UNIVERSITY OF DAR ES SALAAM BUSINESS SCHOOL

AN ASSESSMENT OF CORRUPTION IN THE PROCUREMENT PROFESSION IN GOVERNMENT: CASE IN TANZANIA.

BY

BERNARD, HELLEN

REG. NO. 2009-06-00929

RESEARCH PROPOSAL SUBMITTED FOR APPROVAL TO CARRY OUT RESEARCH FOR THE DEGREE OF MASTERS OR BUSINESS ADMINISTRATION.

Table of Contents

1.0 INTRODUCTION

1.1 BACKGROUND 3

1.2 STATEMENT OF THE PROBLEM 4

2.O RESEARCH AIM 6

2.1 RESEARCH OBJECTIVES6

3.0 RESEARCH QUESTIONS………………………………………………………………………………………………………………………6

3.1 RESEARCH HYPOTHESIS .7

4.0 LITERATURE REVIEW

4.1 CONCEPTUAL LITERATURE…………………………………………………………………………………………………8

4.2 THEORETICAL FRAMEWORK……………………………………………………………………………………………….10

4.3 EMPIRICAL LITERATURE……………………………………………………………………………………………………..12

5.0 METHODOLOGY……………………………………………………………………………………………………………………………….14

REFERENCES………………………………………………………………………………………………………………………………………….17

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1.0. INTRODUCTION

1.1Background

The Tanzania Government has long realized the importance of public

procurement to the economic development of Tanzania and hence to the fulfillment

of key objectives within the national Poverty Reduction Strategy. To this effect,

Tanzania was one of the first countries in Sub-Saharan Africa to enact a law

modeled on the UNCITRAL model law. Since 1996, when the first country

procurement assessment report (CPAR) was carried out, the Government has been

working closely with the World Bank and other development partners to enhance the

economy and efficiency of its procurement system and to make it more transparent

and accountable.

The Government has long acknowledged that there is rampant corruption in

Tanzania and has been fighting hard to reduce it. It is estimated that at the national

level about 20 percent of the government expenditure on procurement is lost through

corruption, mainly through kick-backs and bogus investments that have to be written

off. Considering that public procurement accounts for about 70 percent of the entire

government expenditure budget, this translates to a loss of TShs 300 billion (USD

300 million) per year, enough to finance the combined annual recurrent budgets of

the ministries of health and education.

Clearly such a loss is economically unsustainable. Major losses occur in

construction and supply contracts, which are the major avenues for corruption,

particularly at the local government level. The need for enhancing the transparency

of the procurement system cannot therefore be overemphasized.

The Government of Tanzania is fully aware that its public procurement is still

weak and needs to be strengthened substantially to enable it to ensure that the

procurement laws and institutions become effective tools in the efficient and

transparent management of public funds.

            Strategic management in the public sector begins by looking up toward politics -

the current expectations and aspirations of citizens and their representatives and the

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older political agreements formally enshrined in the legislation that defines public

managers' mandates for action. Corruption had been inculcated in the political culture of

most underdeveloped countries; while, it still elicits the criticism and opposition of the

public, it has nonetheless been accepted as a fact in the political life.

           One of the primary areas of corruption is in the procurement process. Grounded

on the idea that, the bread and butter of politicians exists in this aspect, the

procurement process has been the locus and target of most politicians aiming to get a

slice of the cake. In third world countries, this part of the cake proves to be the life of

people. The foreign aid given by international organizations like the World Bank and the

International Monetary Fund and the government revenue from taxes is easily lost once

the budget is distributed to departments and the “purchase” of equipments and

materials has begun.  .

Earlier on we questioned the assumption or perception that corruption, especially

petty corruption is a function of low pay. In our review of theories of motivation we noted

that there is consensus among theorists on motivation on pay being a necessary, but

not sufficient condition for an employee to perform at a minimum level in an

organization. Where an employee has a perception that the level of compensation given

by the employer cannot and will not meet basic living/existence needs, and the

employee is not in a position to exit from the organization, he/she will adopt deviant

work behavior, which will include a number of income maintenance strategies, including

corruption to address the income shortfall.

1.2statement of the problem

The procurement process has been the locus of government corruption- unless

this can be addressed; the citizens of Tanzania will continue to suffer. It is necessary

that strategies and measures be introduced in the government procurement profession

to reduce the corruption in this process and in effect, corruption in the government.

