26432Volume 1

ZAMBIA

PEMFAR

COUNTRY PROCUREMENT ASSESSMENT REVIEWVolume I

MAIN REPORT

TOWARDSEFFECTIVE AND TRANSPARENT PROCUREMENT

MECHANISMS

October 28, 2002

Operations Quality and Knowledge ServicesAfrica Region

The World Bank

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CURRENCY EQUIVALENT

Currency Unit = ZMK

ZMKI = USD 0.00025

USD1 = ZMK 3966,51'

ABBREVIATIONS AND ACRONYMS

ACC Anti-Corruption CommissionAG Auditor General

AIDS Acquired Immune Deficiency SyndromeASIP Agricultural Training Program of Zambia

BOT Build, operate. and transferBOZ Bank of Zambia

CAMEL Capital, Asset quality, Management, Eamings and Liquidity

CDD Community Driven DevelopmentCIF Cost, Insurance and Freight

CIPS Chartered Institute of Purchasing and SupplyCOMESA Common Market of Eastern and Southern Africa

CPAR Country Procurement Assessment Review

CSO Central Statistical OfficeCTC Central Tender Committee

DG Director General

ESAC 11 Second Economic and Social Adjustment Credit

EU European UnionEXD Export Declaration

FILMUP Financial and Legal Management Upgrading Project

FOB Free on Board

GATT General Agreement on Tariffs and TradeGDP Gross Domestic Product

GPA Government Procurement AgreementGRZ Government of the Republic of Zambia

GSP General System of Preferences

HS Harmonized SystemIBRD International Bank for Reconstruction and Development

ICB International Competitive BiddingICR Implementation Completion ReportsIDA International Development AssociationIFMIS Integrated Financial Management Information System

LC Letter of Credit

LIB Limited International Bidding

LOI Letter of Interest

Official Exchange rate, Bank of Zambia March 3, 2002.

MAFF Ministry of Agriculture, Food and Fisheries

MDD Management Development DivisionMMD Movement for Multi-party Democracy

MOE Ministry of EducationMOFNP Ministry of Finance and National Planning

MOH Ministry of Health

MOLA Ministry of Legal Actions

MSL Medical Stores Limited Company

MTFF Medium Term Financial FrameworkMWS Ministry of Works and Supply

MZMK Million Kwacha

NCB National Competitive BiddingOAG Office of the Auditor General

OMC Oil Marketing Companies

PAC Public Account Committee

PAD Project Appraisal Document

PAS Procurement Accredited StaffPCU Project Coordination Units

PEMFAR Public Expenditure Management and Financial Accountability ReportPIU Project Implementation UnitPS Permanent Secretary

PSCAP Public Service Capacity Building ProjectPSI Pre-shipment Inspection

PSRP Public Service Reform ProgramPSU Procurement and Supply Unit

RFP Request for ProposalsRFQ Request for QuotationROADSIP Road Sector Investment Program

SADC Southem African Development Community

SBD Standard Bidding Documents

SGS Surveillance Generale Suisse

Si Statutory Investment

SIDA Swedish International Development Agency

SME Small and Medium sized EnterprisesSOE State Owned Enterprise

SRP 1I Social Recovery Program 11

TR Tender Regulations

TTL Task Team LeaderUNICITRAL United Nations Committee on International Trade and Laws

USAID United States Agency for International DevelopmentVAT Value Added Tax

WBG World Bank GroupWCO World Customs Organization

WTO World Trade Organization

ZACCI Zambia Association of Chambers of Commerce

ZAM Zambian Association of Manufacturers

ZAMIM Zambian Institute of ManagementZAMTEL The Zambia Telecommunications Company Ltd

ZBIC Zambia Insurance Business College Trust

ZCC Zambian Competition CommissionZESCO Zambia Electricity Supply Corporation LtdZMK Kwacha

ZNCB Zambian National Commercial Bank

ZNOC Zambia National Oil CompanyZNTB Zambia National Tender Board

ZRA Zambian Revenue AuthorityZTBA Zambia Tender Board Act

MAIN REPORT

PREFACE

This country Procurement Assessment Review (CPAR) is a joint undertaking between the

Zambian Govemment and the World Bank to study and analyze the existing public procure-

ment system in Zambia and to recommend suitable actions to improve the economy, effi-

ciency, predictability and transparency of the procurement processes. It provides Government

with tools to make changes and to improve the public procurement system and institutional

framework. It was conducted in January 2002 and in March 2002 by a team comprising offi-

cials from the Ministry of Finance and National Planning, and a multi disciplinary Task Force

representing various concemed organizations set up by that ministry, a team from Govern-

ment's consultants (PLS RAMBOLL) and World Bank officials.2 The CPAR will also be one

of three core reports contained in the Public Expenditure Management and Financial Ac-

countability Report (PEMFAR) being prepared by Bank and government.

The CPAR team interviewed govemment officials and representatives of private sector or-

ganizations, major donors, business associations, training institutions and NGOs, just as it vis-

ited Local Councils, District Offices and the site of beneficiary projects in two locations.

Other activities included a review of tender processing at ZNTB for 14 cases of large value

procurement financed by govemment, a review of contract practices for 10 cases of procure-

ment financed by the Bank and document research. The Task Force conducted internal meet-

ings to collect data and formulate its recommendations. The CPAR team as a whole, including

the Task Force, held a series of meetings to finalize this review.

This report consists of the Main Report and Annexes. The Main Report presents the major

findings and conclusions and related recommendations, and an action plan both short and me-

dium to long term. The Annexes volume contains as Annex I the detailed report, including the

questionnaires, which discusses each of the major issues in more details and is meant for

those readers who would want additional information on these issues. In addition, the main

documents referred to in the report are enclosed.

2 The team was led by Subhash Dhingra Senior Procurement Specialist. Other team members were NarayanaswamiViswanathan (Consultant) and from the country office: Mushiba Nyamazana (Economist). Mehmaz Teymourian (DeputyChief of mission). Fenwick Chitalu (Financial Management Analyst), and Bwalya Mumba (Procurement Officer). TheGovemment Team was led by Mr. David Diangamo, Chairperson / Permanent Secretary. Ministry of Finance and Eco-nomic Planning supported by government's consultants and the Task Force comprising. Mr. James Mulungushi. Directorof Planning, Mr. B Msimuko. Principal Budget Analyst. Mr. J. B. Makumba. Head of Procurement Unit. Mr N MShamaila, Director of Audits. Dr. Kabeta Muleya. Director General. Ms S Zyambo. A/Director - Goods and Services. MrMuyangwa Akolwa, Director - Works. Mr. J K Njolomba. Director - Inspection and Standards, Mr. G. Mwela. FormerDirector General. Mr. Joshua Banda, Director of Procurement. Mr M K Simwanza. Director of' Procurement, Ms ClaraMangani. Assistant Warehouse Manager. Mr. P J Muyawala. Head of Procurement. Mr. F M Silunduko. Head. Emmas-dale Campus, Ms Betty Sombe. Director of Finance. Mr Richard Healev. President. Zambian Association of Manufac-turers. Ms Viola Mtamila. Chief Planner. Mr. Jason Songwe. Head of Procurement Unit. Mr. S D Chibuye. Head of Pro-curement Unit. Mr. E M Sikazwe, Pnncipal State Counsel. Mr. Tenthani Banda. Director of Administration. Mr. Wedexllunga. T.chnical Services Manager. ZMASIF. Mr. George Sikazwe. Procurement Manager. PSACAP, Mr LwambeMondoloka, Chairman. Association of Consulting Engineers. and Dr S M Mashamba. Executive Secretary, National Re-construction Council. The PLS RAMBOLL team comprised Claus B Nielsen (Trade Practice Expert), Claus Thomsen(Private Sector Expert). Soren Staugaard (Legal Exper) and Karen Sondergaard (Procurement Practice Expert).

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PART I

EXECUTIVE SUMMARY

I BACKGROUND

1.01 Zambia's economy has not performed well over the past decade. During 1992-2000, av-

erage annual economic growth averaged less than 1 percent in real terms. Population growth

has averaged 3 percent, implying a drop in per capita income. With per capita income esti-

mated at about $320 in 1999, Zambia is one of the poorest countries in sub-Saharan Africa. Itseconomy is undiversified, and depends heavily on mineral resources and exports, particularly

copper, which generates over 70 percent of the country's foreign exchange eamings. Zam-

bia's foreign debt makes it one of the world's most indebted states, which resulted in Zambia

qualifying for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative in De-

cember 2000. The economic outlook worsened further in early 2002, when Anglo-American

Plc, a major stakeholder in the copper mining industry, began withdrawing from Zambia. In

this context and with little scope for increasing revenue, improving the efficiency and effec-tiveness of public expenditures remains a key to reducing poverty. Development of a well-

functioning procurement system, based on transparency, competition, economy and effi-

ciency, faimess, and accountability, is-critical 3.

1.02 Importance of Public Procurement in Zambia. Public procurement plays an impor-

tant role in the Zambian economy. The total volume of public procurement in 2001 was esti-

mated at USD 485 million, equivalent to 15 percent of GDP -- this is a higher proportion than

the 10% estimated for most countries in Africa. The Central Tender Committee (CTC) of the

Zambia National Tender Board (ZNTB) processed and approved procurement valued at 12

percent of GDP while another 3 percent of GDP was procured at a decentralized level by min-

istries and provincial administrations. If even a conservatively estimated 10% of this cost

could be saved through better procurement policies, practices and institutional arrangements,this would mean a yearly gain to the exchequer of the order of $ 50 million.

1.03 Assistance to and Progress of Public Procurement Reform. Recognizing the im-

portance of efficient procurement for the national economy, public procurement system re-

form has been on the Zambian govemment's agenda for almost a decade, during which anumber of donor-funded projects supported this agenda. The government adopted the Public

3A Country Procurement Assessment Mission. led by Subhash Dhingra. was carried out in January 2002 andin March 2002. The overall objective of the CPAR exercise is to start a process for the government and theWorld Bank to work together to improve the accountability, integrity, and transparency of the procurementprocesses and to reduce the scope I. corruption. This exercise also provides the means to respond to thegovernment's request to the World Bank to assist in developing plans for further reforming the public pro-curement system. The CPAR will also be one of three core reports contained in the Public Expenditure Man-agement and Financial Accountability Report (PEMFAR) being prepared by Bank and government.

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Procurement Action Plan (1996) to (a) implement a plan completely decentralizing procure-

ment to ministries; (b) facilitate decentralization, establish a cadre of professional procure-

ment staff, and support specialized training institutions in building cadre capacity; and (c)

strengthen audit and oversight functions. The 1997 Country Procurement Assessment Report

(CPAR) observed that the action plan implementation had moved slowly, particularly decen-

tralization and establishment of a procurement cadre. The current CPAR concludes that the

action plan's overall objectives have still not been realized, inter alia, due to insufficient ef-forts by ZNTB. Though a number of steps were initiated, planned reforms in significant areas

have not been efficiently implemented:

* Improvement of procurement capacity in the Procurement and Suipply Units (PSlUs) has been slow.In the 1996 action plan, setting up the procurement cadre emerged as a crucial step for delegation of

procurement authority to PSUs. The cadre needs a defined career path and an attractive salary structurelinked with a well-developed training system. These improvements were not initiated, and the cadrewas not created. The capacity in the PSUs remains a problem except where ZNTB has seconded its staff

to work in some ministries' PSUs. In such cases, the somewhat better capacity has enabled PSUs toachieve higher grades in the categorization system by which the ministries' procurement capacity israted.

* Implementation of the Action Plan (1996) did not get adequate attention. Examples are: (a) little orno progress in delegation of procurement authority 4 over 6 years. as the ZNTB did not give a single

ministry full authority to conduct its own procurement. (b) partly because a procurement cadre was notcreated, procurement capacity building5 was unsustainable, as recently trained staff left for other jobs,

(c) a promised corruption survey. financed by the Bank, was not pursued. and (d) anti-corruption meas-ures remained under-funded. Preoccupied with managino procurement, the ZNTB did not focus on the1996 Action Plan.

1.04 Drafting of a Strategic Plan. Presently, in coordination with AfDB, the ZNTB has

drafted a Strategic Plan (2002-2006) that envisages minor adjustments to legislation and dele-

gation of procurement authority but limited to "certifying" all 51 PSUs, over time, but not au-thorizing them to do all their own procurement. The strategy, coverage, and content of this

draft Strategic Plan could be enhanced as a result of the current CPAR.

