REMARKS OF THE CHIEF EXECUTIVE OFFICER PUBLIC PROCUREMENT AUTHORITY (PPA) AT THE MEET THE PRESS SERIES ON TUESDAY, 27TH NOVEMBER, 2007 AT THE CONFERENCE HALL, MINISTRY OF INFORMATION & NATIONAL ORIENTATION
Hon. Minister for Information,
Members of the Governing Board of PPA,
Directors & Staff of the Ministry of Information and PPA,
Friends from the Media,
Distinguished Ladies and Gentlemen.
The importance of such media interaction cannot be over-emphasized especially when it comes to issues that border on public financial management and its implications on the Ghanaian economy.
I therefore see this “Meet- the-Press Series” as a critical platform for assessing the impact of the Act, its implementation, challenges and way forward and therefore commend the Ministry of Information and National Orientation for this wonderful opportunity.
INTRODUCTION
Public Procurement is at the centre of the way public money is spent. Budgets are translated into services in large parts through the workings of the procurement system. The public procurement activities, especially those related to the infrastructural sector in Ghana, like many others worldwide, have had their fair share of damning independent reviews.
In this maiden edition of “Meet-the-Press,” I would want to outline the events leading to, and features of, the public procurement reform in Ghana and analyse their potential impact and the unique challenges. This would include what the Procurement Act set out in its legal, institutional and regulatory framework to secure fiscal transparency and public accountability. Hitherto, the sole reliance on traditional contracting and price-based selection limits the scope for the value for money achievable. Expanding the reforms to cover procurement and project delivery/contract management methods and strategies, with a focus on ‘best value’, will increase the potential and likelihood of achieving value for money in public procurement in Ghana.
The construction of schools, clinics, and roads and drilling of wells, as well as the acquisition of medicine and textbooks occur in most countries through the nation’s public procurement system. The performance of a country’s procurement system will therefore determine whether available funds are sufficient to construct 10,000 or 30,000 wells. The ability of Governments to meet their promises of economic and social improvements is closely related to how well procurement is carried out.
THE ROLE OF PUBLIC PROCUREMENT IN THE DELIVERY OF DEVELOPMENT AND BUDGET TARGETS
The relevance of the public procurement system in the attainment of the GPRS II aspirations cannot be overemphasised. According to the 2008 Budget presented recently to parliament, “in line with the GPRS II, the government’s priority for the fiscal year will focus on facilitating growth and poverty reduction through major infrastructural development. This is emphasised in section 2.2 of the budget statement. The areas identified are roads, water, and energy. A projected amount of GH¢199,200,000 has been allocated to enable all 166 districts to construct and tar major roads in their areas of jurisdiction. The increased involvement of banks and financial institutions would require improved procurement practices to forestall project deliverable overruns. These over-runs are characterized by cost escalations, especially interest on delayed payments, delays in delivery time and the abandoning of projects which negate the attainment of “value-for-money” and development aspirations.
A critical component of this new vision is the government's efforts to promote the private sector as the engine of economic growth. The Government has also identified construction as a priority sector for foreign and private investment. Section 3.1 of the 2008 Budget states that among the initiatives are “improving the regulatory framework of doing business, which has public procurement as a key component. In fact, public procurement is a business process within a political system. Failure to properly balance its elements can lead to wasted effort and poor development results within the most important single market place in a developing country like Ghana.
Ghana’s total Public Procurement expenditure for 2005 was 14,186 billion cedis and 17,847 billion cedis for 2006.
FRAMEWORK FOR PUBLIC PROCUREMENT BEFORE REFORMS
Prior to the enactment of the Public Procurement Act, 2003 (Act 663) there was no comprehensive guidance on the scope and procedures for the procurement of goods, works and services in Ghana. For instance the procurement of construction works and services had been regulated mainly through circulars from the Ministry of Finance. This complemented a set of procedures evolved by convention in connection with the control of procurement exercised by the Ministry. Central, Regional and District Tender Boards supervised the tendering processes and award of contracts within thresholds defined by the Ministry of Finance. World Bank projects used the World Bank Procurement Guidelines and the World Bank Guidelines for the Selection of Consultants. These arrangements notwithstanding, the MDAs and MMDAs maintained separate lists for the pre-qualification of contractors and use different standard conditions of contract for works procurement. World Bank administered projects used the International Federation of Consulting Engineers (FIDIC) conditions of contract for works contracts and shortlists for the selection of consultants.
