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CORRUPTION WATCH:Procurement law must be simplified


Mar 31, 2013 | Corruption Watch

Is our government just really bad at procurement, or is there a deeper problem with the law that applies to tendering?

IT SEEMS that every other week there is a different scandal involving procurement. Most tenders seem to land up in court, with service providers squabbling over the spoils of government spending. Is our government just really bad at procurement, or is there a deeper problem with the law that applies to tendering? Perplexed

Dear Perplexed

We believe that it is a bit of both. While there is no denying that some of the bureaucrats responsible for procurement are corrupt (as are some of the private companies that bid for contracts), the law governing public procurement has become increasingly complicated.

In our view, procurement law has now become so complicated that it may be undermining service delivery. For example, many organs of state are unable to spend their budgets and infrastructure grants. The complexity of procurement law contributes to this problem by paralysing civil servants who become hyper-cautious in their desire to avoid infringing the law.

Part of the problem is that there are so many different levels of procurement law.

A well-intentioned and honest administrator will find that the following layers of law govern procurement:

Section 217 of the constitution expressly deals with government procurement. It provides that when an organ of state contracts for goods or services, it must do so “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.

The award of a tender constitutes administrative action in terms of the constitution. As such, the award of tenders is subject to review under the Promotion of Administrative Justice Act.

Various pieces of legislation govern the budgeting process, internal controls and the requirement that people historically disadvantaged by unfair discrimination be favoured.

Each organ of state has its own supply chain management policy, which must be followed by its bureaucrats when engaging in procurement.

Any information held by an organ of state relating to the tender process is potentially affected by the Promotion of Access to Information Act, and may be the subject of requests for information by other affected parties.

The contract between the relevant organ of state and the service provider is governed by the common law of contract.

As a result, innumerable pitfalls await even the most well-intentioned administrator.

The competitive nature of tender processes and the enormous financial benefits to be gained from contracts for government procurement are a powerful incentive for unsuccessful parties to litigate, which they often do.

Their lawyers scrutinise every step in the process for compliance with the various laws and procedures, and pounce on every real or perceived irregularity. Very few administrative processes are entirely free from any misstep, and when one is found, litigation soon follows.

In addition, bureaucrats are required to account to government oversight bodies in respect of expenditure, including internal accounting officers and the Treasury. The procurement process may also be subjected to scrutiny by the auditor-general and the public protector.

Even where litigation by disgruntled parties fails, or investigations by other organs of state result in a clean bill of health, the effect of such litigation and investigation is to delay the provision of the service in question.

Procurement processes are often suspended while disputes are resolved, which can mean delays of years in service delivery.

We are therefore of the view that legal reforms to simplify and speed up procurement are justified. Any reform would have to ensure that accountability mechanisms remain in place, and that the law retains proper safeguards for detecting corruption and maladministration.

That would require careful balancing between swift, effective service provision and a functioning oversight mechanism.

* This article was first published in Sunday Times: Business Times

 

World Bank Advised Ethiopia to Audit Large Telecom Agreements


Business Ethiopia

Reporter

January 11, 2013

The World Bank (WB) in its report on the status of corruption in Ethiopia advised the government to audit Ethio Telecom’s large agreements. 

According to the report launched this morning at the Hilton Addis, focusing on the level of corruption in the country in different sector sectors, the government needs to apply standards to Ethio Telecom that are in line with Ethiopia’s Public Procurement Proclamation.

The report, “Diagnosing Corruption in Ethiopia”, in its subtopic that assessed the level of corruption in the telecom sector also stated that absence of uniform procurement standards is one of the major causes of corruption, among others.

The report highlighted that the vendor financing contract entered into by the then ETC (Ethiopian Telecommunications Corporation now named Ethio Telecom) in 2006 appears to be highly unusual. “…This brief study should not be seen as an investigation or interpreted as alleging in itself that corruption has necessarily occurred. However, the circumstances as perceived both by stakeholders and by independent observers do raise serious questions about the control of risks in this sector.”

The stakeholders of the then 1.5 billion US dollars vendor financing argue that ETC’s financial requirements were not provided in detail to those suppliers (other than possibly the winning supplier –China’s ZTE) that had been approached to consider providing such financing. The report also stated that there is no evidence of a formal tender procedure for the finance package.

“The supplier selected by the ETC to supply the finance package that suited the ETC’s purposes. The equipment supply element of the vendor financing contract was not put out to competitive tender.”
The report stated that generally the contract was not in accordance with the ETC’s procurement procedure and no competitive tender for the contract and subcontracts.

“Difficulty in measuring technical compliance: By appointing one supplier without competitive tender, the ETC has no opportunity to assess the degree of technical compliance of the supplier’s equipment. The contract was also inappropriate and went through unclear procedures for ensuring technical quality and competitive pricing,” according to the report.