II. FINDINGS OF THE CPAR

1.05 Gaps in the Public Procurement System's Intentions and Practices. A gap be-tween intentions and practice pervades various aspects of Zambia's public procurement. De-spite a legal and institutional framework, weaknesses in its structure and content allow unde-

sirable practices and procedures. While the ZNTB is expected to enforce procurement rules,

Delegation of procurement authority to all PSUs b)y 2002 did not materialize. Of 51 PSUs. 24 are not yetcertified; the monetary thresholds for the remaininc 27 are very low. The ZNTB is still involved in process-ing 80 percent of procurement.

in practice, it is liberal in permitting exceptions. A system to register suppliers for small-value

procurement, for example, has flaws that could engender corrupt practices. While short-lists

are drafted on the basis of the registration list, each short-list is subject to misuse to favor par-ticular firms. Further, the registration lists are not systematically updated nor are the means

available to check the data applicants submit in registration forms. Moreover, the system is

liberally used for larger value items than intended. The ZNTB also has a significant supervi-

sory role, but its preoccupation with processing procurement prevents this. The existing sys-

tem for handling complaints features a too-narrow scope and design, lacks independence from

the ZNTB which is involved in the procurement process, and it suffers from a perfunctory op-

eration, causing supplier and contractor dissatisfaction to grow while malpractices continue.

1.06 The slow pace of delegation of authority to procure to the ministries and agencies is

partly due to ZNTB's lack of confidence in their capacity. But the there are also other reasons

for persistent lack of adequate interest in reform of public procurement. The lack of interest in

ministries and agencies to actively pursue even the limited program of delegation of procure-

ment authority is symptomatic of underlying causes such as preference for a system of dif-

fused responsibility and accountability offered by the current lax systems and procedures andinstitutional arrangements. Any tightening of the arrangements would affect the distribution

of rents be it ZNTB, senior officials or politicians. Though difficult to pin down in any coun-try, political interference in public procurement in Zambia is generally acknowledged.

1.07 This situation, combining poor legislation and procurement practices with political inter-

ference and untrained procurement staff, fosters corrupt practices. Though the government has

not initiated a survey on corruption financed by the World Bank some time ago, the CPARnoted a common perception in Zambia that substantial corruption is associated with public

procurement. Yet the Anti-Corruption Commission (ACC), and the OAG which have roles to

play in curtailing corruption, have been hampered by funding and little effective attention to

their reports.

1.08 Legal and Institutional Weaknesses. The legal framework6 lacks robustness and fea-

tures structural, and content, inadequacies. Basic principles of procurement are not captured

comprehensively. Further, aspects that should be in the Act are in the regulations or guide-lines and vice versa. The ZNTB's role is not limited to oversight and policy functions, as it

also must manage public procurement through CTC. Also, the neglected oversight functionsinclude: (a) monitoring and gathering statistics on public procurement, (b) developing pro-

curement capacities and capabilities, and (c) implementing public procurement reform.

5 Professional procurement staff is required to support delegation of procurement authority. Where the ZNTBhas seconded its staff to ministries to operate procurement units with authority delegated to them, such PSUsprocurement capacity is better.The legal framework is mainly based on the 1982 Zambia National Tender Board Act (ZTBA), which haslimited scope and unclear enforcement mechanisms. It provides for the establishment of the Zambia NationalTender Board (ZNTB).

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1.09 Weaknesses in Procurement Procedures and Practices. Two current practices also

foster corruption and higher prices: using negotiations as an accepted procurement method

and misusing the registration system for purchases from short-listed firms. Further, the

ZNTB's capacity to resist ministry pressure promotes acceptance of less cost-efficient and

corruption-prone procurement methods. Additionally, relatively low thresholds (USD 300,000

maximum for ministries in the highest category for decentralization) lead to more costly pro-

cured goods and civil works. These low thresholds cause ministries to split contracts into

smaller sizes to avoid ZNTB involvement. The registration system is then used to buy itemsbeyond the monetary threshold that the registration system normally permits.

1.10 Weaknesses in Procurement Management. In the few departments where they do ex-ist, procurement files are often incomplete. Also, there are no instructions on how to structurean official procurement filing system and to maintain individual files. Without a proper filing

system supporting papers (such as performance guarantees) are inadequate for good contractmanagement. Poor contract management produces avoidable losses to government. Also, pro-

curement planning as a tool for conducting efficient and economic procurement is largelynon-existent. Vital aspects of procurement planning (packaging, selecting appropriate pro-

curement method and type of contract) are not planned early in the procurement process. In-

evitably, substantial delays in processing and inefficient "urgent" procurement actions result.

1.11 Inadequacies in Budget Allocation and Funds Release System. The funds allocated7

in the budget for each project and each ministry often are not fully released during the year7,

and there are significant delays in the release of even these small amounts. This seriously af-

fects efficient project implementation, procurement, and contract management. Consequencesof the budget system's weaknesses include: (a) contractors' bills being held up for severalmonths, delaying projects; (b) delayed payments incurring interest charges that are paid from

a ministry's limited budget, further reducing funds for product payments, and (c) when con-tracts designated in foreign currencies have protracted payment delays, exchange rate changescause larger amounts of local currency to be needed than originally planned. All this contrib-

utes to higher procurement costs and avoidable losses to government.

1.12 Procurement Cadre. Even though a well-trained procurement cadre is crucial to effi-cient procurement, there has been no progress in efforts to set up such a cadre. Over 600 peo-ple have been trained in procurement at different levels, but most have left their jobs, leavinguntrained people in many positions. Trained staff leave because of the lack of a career path,

an unattractive salary structure, etc. ZNTB salaries are even lower than the Zambia Revenue

Authority's. The ZNTB's staff and those in the ministries do not have defined career paths or

a department responsible for managing the cadre and its capacity development.

In the budget process. the funds allocated are often lower than the amounts required for good project pro-gress. The practice of allocating a "nominal" I Kwacha for "tentative" projects further strains the budget forother projects when more than the allocated I Kwacha is finally released to such projects.

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1.13 Capacity Building. Procurement training institutions8 exist, but need to upgrade their

offerings to feature mid-career and specialized procurement training programs to supplement

the supply management programs they currently conduct.

1.14 Anti-Corruption Commission (ACC) and OAG Handicapped by Insufficient Fund-

ing and Salaries. The activities of the Anti-Corruption Commission and OAG are critical if

Zambia is to achieve a well-functioning, fair, and transparent procurement framework.

Though President acted recently to strengthen the ACC to fight corruption by creating a spe-

cial cell whose role would also include procurement issues, unattractive salaries and condi-

tions of service hamper its ability to attract and retain skilled personnel. OAG is also under-

funded and its reports remain inadequately acted upon.

III. MAIN RECOMMENDATIONS

FOR THE WAY FORWARD

1.15 Central to any recommendations that emerge is the need for a "champion" for the Re-

form program as it should not be left to be an internal program within ZNTB. Besides, such a

program that needs to tackle the various vested interests in the statuis qluo can only be tackled

by political will.

1.16 Given adequate attention to the above, the actions described below are priorities for im-

proving the Zambian public procurement system.

i. Establish a Procurement Reform Task Force (High Level Committee). Set up a High

Level Committee that will be responsible for initiating and overseeing implementation of

activities in the action plan developed by this CPAR. This Committee must have high-

level members from, for example, ZNTB, MOFNP, ACC, and OACi, and members

should not be allowed to appoint substitutes. The Committee should have a clear mandate

and time frame for concluding its reform agenda. A Procurement Reform Implementation

Unit (PRIU) should be created to manage day to day implementation of reforms and to

act as the secretariat to the Task Force. This Unit should be separate from the ZNTB and

should report to the Permanent Secretary in the Ministry of Finance.

ii. Re-establish the Policy and Supervisory Role of ZNTB Immediately. Without waiting

for new procurement legislation (see below), prepare refocus ZNTB to its policy and

regulatory role already required under existing legislation. As the ZNTB Director General

will manage the CTC until its dissolution in 3 years (see below), strengthen the secretariat

of ZNTB to support it in this role by enhanced staffing (and possibly splitting it off from

the current secretariat). Provide an adequate budget to support this objective.

For example, the Zambian Institute of Management (ZAMIM) and Zambia Insurance Business College Trust(ZBIC).

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iii. Revise the Legal Framework.9 Ideally, a new procurement act whose content should be

guided by the UNCITRAL Model Law and by current international best practices.

Among other things, it should provide for a new procurement authority and a complaints

system based in the procurement authority but with a separate independent, part time,

Appeals Body. A Cabinet Paper should be developed for the new legislation, which Par-liament should enact. New regulations and guidelines should be developed on the basis of

the new act. Pursuant to its enactment, a new procurement auitlhority should be estab-

lished. A Director General and other staff for the new authority should be appointed to

replace the ZNTB immediately on creation of the Authority. The Authority's specialized

functions should be described and developed in detail.

iv. Finalize the Plan for complete delegation of procurement authority. A phased, 3-year

plan for complete delegation of procurement authority should be developed. The plan

would give full authority to ministries and agencies to conduct procurement without ref-

erence to or approval by the ZNTB or CTC. In the short term, the plan should appoint one

or two provinces as pilot provinces for full decentralization. On completion of this proc-

ess, CTC will cease to exist.

v. Establish a Professional Procurement Cadre. Define the composition of the cadre to be

established and supporting measures, including funding an adequately attractive salary

structure. Start implementing such measures giving the cadre management function to the

ZNTB until the new procurement authority (possibly called Zambian National Procure-

ment Authority or ZNPA) comes into effect. The existing system of secondment of

ZNTB staff to positions in PSUs directly managed by the Ministries and agencies should

apply for all the staff in the procurement cadre. A human resource database should be es-

tablished with both cadre members' curriculunm vitae and those applying for membership.

A training action plan should be developed.

vi. Re-design Registration List System. A revised Registration System should be defined.

New guidelines should be developed that restrict its use to small-value contracts only.

vii. Anti-Corruption Actions. The planned corruption survey should be implemented. Im-

plementation should be coordinated with the Public Service Capacity Building Project

(PSCAP). Anti-corruption clauses should be included in the standard bidding documents.

*iii. Introduce Procurement Planning and New Filing System. A manual on procurenment

planninig should be developed, containing clear instructions for introduction of best prac-

tices. Release of budget funds from the budgetary system should be suitably linked to re-

The Terms of Reference for the review of the legal and institutional framework, which is currently beincdeveloped with the AfDB, should be revised to consider the recommendations of the present report. The TORshould state clearly that revisions of procurement legislation should build on the UNCITRAL Model Law.

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alistic procurement plans. A separate procurement register should be defined. In addition,

instructions and guidelines should be developed for PSUs on establishing and maintain-

ing a procurement filing system.

ix. Strengthen Training Programs and Training Institutions. A capacity assessment of

training institutions should be carried out. The need for supplementary procurement train-

ing programs should be defined. Required training programs should be developed and de-

livered.

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TABLE OF CONTENTS

MAIN REPORT ............................................ i

PREFACE ............................................ i

PART I ........................................... ii

EXECUTIVE SUMMARY ........................................... ii

PART II ............................................ 1

MAIN REPORT ............................................ 1

1. INTRODUCTION ............................................ 1

2. THE PUBLIC PROCUREMENT FRAMEWORK ............................................. 3

a. Legal and Institutional Framework ............................................. 3

b. Ongoing Legal and Institutional Reforms ............................................. 5

C. Assessment of the Legal and Institutional Framework ............................................. 6

d. Recommendations ............................................ I 1

3. PROCUREMENT PROCEDURES AND PRACTICES ............................................ 14

a. Procurement Procedures ............................................ 14

b. Assessment of procurement practices ............................................ 16

c. Performance on Bank-Assisted projects ............................................ 20

d. Recommendations ............................................ 22

4. TRADE PRACTICES AND CUSTOMS ............................................ 24

a. The Zambian Trade Regime ............................................ 24

b. Main Recommendations ............................................ 25

5. PRIVATE SECTOR COMMERCIAL PRACTICES ............................................ 26

a. The Private Sector in Zambia ............................................ 26

b. Main Recommendations ............................................ 27

6. GENERAL RISK ASSESSMENT ............................................ 28

7. RECOMMENDED ACTION PLAN ............................................ 32

ACTION PLAN MATRIX ............................................ 35

Sequenced Actions Summarized by Major Categories - ............................................ 35

Short Term ............................................ 35

Medium to long Term ............................................ 38

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ANNEXES (VOLUME I1)

ANNEX I - DETAILED REPORT including Questionnaires

ANNEX II - LIST OF MEMBERS OF THE TASK FORCE

ANNEX HI - VOLUME OF PROCUREMENT IN ZAMBIA

ANNEX IV - "CONTRACT REVIEW" OF WORLD BANK FUNDED PROJECTS

ANNEX V - WORLD BANK PORTFOLIO

ANNEX VI - LIST OF PEOPLE MET

ANNEX VII - DOCUMENTATION

PART II

MAIN REPORT

1. INTRODUCTION

1.01 Background. Zambia's economy has not performed well over the past decade. During1992-2000, average annual economic growth averaged less than I percent in real terms. Popu-

lation growth has averaged 3 percent, implying a drop in per capita income With per capita

income estimated at about $320 in 1999, Zambia is one of the poorest countries in sub-Saharan Africa. Its economy is undiversified, and depends heavily on mineral resources and

exports, particularly copper, which generates over 70 percent of the country's foreign ex-

change earnings.. Zambia's foreign debt makes it one of the world's most indebted states,which resulted in Zambia qualifying for debt relief under the Heavily Indebted Poor Countries

(HIPC) Initiative in December 2000. The economic outlook worsened further in early 2002,when Anglo-American Plc, a major stakeholder in the copper mining industry, began with-drawing from Zambia.