The classification of Contractors by the Ministry of Water Resources, Works and Housing were observed to be too general and obsolete and the registration criteria, lists of contractors and monetary thresholds were not regularly updated according to the World Bank in 1996. Except for major or complex assignments, most government-financed architectural consultancy services and project supervision had been assigned to the Architectural and Engineering Services Limited on sole source basis. The shortlists used on World Bank-administered projects for the selection of consultants were observed to be repetitive, with the same firms selected for civil engineering and building works supervision. Many instances of a single contractor buying and pricing all the bidding documents, and of the award of a number of contracts (or lots) to the same contractor/supplier, under different contracting names were also observed according to the Crown Agents findings in 1998.
Studies have shown that public procurement represents about 24% of total imports of this country and apart from personnel emoluments, it represents between 50-70% of the national budget. Thus, contributing about 14% to Ghana’s Gross Domestic Product (GDP). This no doubt explains why management of public procurement has assumed a significant role in national development.
Ladies and gentlemen, it is in recognition of the enormous role public procurement plays in the socio-economic development of the country, that an exercise to reform the Public Procurement System was began in 1996 as an integral part of a wider Public Financial Management Reform Programme otherwise known as (PUFMARP). As a result of the exercise, a number of shortcomings and organizational weaknesses inherent in the country’s procurement system at the time were identified.
Thus, the recommendations of an oversight group which conducted an in depth studies into the public procurement systems in Ghana finally led to the enactment of the Public Procurement Act , 2003 (Act 663). Section 1, Subsection 2 of the Act established a body corperate, charged with the responsibility of overseeing the effective implementation of this law. May I therefore use this opportunity to inform you that this body which used to be called Public Procurement Board has been re-named as ‘Public Procurement Authority’.
This has become necessary following a statute law revision exercise undertaken by government to review, clarify and merge a number of laws that had become difficult to deal with because of too many amendments or ambiguities needing clarification. The Public Procurement Act, 2003 (Act 663) was one of the laws revised.
The revisions did not affect substantive content of the enactments concerned, they have instead been made easier to read and interpret.
The result of this exercise is the publication of seven (7) volumes of laws known as the ‘Revised Edition of the Laws of Ghana’. These volumes became effective on 16th April, 2007 by Executive Instrument, 2007 (E.I. 13), which changed our name from PPB to the PPA
All documents however, bearing the name of Public Procurement Board remain valid.
PPA’s objective is to secure a judicious, economic, and efficient use of public funds in a fair, transparent and non-discriminatory manner while promoting a competitive Local Industry.
Our vision is “to have a world class, efficient, transparent, accountable and professionally managed public sector procurement system in Ghana which enjoys high level of business confidence and ensures consistent attainment of best value for money in the procurement of goods, works and services in support of national development and fiscal policies”.
ACTIVITIES & ACHIEVEMENTS SO FAR
Ladies and Gentlemen, after barely three (3) years of implementation of this Act, the Authority together with its governing Board has successfully untaken a number of activities and programmes. These include:
• development of Regulations and Manuals;
• development of PPA’s website: www.ppaghana.org [1];
• public Procurement Module of Excellence Tool;
• guidelines on Margin of Preference;
• Skills & Training Needs Assessment;
• Career Path Progression & Professionalization;
• Short, Medium and Long Term Training;
• Appeals & Complaints Panel;
• Sole Source and Selective Tendering Procedures;
• Publicity and the Publication of the Public Procurement Bulletin.
Regulations and Manuals: Consultants were engaged to assist in the Development of Regulations and Manual as required by Section 97 (2) of Act 663. Our draft regulations which is being considered for parliamentary approval has since been posted on our website for the information of the general public. The aim of doing so is to expose it to wide stakeholder comments.
Our manual was completed in October 2006 and is also posted on our website. The regulations and manuals provide more detailed and step by step information required for the effective implementation of Act 663.