In addition, the report further mentioned that Ethio Telecom is vulnerable to corruption because it is under government monopoly.

Health, education, water, justice, construction, land and mining are also the sectors surveyed by the report sponsored by the World Bank, Canada International Development Agency, UK Aid and the government of the Netherlands.

“Some of the recommendations of the report are under implementation,” said Ali Suleman, Commissioner of the Federal Ethics and Anti-Corruption Commission (FEACC).  While the report also recalled that in January 2008, the FEACC 2008 brought charges against a former ETC CEO and 26 former ETC executives for allegedly “procuring low-quality equipment from companies that were supposed to be rejected on the basis of procurement regulations.”

World Bank country Director, Guang Zhe Chen, on his part stressed that the purpose of the study is conducted to support evidence-based policy formation.

Monitoring Findings of the Sierra Leone Coalition for Budget and Procurement Transparency in the Education Sector


Awareness Times Newspaper in Freetown

August21, 2012

TRANSPARENCY INTERNATIONALSierra Leone

20, Dundas Street, Freetown, Sierra Leone, West Africa P.O Box 1312

Press Release

Monitoring Findings of the Sierra Leone Coalition for Budget and Procurement Transparency in the Education Sector

“The Sierra Leone Coalition for Budget and Procurement Transparency in the Education Sector” supported by Open Society Initiative for West Africa (OSIWA) through its monitoring exercises had so far made the following findings.

1. There are established procurement committees with the required membership in all the entities monitored

2. Most of the procurement units monitored were able to produce documentary evidence of procurement committee meetings, bid documents, etc.

3. All the bid openings were done in public

4. Most of the procurement committees work independently without administrative or  political influence

5. Lack of adequate equipment like computers, printers in all the Procurement Units monitored. This will affect there efficiency of the unit and proper storage of records

6. In some entities, there is semblance of administrative/ political interference in public procurement processes. This will undermine the independence of the Unit

7. In all the entities monitored, there is inadequate number of procurement professionals to effectively handle procurement processes especially in big councils like the Freetown City Council. This is one of the factors responsible for flouting procurement regulations.

8. There is in most cases the absence of technical experts in the preparation of bids and the award of contracts. This can lead to the quotation of wrong specifications of goods, works and services required.

9. In most of the councils monitored, there is no documentary evidence of the 5% retention fee for every contract awarded especially works. This makes it  difficult to track contractors who abandon their contracts before completion

10. There is insufficient teaching and learning materials like text books in most of the schools monitored

11. There is delay, and sometimes non-payment of the 5% retention fees

12. In most of the entities monitored contract details including BOQs are not publicly displayed. This makes monitoring of contract performance very difficult

For more information or clarification please contact Transparency International Secretariat 20 Dundas Street Freetown or call Mr. Edward B. Koroma (Project Coordinator) on the following mobile telephone numbers 076-407979/033-445884/077-173936.

© Copyright 2005, Freetown, Sierra Leone.

Kenya: Procurement law set for review


 

Sunday Nation

By  TOM MOSOBA tmosoba@tz.nationmedia.com

August 18th, 2012

IN SUMMARY

  • The review is in response to a spate of court cases and controversies that continue to plague tendering for major public projects, including those in critical areas such as the forthcoming General Election, national security and infrastructure development, he said.
  • Local suppliers also want to use the window to seek legal protection against stiff competition from established foreign firms while a stringent appeals formula is being proposed as the best way to escape prolonged litigation among querulous bidding parties.
  • But the law society says corruption and lack of capacity in public entities, rather than the flaws in the law itself, were to blame for the procurement gridlock.

The procurement law is finally to be reviewed to remove bottlenecks in tendering for public projects and make it easier for private entities to transact business.

The ministry of Finance is spearheading the process to amend the Public Procurement and Disposal Act 2005 and attendant regulations, ostensibly to align it with the new Constitution, but there is the view that it is largely to fix growing tendering nightmares.

However, the Law Society of Kenya has cautioned against mutilating the law and has asked the government identify ways to address tendering loopholes and confront corruption which it says is the main issue.

Public Procurement Oversight Authority director-general Maurice Juma told the Sunday Nation in an interview that the agency and other parties have started on the review.

Mr Juma said the amendments would help plug a number of shortcomings and incorporate lessons learnt over the five years that the Procurement Act has been in force.

“A number of stakeholders’ views and input have been gathered and will inform the amendments envisaged in the new Act,” he said.

“At this point in time, views and comments gathered from stakeholders are raw proposals for amendments. The next step will be validation of these views through public consultative meetings with various stakeholders.

“It is only then that we will have specific and concrete proposed amendments that we can share with you and other interested parties,” he said when pressed for specifics.

The review is in response to a spate of court cases and controversies that continue to plague tendering for major public projects, including those in critical areas such as the forthcoming General Election, national security and infrastructure development, he said.