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Procurement corruption is deeply rooted in the political culture and traces its

roots on the nature of governments. As long as the nature of government and politics

remains to be relatively immature, corruption in the procurement process will remain.

Thus, the need for strategies to hamper this occurrence arises.

A focus on newspaper reports, editorials and letters from readers in any of the

last ten years would make one conclude that this country has been eaten away by the

corruption scourge. Contrast the foregoing situation with what obtained between 1961,

as we became independent and the late 1970s. The decade following Tanzania’s

independence (1960-1970) did not manifest intense corruption. Where it took place it

tended to be restricted to low-level officials who demanded and received negligible

sums of money.

As the country expanded the public sector and public administration institutions

progressively decayed, entailing the rise of bureaucratic malfunctioning, opportunities

for rent-seeking behavior and asking and offering bribes started creeping in. In the

same period, the cost of living rose dramatically while public service pay remained static

or declined. Public officials became driven by a culture of survival and they

progressively adopted deviant behavior patterns discussed earlier in the paper,

including the use of corruption as an income maintenance strategy.

To address and control the trend of increased corruption, the Nyerere Government

enacted the leadership code as part of the Arusha Declaration which had been adopted

in 1967 and dedicated Tanzania to the pursuit of Ujamaa and Self Reliance as its

ideology.

While moral suasion through a socialist code of conduct was making its

contribution to the fight against corrupt tendencies, the country came to experience a

major economic crisis following the oil crisis and the after effects of the war with Idd

Amin in the late 1970s and early 1980s, with double digit inflation, major fiscal deficits

and negative economic growth. That situation saw the state lose its ability to pay public

servants a living wage. Official salaries, even at managerial and executive levels, fell

below subsistence needs, creating incentives to look for side incomes. As the state

controlled economy declined, an informal one arose to take its place. Smuggling

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became rampant. In the end, the harsh realities of scarcity and poverty overwhelmed

the dedication to socialist equality and corruption became embedded in Tanzania

society.

2.0 RESEARCH AIM

         This study aims to propose measures and strategies that could resolve the issue

of government corruption in the procurement process.

2.1 research objectives

            This research paper aims to:

1.            Identify the different procurement corruptions in governments of Third

World countries

2.            Determine the stages of the procurement process and discover where

corruption happens

3.            Evaluate the nature of Third World Government and politics and the

corruption in procurement

4.            Propose measures that can resolve the issue of corruption in the

procurement profession

3.0 RESEARCH QUESTIONS

            This study seeks to answer the following questions:

1.            What are the indicators of procurement corruption and how

extensive is it among governments (Developed, developing and

Third World)

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2.            What are the different corrupt practices in the process of

procurement?

3.            Outlining the procurement process, what stage(s) does

corruption happen?

4.            In relation to the nature of Third World Governments, what is

their relation and to what degree that these two variables

(corruption in procurements and government) affect each other?

5.            What are the measures and strategies that governments have

employed to address this issue?

 

3.1 Research hypothesis

1.    The nature of government and politics in a country is significantly

related to its corruption practices

2.    The more accountable the government, the lesser the tendency of

corruption in the procurement process

3.    Further, procurement corruption is directly related to the lack of

transparency in government purchases.

 

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4.0 LITERATURE REVIEW

4.1 Conceptual literature

CORRUPTION

Corruption is a very widespread phenomenon with most governments having a

least some. While corruption usually meets with disapproval, it may have some

redeeming features (Tullock, 1996). It may make possible smaller or no salary

payments to officials who, if carefully supervised, will still carry out their functions on a

fee-for-service basis (Tullock, 1996).

Transparency International (TI) has chosen a clear and focused definition of the

term: Corruption is operationally defined as the misuse of entrusted power for private

gain. TI further differentiates between "according to rule" corruption and "against the

rule" corruption. Facilitation payments, where a bribe is paid to receive preferential

treatment for something that the bribe receiver is required to do by law, constitute the

former. The latter, on the other hand, is a bribe paid to obtain services the bribe receiver

is prohibited from providing.

The cost of corruption

The cost of corruption is four-fold: political, economic, social, and environmental.