Website: The PPA website was launched on 4th July 2006 and has since proven to be a very useful tool in the dissemination of information on public procurement activities. A visit to the site will provide vital and relevant information such as Act 663, Procurement Regulations and Manuals, Standard Tender Documents, Tender Notices, Contracts Awarded and information of Upcoming Events. Training in ICT skills are also being organised for both service providers and procurement officers to enable them access these information as well as post tender notices and contracts awarded on the site.
The PPA has also developed a Web-based Procurement Planning software which seeks to standardise the formats of Entities procurement plans. It is intended to serve as a springboard for the eventual establishment of an E-procurement system. The benefits of this software include:
• Timely delivery and receipt of Entities procurement plans;
• Meets International Standards
• Cost Effectiveness and
• Transparency
Public Procurement Model of Excellence Tool: In May 2006, the Authority formally launched the PPME tool. This followed a pilot assessment of 100 Entities in October 2005.
The objective of the PPME Tool is to accomplish the following:
Monitor Compliance of the Public Procurement Act, 2003 (Act 663)
Provide results on the Level of Performance of Procurement Entities
Institutionalise the Assessment Process in Public Procurement
The key features of this Tool are:
It comprehensively assesses Procurement Performance of the Entities, qualitatively and quantitatively in accordance with best practices agreed at the Paris Declaration.
It enables comparison to be made among Sectors and Procurement Entities with regards to Level of Performance.
It highlights risks & weaknesses for strategic decision- making and capacity development
Finally, it helps to identify areas of improvement.
The Performance Assessment System (PAS) which is a key component of the Tool provides a detailed assessment in 4 main areas namely:
- Management Systems
- Programme Design
- Procurement Process
- Contract Management
To date a total of 213 entities have been assessed and the results are very revealing. It may interest you to note that the overall performance is showing significant progress in public procurement management.
Indeed, this tool over the years has proven to be an effective tool for assessment. Thus, about 2 weeks ago, the Commonwealth Secretariat through its Governance and Institutional Development Division sponsored Procurement Personnel from Commonwealth African Countries to embark on a study tour to Ghana to study this Benchmarking, Monitoring and Evaluation Tool as well as offer Ghana the unique opportunity to learn from sister African Countries in the spirit of networking.
Guidelines on Margin of Preference: To remove the discretionary powers of Procurement Entities to grant Margins of Preference as stipulated in Section 60 of the Act, the Public Procurement Authority in consultation with the Minister of Finance and Economic Planning, launched the Guidelines for its effective application on 12th June 2006. These guidelines are carefully tailored and applicable to Goods, Works and Services procured under both National and International Competitive Tendering. Its policy objective is to assist the local business community to become more competitive and efficient suppliers to the public sector.
These margins are supposed to be granted only during the Evaluation of Tenders and should therefore be captured in the Tender documents to give preference to local Suppliers and Contractors when in competition with foreign Suppliers and Contractors.
For instance, to qualify for 20% margin of preference during evaluation of tenders, a tenderer of domestic goods (equipment, materials, consumables etc.) must prove in its tender documents that the use of local labour, raw materials etc from within Ghana accounts for 15% or more of the Ex-Works (EXW) price of its products.
Skills and Training Needs Assessment: Considering the fact that human resource plays a significant role in the implementation of the Act, the Board in conjunction with the Controller and Accountant General and the Internal Audit Agency (all three fiduciary institutions) embarked on a Skills and Training Needs Assessment Programme. This has informed the development of Training Modules which are being used for a nationwide training of personnel of the various Procurement Units, Entity Tender Committees, Tender Review Boards, Private and Public institutions as well as the media on the requirements of Act 663.
Short Term training: Having identified that key personnel implementing and overseeing the effective implementation of Act 663 lack the basic knowledge in public procurement practices, the Board has developed various modules for short term intensive training programmes for the following Target Groups:
a) Entity Tender Committees and Tender Review Boards
b) Providers of Goods, Services and Works
c) Independent and National Oversight Institutions,
General Public, Media, NGOs
d) Procurement Practitioners in the Public Sector
This all important exercise was rolled out in September this year as a Nationwide Short Term Training Programme. Duration of these training sessions vary from a day to a maximum of 5 days seminar(s). For instance, Independent and National Oversight Institutions including Ministers, High Ranking Officials, Auditors, Anti-corruptions Groups, Judiciary, MPs, Media and Civil Society will have one day seminars conducted across the country concurrently. The focus of their training will be to build a greater appreciation of the Public Procurement Act, 2003, (Act 663).