The push to amend the procurement law recently attracted the attention of Prime Minister Raila Odinga who said new legislation must be put in place urgently to cater for Kenya’s development needs.

The current one, he noted, was forced on Kenya by the International Monetary Fund and the World Bank.

The Sunday Nation learned that among the changes being sought by the private sector include the separation of the tender process for huge projects from the routine undertakings by ministries and public agencies.

Local suppliers also want to use the window to seek legal protection against stiff competition from established foreign firms while a stringent appeals formula is being proposed as the best way to escape prolonged litigation among querulous bidding parties.

Kenya’s Vision 2030 chief executive officer Mugo Kibati said the amendments were inescapable if the country is to move forward. “We cannot move this way, and I have made my point to the Treasury and the Public Procurement Oversight Authority,” he said.

Mr Kibati said tendering for infrastructural projects with a huge economic impact on the country should not be subject to the same kind of bureaucracy common in ministries and the same adjudicating committees involved in buying furniture and cars.

“The current law also encourages unnecessary and costly court suits and is short on the sophistication that is needed for some of the projects lined up to attain growth levels of a newly industrialised economy,” Mr Kibati said.

A new law that offers remedy to aggrieved parties but does not hold the nation at ransom or punish hard-working public servants at the behest of a few profiteers is what is desired, he said.

Kenya Publishers Association chairman Lawrence Njagi said the new law should clearly define the role of the public private partnership in procurement.

“For instance, to get value for money, we as publishers would like to be involved in the auditing of post- bidding services to ensure what was sold is actually delivered to the final consumers,” he said.

Mr Njagi said the 10 per cent country preference rule should also be operationalised to safeguard local manufacturers against undue foreign completion.

Public sensitisation

“The private sector would also like to be involved in public sensitisation because as it is now the task cannot be carried out sufficiently by the oversight authority,” he said.

But the law society says corruption and lack of capacity in public entities, rather than the flaws in the law itself, were to blame for the procurement gridlock. (READ: Public procurement a haven of graft, TI)

“There could be some justification for those advocating the amendments, but I must say that corruption remains the biggest threat, and therefore as a country we should be careful not to mutilate the stringent regulations to check the vice,” cautioned Mr Eric Mutua, the law society chairman.

“We should look at the bigger picture and demand that only minimal amendments be allowed,” he said. The chairman said many times government officials have overlooked legal counsel to engage in wheeler-dealing.

Earlier, Mr Juma reinforced the corruption claim and said it is a monster that all must be ready to face. He also said the penchant for shortcuts did not help matters.

“We have had instances where procuring entities are brought before the Public Procurement Administrative Review Board and advised to address various anomalies before they re-tender. When they re-tender, these entities ignore the advice of the Board and commit the same mistakes… In such cases, the law cannot be blamed for deliberate human failures,” he said.

On the positive, he said the high number of procurement cases and complaints filed with Public Procurement Oversight Authority and the procurement review board is proof that more people were now conversant with the procurement law and are aware of their rights.

 

Corruption Watch queries R13m tender


www.oil.co.za  Business Report

By SAPA

June 21, 2012

A Corruption Watch probe has found irregularities in a R13 million tender awarded by the department of transport (DOT), the civil society organisation said on Thursday.

The department had awarded a tender to a company which had not fulfilled all the necessary requirements, and overpaid for services by R10 million, it said in a statement.

Global Interface Consultancy won a tender to manage conference and communication services for the department of transport’s international investor conference in June last year.

It had submitted a bid for R13.5 million.

Losing bidder Indigo Design and Event Marketing bid R3.837 million – about one-quarter of the winning bid.

Indigo Design, a BEE-accredited company, lodged complaints with the department, the Public Protector, and Corruption Watch (CW).

“CW’s further investigation into the DOT tender award revealed gross irregularities in the tender process,” Corruption Watch said.

Corruption Watch had handed over its findings, as well as two cases involving irregular public tenders, to the Public Protector for further investigation.

It was in the process of formalising a working relationship with the Protector.

“We will closely monitor the cases that we hand over to the Public Protector and we will assist her office with further evidence and information gathered from the public,” said executive director David Lewis.

“It should be stressed that this case and each of the serious acts of corruption that we are investigating were reported by alert members of the public.”

Comment from the department could not be immediately obtained. – Sapa

Zambia: Witness testifies against Dora


Zambia Daily Mail

By JIMMY CHIBUYE

July 13th, 2012

FORMER minister of Communications Transport Dora Siliya issued instructions to halt the contract for the supply, delivery, installation and commissioning of Zambia air traffic management surveillance radar system awarded to Thales Air Systems of South Africa , a State witness has testified.
Former Zambia Public Procurement Authority (ZPPA) director-general David Kapitolo said Siliya instructed the then permanent secretary Eustern Mambwe to halt the process and retender the duly awarded contract because of alleged corruption. Mr Kapitolo however said the only person who can make variations for the cancellation of the tender awarded by the Central Tender Committee (CTC) is the minister of Finance, who is the chairperson of the CTC and the variations should be done through a statutory instrument.