On the political front, corruption constitutes a major obstacle to democracy and the rule

of law. In a democratic system, offices and institutions lose their legitimacy when they

are misused for private advantage. Though this is harmful in the established

democracies, it is even more so in newly emerging ones. Accountable political

leadership cannot develop in a corrupt climate. Economically, corruption leads to the

depletion of national wealth. It is often responsible for the funneling of scarce public

resources to uneconomic high-profile projects, such as dams, power plants, pipelines

and refineries, at the expense of less spectacular but more necessary infrastructure

projects such as schools, hospitals and roads, or the supply of power and water to rural

areas. Furthermore, it hinders the development of fair market structures and distorts

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competition, thereby deterring investment. The effect of corruption on the social fabric of

society is the most damaging of all. It undermines people's trust in the political system,

in its institutions and its leadership. Frustration and general apathy among a

disillusioned public result in a weak civil society. That in turn clears the way for despots

as well as democratically elected yet unscrupulous leaders to turn national assets into

personal wealth. Demanding and paying bribes become the norm. Those unwilling to

comply often emigrate, leaving the country drained of its most able and most honest

citizens. Environmental degradation is yet another consequence of corrupt systems.

The lack of, or non-enforcement of, environmental regulations and legislation has

historically allowed the North to export its polluting industry to the South. At the same

time, careless exploitation of natural resources, from timber and minerals to elephants,

by both domestic and international agents has led to ravaged natural environments.

Environmentally devastating projects are given preference in funding, because they are

easy targets for siphoning off public money into private pockets.

PROCUREMENT

Procurement is the full process involved in acquiring required goods, services or

works. Procurement involves identifying the requirement of the purchasing authority,

building a list of minimum requirements, and then scoring any interested parties who

meet the minimum requirements, usually offering the highest score based on the most

economically advantageous bid, commonly known as "best value". Part of the

Procurement process is also to manage the contract once awarded, to ensure that the

successful suppliers, or suppliers, are providing a quality service.

Collaborative contracts are becoming more commonplace; where multiple public

bodies will combine their requirements and run a single Procurement process to meet

their merged requirements. Due to the higher volume of business promised by

collaborative contracts, suppliers will usually offer larger discounts. Collaborative

contracts are usually led by one public body, acting on behalf of the others. In addition

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to this, some Procurement Centers of Expertise set up and manage contracts on behalf

of public bodies, allowing all public bodies to use these collaborative contracts. Some

examples of these Centers of Expertise are OGC, Buying Solutions and Procurement

Scotland.

The stage of the Procurement cycle when suppliers are invited to submit bids is

known as the Tendering process. Usually, in addition to submitting their monetary bid,

suppliers are required to respond to a questionnaire which the public body has put

together with the intention of identifying and eliminating suppliers who are unable to

meet their basic requirements, thereby preventing their tender from being successful

regardless of whether they have the most economically advantageous bid.  

4.2 Theoretical framework

The systematic study of political corruption encompasses matters of definition,

typology, cause, and consequence, linked by a common theoretical framework. A

substantial body of literature explores these issues, but many problems exist. The

countless definitions inadequately set out the fundamental normative and behavioral

dimensions of corruption and fail to incorporate the phenomenon into a broader

theoretical framework or to deal accurately with the question of private interests.

Typologies of corruption, though equally rife, also seem to lack clear theoretical

relevance. Existing explanations of corruption can be attacked for projecting confusing

and contradictory hypotheses, for being fragmentary, and for failing to differentiate

various types of corrupt behavior; those centering on the functions of corruption also

seem incomplete. Some, for instance, underscore the positive effects of corruption in

integrating ruling elite but fail to question whether corruption influences feelings of

legitimacy toward government or inspires destabilizing protests and mobilizations.

As a form of deviant political behavior, corruption is political conduct contrary to

political norms. This definition underscores both its normative and behavioral

components. The normative aspect of corruption centers on the evaluative standards or

rules that determine political propriety: the criteria used to judge the legitimacy or

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illegitimacy (i.e., the "corruptness") of a political act; the behavioral aspect corresponds

to observable actions (Morris, 1991). The norm provides the standard by which all acts

of government are to be interpreted and judged. Accordingly, any private usurpation of

that pertaining to the public domain, which negates this principle, invites condemnation.

An important issue that warrants attention concerns the role of personal gain or

interest. Including personal gain or what is tantamount to private interest in a definition

of corruption presents two major problems. First, it is generally held that all acts are a

function of personal gain; in formal theory, this is referred to as "rationality."