1.02 Importance of Public Procurement. Public procurement plays an important role in theZambian economy. The total volume of public procurement is estimated at 15 percent ofGDP: In 2001, procurement of a value equivalent to 12 percent of GDP was approved by theCentral Tender Committee (CTC) of the ZNTB, and goods, works, and services of a valueestimated at 3 percent of GDP were procured directly by ministries and provincial administra-tions. This is a higher proportion than the 10% estimated for most countries in Africa. Al-though a survey on corruption for which the Bank provided financing has not been performned,it is generally accepted that various inadequacies in Zambia's public procurement system con-tribute substantially to corruption. These inadequacies include poor legislation, political inter-

ference, poor procurement practices, untrained staff, and inadequate pay to procurement staff.In this context, a well-functioning public procurement system is highly important. Sound pub-

lic procurement policies are among the essential elements of good governance, and a well-functioning public procurement system contributes to better service delivery and economic

development.

1.03 Assistanice to Procurement Reform. Reform of the public procurement system has beenon the Zambian government's agenda for almost a decade. This goal has resulted in a number

of donor-funded projects, which have supported, and continue to support, the government'spublic procurement reform agenda. In 1993, the World Bank and the Zambian governmentagreed on a Financial and Legal Management Upgrading Project (FILMUP), which among

other things, focused on improving the Zambian National Tender Board's and various minis-

tries' procurement performance. In the mid-1990s, SIDA provided support for training and

capacity building for improved public procurement. In ESAC II (the second economic and-I -

social adjustment credit), strengthening and streamlining public procurement was an impor-

tant element. The Public Service Capacity Building Project (PSCAP), which is currently be-

ing implemented, seeks to strengthen, among other things, the Office of the Auditor General

and the ZNTB in their roles of ensuring sound management of public funds.

1.04 Government Action. In 1996, the Zambian government adopted the Public Procurement

Action Plan (1996), which aimed to develop the human resources of the public procurement

system along with decentralizing procurement to various ministries and agencies and

strengthening audit and oversight functions. In 1997, a World Bank Country Procurement As-

sessment Review concluded that the action plan implementation had movecl more slowly than

expected, particularly with regard to the planned decentralization and the establishment of a

cadre of procurement professionals to support improved procurement activities. The currentreport concludes that, in many respects, the objectives of the 1996 action plan still have not

been realized. A number of steps have been taken, but in significant areas, required reforms

have not been implemented effectively, or reform results have not been lasting or have been

otherwise insufficientlo.

1.05 Objectives of the CPAR. Against this background, the main objective of the Country

Procurement Assessment Review (CPAR) is to provide the analytical basis for a dialogue on

public procurement reform and to propose practical recommendations for short and long-term

actions. To achieve this objective, the CPAR comprises:

* A review of Zambia's public procurement structure, including the existing legal frame-

work, organizational responsibilities, and capabilities and present procedures and prac-

tices;

* A risk assessment specifically related to the Zambian public procurement system;

* Recommendations for reforms of the public procurement system and of trade and custom

practices as well as private sector commercial practices;

* A review of the country's trade practices, including customs and trade regulations and

practices, and finally

* A review of private sector commercial practices, including commercial regulations,

regulatory barriers and private sector procurement.

1.06 The CPAR was prepared in the context of the Public Expenditure MJanagement and

Financial Accountability Report (PEMFAR). The PEMFAR report is currently being prepared

by Bank and Government in the context of Poverty Reduction Strategy support credits which

call for assessment of a country's public financial accountability, including an assessment of

public expenditure, procurement, and financial systems before the development of a Country

Assistance Strategy and/or PRSC program in the country. This CPAR report will form one of

the Annexes of this PEMFAR report, as will reports on the other subjects.

'° However. the election of a new political leadership in Zambia in December 2001. appearing determined tofight corruption. may open up new possibilities for the efficient implementation of reforms

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2. THE PUBLIC PROCUREMENT FRAMEWORK

A. LEGAL AND INSTITUTIONAL FRAMEWORK

2.01 Legal Foundations. The legal framework for public procurement in Zambia comprises

the Zambia National Tender Board Act (ZTBA) of 1982, the Tender Regulations (TR), and

the Procurement Guidelines. The ZTBA provides for the establishment of the Zambia Na-

tional Tender Board (ZNTB) and the Central Tender Committee (CTC) in the ZNTB. The

Tender Regulations provide for the establishment of tender committees in various ministries,

provinces and agencies. They also define basic procurement principles such as procurement

methods.

2.02 Some aspects of the regulations are supplemented by procurement guidelines. The

ZNTB has issued a set of procurement guidelines (with the status of circulars) for formal ten-

ders in procurement of goods and services, consultancy services and civil works, and informal

tenders. In addition, there are guidelines on general conditions for contracts and for supplier

registration.

2.03 The National Tender Board and the Central Tender Committee. The Tender Board

Act establishes the ZNTB as an autonomous institution and defines the functions of the Board

as those of regulating, and controlling the procurement, of goods and services for the govern-

ment and parastatal bodies. In carrying out these tasks, the ZNTB may - through Ministry of

Finance - formulate rules and regulations governing procurement, regulate procedures for the

award of contracts, and formulate the conditions under which any rules and regulations gov-

erning procurement may be varied or waived.

2.04 TR further defines the role of the ZNTB to resolve coniflicts in procurement matters.When a dispute arises between a tender committee and a contractor, either of the parties may

refer the dispute to the ZNTB for a decision. The legislation or regulations do not provideguidance on applying sanctions. Furthermore, the regulation does not prescribe a time limit

for the disposal of complaints, and the scope of complaints is limited to those between a ten-

der committee and a contractor. The ZNTB's role of complaints resolution conflicts with its

direct involvement in procurement processes.

2.05 The ZTBA authorizes the ZNTB to establish tender com,mittees in ministries, parastatal

organizations, and provinces. This system includes a Central Tender Committee (CTC),which is explicitly mentioned in the ZTBA. The CTC and ZNTB are closely linked. They

share the same location and secretariat, and some members of the CTC are also members of

the ZNTB. CTC's role is to examine and authorize all procurement of goods, works, and ser-vices in both government and parastatal bodies above specified monetary thresholds. The

CTC meets once a week to review and approve the procurement issues prepared by the secre-

tariat. These issues predominately concern (a) tenders of a value that removes them from the- 3 -

decentralized tender committees' authority, (b) approval of waivers of rules, and (c) approvalof variations to approved contracts.

2.06 Procurement and Supply Units. At the decentralized level (the ministries and agen-cies), the various tender committees are supported by secretariats called Procurement andSupply Units (PSUs). The ZNTB determines the monetary thresliolds below which procure-

ment may occur at the decentralized level without prior CTC approval. These limits are basedon criteria such as the PSUs' administrative capacity in terms of human resources, officespace, and equipment; budgets for daily operation; and experience and track records in pro-curement.

2.07 On this basis, the PSUs are placed in one of four categories: A, B, C, or D. The PSUs incategory C are presently allowed to independently conduct procurement up to a limit definedin ZMK whose current equivalent is about USD 300,000. The corresponding limits for PSUsin category B and A are currently equivalent to USD 125,000 and USD 50,000, respectively.The PSUs in category D are "not-certified" units. These PSUs can only procure independentlyup to a value currently equivalent to USD 7,500. This system and these monetary limits meanthat most public procurement must be done through the CTC in the ZNTB. This is supportedby the CPAR findings that 80 percent of approvals are handled by CTC and 20 percent by alldecentralized PSUs.

Table 1. Monetary Thresholds applicable to Certification Categories for Procurement SupportUnits

Category Certificationz Monetary threshold Nunber of PSUs

A ZMK 200 million (USD 50,000) 17B ZMK 500 million (USD 125,000) 4.C ZMK 1,200 million (USD 300,000) 6D *'Not certified" 24

Total 51

2.08 At present there are 51 PSUs (two of the nine provinces have PSUs). Almost half thePSUs are in category D and, thus, are not certified. Another 21 are in the categories A and B(the two provinces are in Category A). Only six PSUs are authorized to carry out procurement

up to a financial limit of about USD 300,000. Since the system began in 1996, not a singlePSU has been given full authority by the ZNTB to procure without any monetary limits.

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B. ONGOING LEGAL AND INSTITUTIONAL REFORMS

2.09 As detailed above, there have been several attempts in recent years to reform or improvethe Zambian procurement framework in different respects, most often in connection with do-

nor-funded projects. The status of some issues follows.

2.10 Absence of Private Sector Involvement. As a part of the Public Procurement Action

Plan (1996), the Tender Board Act was to be amended and a "Zambia Tender Advisory Coun-cil" introduced. The Council's intended functions included receiving views from organiza-

tions and individuals connected with public procurement and making recommendations to the

ZNTB. The proposed Council would have a majority of representatives from various stake-

holders outside government. The revised legislation (Bill) was sent to Parliament, but has

never been enacted.

2.11 Little Progress in Delegation of Procurement Authority. An important objective of the

Public Procurement Action Plan (1996) was delegation of procurement authority. A number

of PSUs were to be established in the ministries and agencies, and the govemment intended togradually increase the monetary thresholds below which the PSUs would be allowed to carryout public procurement without central approval. The ZNTB now has a draft "Strategic Plan

2002 - 2006," which reaffirms that the ZNTB should not perform procurement, and the gov-

ernment's shall continue this authority delegation process. However, the plan does not proposefull delegation but limits it to "certification of all" PSUs into categories A to C should beachieved by 2003 within the related thresholds.

2.12 Stalled Capacity Building Plans. Another objective of the Procurement Action Plan(1996) targeted the professional capacity problem in procurement. The objective was to builda cadre of procurement professionals based on sound principles of (a) a defined and ensuredcareer path, (b) an attractive salary structure commensurate with the skills required and mar-ket conditions, and (c) the establishment of a cadre management agency responsible for de-veloping the capacity of the cadre staff to ensure adequate numbers of skilled staff to satisfy

demand, to find suitable placement for individual staff, and to develop capacity- and skills-

building programs at various stages in the career path. Further, no permanent cadre of pro-

curement professionals was established as originally intended. There has been no sustained

progress in creating capacity as staff were trained but did not stay on in civil service jobs.

2.13 Underfunded Anti-Corruption Measures. Traditionally, the political will to fight cor-ruption has not been strong in Zambia. However, this situation may now be changing. The1996 Anti-Corruption Commission Act first established the Anti-Corruption Commission

(ACC) as an autonomous and strengthened institution that is not subject to the direction or

control of any person or authority but reports directly to the President. The ACC's functions

include prevention measures and powers to investigate and prosecute independent of the nor-mal channels of administrative complaint. By the end of 2000, the ACC had 184 professional

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staff plus 62 support staff. However, its offices are spread throughout the country and lack

infrastructural support for effectiveness, such as vehicles.

2.14 Following the election in December 2001, there are signs that the political leadership

may be willing to implement a zero-tolerance policy towards corruption. The President has

initiated the establishment of a special Directorate in the ACC, which will, among other is-

sues, investigate compliance with public sector procurement rules. The initiative will be coor-

dinated with the ZNTB, the Office of the Auditor General, and other stakeholders.

C. ASSESSMENT OF THE LEGAL AND INSTITUTIONAL FIRAMEWORK

2.15 Legal and Institutional Characteristics for a Good Putblic Procurement System. A

good public procurement system strives for transparency, competition, economy and effi-

ciency, and faimess and accountability. The analysis of Zambia's system is based on compari-

son with the following desirable features:

* A clear, comprehensive, and transparent legalfraniework. characterized by the presence

of legal rules that are easily identifiable and govern all aspects of the procurement proc-ess;

* Clarity of funictional responsibilities and accountabilities in the procurement function,

which requires clear distinctions between those responsible for implernenting procure-

ment and those accountable for proper procurement rules in the buying entities as well as

the means to enforce these responsibilities and accountabilities;

* An institutionalframework that differentiates between those carrying out the procurement

function and those with oversight responsibilities, the latter of which requires separation

from operational procurement matters, functional independence, and adequate budget and

staff to perform efficiently;

* Robust mechanisms of enforcement, in which rules and institutional arrangements are

clearly established and duly supported by the proper means to enforcement; and

* A wvell-trained procurement staff, necessitating a continuous, focused, and targeted train-

ing program.

(a) Reform of Legal Framework

2.16 Needed Upgrading of Legal Framework. A comprehensive legal framework for public

procurement presently exists in Zambia. However, while the Tender Board Act defines the

institutional framework, it does not specify the basic procurement principles of a public pro-

curement system, such as procurement methods, basic rights of bidders, evaluation criteria,

public bid opening, maintenance of records, etc. Based on experience with the current legisla-

tion, the ZNTB is currently working with the AfDB to initiate a review of the legal and insti-

tutional framework. It would be advantageous to base an upgraded legal framework on some

features of the UNCITRAL Model Law and current international best practices, as it would

- 6 -

then meet all the criteria spelled out above as well as the recommendations arising from this

CPAR.