Training modules for members of Entity Tender Committees (ETCs) and Tender Review Boards (TRBs) cover topics aimed at improving their understanding of their roles and functions.
Procurement Practitioners involved in daily procurement functions are given a 5-day training in Effective Procurement Practices.
The private sector (ie: Suppliers, Consultants and Contractors) which constitutes the supply side of the tender process will also not be left out. As part of their training, which is expected to start later this month in accordance with Act 663 in order for them to respond effectively to tender notices and help create a competitive local market place.
Medium-Long Term training: Furthermore, as part of the medium term training, PPA in conjunction with the Millennium Development Authority is in the process of contracting a consultant to work towards the development of appropriate training modules for courses that will be delivered by accredited institutions for varied certifications. The proposed programmes are as follows:
1. 3-6months: This will be an intensive training programme leading to a CIPS Level 4 qualification. The target group is personnel with various qualifications but performing procurement functions.
2. 10 months: This is also an intensive programme for HND students in Purchasing and Supply to attain CIPS Level 5 &6 certificate which will lead to a combined award of both Bachelor of Science Degree and MCIPS.
3. 3-4 Degree: This programme is purposely aimed at encouraging universities and other tertiary institutions to offer degree programmes in Procurement and Supply Chain Management courses which will lead to a combined award of Bachelor of Science Degree and the Graduate Diploma final level of the Chartered Institute of Purchasing and Supply. These Graduates will automatically acquire full MCIPS.
4. Internship: To ensure that people who benefit from the above training receive a hands-on experience with regards to public procurement management, students and graduates will be attached to public institutions and supported through a comprehensive internship program.
Career Path Progression & Professionalization: Ladies and gentlemen, the PPA observed that a key requirement for attracting and retaining a cadre of procurement professionals in the Public Sector was the establishment of procurement as a career in the Public service. This will be achieved by clearly defining the procurement career path, including formulating the requirements for entry and promotion with clear job functions, grades, promotion and salary structure.
After an extensive stakeholder’s consultation, two teams were set up to work on improving the capacities of all in the practice of Public Procurement in Ghana. The first team was tasked to design a curriculum that will be geared towards institutionalizing a definite career path for practitioners of public procurement, whiles the other was charged with the responsibility of devising ways of reviving the professional associations of Procurement in Ghana. Ladies and gentlemen, I am glad to announce that these teams have submitted their reports, which have since been forwarded to the office of the Head of Civil Service and the Public Service Commission and receiving attention.
Let me assure stakeholders that the PPA’s Capacity Building Policy will ensure that functional procurement units are established in each procurement entity with competent personnel who have opportunities to develop professional career paths. This we hope to do by liaising with local and international training bodies to deliver world-class quality procurement and supply chain management training that will include ethics, anti-corruption measures, communication/negotiation skills and effective record keeping.
Appeals and Complaints Panel: The PPA has over the years been receiving a number of complaints from suppliers and contractors who are dissatisfied with various tender processes they participated in. In exercising the statutory mandate under Section 81 of Act 663, the PPA has inaugurated a 7-member Appeals and Complaints Panel with representatives from the Attorney General’s Office and the Chamber of Commerce. Its principal task is to undertake Administrative Review of cases brought up by aggrieved parties of the procurement process. Meanwhile, all complaints (most of which were shrouded in suspicion and lack of clarity) received by the Authority prior to the inauguration of this Panel have been exhaustivebly investigated and decisions taken accordingly.
On this note, ladies and gentlemen, we would want to draw the attention of all to Section 65 (9) of the Act 663 which among other things makes it mandatory for all Procuring Entities to notify unsuccessful bidders of the award of contracts after the relevant contract is in force, specifying details of the successful bidder and the Contract Price. This, we believe, if complied with will go a long way to ensure greater transparency and efficiency in Ghana’s Public Procurement System.