Consequently, all acts by government officials, whether corrupt or otherwise, are

thought to be motivated by a rational promotion of private interest. In other words, a non

corrupt act is promoted by personal interest just as is a corrupt act. Since personal

interest is an assumption of human behavior and a constant, it need not be included in a

definition

Strategic management in the public sector begins by looking up toward politics -

the current expectations and aspirations of citizens and their representatives and the

older political agreements formally enshrined in the legislation that defines public

managers' mandates for action. Politics, and the laws that politics produce, deserve this

pride of place for three key reasons. First, it is this realm that managers must search to

discover what purposes are deemed publicly valuable and can, therefore, be practically

and normatively sustained as the focus of their managerial efforts. It is in and through

politics that they can discover and help shapes their mandates for action. Second,

political institutions grant public managers the resources they need to accomplish their

operational purposes--including money and authority over their own organizations and

over those beyond their organizations who can contribute to the managers' purposes.

Third, it is to politics and law that public managers are both theoretically and practically

accountable; their performance is graded and their reputations made within this realm.

Procurement contracting often entails large monetary sums and involves widely

known or powerful people inside and outside government. Thus, this kind of corruption

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can be especially damaging to a country in terms of distorted incentives, undermined

public trust, and inequitable distribution of national budgets. This is particularly prevalent

in Third World countries where the political socialization of people seems to accept

corruption as a part of the political culture.

Among the principal types of procurement corruption includes: collusion in

bidding (leading to higher costs/prices for the city, payments for which may or may not

be shared with corrupt officials); kickbacks by firms to "fix" procurement competition;

and bribes to officials who regulate the winning contractor's behavior (which may permit

lowball bids with subsequent cost overruns and unnecessary changes in contract

specifications) (Klitgaard, MacLean, and Parris, 2000).

4.3 Empirical literature

Corruption is about economics, gaining power, maintaining power and

unfortunately to some, survival (Green, 2000). Generally, it's been my experience that

corruption usually involves bribery, kickbacks, gratuities and gifts to government

employees from individuals doing business or attempting to do business with the

government. A large percentage of corruption taking place within governments and

businesses worldwide rests within the procurement of goods and services.

The movement toward decentralization, accountability, and democratic forms of

government at the local level is gathering momentum (Klitgaard, MacLean, and Parris,

2000). In this context, the enormous costs of corruption are being explicitly recognized,

as is the urgent need to correct governmental malfeasance (Klitgaard, MacLean, and

Parris, 2000). Corruption is an entrenched symptom of misgovernance often reflected in

patronage, red tape, ineffective revenue-generating agencies, large scale bribery in

procurement, and failure to deliver services to city dwellers

When the government needs a good or service, the city government has the two

broad alternatives of making it or buying it: that is, the city can provide the good or

service itself, or procure it from the private sector (Klitgaard, MacLean, and Parris,

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2000). Corruption is one of the dimensions of this choice. Because contracting is "where

the money is", most government officials are tempted by the lure of procurement

services often at the expense of the public.

Recent developments and current trends are highlighting the role of accountants

in governance. Foremost among these are: the increasing concern with rising levels of

corruption, the renewal of interest in accountability and transparency as inoculations

against corruption; the new government focus on results, benchmarking and value-for-

money (the "new public management") and the corresponding thrust in the private

sector through business process reengineering, knowledge management and intranets

-- where accounting systems play a major role; decentralization and participation by

citizens and NGOs in public management are multiplying the needs for credible

accounting information; the privatization of utilities in several countries is increasing the

need for regulation, in which accountants have a major role in reducing information

asymmetry; the globalization of corporate finance has enhanced the need for global

standards of accounting and auditing; the Asian crisis has highlighted the weaknesses

in transparency, in financial sector regulation and in corporate governance generally in

a number of countries (Bennett,  2000).

There are several measures that could be done in order to reduce the incidence

of corruption. First, reducing the scope and role of personality politics. An increase in

public policy debates and other activities of government, opening the closed doors, and

permitting greater public scrutiny of official processes would clearly have such an

impact. Generally, the more public government affairs become, the less corrupt they

can be (Bennett, 2000).