2.17 Inadequate Oversight Functions. An independent oversight function in procurement

serves to ensure public confidence in the procurement system. Important tasks in this respect

are the monitoring of public procurement policies and practices and contributions to the de-

velopment of these policies and practices. To prevent conflicts of interest from emerging, ef-

ficient oversight requires the total separation of regulatory and overview functions from actual

procurement, a clear mandate formnulated in legislation, and the necessary powers to enforce

legislative objectives.

2.18 The legal framework of Zambian public procurement does not support this. Present leg-

islation does not precisely describe the oversight functions relating to public procurement andthere is no clear separation between the implementing agencies and the oversight function.

According to the TR, the Central Tender Committee "performs the functions of the Board,"

and there is a significant overlap of the CTC and ZNTB membership. The CTC and the

ZNTB are also supported in their daily operations by a common secretariat; in practice, thefunctions of the two are difficult to separate. The secretariat's Inspections and Standards De-partment represents an attempt to develop the oversight function. However, that function's

development has been impeded by requirements to inspect and categorize the decentralized

PSUs and the resource demands of examining and approving procurement cases for the CTC.

Nevertheless, the current legal provisions do permit the ZNTB to define and implement its

policy and regulatory roles, pending greater clarity being built into new legislation, as sug-gested above.

2.19 Insufficient Information on the Volume of Public Procurement. In connection with

inadequate oversight and monitoring functions, there is presently no single source that canidentify the total volume of public procurement. For the purposes of the CPAR, the CentralTender Committee was able to compile information from which an overview of centrally ap-

proved procurement could be constructed. But such information does not form part of the

normal monitoring and review efforts of the ZNTB. For the same reason, it was not possible

for the ZNTB to provide the corresponding data at the de-centralized level. For a proper su-pervisory role, the ZNTB should obtain this and other relevant data to critically examine the

performance of public procurement and take corrective measures.

2.20 Inadequate Complaints System and Unclear Enforcement Mechanisms. The ZNTB is

defined in the Tender Regulations as the authority that resolves conflicts in procurement mat-ters but is limited to disputes between tender committees and contractors. It does not cover the

larger scope of complaints, for example, by dissatisfied bidders. To ensure confidence in the

objective, independent, and efficient handling of complaints, coverage should be more com-

prehensive and an independent office, removed from involvement in the actual procurement

- 7 -

process, should handle the complaints. However, due to the overlap of membership in the

ZNTB and CTC and the existence of the joint secretariat of the two bodies, the ZNTB's inde-

pendence in this respect is questionable, at best. Furthermore, in present legislation, there is

no guidance as to what sanctions are available for the ZNTB. It is, therefore, at the Board's

discretion to select and apply sanctions. Nor does legislation prescribe a time limit for the dis-

posal of complaints. The lack of an effective system for complaint handling is reflected in

complaints being made to various agencies, such as OAG and ACC.

2.21 Unclear Reporting Linkages for the ZNTB's Supervisory Functions. The TenderBoard Act does not specify to whom the ZNTB reports on the outcome of its activities. Ac-

cording to part IV of the ZTBA, conceming "Financial and Other Provisions," the ZNTB re-

ports to the "minister," presumably MOFED. For the legislative framework to support trans-

parency and accountability, three elements should be clearly defined: what issues the ZNTB is

to report on, who should receive the report, and when the report should be submitted. This

will provide focus for the report's content.

(b) Delegation of centralization of Procurement Authority

2.22 Insufficient Delegation of Procurement Authority. Despite government commitment to

delegate procurement authority, it has proceeded very slowly since 1996. In real terms, mone-

tary thresholds beyond which the PSUs are authorized to carry out procurement have not in-

creased since 1996. Furthermore, since the adoption of the Procurement Reform Action Plan

(1996), not a single PSU has been given full authority to procure without financial limits. The

low thresholds for delegated procurement authority have fostered a tendency to split the size

of contracts to remain below the threshold. While this avoided referring the proposal to the

ZNTB for processing, it led to sub-optimal purchase prices due to smaller procurement pack-

ages and decreased competition from a limited number of bidders being invited to bid.

2.23 There are several reasonzs for the slowv pace of delegationz of procurement authoritY'.

Delegation of procurement authority requires an efficient framework for monitoring and con-

trol and procurement rules, and a professional staff. An analysis of the ZNT]B's inspection re-

ports revealed that, in many cases, the required professional staff is not in place. Furthermore,

at the provincial and district levels, the Tender Board Act and Tender Regulations are not

fully known and understood, causing many cases of non-adherence. The staff responsible for

procurement often has other functions as well, and there are examples of tender committees

not being established despite the ZNTB's recommendation to do so. Standardization of, for

instance, local purchase orders, also is lacking as are proper filing systems.

-8 -

2.24 Full delegation of procurement authority at the province level is unlikely to take place

in the short term because systems and resources to handle decentralized procurement are not

in place. However, according to the ZNTB, approximately 21 professional procurement ex-

perts are needed in the nine provinces. It should be possible to reach this target within I to 2

years. To stimulate the process, one or two provinces could be appointed as pilot provincesfor full delegation of authority. This would provide valuable experience and enable the le-

gitimate experimentation with different practical solutions to problems as they occurred.

(c) Procurement Cadre and Capacity Building

2.25 Insufficient Training and Salaries for Procurement Staff. In spite of government

commitments in the Public Procurement Action Plan (1996), neither a cadre of highly skilled

procurement professionals nor a cadre management agency has been established. Neverthe-

less, assisted by donor support, various activities have aimed to strengthen human resource

procurement capacities. From 1998 to 2001, around 600 persons received procurement train-

ing in ZBIC and ZAMIM at different levels, and a group of 63 persons are currently being

trained.

2.26 Even though training activities have been substantial, they have not efficiently ad-

dressed the human resource problem in public procurement. This is primarily due to the large

share of people who seek alternative employment opportunities after receiving procurement

training. In 1998, the ZNTB defined the demand for trained procurement specialists in minis-

tries and agencies as 157 positions. By June 2000, as many as 66 positions were vacant, and

approximately half of the 91 people employed by the ministries were not trained in procure-

ment at all.

2.27 Thze Importance of Pay Structure and Career Paths. The pay structure and career pathfor procurement professionals is, therefore, a key to the achievement of a procurement cadre.

Currently, the staff employed and seconded by the ZNTB receives better pay than those em-ployed as civil servants by the ministries. Even the ZNTB pay structure is inadequate to retain

staff. Its pay structure should be more competitive vis-a-vis wages in the private sector. The

ZNTB's pay structure could be similar to that of other agencies with attractive salary struc-

tures.

2.28 Need for Training Capacity Assessment and Development of Relevant Trainilng Pro-grams. Along with developing a procurement cadre, an assessment is needed of both the ca-

pacity of relevant training institutions and the content of their courses as well as the fundingavailable to implement training programs. At present, ZAMIM and ZBIC are the main train-

ing providers in procurement. Both institutions currently offer the CIPS-based, l training pro-

CIPS is the Chartered Institute for Purchasing and Supply, an international education and qualification bodybased in the United Kingdom.

-9-

gram. Additional training programs can be developed based on the expertise and facilities

available in these institutions.

2.29 It is relevant to supplement the CIPS training system with various mid-career courses,

and those that focus on special issues related to public procurement. Special courses could be

developed to cover procurement issues that traditionally are cause for concern and compli-

cated to handle. Examples include procurement planning, procurement of consultancy ser-vices, the evaluation process, filing and documentation, contract management, development

of terms of reference using the logical framework approach, anti-corruption measures, and

donor procurement systems.

(d) Anti-Corruption Measures

2.30 Perception of Corruption in relation to Procurement. In 1998, the World Bank funded

a planned survey on the public perception of corruption. However, the initiaztive was stopped

after the call for proposals to carry out the survey appeared in the media. Another survey is

now planned to be carried out within the framework of the Public Service C'apacity BuildingProject. Thus far, no survey of the public perception of corruption has been carried out.

2.31 It is the perception of the private sector, however, that corruption takes place in connec-

tion with public procurement, both in the evaluation of tenders regarding short-listing and

contracting, and in supervision of civil works contracts. In general, the private sector per-

ceives the procurement system as unfair and nontransparent. Many private enterprises choose

not to present proposals for publicly tendered jobs, as the enterprises do not believe that con-

tracts are awarded on the basis of a transparent procurement process. Potential suppliers re-

ported to the CPAR team that it is a common experience to participate in a publicized tender

that is subsequently cancelled, only to find the contract resurfaces later, already having been

awarded to one of the bidders without re-tendering. Some of the contracts reviewed by the

CPAR team (in the review of 14 large contracts funded by government) exhibited the same

phenomenon; the bidding process was "annulled" and then negotiated separately with one of

the bidders.

2.32 Insufficient Funding of Anti-Corruption Commission. Against this background, the

activities of the Anti-Corruption Commission are highly important if Zambia is to move to-

wards a well-functioning, fair, and transparent procurement framework. The recent decision

to establish a special directorate in the ACC to investigate compliance with public sector pro-

curement rules is a step in the right direction. However, due to unattractive salaries and condi-tions for service, it is difficult for the ACC to attract and retain skilled personnel and, in gen-

eral, it has been seriously hampered in its activities due to funding described by the ACC as

"erratic and inadequate" in its 1999 report.

- 10-

2.33 Code of Conduct for Public Employees ilt Procurement. Other anti-corruption meas-

ures are relevant. Precise definitions of what is expected of a civil servant and what consti-

tutes a conflict of interest are prerequisites for effective enforcement of procurement regula-

tions. There is no general Code of Conduct for the Zambian public sector employees. The

only guidance is given in the General Orders that regulate all aspects of public employment,

which include a section on Conduct and Discipline but lack a general ban on conflicts of in-

terest, and in the Financial Regulations that regulate all aspects of disbursement of public

money. A Code of Conduct for procurement professionals was developed as part of the Public

Procurement Action Plan (1996) but never implemented. It is still appropriate to consider de-

veloping a general code of conduct for civil servants and for procurement professionals.

D. RECOMMENDATIONS

2.34 With the objective of promoting transparency, competition, economy and efficiency,

and fairness and accountability in the Zambian public procurement framework, the following

is recommended:

(a) Reform of Legal Framework2.35 The legal framework should be reformed in the following key areas:

* An upgraded legalframework should be adopted, based on the UNCITRAL Model Law.

* The revised procurement act should contain2 tlre basic procuremnent prin2ciples of a public

procurement system, such as procurement methods, the precise circumstances that call for

different procurement methods, basic rights of bidders, evaluation criteria, public bid

opening, price adjustment provisions, maintenance of records, etc. It should cover the ob-

jectives and functions of a new independent policy and regulatory procurement authority,

say, the Zambia National Procurement Authority (ZNPA), to replace the ZNTB immedi-

ately on creation of ZNPA. Important functions of ZNPA should be monitoring procure-

ment policies and practices, developing and managing the procurement cadre, conducting

capacity building and outreach to contractors, consultants, and suppliers to engender a

greater share of contracts to local organizations.* A reliable reporting system should be established whereby ZNPA can obtain statistical

information on procurement activities at all levels. ZNPA should establish benchmarks

and performance indicators to keep track of and measure the progress of procurement re-

form and quality of actual procurement processes.

* The secretariats of t/e CTC anid ZNVPA stiould be phrysicallv separate. It is expected that

CTC secretariat will not be needed when decentralization is completed in 3 years. The au-

thority's reporting obligations should be specified.

* The establishment of an indepenrdent appeals bodv (part rimre) in conjunction with a well

defined complaints system managed by ZNPA which will no longer have a conflict of in-

terest as ZNPA will not conduct any procurement.

- II -

(b) Delegation of Procurement Authority2.36 A number of steps should be taken to speed up the delegation of procurement authority.Complete delegation of procurement authority to the ministries in a phas,ed manner over 3years, as proposed below, is feasible if supporting measures are taken in a concerted manner.These supporting measures include setting up the procurement cadre under the ZNTB's man-agement and positioning these personnel to the ministries (as ZNTB does at present except forstaff hired directly by the ministries as civil servants) instead of requiring them to recruit andtrain their own procurement staff, thus rapidly enhancing the training of a cadre of procure-ment specialists, improving salaries, etc. The existing system of categorizing and certifyingPSUs for specified monetary thresholds should be phased out and replaced with full authori-zation to the ministries and agencies for procurement decisions. The plan for this changecould be the following:* Full authorization should be given to the six PSUs in category C in the first year of imple-

mentation, to PSUs in category A and B in the second year, and to "not-certified" PSUs in

the third year. The responsible management should be given a maximum of 6 months' no-tice to enable them to assess the capacities needed and adjust the organization.

