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4th East African Public Procurement Forum: Improving the Efficiency of the Public Procurement in the East African Community for Economic Growth

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Title: 4th East African Public Procurement Forum: Improving the Efficiency of the Public Procurement in the East African Community for Economic Growth


1
4th East African Public Procurement Forum
Improving the Efficiency of the Public
Procurement in the East African Community for
Economic Growth
  • PRIVATE SECTOR VIEWS ON PUBLIC PROCUREMENT
    PRACTICES
  • Eng. Pascal Ncheye
  • Chairperson Tanzania Civil Engineering
    Contractors Association (TACECA)

2
1. Introduction
  • 1.1 Objective of the Paper
  • 1.2 The Public is the major employer of the
    Private sector
  • 1.3 The construction industry has an important
    role in the national economy of Tanzania.
    Statistics
  • During 2002 2006 industrys contribution to GDP
    averaged 7.7, rising to 8.1 in 2008 and is
    projected at 8.7 in 2011
  • The industry accounts for 50 of Gross Fixed
    Capital Formation
  • It contributes 9 of formal employment
  • gt 70 of the government dev budget is incurred
    by constr.
  • Annual turnover is about 1,800 2,000 million

3
1. Introduction
  • 1.4 Justification of utilizing such public funds
    coupled with realization of value for money is
    implementing well the pp practices
  • 1.5 In Tanzania, the pp, focusing on procurement
    of works, is guided through such policies and
    legislations, namely
  • The Construction Industry Policy, 2003 (CIP), the
    National Economic Empowerment Policy, 2004 (NEEP)
    and the Small and Medium Enterprises Development
    Policy, 2003 (SMDP)
  • The Public Procurement Act, 2004 and the Public
    Procurement Regulations, 2005.

4
2. Policy, Legal and Regulatory Framework
  • 2.1 Policies
  • These policies derive from the Tanzania
    Development Vision 2025, whose goal is to move
    the country from a least developed agricultural
    economy to a semi-industrialized middle economy
    by the year 2025, and with a high level of human
    development.
  • It focuses on eradicating poverty through
    empowering and investing in people, enhancing
    productive sectors, promoting private sector
    development as well as infrastructure
    improvement.
  • Thus competent and well resourced local
    contractors must be present in order to achieve
    the above

5
2. Policy, Legal and Regulatory Framework
  • 2.1.1 Policy interventions Let us pick CIP, 2003
    to elucidate the realization of Vision 2025 via
    the construction sector
  • The policy aims at creating an enabling
    environment for the development of a vibrant,
    efficient and sustainable local construction
    industry in which local players are able to meet
    the demand for all construction services in the
    country and to export such services to other
    countries.
  • Specific policy directions to support the above
    said are
  • Capacity and performance improvement of
    local construction enterprises
  • The government shall ensure both local and donor
    procurement policies provide a comprehensive
    framework for fostering the local construction
    industry in Tanzania

6
2. Policy, Legal and Regulatory Framework
  • The government shall ensure that public funded
    works carried out within the country involve the
    partnership with local players
  • Improvement of public sector delivery
  • The government shall develop the capacity of its
    staff in project management and contract
    administration
  • The government in collaboration with the private
    sector shall formulate standard guidelines for
    procurement and project delivery arrangements.

7
2. Policy, Legal and Regulatory Framework
  • Compliance with international trade
    agreements
  • Local participation requirement shall be
    mandatory in all construction projects
  • Create awareness on WTO protocals and those of
    sub-regional arrangements particularly EAC and
    SADC
  • Ensure that in negotiating for development
    support funds from bilateral and multilateral
    funding institutions, support for the development
    of capacity of the local construction industry is
    embodied

8
2. Policy, Legal and Regulatory Framework
  • 2.2 Legal and Regulatory Framewok
  •  The afore named policies are implemented through
    an elaborate framework of a regulatory and
    monitoring public institution, namely PPRA, which
    was established in 2004. The PPAct was enacted in
    2004 and has generally addressed the policy
    directions.
  • However, there are few, but crucial, areas which
    are inadequately addressed, e.g two such areas
    are
  • The government shall ensure that public funded
    works carried out within the country involve the
    partnership with local players The Act and its
    Regulations are silent/not elaborate when the
    stipulated threshold value is exceeded.
    Furthermore, there must be a way of having
    mandatory meaningfull participation of local
    contractors in projects whose value exceed the
    stipulated threshold, in the event that foreign
    contractors are involved.
  •  

9
2. Policy, Legal and Regulatory Framework
  • Local participation requirement shall be
    mandatory in all construction projects The Act
    and its Regulations are silent/not elaborate
    enough on the matter. For foreign/donor funded
    projects there must be some form of partnership
    between foreign contractor and local
    contractor(s). This shall be made possible
    through prior negotions between our government
    and bilateral or multilateral funding
    institutions if our stipulation conflicts with
    theirs.