Enhancing the autonomy of the state's subsystems would also reduce the

likelihood of corruption. This could be pursued, for instance, by creating an effective civil

service system or merit system or opening up grass-roots political involvement. Such

reforms would cripple the centralization of recruitment and thereby temper the loyalty

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patterns that currently prevail. Strengthening the autonomy and role of Congress or

democratizing corporate organizations would be steps in this direction (Bennett, 2000).

Strengthening social organizations would also impinge on corruption. This could

be done by reducing the tutelary role of the state and lessening the dependency of

social organizations on the state or by enhancing popular input into the organizations

themselves. Not only must businesses or union’s articulate demands on the

government, but such organizations must be structurally responsive to the demands of

their constituents. Tying the fate of leaders of social organizations to criteria internal to

the group rather than those determined by the state would greatly inhibit current

patterns of corruption (Bennett, 2000).

5.0 METHODOLOGY 

This chapter will discuss the method of research to be used, the respondents of the

study, the sampling technique, the instrument to be used, the validation of the

instrument, the administration of the of the instrument and the statistical treatment of the

data that will be gathered.

Research Methodology and Techniques for data collection

This study will use the descriptive approach.  This descriptive type of research

will utilize interview, observation and questionnaires in the study.  To illustrate the

descriptive type of research, the researcher will be guided by Calmorin when he stated:

“Descriptive method of research is to gather information about the present existing

condition.  The purpose of employing this method is to describe the nature of a situation

as exists at the time of the study and to explore the cause/s of particular phenomena.

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Proposed subject Population/Sample

The general population for this study will be composed of government officials and

personnel in the procurement process, randomly selected private companies who have

been involved in the bidding process and randomly selected citizens.

I will use a combination of cluster and random sampling.  First, I will cluster the

respondents from the government, the private sector and the public sector.  To make

the sampling easier for every specific cluster, I will seek the aid of any anti-corruption

non-government organization to facilitate the names and addresses of the respondents

or have them together in one place (i.e., in an organizational meeting) so that the

surveys can be given in one session.  I will pick one hundred (100) respondents per

cluster for a total of three hundred (300) respondents.

Validation of the Instrument

For validation purposes, I will initially submit a survey questionnaire and after approval,

the survey will be given to five respondents from the government, private corporations

and the public sector.  After the survey questionnaire will be answered, I will ask the

respondents for any suggestions or any necessary corrections to ensure further

improvement and validity of the instrument.  I will again examine the content of the

survey questionnaire to find out the reliability of the instrument.  I will exclude irrelevant

questions and will change words that would be deemed difficult by the respondents, too

much simpler terms.

Administration of the Instrument

The revised instrument will then be administered to the respondents of the study which

will be chosen through a combination of cluster and random sampling.  I will exclude the

ten respondents who will be initially used for the validation of the instrument.  I will also

tally, score and tabulate all the relevant data in the survey questionnaire. 

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Statistical Treatment of Data

When the entire survey questionnaire will have been collected, the researcher will use

statistics to analyze all the data.

The statistical formulae to be used in the second and third part of the survey

questionnaire will be the following:

1.     Percentage – to determine the magnitude of the responses to the

questionnaire. 

2.     Weighted Mean 

3. I will use chi-square to relate the participation rate of the government employees,

companies and the public sector. I will be assisted by the SPSS in coming up with

the statistical analysis for this study.

Resource, Confidentiality and other consideration

            The survey respondents and interviewees’ identities will be held confidential.

Only I will have the knowledge on their identities and utmost secrecy will be provided.

Further, personalities who do not want to be quoted in interviews will not be disclosed.

 

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REFERENCES.

1. Klitgaard, Robert, MacLean, Ronald and Parris, Lindsey, Corrupt Cities: A Practical

Guide to Cure and Prevention, Ics Press, 2000

2. Bennett, Anthony, “The Role of Accounting in Good Governance”, In Carter, Williiam,

Davies, Mark, El, Yassin and Ford, Kevin, Government Ethics and Law Enforcement:

Toward Global Guidelines, Praeger Publishers, 2000

3. Green, Vincent, “An Approach to Investigating Corruption in Government”, In Carter,

Williiam, Davies, Mark, El, Yassin and Ford, Kevin, Government Ethics and Law

Enforcement: Toward Global Guidelines, Praeger Publishers, 2000

4. Morris, Stephen, “A State-Society Approach to the Study of Corruption “, Corruption &

Politics in Contemporary Mexico, University of Alabama Press, 1991

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