* In parallel with this, the "non-certified" PSUs (in ministries and agencies, including prov-inces) must be given 6 months' notice or more to prepare for complete decentralized au-thority. By the end of the second year of implementation, they should all be able to under-

take procurement independent of the CTC.* To stimulate the decentralization process, one or two provinces should be appointed in the

short to medium term as pilot provinces for full delegation of procurement authority. Thiswould provide valuable experience.

(c) Procurement Cadre and Capacity Building2.37 A number of human capacity problems should be addressed. The priorities are:* A professional procurement cadre shouild be established based on the elements of (a) a

defined and ensured career path, (b) an attractive salary structure commensurate with theskills required and market conditions, (c) the establishment of a cadre managementagency responsible for developing the capacity of cadre staff, (d) placement of cadre staffinto positions in PSUs based on matching experience and expertise with each PSU's re-quirements, and (e) the establishment of in-career capacity building programs managedby the cadre management agency.

* The cadre should be managed bv tlhe new procuirement autlioritr (ZNPA).

* To increase the competitiveness of salaries paid to procurement officials, the existingsystem of staff secondment from the ZNTB should be expanded to cover all procurementstaff working in ministries or agencies. Funding for salaries to the cadre should be im-proved to the level of other agencies with attractive salaries.

* To identify opportunities to upgrade their ability to deliver mid-career training, training

instituitionzs soiould be assessed. Mid-career training programs should be developed

(d) Anti-Corruption Measures2.38 The following is recommended:

* Sufficient funding should be ensured for the Anti-Corruption Commission.

* The new Directorate of the Anti-Corruption Commission, which is to investigate, inter

alia, compliance with public sector procurement rules, should employ procurement spe-

cialists to assist with its tasks.

* The functions and tasks of the foreseen new Directorate in the ACC should be coordi-

nated with the new redefined procurement authority to ensure exchange of information

and close cooperation in the fight against corruption in procurement.

* public procurement tender procedures to use new anti-corruption clauses such as thoseused by the World Bank in its standard bidding documents.

• The corruption survey presently planned under the PSCAP project should be initiatedimmediately.

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3. PROCUREMENT PROCEDURES AND PRACTICES

A. PROCUREMENT PROCEDURES

3.01 Use of Standard Bidding Documents Not Mandatory. The Procurement Guidelinescontain one set of bidding documents for all types of products. The use of these biddingdocuments is not mandatory. As in the case of the long list of standard bidding documents ofthe World Bank, Zambia also needs a wide range of bidding documents to support the varioustypes of products and services to be procured.

3.02 Award Criteria. The Tender Regulations do not detail the range and nature of awardcriteria that should be applied in the various tender methods nor do they detail the proceduresfor applying them. The only reference to award criteria in the regulations is in the descriptionsof the tender committee's functions, where they specify "that the committee must ensure thatthe criteria used in evaluating tenders is fully consistent with information given in the tenderdocuments." The Procurement Guidelines for services and goods do not provide any guidanceon applying award criteria and arriving at the "lowest evaluated bidder." The guidelines forcivil works, however, mention both a technical evaluation and a commercial evaluation, list-ing a number of standard criteria for each section.

3.03 Registratiotn System for Small Value Procurement. Zambian public procurement relieson a registration list system for identifying and assessing the potential suppliers' qualifica-tions. The Tender Regulations require the Central Tender Committee to register suppliers ofgoods, works, and services at the central level and the PSUs to register suppliers at the decen-tralized level. According to the Guidelines, this registration list assists the PSUs with marketinformation and enables them to carry out "informal" procurement (below the monetary limitof ZMK 30 million or about USD 7500) with diligence. The Guidelines provide for centralregistration of suppliers that sell items of general use for all public sectors at the CTC/ZNTB.In addition, all foreign firms are to be registered at the ZNTB. Each ministry also requires aseparate registration for items of non-general use. This leads to multiple registrations for asupplier or contractor. Consultants are not required to be registered in areas such as quantitysurveyors.

3.04 The ZNTB/CTC list is circulated to the purchasing ministries or agencies. Applicationforms are available at the National Tender Board and the PSUs. There is a registration fee ofbetween ZMK 50,000 and ZMK 200,000 (equivalent to USD 12.50 to USD 50). Companiesmust pay a fee to each ministry or agency where they request to be registered. Both the ZNTBand PSU can refuse applications for registration. The basis for refusal is not defined in detail.There is no appeal, except to the ZNTB itself.

- 14-

3.05 Tender Methods. The Tender Regulations and Procurement Guidelines define a number

of different procurement methods. These methods differ in terms of their openness to poten-

tial suppliers.

3.06 A Formal Tender is required to be advertised in the Government Gazette and is for con-

tracts exceeding ZMK 30 million. It is equivalent to an "Open Tender," which is open to all

who respond to a national or intemational advertisement. There are no thresholds indicating

when to advertise internationally. The Tender Regulations imply the Formal Tender to be the

preferred procurement method. A Special Fornmal Tender is an exception to the Formal Ten-der that is used where quotations are requested from a number of potential suppliers. The

minimum number of quotations is not specified. An Inffonnal Tender is not advertised. The

contract value should not exceed ZMK 30 million for,government bodies or ZMK 30 million

for parastatals. The approving authority (CTC, Head of Department in Ministry, etc.) dependson the value of the contract concerned. For Informal Tenders, bids are required to be invited

from at least three contractors or suppliers. Another recognized method of procurement is nze-

gotiation. The TR permits a tender committee to (i) authorize direct "negotiation" and, (ii) the

Special Formal Tender procedure. These exemptions from the preferred Formal Tender

method are on conditions that are broad and open for interpretation. For instance, negotiation

and the Special Formal Tender may be allowed when civil works of a "specialized and com-

plex nature" are involved or "highly specialized" equipment is to be obtained, or when the

goods and services to be obtained are of a "personal or professional nature" or "no acceptable

tender from all formal tenders previously invited" has been made.

3.07 Single sourcing of consultancy services is not mentioned in the Act but appears in the

Guidelines. The criteria for allowing for single sourcing are broad; for example, the preferred

company or consultants have a close association with similar projects, have specific expertise

that is not widely available, or have undertaken similar assignments before. Single sourcing isnot allowed for the procurement of civil works and goods.

3.08 No comprehensive list of procurement methods is definied. The various tender methods

are not comprehensive enough. Also, the definitions of the methods are scattered over differ-

ent legislative documents. The UNCITRAL Model Law includes a comprehensive descriptionof procurement methods, which can serve as a benchmark for improving the current provi-

sions.

3.09 Bid and Opening of Bid. To avoid malpractice, bids should be opened immediately af-ter the announced bid submission time. This important principle is not clearly specified in the

procurement regulations. In practice, most bids are opened immediately after the expiry of the

deadline. However, delays of as much as a few days in the opening of bids do occur.

- 15 -

B. ASSESSMENT OF PROCUREMENT PRACTICES

3.10 In assessing procurement practices, an important issue is whether practices support a

transparent, fair, and accountable procurement system, which promotes competition among

suppliers.

(a) Regulatory Framework

3.11 Practices Differfrom Formal Objectives. The Zambian public procurement system ischaracterized by a divergence between overall, formal legislation and objectives on the onehand and daily practices on the other hand. This divergence is manifest in the general appre-ciation of procurement rules and, in particular, the application of tender methods, registrationsystem, and the enforcement of rules by the ZNTB, which waives its rules liberally. This di-vergence is possible in large part because of the vagueness and imprecision of important leg-

islative and regulatory documents. The imprecision enables a number of interpretations and

the arbitrary application of procurement rules. Political interference and the weak will of theCTC and ZNTB to enforce their regulations also support this divergence. The result is a pro-

curement system that is perceived among potential suppliers as unfair, ambiguous, nontrans-parent, and subject to misuse.

3.12 Informal Tender and Negotiations Widely Used for Procurement. Even though theTender Regulations imply that Formal Tenders should be the predominant tender method forlarger value procurements, this is not the predominant practice. On the contrary, both the In-

formal Tender and negotiation methods are widely used.

3.13 While Informal Tenders are to be used only for small value contracts (not exceeding

ZMK 30 million, equivalent to USD.7,500), it is a frequent practice for PSUs to seek CTC'swaiver for Informal Tenders for larger value contracts. These are then awaried to registered

suppliers using the Special Tender method. This circumvents the Formal Tender method re-

quirement. In practice, CTC is frequently unable to strictly enforce the rules and tends to bow

to the pressure from the PSUs to allow the use of Informal Tenders. This phenomenon was

noticed even in the 14 cases of large-value procurement at the CTC reviewed for this CPAR.

3.14 Another frequent practice is to "ainnul" a Fonnial Tenzder procedure mid-way during

processing. Immediately thereafter, "niegotiationts" are initiated with bidders from the very

tender that was annulled. This undesirable practice of ainnilinenr followed by ntegotiations wasobserved also in the 14 large-value cases. This practice entails nontransparent procurement

and works against faimess and competition.

-16 -

(b) Inadequacies and Misuse of the Registration System

3.15 Registration List System Considered Unfair and Nontransparent. In all procurement,

it is important for the procuring entity to evaluate bidders' qualifications and capacity to en-

sure their ability to deliver the promised products. To prevent arbitrary decisions, it is impor-

tant that the procedures and criteria used to assess the qualifications of the bidders are openand transparent. Tendering with initial pre-qualification and a subsequent short-listing of bid-

ders is one way to achieve this. However, the Tender Regulations do not define these qualifi-

cation methods, nor is any guidance on these methods available. Instead, the registration listsystem described earlier is used. While short-lists are drafted on the basis of the registration

list, each short-list is subject to misuse to favor particular firms. Further, the registration listsare not systematically updated nor are the means available to check the data applicants submit

in registration forms. Moreover, the registration system is used for much higher value con-

tracts than the regulations intend.

3.16 This non-transparent system, which does not truly assess bidder qualifications, is per-

ceived as being misused or not used as intended in establishing short-lists. The fee for regis-

tering as a potential supplier is perceived as a tax, and the ministries see it as an important

revenue generation activity. The system, as currently designed, is a potential source for cor-

rupt practices.

3.17 The use of the registration system is widespread even though regulations require it to be

limited to small value items (commonly termed as a "shopping" method). Widespread use,

including for larger value procurement than intended in the system, enhances the scope for

corruption and also results in costlier procurement overall.

(c) Administration of Procurement Procedures

3.18 Insufficient Guidelinzes for Procurement of Conzsultancy Services The guiidelinies for

consultanzcY services are, in a number of respects, broad and imprecise. A proper definition of

"consultancy services" is lacking while the criteria for selecting a method, identifying bidders.

and determining selection and evaluation processes are open to interpretation. For certain pro-fessions (surveyors, architects, etc.), the registration system described earlier is used for shtort-

listing consultants, in addition to "registers maintained by professional bodies of members of

firms." The award process permits opening the best three technical proposals without regard

to a minimum threshold of quality. Financial proposals are opened privately by a committee, a

process which is not "open" to the bidders. The criteria for the sinigle source selection method

are imprecise and allow for liberal use of this method. In all consultancy contracts, negotia-tions are allowed without restrictions, both in regard to substantial elements of the specifica-

tions and for unit rates already offered. Such liberal access to negotiation presents a high riskl

of collusion and non-equal treatment of bidders.

- 17 -

3.19 For donor-funzded consultancy contracts, donor procurement requirernents are followed.

In practice, much of the consultancy services procured with governientefuids are for routine

assignments such as architects, engineers, and quantity surveyors, where the registration sys-

tem (with its attendant weaknesses) is the primary basis for short-listing. An earlier practice of

hiring civil servants as preferred providers for consultancy services has been largely, though

not completely, abandoned. Today, this practice is known to continue mainly for some gov-

ernment-funded contracts.

3.20 Insufficient Proceduresfor Use of Domestic Preference System. The domestic prefer-

ence system applies only for goods manufactured in Zambia (15 percent) or for imported

goods held in stock in Zambia (5 percent). The SMEs (small and medium enterprises) receive

a preference of 25 percent for manufactured goods supplied by them. No preference is permit-

ted for domestic civil works contractors. In practice, CTC and the ministries have difficulty

applying these preferences as the means of application are not described in any detail. The

procedures also do not have provisions requiring a minimum domestic contribution by the

manufacturer to be eligible for the preference. No data is maintained on the impact of, or inci-

dence of, the use of the domestic preference system for goods manufactured, or goods im-

ported and stocked for sale locally.

3.21 Insufficient Filing Systems. A number of shortcomings characterize the present filingsystem of public procurement. Files on procurement are not always maintained. Where they

are maintained, they are not complete and vital documents (example, performance guarantees)

are not readily available when needed. There is no clear guidance on what data should be

maintained in the filing system and its structure (as government has directed for other filing

systems) and no special filing system has been developed for documentation linked to the pro-

curement process. There is a lack of appreciation of the importance of and methods for main-

taining files. The result is files that are generally incomplete. A review of World Bank-funded

projects documented serious problems in managing procurement records. This situation also

leads to ineffective contract management when vital documents, such as performance

ouarantees or the contract itself, cannot be found when required.