He was testifying in a case in which Siliya, who is MMD Petauke Central member of Parliament, is charged with two counts of abuse of authority of office, contrary to the Laws of Zambia.The tender for supply, delivery, installation and commissioning of a Zambia Air Traffic Management Surveillance Radar System was for Kenneth Kaunda and Harry Mwaanga Nkumbula International airports.

“I received a letter which was not directed to me but to Ministry of Communications and Transport permanent secretary Eustern Mambwe from the minister asking him [Dr Mambwe] to halt the tender and retender the process because the best evaluated bidder, Thales Air Systems, was not a manufacturer,” he said.

Mr Kapitolo said the procurement process and tender awarded to Thales Air Systems of South Africa was conducted in accordance with the ZPPA rules, up to the selection of the best evaluation bidder and notification but Siliya interjected. He said Selex Systemi Integrati was not among the bidders who submitted their documents for the tender of the radars because their bidding documents were rejected for being delivered late. Mr Kapitolo said he received a letter from Dr Mambwe, seeking the cancellation of the tender awarded by the CTC but he advised that the contract cannot be cancelled by an individual. He said he replied to Dr Mambwe’s letter and advised him that he cannot ask the CTC to cancel the tender because the manufacturer who authorised Thales Air Systems to bid was a reputable institution capable of making the radars.

Mr Kapitolo said unfortunately his letter to Dr Mwambwe was leaked to the media, forcing then President Rupiah Banda to set up a tribunal to investigate the matter. He said after the tribunal’s verdict which cleared Siliya of abusing her office, his contract of employment was terminated.
Mr Kapitolo also said the ZPPA received an anonymous letter alleging that the awarding of a contract to Thales Air Systems was marred by corruption and it should be halted. He said after investigations, it was revealed that the allegations contained in the anonymous letter were a ploy to halt the procurement process so that it could be redone and allow Selex Systemi Integrati to be part of the bidding process.
Mr Kapitolo said the permanent secretary is the purchaser and buyer of any ministry.

It is alleged that Siliya between February 20, 2008 and April 20, 2009 in Lusaka, employed as Minister of Communications and Transport, abused the authority of her office, by directing the cancellation of a duly awarded tender. The tender was for the supply, delivery, installation and commissioning of a radar system to Thales Air Systems South Africa, whose implementation was frustrated. This act was prejudicial to the rights or interests of the Government of the Republic of Zambia. Particulars of the second offence are that during the same period, in breach of laid down procedure, Siliya did accept a purportedly free offer from Selex Systemi Integrati for the repair of a Radar Head at Lusaka International Airport, as a result of which government actually paid K1, 943, 932, 360, an act prejudicial to the rights or interests of the Government of the Republic of Zambia.
The matter will come up today for continued hearing.

Stop sitting on the sidelines (South Africa)


Information
Image by heathbrandon via Flickr

Moneyweb

August 2011

Kim Cloete

CAPE TOWN – Gareth Ackerman comes across as something of a lone ranger in the business world.

Well, at least as far as putting his views on the line about controversial legislation and problems within government.

He raised concerns about the Protection of Information Bill a few months ago when he said it had the potential to scare off foreign investors and blunt the rights of consumers.

Now he’s come out strongly again about the legislation – as well as a range of other issues which he has warned could potentially scupper investment in South Africa, amongst them labour inflexibility, corruption and fading democratic principles.

In a speech to the Cape Town Press Club, he called on other business leaders to take more of a stand on key policy debates and issues they feel strongly about.

I’m very concerned that business people who are very dependent on government contracts, are scared of retribution from government. Government is a very large spender with very large tenders. You don’t want to fall foul of government. That’s why business falls quiet.” Read more.

Modes of Punditry, Modes of Influence


Woldbank.org

August 10th, 2011

By Sina Odugbemi

Years ago, I was a writer of opinions and editorials on the leading newspaper of influence in Lagos, Nigeria. We had on the editorial board  advisers to we the writers men who had vast experience of government and business both within and outside Nigeria. I learned a lesson from them that has stayed with me. They taught me that if you want policy makers to take you seriously even when they disagree with you, your commentary must meet two requirements.

What is saddening about our age of volubility is that the vast majority of public affairs commentators do not meet these two requirements. Lots of commentators do not have real mastery of the policy issues they are commenting on. Plus there is an epidemic of cheating, of ignoring political realities and simply assailing policy makers and leaders, and yelling: ‘Just fix it! Just show leadership!’ Leadership is coming to mean Performer of Miracles! Read more

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