Joel Munyori – Senior Procurement Specialist, World Bank

Introduction to Public Procurement: Basic Principles

and Concepts

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Content

A. Public Procurement: Definition

B. Legal Framework for Public Procurement Contracts

C. Key Objectives of Public Procurement

D. Key Principles for Implementing Procurement Objectives

E. Procurement as a Business Process

F. Status of Procurement Reforms in East African Countries

G. General Institutional Set-up of the Procurement Function in the East African Countries

H. Parliament as an Oversight Institution to Public Procurement

I. Reforms in the Public Procurement Function

Public Procurement: Definition

Public Procurement may be defined as the Government’s activity of purchasing the goods and services which it needs to carry out its functions;

Public Procurement process comprises three key Phases:

Although the three phases are distinct and at times involves different players, they should be regarded as a single cohesive “Cycle” for the process to be successful;

Regulatory rules on public procurement generally focus on the second stage where legal rules and other regulatory measures are important tools of policy;

Procurement Planning

Procurement Process

Contract Managemen

t

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Public Procurement : DefinitionProcurement is divided into three broad categories:(a) Goods; (b) Works; and, (c) Services(b) A good procurement law should address each of

these categories separately since the procurement approach is largely different;

Distinction between Public Procurement and In-house provision:Public procurement refers to acquisitions of goods,

works, and services from entities outside the procurement entity itself; while;

In-house provision of goods, works and services refers to acquisition through the government’s own employees and organization (force account);

Emerging global best practices are such that governments are moving away from in-house provision to outsourcing;

Legal Framework for Public Procurement Contracts Government contracts are often subject to the

ordinary private law of the state concerned; In order to make sensible policy decisions,

there is need to understand the objectives of public procurement, how they relate to each other, and their relevance to a particular procurement system;

The key objectives of public procurement are:(1) Value for money(2) Integrity(3) Accountability(4) Equal opportunities and treatment for providers(5) Fair treatment of all suppliers and service providers(6) Efficient implementation of industrial, social and environmental objectives in procurement (horizontal policies)(7) Opening up public markets to international trade; and,(8) Efficiency in the procurement process

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Legal Framework for Public Procurement ContractsDifferent procurement objectives would result in

different approaches and rules that governing it; for example, a system that places great weight on “accountability” is more likely to provide detailed “rule-based” system which also allows close public contract monitoring of the procurement process;

It is however important to mention that the said objectives compete among each other ; rigid rules that emphasize accountability may result in reduced “Value for Money” or “Efficiency” in certain procurement procedures; It is therefore necessary to strike the right balance on the relative importance of each of the objectives in policy formulation;

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Key Principles for Implementing Procurement Objectives

TransparencyThis principle entails; (a) publicity for contract

opportunities; (b) publicity for the rules governing each procedure; (c)rule-based decision making; and (d) mechanism for verification and enforcement ;

CompetitionTo ensure that government obtains; (a) best contract

terms; (b) enhance transparency; and (c)regulate the functioning of the international market;

Equal Opportunities and TreatmentProvide all bidders with fair access to (a) bidding

opportunities; and (b) similar treatment during and after contract award;

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Public Procurement as a Business ProcessPublic Procurement is a function that encompasses both

economic and political dimensions; A good procurement system enhances transparency in the management of public resources and encourages firms to have confidence in the process thus attracting the best firms to participate in the process;

It is a major economic activity of the government; in most economies it accounts for 15 percent of the GDP;

It is a significant factor for achieving development objectives of the government; It can be used to provide strategic outcomes;

It is everybody’s business and every citizen must play their part; stake-holder participation should be encouraged;

It is however vulnerable to abuse, wastage, corruption, and most of the time affects government spending; there is therefore need for continuous reforms and improvement so as to bring on board emerging international best practices;

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Procurement Reforms in East AfricaKenya

Public Procurement law was enacted in 2007;The Government is in the process of revising the

law to be in tandem with the new Constitution;Tanzania

The Public Procurement Law was enacted in 2004 and revised in 2011; however, the associated Regulations are not yet finalized;

Drafting of the Procurement Policy is progress;Uganda

The Public Procurement law was enacted in 2003 and a major overhaul of the law done in 2012;

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General Institutional Set-up of the Procurement Function in East AfricaThe responsibility for the management and regulation of

the public procurement function is spread over five institutions:

Procurement Entities: Responsible for conducting and managing the procurement process on a day-to-day basis;

Public Procurement Policy Unit: Formulates procurement policies; employment and deployment of staff; and formulation of capacity development strategies;

Public Procurement Oversight/Regulatory Authority: provides implementation oversight, compliance monitoring and enforcement of the procurement law;

Public Procurement Appeals Board: Adjudicates on appeals not resolved by the regulatory authorities

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General Institutional Set-up of the Procurement Function in East AfricaProcurement and Supplies Professionals:

Responsible for the career development and regulation of procurement and supplies professionals in both the public and private sector;

Supplies Branch (Kenya) and Government Procurement Services Agency (Tanzania): Administration of framework contracts for common user items and services;

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Parliament as an Oversight Institution to the Procurement FunctionDebates and passes the Procurement Bill

This sets the legal and institutional framework, market practices and the integrity of the procurement function; due diligence and thorough scrutiny is therefore required at this stage before enacting the bill into law;

Debates and passes the Fiscal BudgetsScrutiny of the budget against Annual Workplan

Activities; Is the planning stage supported by rational procurement plans? Are the plans linked to the available budget?; Are all the lines of expenditure in the plan necessary? How is the cash flow, is it sufficient?

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Parliament as an Oversight Institution to the Procurement Function

Debates and passes the Financial Audit ReportsDoes the Financial Audit Reports comprehensively

capture procurement management issues? What are the audit qualifications? Based on previous audit reports, is there need for integrating procurement reviews with financial audits?

Procurement Audit/Review Reports conducted by the Public Procurement Oversight Authority are submitted to the Minister responsible for Finance; is there need to have these reports submitted to and discussed by Parliament for independent review?

Are the oversight institutions adequately staffed and funded to be able to discharge their responsibilities?

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Reforms in the Public Procurement Function is Critical

Automation of operations: This would enhance overall operational efficiency, improver reporting and allow structured records management;

E-procurement: This is still at elementary level; embracing e-procurement would enhance transparency, minimize transaction costs, and increase efficiency;

Use of Framework Agreements: used in the procurement of common user items by a central agency; it eliminates duplication of effort, wastage, and reduces costs of goods through economies of scale and enhances overall operational efficiency;

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Q & A?