

NEW INDICATORS

Performance Targets

Baseline = Current score using new indictors –

65%

2012/13 = Baseline + 5% = 68%

2013/14 = Baseline + 10% = 72%

2014/15 = Baseline + 15% = 75%

2015/16 = Baseline + 20% = 80%

CONCLUDING REMARKS

Let us establish:

What capacity is necessary in LGAs in order to

improve compliance and performance from 57% to

> 80%;

What is lacking in capacity and the root causes;

What should be the priority areas;

What actions are necessary to fill the gap in the

priority areas; and

What resources are required and how they will be

prioritized and allocated by LGAs to strengthen their

procurement performance.

Documents

LGA PROCUREMENT CAPACITY BUILDING STRATEGY FORMULATION ... · authorities project (epc – lgap) lga procurement capacity building strategy formulation workshop ... deliberate splitting,