31.22 Insufficient Procurement Planning. Except in isolated ministries, which practice a sys-

tem limited to procurement "scheduling, the use of procurement planning as a tool for con-

ducting efficient and economic procurement is largely non-existent. The CPAR team was ad-

vised that procurement planning is not done as there is no certainty that the funds allocated

will be available in full, or in time, when needed. While the funds problem affects contract

scheduling, other vital aspects of procurement planning (such as packaging, choosing, the ap-

propriate procurement method and type of contract, etc.) are not taking place early in the pro-

curement process. Consequently, there were many cases where prior agreement on these as-

pects was lacking, which caused delays; when the actual bid documents were forwarded to the

- 18-

CTC, these choices were questioned. The guidelines are silent on the need for and importance

of procurement planning, and on when and how it should be done.

3.23 This state of affairs results in a large incidence of "urgent" cases of procurement. In ur-

gent cases, suboptimal methods of procurement must be used, undermining efficient and eco-nomic procurement. The review of 14 large-value procurement contracts in the ZNTB re-

vealed that valuable time (as much as 2 to 3 months) was often lost while ministries and the

ZNTB discussed the choices made without due process.

(d) Payments and Procedures

3.24 Unreliability in Release of Funds Allocated to Ministries in Budget The funds allo-cated in the budget for each project for each ministry are generally not released to the full ex-

tent during the year. Also, there are significant delays in releasing even the small amounts that

the budget office finally agrees to give. Statistics are not maintained, but it is generally agreed

that this occurs too often and seriously affects project implementation, efficient procurement,

and contract management. This unreliable state of affairs has several consequences, including:

(a) contractors' bills are often held up for several months, which delays projects, makes con-

tractors wary of bidding on government contracts, and leads to higher prices, (b) delayed

payments incur interest charges, which are paid from the ministry's limited budget, thereby

further reducing the funds available for product payments, (c) when contracts are designated

in foreign currency and payment delays are protracted, exchange rate changes have been

known to cause a larger amount of local currency to be required than was originally provided.

3.25 Further, in the budget process, the funzds actuallv allocated are often lower than the

amounts required for good project progress. Also prevalent in the budget system is a practice

of allocating a "nominal" I ZMK for "tentative" projects that "may" be approved during thebudget year. While this allows such tentative projects to be listed in the budget papers for eli-

gibility to use the budget funds during the year, it further strains the budget for other projects

when more than the allocated I ZMK is finally released to such tentative projects. Subse-

quently, it exacerbates the problem of adequate and timely release of funds.

3.26 External Payments Procedures. The use of Letters of Credit as a means of payment has

declined both in the public and private sector since 1992, when restrictions on the use of for-

eign currency were abolished. Before then, it was mandatory to go through a central bank and

open Letters of Credit on all amounts above USD 5,000. Now it is up to the buyer and seller

to agree on the means of payment. Opening an LC takes between I and 2 weeks. The proce-

dure, as presented by the banks, is normal compared to practices in other countries.

3.27 An analysis conducted by the Office of the Auditor General provided several reasons

for the decline in the use of Letters of Credit, mainly related to goods imported by local agents

- 19 -

that are contracted as suppliers. Such agents do not have their own financial resources and

demand electronic money transfers to bank accounts abroad. The money is then used for buy-

ing goods and services. Second, electronic money transfers are preferred because the system

makes it possible to evade taxes. Third, companies prefer electronic transfer because it en-

ables easy and safe money laundering. For government-financed public procurement, the re-

lease of funds in this way, instead of with LCs directly to the foreign supplier, does occur, but

a security is obtained before such advances are paid. For payments financed by World Bank,

the opening of an LC is facilitated by the World Bank by a system of "direct commitment."

For World Bank-funded projects, the incidence of opening LCs without recourse to a direct

commitment method is low (statistics could not be obtained). Contrary to reports received by

the CPAR team, delays by the World Bank in facilitating the opening of LC(s through provid-

ing direct commitment were not found. Another reason attributed by some projects for lesss

use of LCs, is the high cost in terms of bank charges. The commercial banks do not find it

possible to charge lesser than they do.

3.28 Bonds and Guarantees. Bank guarantees normally give a better security for the buyer

than do bonds. However, this requirement prevents a number of smaller companies from par-

ticipating in public tenders because, for guarantees, banks require collateral, often in cash,

which is difficult for such companies to provide. On the other hand, bonds are riskier as their

encashment is not unconditional. Government regulations require that performance guarantees

and guarantees for advances released should be obtained. However, govemment does permit

the use of bonds in place of bank guarantees due to liquidity problems. PSUs do attempt to

encash these bonds but data was not available. It was reported that bonds are accepted infre-

quently by most government agencies. However, as mentioned earlier, these documents are

often filed improperly and may not be available when needed.

C. PERFORMANCE ON BANK-ASSISTED PROJECTS

3.29 The current active portfolio comprises 14 operations with total commitments of USD

463 million. Of this, USD 199.5 million has been disbursed by end of FY02. The Country

Portfolio Performance Review for Zambia notes that project performance improved slightly

since end of FY 2001 as there are now only two problem projects compared to five then.'2

3.30 Recently a number of procurement-related reviews have been conducted for various

reasons. An Independent Procurement Review (IPR) was conducted in 1999 by a consulting

firm (M/s Crown Agents). Ex-post Procurement and Statement of Expenditure (SOE) Re-views were conducted (a) in June 2001 for the HSSP and (b) in August 2001 for four other

At the end of FY 2001 (June 2001), there were five problem projects: Urban Restructurinn and Water SupplyProject (URWPS), Environment Support Program (ESP), Road Sector Investment Program Support Project(ROADSIP), Health Sector Support Project (HSSP), and the Power Rehabilitation Program (PRP). At the endof FY 2002 (June 2002), there are two problem projects: ESP and HSSP as two operations have been closed,and PRP performance has been upgraded to satisfactory

- 20 -

projects 3. In February 2002, the Bank conducted a procurement review of 10 selected con-tracts that were subject to DA prior review. All these reviews point to similar deficiencies inprocurement capacity, procurement management, filing and documentation, and contract

management.

3.31 In the case of one project (HSSP), cases of misprocurement were identified and re-ported to government. In the same project, it was discovered that the Special Account was

used repeatedly to finance ineligible expenditures. Due to its improper uses of the shopping

method, the project was advised to suspend this procurement method and use the National

Competitive Bidding procedure instead. However, such serious irregularities were not notedin other projects.

3.32 For all projects, the common problems included: (a) lack of files and documentation;

(b) bid opening procedures, etc., not rigorously followed; (c) prior review clearances not ob-

tained in time; (d) deficiencies in important features of bid documents; (e) poor contract man-

agement, including release of advances without guarantees; (f) deficiencies of capacity and

capability in contractor firms awarded civil works contracts; and (g) cost overruns coupledwith time overruns.

3.33 Al] these reports drew attention to inadequacies in the capacities of the PSUs. Theinadequacies included (a) understaffing, (b) inadequate exposure to and training in procure-

ment, (c) inadequate knowledge of filing needs and contract management issues, (d) lack of

procurement planning and its use for efficient procurement, and (e) insufficient clarity in in-

stitutional and organizational arrangements affecting the capacity of PSUs to perform effec-tively.

3.34 The slow pace of delegation of authority to procure to the ministries and agencies ispartly due to ZNTB's lack of confidence in their capacity. But the there are also other reasons

for persistent lack of adequate interest in reform of public procurement. The lack of interest inministries and agencies to actively pursue even the limited program of delegation of procure-

ment authority is symptomatic of underlying causes such as preference for a system of dif-

fused responsibility and accountability offered by the current lax systems and procedures and

institutional arrangements. Any tightening of the arrangements would affect the distribution

of rents be it ZNTB, senior officials or politicians. Though difficult to pin down in any coun-

try, political interference in public procurement in Zambia is generally acknowledged.

Agricultural Sector Investment Program (ASIP). Economic Recovery and Investment Promotion Credit(ERIPTA). ROADSIP, and Social Recovery 11 Project (SRP 11).

- 21-

D. RECOMMENDATIONS

(a) Improve the Regulatory Framework

3.35 The following is recommended for the regulatory framework:* The different tender methods and the precise conditions for their use should be adequately

described in a revised procurement act, and not in the regulations. In this connection, alist of procurement methods should be defined consistent with the UNCITRAL Model

Law* All applicable award criteria to determine the lowest evaluated bidder should be defined

in an act. Their disclosure as part of the bidding documents should be mandatory. Theprinciples for pre- and post-qualification should also be described in the procurement act.

* The new procurement act should set very stringent criteria and conditions for negotiation.Recourse to "annulment" followed by negotiations should be banned.

* Consistent with the revised legal framework, action should be taken to recast the regula-

tionzs and giuidelinies governing public procurement. Regulations should elaborate the de-

tails on the process and the technical details separately for civil works, goods, and consul-tancy services. Regulations should clearly specify that bid opening must take place im-mediately after the deadline for bid submission.

* Domestic price preference for civil works contracts should be introduced with eligibilityrequirements similar to the provisions in Bank guidelines. For manufactured goods, a cri-teria of minimum value added should be introduced. The price preference for (a) imi-ported goods held in stock in Zambia should be abolished as this represents a subsidywith limited lasting impact on domestic capability generation, and (b) goods produced byZambian SMEs should be reviewed as the desired objectives are better achieved by othermeans.

* Requirements regarding docunzenitation antdfiling should be addressed in the revised pro-curement act, and the Procurement Authority should develop detailed instructions for fil-ing, including a checklist to be used by the PSUs.

(b) Improve the Registration System

3.36 Regarding the system for identifying qualified bidders, the following is recommended:* The registration system for identifying potential bidders sholuld be redesignzed with the

objective of (a) restricting the use of the system to only very small value items (below theequivalent of USD 7500) and (b) providing effective means for administration, enforce-ment, and monitoring of the system.

* Private sector representatives should be involved in reviewing the registration list system.* The registration fee should be less expensive and reflect more directly the actual cost of

registration.

-22 -

(c) Enhance the Administration of Procurement Procedures

3.37 The administration of procurement procedures should be reformed in a number of ways:* CTC should enforce the use of procurement metliod and related thresholds much more

rigorously and only allow waivers in a few well-justified cases.

* A full set of standard bidding documents should be developed. The use of standard bid-

ding documents should be mandatory.* For the documentfiling system, a procurement register separate from the main register in

each ministry should be established, containing a complete set of documentation for pro-

curement activities in one place. The proposed new procurement authority should de-velop detailed instructions for filing, including a checklist to be used by the PSUs.

* A manual on procurement planning should be developed. The system of procurementplanning should be enforced. Methods of procurement, packaging, etc., should be defined

and agreed to well before the procurement process begins and should then be followed.

Release of budget funds from the budgetary system should be suitably linked to realistic

procurement plans

(d) Facilitate Payments and Guarantees

3.38 The present practices for payments and guarantees call for certain reforms:

* The system of allocation and release of funds to ministries under the government'sbudget should be modified to improve reliability and adequate availability of timely re-

sources.

* The use of Letters of Credit should be mandatory for procurement above a certain value.

* In lieu of bank guarantees for bid security and performance guarantees, bonds may be

allowed for small enterprises when it can be assessed that they are easily encashable. To

secure the interest of the procuring entity, bank guarantees should be mandatory for lar-ger contracts.

- 23 -

4. TRADE PRACTICES AND CUSTOMS

A. THE ZAMBIAN TRADE REGIME

4.01 Procurement Issues. A central procurement issue in relation to trade is the applicationof transparent and internationally recognized customs and trade procedures, which allow the

effective import and export of goods. A modem customs administration must be able to facili-tate trade flows through smooth import and export procedures and, at the same time, fulfill its

role as a key revenue generator to the state budget.

4.02 Trade Policy. Zambia has adopted most of the international standards in terms of tradepolicies and customs regulations. As a member of COMESA (Common Market of Eastern

and Southern Africa), Zambia has moved ahead of other member states in adopting tariff re-ductions of up to 80 percent on most tradable commodities. Zambia is also a member of

SADC (Southern African Development Community) and has bilateral trade agreements with

South Africa and Zimbabwe. Furthermore, Zambia has trade agreements with the European

Union and the United States of America.

4.03 Tariffs and Taxes. Zambia has consistently followed a policy of reducing tariff levels,with significant rate reductions taking place in 1996. The current rates of customs duty range

between zero and 25 percent, with 15 percent as the most common rate. In general, a 5 per-cent rate applies to raw materials, a 15 percent rate.to intermediate goods, and a 25 percent

rate to finished products and luxury goods. In addition, there is a limited list of duty-freegoods including, among other items, books, fertilizers, and primary forms of rubber and steel.The VAT rate is 17.5 percent.

