DOING BUSINESS WITH GOVERNMENT

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DOING BUSINESS WITH GOVERNMENT
By James Kalibbala Chairman Uganda Manufacturers
Association
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Introduction

• Ugandas private sector is dominated by small and
  medium scale enterprises (SMEs) which accounts
  for the majority of the entire business
  community. Our commercial activities represent on
  average 75 of Ugandas annual GDP. We employ
  over 80 of the total workforce in the country
  and produce largely for the domestic market.

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Extent of the Private Sectors Business with
Government

• The share of local private sector participation
  in doing business with Government in Uganda is
  still very limited and low compared to all other
  enterprises that are participating in this
  market.

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Extent of the Private Sectors Business with
Government

• The low level of participation is discouraging
  since Government procurement represents a
  relatively stable market for the manufacturers.

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Extent of the Private Sectors Business with
Government (contd)

• Taking full advantage of doing business with
  Government would help the revenues of our
  manufacturers and enhance their growth and
  competitiveness.

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Extent of the Private Sectors Business with
Government (contd)

• The current low levels of doing business with
  Government is attributed to the limited local
  capacities to produce and innovate on the one
  hand and to limited access to procurement
  information on the other hand.

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Factors that Inhibit the Private Sector from
doing Business with Government.

• The local private sector has not significantly
  seized the opportunities offered under the
  current procurement practices of Government. This
  is due to a number of barriers they face as they
  attempt to do business with Government. Some of
  the major factors inhibiting such participation
  are

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• 1. Corruption
• Is one of the major obstacles for doing business
  with Government. There is corruption worldwide
  even in the US and UN but it is worse in the
  developing countries.
• 2. Complexity of documentation
• Preparing bids is quite complex, so the
  tendering procedures needs to be simplified and
  explained to the bidders.

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• 3. Financial Problems
• There are delays in payments by Government as
  well as uncertainties of guarantees offered.
  This constrains business cash flows.
• 4. Unfair Awards of Tenders
• Wrong evaluation and awarding of contracts and
  tenders in Government affects the private sectors
  in doing business with Government. This is most
  due to bias and favouritism.

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• 5. Political interference
• There is a need to depoliticize the procurement
  function in the Local Governments.
• 6. Bureaucracy
• In the Government procurement process.

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• 7. Cost
• Preparing a tender is costly and yet gives no
  guarantee of success. It is costly to prepare the
  documentation that is required right from the
  pre-qualification stage to tendering.
• 8. Time
• preparing bids is time consuming because of the
  huge volumes of documents that are required.

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• 9. Banks
• Banks dont consider Government orders as a
  serious form of commitment.
• 10. Limited Skills, Technologies and Expertise
• Our local enterprises with limited skills,
  technologies and expertise are faced with stiff
  competition from the large firms, mostly
  international, who already enjoy economies of
  scale.

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• 11. Limited Capital
• Awarding of tenders by Government to the local
  entrepreneurs is inhibited by the companies
  insufficient capital

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Some Specific Issues on Doing Business with
Government
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Pre-qualification

• Purchase of bid document (average cost per
  document Ushs. 50,000)
• There are several items that are included in the
  bid

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Submission

• Number of copies on average 6
• Bid bond (many times required) Normally 120 days
• Total cost of submission is on average Ushs
  120,000 200,000

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Opening

• Bidder may attend or may not be required

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Verification

• After opening, verification can take months to be
  completed
• Process can be cancelled
• Misplacement of documents (bidders are asked to
  reapply)

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If the bidder succeeds

• A performance bond for the contract period is
  required (some may require six months)
• Signing of a contract may take months
• The internal system is slow and it may take
  months to flow internally
• Delayed payment

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General

• This process is repeated annually ( has become
  one of the Main Revenue Sources of Government)
• If you do not know someone in the system, it is
  useless trying to bid (Every one submits the
  relevant information and quotes low, and the know
  who process begins)

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General (Contd)

• Professionalism has been compromised by depending
  on what that organization wants (if you know
  someone in an organization, you can supply
  anything)
• PPDA may have had good intentions, but it has
  only formalized corruption, with increased costs.

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CONCLUSION

• The private sector is committed to working with
  Government in building capacities to better
  respond to the requirements of the procurement
  process. This will enable the private sector to
  participate more effectively in doing business
  with Government thus contributing to the economic
  growth and social transformation of the private
  sector.

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Thank You