10
3. CHALLENGES AND PROSPECTS
  • In terms of procurement of works, there are two
    major kinds of challenges facing the local
    construction industry which negatively affect its
    performance and competitiveness. The first one is
    associated with the business environment, whereas
    the second one is related to capacity and
    competence of individual firms.

11
3. CHALLENGES AND PROSPECTS
  • 3.1 Bussiness Environment 
  • 3.1.1 Globalization
  • The socio-economic development worldwide is
    currently being driven by the globalization
    phenomenon and rapid scientific and technological
    advancement. This trend has exposed local
    contractors to immense international competition.
  • In this economic globalization, the already well
    established players in the global market are the
    winners.They have access to finances and can
    make substantial investments in modern
    technology. On the contrary, local players are
    ill prepared to meaningfully participate in the
    global market and hence are the loosers. The
    local contractors can hardly access finances
    apart from the fact that they lack the track
    record.
  •  

12
3. CHALLENGES AND PROSPECTS
  • To mitigate this situation, bold steps must be
    taken by both the government and the private
    sector such that
  • Stringent qualification criteria for local
    contractors to participate in such procurement
    proceedings should be revisited for them to
    enhance their possibilities of equally qualifying
    to tender for meaningful projects.
  • Local contractors should strive to enhance their
    capacities and competences through such
    modalities as mobilizing and combining together
    their resources, acquisition of knew knowledge
    and technology as well as partnerships with
    foreign contractors.

13
3. CHALLENGES AND PROSPECTS
  • 3.1.2 Marginalization
  • Marginalization of local contractors manifests
    itself in various forms
  • Inequitable projects packaging This is more
    evident where government and donor funded
    projects are involved whereby large contracts are
    prefered, thus excluding small and medium
    contractors
  • Lack of confidence Some procuring entities, in
    most cases potential ones, harbour the notion
    that works executed by local contractors will
    always be of low/unacceptable standards of
    quality.
  • Imperfect competition In some of the donor
    funded projects, procuremet is restricted to
    domestic goods and services originating from the
    donor country.

14
3. CHALLENGES AND PROSPECTS
  • The problem of marginalization can be
    solved/alleviated through
  • Procuring entities packaging large projects in
    such a way that they are economical and
    affordable by local contractors. In addition, all
    foreign contractors tendering for construction
    works must associate with local contractors.
    These aspects must be well stipulated in our
    legislations. 
  • Local contractors themselves, individually and
    through their Associations, must develop
    marketing strategies which will enable them lobby
    and access potential procuring entities for
    projects.

15
3. CHALLENGES AND PROSPECTS
  • 3.1.3 Corruption
  • Corruption is a big problem which manifests
    itself at all stages of the procurement process.
    It is one of the responsible factors for
    enourmous economic losses to the nation through
  • Inflating costs of projects due to the fact that
    costs of paying bribes are always embeded in the
    project value.
  • Reduction of competitiveness by distorting an
    otherwise level playing ground, shielding corrupt
    firms from competition, sustaining inefficient
    corrupt players and thus killing competent clean
    players.
  • Creation of projects which are white elephants.
    Conservative figures indicate that about 20 to 30
    percent of expenditure on public projects is lost
    through corruption and improper use of project
    funds.
  •  

16
3. CHALLENGES AND PROSPECTS
  • 3.2 Capacity and Competence
  • Local contractors must have adequate capacity and
    competence for them to be adequately competitive
    and meet the market demands for construction
    projects.
  • Inherent inadequacies can be attributed to
  • Limited resources and skills within individual
    local firms which inhibit them to undertake large
    and/or complex contracts
  • Under utilization of available capacity, because
    of lack of potential demand as well as presence
    of marginalization and corruption
  • The construction sector being populated by many
    small firms which lack bargaining power with
    clients. Also they lack a modern corporate
    culture

17
3. CHALLENGES AND PROSPECTS
  • The above challenges can be well addressed by
    contractors themselves in collaboration with the
    government
  • Utilization of partnerships for capacity building
    with experienced foreign contractors is
    encouraged and facilitated. This will make
    possible the sharing of experience, technology,
    managerial techniques and new markets
  • Training and continuos upgrading of skills of
    personnel with a focus on core expertise and
    business development.
  • Formation of Joint Ventures (JVs) among local
    contractors whereby resources are pooled
    together.
  • Strenthening contractors associations and use
    them effectively for lobbying the government and
    the donor community.