4.04 Registration of Traders. All traders, including foreign firms using a national agent,must be registered. A prospective company must register with the Registrar of Companies atthe Ministry of Commerce, Trade, and Industry. After that, a Certificate of Incorporation is

issued. Within Customs, an identification number is allocated to traders who import, export,

or transport goods. The import licensing system has been abolished. However, a certification

procedure is applied for certain goods. Import certificates to clear goods are issued both to

importers themselves and to customs brokers.

4.05 Organization and Human Resources. The Customs Department is part of the ZambianRevenue Agency (ZRA). Customs has 32 local offices and 8 regional offices located across

the country, staffed with approximately 500 staff members. The staff in lower grades is pro-vided with only 3 weeks of training upon recruitment, whereas higher-grade officers with

university degrees receive 4 weeks. There are incidents where newly recruited staff must han-

dle work all alone.

- 24 -

4.06 Computerized Customs System. In 1998, the computerized customs system, ASY-

CUDA, was introduced. It includes all functions needed in a modem customs operation. Ver-sion 2 of ASYCUDA is currently in place, and the latest version, ASYCUDA++, will be in-

troduced later in 2002. This version will reduce direct interaction between the customs bro-

ker/trader and the customs officer, thereby significantly reducing the risk of corruption.

ASYCUDA includes an automatic risk analysis module that supports the identification and

selection of consignments, which represent a higher risk and, therefore, should be controlled

further. Due to inadequate training, the risk analysis module is not being properly used, lead-

ing to a high percentage of consignments (30-50 percent) being inspected. This causes delays

and increases procurement lead time.

4.07 Under-invoicing and Forged Invoices. The incidence of under-invoicing and forgedinvoices is not higher than in other countries, but should be controlled to boost revenues andreduce organized customs and tax fraud. In this context, the Customs Department has intro-

duced post-entry control as a supplement to the traditional transaction control at the border.

However, to ensure effectiveness, the department is contemplating a more advanced system of

integrating this control with VAT and profit tax audits for which it currently does not have theexpertise.

B. MAIN RECOMMENDATIONS

4.08 As most international standards in terms of trade policies and customs regulations havebeen adopted, and customs and licensing procedures are generally transparent, the followingare recommended:

* Basic training for customs officers should be increased at all levels. This would support

effectiveness of both private and public sector procurement when goods are imported.Newly recruited officers need more comprehensive introduction and training.

* Implementation of ASYCUDA++ should be co,ntinzued anzd suipported bv traininig. Theuse of the system's risk analysis module should be ensured to minimize corruption and

lower the currently too-high inspection rates, which slow customs clearance. This stepwould also prevent revenue lost due to poor e-mail connections.

* International assistance should be requested to improve ZRA's capacirv to redlce un?(der-inivoicing andforged invoices. Control efforts directed towards under-invoicing should be

integrated with VAT control and audit of profit tax.* Trainlizng capacitv should be strengthened, and training should be provided for customs

officers for carrying out efficient investigations of under-invoicing.

-25 -

5. PRIVATE SECTOR COMMERCIAL PRACTICES

A. THE PRIVATE SECTOR IN ZAMBIA

5.01 Competitiveness in a Liberalizing Economy. The competitiveness of major parts of

Zambia's private sector has been improving steadily since the early 1990s, when Zambia took

several significant steps towards a more liberal economy, including privatization of ineffi-

cient, state-owned enterprises. Privatization has culminated in recent years with privatization

of the mining sector. However, the recent decision of Anglo American to withdraw fromZambia is a seZTBAck in the private sector.

5.02 Private Sector Organizations. There are two major private sector organizations in

Zambia: The Zambia Association of Chambers of Commerce (ZACCI) and the Zambian As-

sociation of Manufacturers (ZAM). Together, they represent most of the enterprises in the

formal private sector.

5.03 Private Sector Growth. Private sector employment has been growing since 1994 andcontinues to grow, but at a lower rate. At the same time, the private sector production is ex-panding. Private sector output, in general, seems to rise faster than employment, pointing to

increased competitiveness and a more sustainable private sector.

5.04 Regulation of Commercial Practices. The Competition and Fair Trading Act of 1994 isthe basic legal foundation for regulating commercial activities in Zambia. The Act covers

anti-competitive practices, mergers and take-overs, trade agreements, anti-competitive trade-practices by associations, criteria for controlling monopolies and concentration of economic

power, and consumer welfare protection. The Act established basic regulations, and neither

enterprises nor their organizations find significant flaws in the regulation or have immediatesuggestions for any amendments to the regulations.

5.05 Institutional Support to Implement Commercial Regional. The organization set up to

implement the Act is the Zambian Competition Commission (ZCC), an autonomous corporate

body under the Ministry of Commerce, Trade, and Industry. According to the ZCC, its limited

resources make it difficult to exercise its powers. Many cases are not pursued due to the lack

of staff.

5.06 Private Sector Procurement and Procurement Procedures. The volume of private sec-

tor procurement cannot be estimated on the basis of the available data. Also difficult to esti-

mate is the quantitative contribution of the domestic private sector to public procurement. In-

dustry estimates the volume of private sector procurement at well below that of public pro-curement. For the majority of companies, there are no formal procedures for procurement,

particularly among SMEs. Some large companies, especially the "privatized parastatals," have

comprehensive and efficient procurement procedures.- 26 -

5.07 Professionalism and Capacity Building. There is room, and the need, for Zambian sup-

pliers to be professionalized to meet the demands of procuring enterprises. The professional-

ism and sustainability of suppliers is a major issue for Zambian private sector procurement.

Some suppliers are professional in terms of good business practices, but many are not.

5.08 Private sector procurement systems and procedures There also are considerable defi-

ciencies in general understanding and recognition of the procurement process. Zambian pri-

vate sector procurement procedures can be grouped as (a) those with no formnal procedures for

procurement, that is, the majority of companies, especially SMEs, and (b) "frontrunners" in

private sector procurement, which applies to some large companies with comprehensive, effi-

cient procurement procedures, especially "privatized parastatals."

5.09 However, procurement practices are company-specific and range from simple direct

purchase/contracting, to short-listing for quotations, and open tendering, including interna-

tional bidding processes. Open tender is more common for goods than for works. The larger

the purchase, the more likely it is that an open or international tender procedure is applied.

INCOTERMS are frequently used, with CIF and FOB being the most common. Multinational

companies follow corporate rules and procedures, and they commonly buy only from corpo-

rate-approved suppliers.

5.10 Purchasing and procurement is not generally recognized as a profession, and there is

room for greater professionalization of the purchasing, supply, and procurement function in

private enterprises. Related problems are unrealistic calculations and promises regarding what

suppliers believe they can deliver; failure to deliver the promised goods or services, both in

terms of under-deliverance and over-deliverance with claims for extra payment; and non-

compliance with time schedules for delivery. There is also little understanding of the payment

procedures agreed upon. Many suppliers insist on different procedures of payment than those

originally agreed in the contract once they deliver the goods.

B. MAIN RECOMMENDATIONS

5.11 The following are recommended:* Training in good business practices could be made available to Zambian enterprises. A

training program could be developed and launched in cooperation with private sector in-

stitutions such as ZACCI, ZAM and Zambian Enterprise Network Association through

donor support.* Development of good business practices in the Zambian business community could be

furthered by facilitating the development of a code of ethics for good business practices.

ZACCI, ZAM and Zambian Enterprise Network Association should be involved in this

work.

- 27 -

6. GENERAL RISKASSESSMENT

6.01 In achieving a well-functioning public procurement system, the government should

focus on managing the following risks:

No. Risk to be managed What can happen How can it happen Risk mitigation

I Institutional frame- * Faith in govern- * Oversight role of * Definition of a newwork lacks separa- ment's procure- ZNTB unclear in institutional frame-tion between imple- ment system can- terms of tasks work that clearlymenting agencies and not be built or and day-today separates those whooversight function maintained performance carry out and ap-

* Decentralization * Role of CTC vis- prove procurementslowed down a-vis the ZNTB from those with pol-

unclear icy and oversight re-

* Conflict of inter- sponsibilityest due to overlapof members

Enforcement by * Implementing * Even though re- * Provide funding forOAG. ACC, and agencies don't re- ports document institutionsprocurement author- ceive direction lack of apprecia- * Revise the Auditity remains weak needed for imple- tion of procure- Act to strengthenpartly due to lack of mentation ment rules, it is mandate of OAG of-funding * General belief in not remedied fice

the system not * Practitioners tend * Strengthen institu-built or maintained to choose own tional linkages be-because a breach interpretation of tween OAG/ACCof rules has no rules and procurement au-consequence * Those tempted to thority with regular

* Corruption contin- misuse the sys- meetings of agen-ues tem to their own cies' CEOs

* Even though re- benefit not pun-form plans exist, ishedthey will not be ef- * Reform plan notfectively imple- coordinated.mented because leading to fund-implementing in- ing provided on astitutions (OAG, project-by- pro-ACC. ZNTB) do ject basis insteadnot have sufficient of a total pro-and constant flow gram basisof funds to operate

3 Legal instruments - * Enforcement * Various guide- * Review of legalact, regulations, and weakened with dif- lines developed frameworkguidelines inade- ferent practices by differentquate and used insuf- developing due to PSUsficiently lack of clarity and

authority in rules

- 28 -

No. Risk to be managed What can happen How can it happen Risk mitigation4 Lack of faith in the * Companies choose * Late payments * Government to im-

government's pro- not to work for continue prove budgetingcurement system by government be- * Registration sys- process to ensurethe private sector cause of late pay- tem not transpar- availability of funds

ments and non- ent for paymentstransparency in the * Bids rejected on Review of registra-bidding process, arbitrarv basis tion systemwhich providesless competition * Use of short-

* Companies that listing instead ofwork with the gov- open tenderingernment calculate on large contractshigher prices tocompensate forlate payments, etc.

* Companies col-lude, preventingreal competitionand increasingprices

5 Lack of ability to * Pay structure un- * Procurement * Establishment ofretain staff even changed and cadre staff continue to cadre, including ca-though many have not fully developed be hired as civil reer path and com-been trained as planned. High servants petitive and ade-

staff turnover con- * The pay structure quate pay structuretinues and trained of procurement based on a grant-staff go to private staff linked to the aided system such assector, where pay civil serve reform the ZRA.is 5-10 times better program. making * ZNTB seconds pro-

* Difficult to attract a short-term solu- fessional procure-the right people for tion unlikely ment staff to im-training because prove the quality ofskill improvements procurement proce-not linked to pro- dures and processesmotion and betterpay

* Decentralizationslowed down dueto lack of capacityin the PSUs

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No. Risk to be managed What can happen How can it happen Risk mitigation

6 Lack of faith and * Complaints sent to * Need to improve * Review of legalconfusion regarding the wrong office the complaints framework and de-the procedures and and not addressed system generally velopment of newpossibilities for par- in time agreed on, but complaints systemties involved in bid- * Bidders stop com- new independent enshrined in an actding to file com- plaining due to institution han-plaints fear of not being dling complaints

short-listed in the not identifiedfuture

* Bidders seek solu-tions through al-ternative means

7 Slow pace of decen- * Management of * Lack of pro- * Establishment of thetralization -PSUs not the ministries and curement capac- cadre and all posi-given higher author- agencies cannot be ity continues as a tions in PSUs filledity to handle pro- held 100 percent problem in the * Abolishment of thecurement without responsible for PSUs PSU categorizationcontinuous approval their procurement * No real com- system with a de-of CTC operation because mitment to de- clared target of 3

of constant CTC centralization years.involvement in ap- policy at political * Full authority given

provals level because of to six PSUs by end* Contracts split to desire to be able of 2002

avoid referral to to influence andthe CTC control contract * Full authority given

* Procurement more awards through fromai003-2004Pcostly to handle for the present sys-the government tem. * Monitoring system

built within new* Procurement procurement author-

slowed down ity to ensure en-

forcement of pro-curement legislation

6.02 The table below rates the likelihood of the government's ability to manage risks, with

4 representing high risk; 3, medium risk: 2, low risk: and 1, no risk.

Risk to be managed Indicative assessment of risk

not being managed

Institutional framework lacks separation between implementing 3agencies and oversight function

Enforcement of procurement rules remains weak. partly due to 4lack of fundingLegal instruments (acts, regulations, and guidelines) are unclear 3and inadequately used

Lack of faith in the government's procurement system in the pri- 3vate sector

Lack of ability to retain procurement staff even though many have 4been trained

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Risk to be managed Indicative assessment of risknot being managed

Lack of faith in effects and confusion regarding possibilities of 3filing complaintsSlow pace of procurement decentralization 4

6.03 The risk profile can be categorized as medium to high because of the need to adjust

basic procurement system elements such as the institutional and legal frameworks. In combi-

nation with the lack of funding, this is a high risk factor.

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7. RECOMMENDED ACTION PLAN

7.01 Central to any recommendations that emerge is the need for a "champion" for the Re-

form program as it should not be left to be an intemal program within ZNTB. Besides, such a

program that needs to tackle the various vested interests in the stat(s quo can only be tackled

by political will.