18
4. CONCLUSIONS AND RECOMMENDATIONS
  • 4.1 Conclusions
  • It is evident that the construction contracting
    sector potentially contributes to the countrys
    economy, whereas the Public is the major employer
    of the Private sector which is the key
    implementor of the construction projects.
    However, there is a clear lack of the trickle
    down effect in terms of enhancement of the local
    players capacity and competence as well as the
    nations economy as a whole. Regarding the public
    procurement practices in Tanzania, the following
    salient facts are revealed
  • Existence of conducive policy interventions
    coupled with a sound legal and regulatory
    framework which guide the development of the
    industry. However, the monitoring aspect and
    contractors empowerment have received little
    attention.

19
4. CONCLUSIONS AND RECOMMENDATIONS
  • Presence of many small local contractors poses
    the greatest weakness of the construction
    contracting sector in Tanzania. On the other
    hand, this situation attracts and reinforces the
    dominance by a few foreign contractors in the
    construction business market for both large and
    medium size projects. This in-turn marginalizes
    local contractors and renders them unable to grow
    and compete globally.
  • Generally, local contractors face challenges
    emanating from globalization and marginalization
    in the construction business market. In addition
    they are faced with a lot of capacity and
    competence related challenges.
  • Corruption, being one of the major challenges,
    must be addressed and curbed the soonest,
    otherwise it is likely going to kill the local
    construction contracting sector

20
4. CONCLUSIONS AND RECOMMENDATIONS
  • 4.2 Recommendations
  • Joint but sincere action and collaboration
    between the public and private sector in
    addressing the above named salient facts must be
    exercised in order to ensure sustainable
    development of the construction contracting
    sector and the nations economic growth thereof.
    The paper recommends the following strategies
  • Enhancement of Local Capacities
  • Deliberately optimally utilizing the available
    capacities and resources inherent in individual
    local firms by such strategies as
  • Making it mandatory for foreign contractors to
    partner with local contractors when tendering for
    and executing construction projects in Tanzania.

21
4. CONCLUSIONS AND RECOMMENDATIONS
  • Equitable packaging of construction projects in
    such a way that small and medium size local
    contractors are able to participate and thus
    capture a sizable share of the construction
    business market.
  • Deligation of relevant regulatory functions
    undertaken by PPRA to the private sector, namely
    the Associations. PPRA works alongside a number
    of trade and professional associations of key
    stakeholders, these include TACECA, CATA, AAT,
    ACET TIQS. These organisations are highly
    endowed with a large pool of professionals in
    various fields of engineering, business practice
    and management who are spread all over the
    country. Further to that, they themselves know
    one another well.
  • Joint Ventures (JVs) among local contractors must
    be encouraged and facilitated which in turn will
    enable them execute large and profitable
    projects.
  •  

22
4. CONCLUSIONS AND RECOMMENDATIONS
  • Alleviation of Corruption
  • Concerted efforts to alleviate corruption and
    mismanagement of public projects must be given
    the rightful impetus such as
  • Keenly abiding by the legislations designed to
    curb corruption in the public procurement
    proceedings. For instance, the highly
    comprehensive piece of legislation that lays out
    the procedures for tendering and awarding of
    contracts for public projects must be thoroughly
    monitored by the PPRA.
  • Improving contractors compliance with
    anti-corruption requirements by establishing
    mechanism for private sector monitoring of
    corruption within construction contracting
    procurement. One way of achieving this is through
    instituting and practicing code of ethics
    formulated and monitored by the contractors
    associations.
  •  

23
4th East African Public Procurement Forum
Improving the Efficiency of the
Public Procurement in the East African Community
for Economic Growth
  • PRIVATE SECTOR VIEWS ON PUBLIC PROCUREMENT
    PRACTICES
  • Individually, each EAC member country must
    deliberately improve her procurement practices
  • So that
  • Collectively, we enhance economic growth of our
    Region.
  • THANK YOU FOR YOUR ATTENTION
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