7.02 The actions described below are of major importance for the improvement of the

Zambian public procurement system. (See also the fully developed action plan in the AC-

TION PLAN MATRIX at Annex Al and A 2).

Actions in the Short Term

1. Establish a Procurement Reform Task Force (High Level Committee). Members

should be appointed to a steering committee that will be responsible for initiating and su-

pervising the implementation of the activities in the action plan. The committee must

have high-level members from, for example, ZNTB, MOFED, ACC, and OAG. Themembers should not be allowed to appoint substitutes. The committee should have a clear

mandate and time frame in which to conclude its reforn agenda. To support this work, a

Procurement Reform Implementation Unit (PRIU) should be established. It should be re-

sponsible to the Permanent Secretary. Ministry of Finance and National Planning.

2. Finalize the Plan for complete delegation of procurement authority. Develop a 3-year

plan for the full delegation of procurement authority, divided into phases. The plan

would give ministries and agencies full authority to conduct procurement without any

reference to or approval by ZNTB or CTC. In the short term, the plan should appoint one

or two provinces as pilot provinces for full delegation of procurement authority.

3. Re-establish the ZNTB's Policy and Supervisory Role Immediately. Without waiting

for new procurement legislation, prepare the structure of the ZNTB for this role, which is

already required under existing legislation. As the DG of ZNTB will manage the CTC un-

til its dissolution in 3 years (see below), strengthen the secretariat of ZNTB to support it

in this role by enhanced staffing (and possibly splitting it off from the current secretariat).Provide an adequate budget to support this objective.

4. Define TOR for Revision of Legal Framework. The Terms of Reference for the review

of the legal and institutional framework, which is currently being developed with the

AfDB, should be revised to consider the present report's recommendations. The TOR

should state clearly that procurement legislation revisions should build on the UN-

CITRAL Model Law and current international best practices.

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5. Revision of Legal Framework. A new procurement act should be developed, based on

the UNCITRAL Model Law and current international best practices. Among other things,

it should contain provisions for the new procurement authority and a complaints system,

managed by the procurement authority but with a separate independent, part time, Ap-

peals Body. A Cabinet Paper should be developed for the new legislation, and Parliament

should enact the legislation. New regulations and guidelines should be developed on the

basis of the new act.

6. Prepare Establishment of Professional Procurement Cadre. Define the composition

of the cadre to be established and measures for its adoption. Start implementing the

measures with the cadre's management function given to the ZNTB until the new pro-

curement authority (possibly called Zambian National Procurement Authority - ZNPA) is

established.

7. Re-design of Registration List System. A revised Registration System should be de-

fined. New guidelines should be developed which restrict its use to small-value contracts

only.

8. Implementation of Corruption Survey. The planned corruption survey should be im-

plemented. Implementation should be coordinated with the PSCAP project.

9. Establish a Procurement Filing System in PSUs. A separate procurement register

should be defined. Instructions and guidelines on establishing and maintaining a pro-

curement filing system should be developed for the PSUs.

Actions in the Medium to Longer Term

1. Establish New Procurement Authority. A Director General and other staff for the new,

Authority should be appointed. The specialized functions of the Authority should be de-

fined and developed in detail. Simultaneously with establishment of ZNPA, ZNTB

should be abolished. Also establish a part time and independent Appeals body.

2. Continue Implementation of Plan for complete delegation of procurement authoritN.

The 3-year plan should be monitored for effective implementation. Delays, as in the past,

should not be allowed.

3. Develop the Capacitv of the Procurement Cadre. A secondment system for the pro-

curement cadre staff should be developed. A human resource database with the CVs of

cadre members and those applying for membership should be established. A training ac-

tion plan should be developed and upgraded.

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4. Develop Manual on Procurement Planning. A manual on procurement planning shouldbe developed, containing clear instructions for the introduction of best. practices. Releaseof budget funds from the budgetary system should be suitably linked to realistic procure-

ment plans

5. Strengthen Training Programs and Training Institutions. A capacity assessment of

training institutions should be carried out. The need for supplementary procurement train-

ing programs should be defined. Required training programs should be developed and de-

livered.

6. Introduce Anti-Corruption Clauses. New anti-corruption clauses should be introduced

in the standard bidding documents.

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ACTION PLAN MATRIX

Annex A 1. Short Term

SEQUENCED ACTIONS SUMMARIZED BY MAJOR CATEGORIES -

SHORT TERM

Issue Recommended Action TTiming Responsible

From To

I Establish Pro- Appoint a High Level Committee, which will November November MOFNPcurement Re- be responsible for initiating and overseeing the '002 2002form Task Force implementation of the activities in the Actionand an Imple- Plan. The Committee must have high-levelmentation Unit members from, for example. ZNTB, MOFNP,

ACC, and AOG. The members should not beallowed to appoint substitutes. The Committeewill be supported by a Procurement ReformImplementation Unit located in and responsi-ble to PS Ministry of Finance and NationalPlanning.

2. Finalize new * Develop plan for full decentralization of November February MOFNP ZNTBdecentralization procurement in phases. 2002 2003plan * Appoint one or two provinces in first year as February April ZNTB

pilot provinces for full decentralization. 2003 2003* Communicate plan to ministries and agen- February April MOFNP/ZNTB

cies and explain the plan's implementation 2003 2003and their responsibility.

3. Re-establish * Without waiting for new procurement legis- December February MOFNP/ZNTBpolicy and su- lation, prepare the structure of the ZNTB for 2002 2003pervisory role of this role and define the tasks.the ZNTB as re- * Prepare the budget for the ZNTB to carry July 2003 July 2003 ZNTB/MOFNPsponsible for out relevant role and ensure availability ofpublic procure- funds.ment policy and * ZNTB to focus primarily on its policy and December January MOFNP/ZNTBregulation regulatory role immediately. Strengthen the 2002 2003

department responsible for support to ZNTBfor its regulatory functions. pending com-plete decentralization of ZNTB/CTC ap-proval functions on procurement.

* Define and develop specialized functions July 2003 October MOFNP/ZNTBmatching tasks, such as monitoring of pro- 2003curement, data collection on procurementactivities, performance indicators andbenchmarks. law drafting. drafting regula-tions and guidelines. and management anddevelopment of the cadre. and conduct out-reach to private sector for closer involve-ment.

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Issue Recommended Action Timing Responsible

From To

4. Revise legal Revise terms of reference. already drafted in November December ZNTB/MOFNPframework cooperation with AfDB, and clearly state 2002 2002

that the revision of the procurement legisla-tion should build on the UNCITRAL ModelLaw in terms of content and terminology.

Develop new procurement law based on March Septem- DG ZNTBUNCITRAL Model Law that provides for 2003 ber 2003the new procurement authority, complaintsfunction, and a revised price preference sys-tem with more robust criteria.

• Develop Cabinet Paper for new legislation. October November ZNTB/ MOFNP2003 2003

* Obtain Parliament approval of new legisla- January February MOFNP/ZNTBtion, set up ZNPA, and disband ZNTB. 2004 2004

• Develop new regulations based on the new March May 2004 DG of Newprocurement law. 2004 Procurement Au-

thority* Develop new guidelines based on new law March May 2004 DG of New Pro-

and regulations. 2004 curement Author-ity

• Prepare new versions of standard bidding June 2004 October DG of Newdocuments and incorporate anti- corruption 2004 Procurement Au-clauses. thority

5. Establish the * Describe and define the cadre: level of skills December March ZNTBprofessional for entry. code of conduct. salary structure, 2002 2003procurement career path, and role of the cadrecadre administrator (the procurement authority).

* Develop secondment system for the pro- March June 2003 ZNTBcurement cadre based on attractive salary 2003system. administered by the procurementauthority to replace the current system ofmixed civil servants and personnel secondedby ZNTB.

* Develop HR database with the curricula of July 2003 Septern- ZNTBcadre members and those applying for entry. ber 20Q3

* Identify and register cadre members who July 2003 Sept. ZNTBcan enter the cadre without further training. 2003

* Develop upgrading and training action plan May 2003 July' 2003 ZNTBfor both cadre members and potential mem-bers to ensure development and mainte-nance. _ _

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Issue Recommended Action Timing Responsible

From To

6. Streamline the * Streamline the existing registration system. December August ZNTBguidelines and 2002 2003operation of theregistration sys- * Develop revised guidelines for the operation August Oct. 2003 ZNTBtem of the registration system. 2003

a Implement the improved system and ensure Feb. 2003 Sept. ZNTBinformation to stakeholders. 2003

7. Establish sepa- * Develop: March Sept. ZNTBrate procure- - Concept for separate procurement register 2003 2003ment filing sys- - Instructions and guidelines to PSUs con-tems in PSUs cerning establishment and maintenance of

procurement filing system.

8. Develop manu- * Develop: January July 2004 ZNTBals on (a) pro- - Manuals with clear instructions and tools 2004curement plan- for introducino best practices for (a) pro-ning and (b) curement planning and (b) contract man-contract man- agementagement - Mandatory training sessions in the subjects

for procurement cadre members and con-tract managers from ministries and agen-cies.

9. Enhance effec- * Strengthen the mandate and the funding of Ongoing AG/Cabinet officetiveness and re- the OAG office as suggested earlier by theportinc from PAC, and Improve timeliness of OAG'sOAG yearly report.

10. Reduce delays * "The following should be coordinated with October January MOFNPin government the recommendations coming out of the Fi- 2002 2003payments nancial Accountability Assessment Review:

- Change actual release of funds to matchthe appropriation of funds in the budget andreduce the delays in government payments."

I. Conduct anti- * "The following should be coordinated with October MOFNPcorruption sur- the PSCAP project: 2002vey - Ensure implementation of planned anti-

corruption survey."

12. Involve private * Inform the private sector of the action plan. Oct. 2002 Ongoino MOFNP/ ZNTB /sector in pro- * Involve private sector in work groups Ministry ofcurement re- where suitable. Commerce. Tradeform and Industry

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MEDIUM TO LONG TERM

Annex A 2. Mediunm to Long Term

Issue Recommended Action Tifming Responsible

From Tol. Set up ZNPA * Set up ZNPA Feb. 2004 March 2004 MOFNP

and Develop and * Set up the Appeals Body upon enact- Feb 2004 July 2004 MOFNPestablish new in- ment of legislation based on UN-dependent Ap- CITRAL Model Law provisions thatpeals body au- mandate a new, independent, part-timethority appeals body to complement the role

of complaints handling given to thenew Procurement Authority.

2. Implement anti- * Introduce new anti-corruption clauses January July 2004 Procurementcorruption in the standard bidding documents. 2004 Authority /clauses MOFNP

3. Create training * Perform a capacity assessment of train- July 2003 Nov. 2003 ZNTBprograms and ing institutions. Agree on a capacityconduct capacity building action plan for each institutionassessment of with clear targets. Provide funding fortraining institu- upgraded activities and investment intions equipment/facilities if needed.

* Define the training programs needed tosupplement the existing CIPS program, July 2003 Nov. 2003 ZNTBfor example, mid-career training pro-grams. Visit international traininginstitutions to collect information onother types of training programs.

* Develop and deliver training programs.Nov. 2003 Ongoing ZNTB

4. Strengthen ca- * Develop a new licensing system for November March 2003 ZRApacity of clearing clearing agents. 2002agents * Develop a 2-3 day training program for Jan. 2003 Mar. 2003 ZRA

clearing agents. Participation should bemandatory for agents to keep their li-cense.

* Deliver the training. Apr. 2003 June 2003 ZRA* Develop guidelines and instructions to Sep. 2003 December ZRA

clearing agents. 2002

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Issue Recommnended Action Timing Responsible

From To

5. Strengthen ca- * Revise current training programs and Sept. 2002 Dec. 2002 ZRApacity of customs develop more training on:officers - Basic customs procedures and use of

ASYCUDA system- ASYCUDA's risk analysis module- Physical inspection requirements,

corruption prevention, and disap-pearance of goods

- Reduction of under-invoicing- Improvement of duty-drawback

system.* Deliver the training program. Jan. 2003 Dec. 2003 ZRA

6. Implement * Implement ASYCUDA++ and increase Jan. 2003 Dec. 2003 ZRAASYCUDA++ the processing fee to USD 5 per decla-

ration.* Develop training in use of new system. June 2003 Nov. 2003 ZRA* Deliver training. Dec.2003 Ongoing ZRA

7. Develop training * Develop a training program in coop- Sep. 2002 June 2003 Ministry ofin good business eration with ZACCI and ZAM on: Commerce,practices for the - Good business practices and ethics Trade, and In-private sector - Purchasing, supply, and procurement dustry

- Financial management- Effective communication with

customers and public authorities.

8. Improve com- Examine barriers in commercial regu- Sep. 2002 Sep. 2003 Ministry ofmercial regula- lations and identify measures to im- Commerce,tions prove regulatory practices. Trade, and In-

dustry

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