SOLE SOURCE & SELECTIVE TENDER APPROVALS
Section 38 and 40 of Act 663 mandates institutions that seek to waive or restrict competition to first secure approval from the Governing Board of the PPA and we are pleased to inform you that in 2006, out of 135 applications that were received for sole sourcing, 68 of these applications were approved. Furthermore, 80 applications for Selective Tendering were approved by the Governing Board out of the 140 applications that were considered.
Publicity: In order to engender and engage the public in discussions on public procurement, the PPA has since its inception undertaken vigorous awareness creation programmes i.e.: granting interviews on a number of electronic and print media across the country eg: Press Briefing held in February this year, the publication of Corporate Flyers, 2006 Annual Report among other Publicity Materials. These we believe have created enough awareness about the requirements of the Act and its implementation for national development. However, we strive to do more by developing more issues specific flyers that address concerns on major areas of Public Procurement such as the Margin of Preference and the Operations of the Appeal and Complaints Panel.
Public Procurement Bulletin: In our quest to fulfill our mandate as stipulated in Section 3 (g) of the Act, the PPA has successfully launched the maiden edition of the Procurement Bulletin and is busy with the printing of subsequent issues. This publication contains information germane to public procurement including proposed procurement notices, invitation to tender, expression of interest and contract awards. The intended purpose is to provide a one-stop information outlet to serve the stakeholders in both the public and private procurement system in the country.
CHALLENGES
The biggest challenge of the reforms taking place is that, the fiscal decentralization and deconcentration in the public sector have placed procurement responsibility on many public entities, many of whom were not prepared for this role. Various studies and reviews of the current state of the public procurement system have revealed the general lack of professional input in the public procurement and contracting process, which has led to various ad hoc arrangements including the use of ‘external’ expertise at various stages of the procurement process.
As happens in any change management initiative, the implementation of Act 663 and the execution of its mandate have faced a number challenges most of which can be termed as teething difficulties. For instance, the initial assessment of the 100 selected entities revealed that majority of practitioners involved in public procurement lacked the requisite professional expertise and knowledge of the law governing the practice. This, therefore, places them at a disadvantage in ensuring that the right practices prescribed by the law are adhered to.
WAY FORWARD
The way forward, Hon. Minister, is to integrate procurement reform into the broader workings of the public sector to ensure that changes within procurement systems are aligned and properly sequenced with changes occurring in other parts of the public sector. When improvement in procurement systems is approached in this manner, procurement reform will be transformed from a technical and procedural reform to an effort that is critical to the overall success of a major national reform process. Integration broadens participation in implementing change to a large number of constituents and enables success in one area to reinforce and catalyze success in other areas.
To ensure the attainment of value for money, the Authority in collaboration with the Ministry of Finance has proposed the introduction of Framework Contracts and Sustainable Public Procurement. These procurement concepts are part of the Authority’s strategic initiatives aimed at attaining a world class procurement system which guarantees sustainable nationwide development.
The Framework concept, Hon. Minister was captured in the 2008 Budget Statement and will hopefully be piloted by the end of the 1st quarter of next year. The concept essentially seeks to obtain the economies of bulk purchase.
BRIEF ON FRAMEWORK CONTRACTING
A framework agreement, also known as “blanket purchase agreement”, is an agreement that establishes the general terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged. It is usually between one or more buyers and one or more suppliers. It is used for filling anticipated repetitive needs for supplies, services, or works.
RATIONALE FOR FRAMEWORK AGREEMENTS/CONTRACTS
The following factors, among others, are basis for applying framework contracting:
• Framework contracting becomes the vehicle for rationalising a public procurement system that is characterised by fragmentation of purchase actions and help minimize administrative costs involved in ‘repeat’ orders.
• Some agencies of government, lacking the wherewithal to undertake procurement, can make use of the existing framework agreement if their requirements fall within the agreement.
• Where there is uncertainty about actual delivery schedules
• Where there is uncertainty about the actual usage (demand) of a product; there is the flexibility of increasing or decreasing quantities.
• The burden of stocking can be reduced as the suppliers may stock the bulk of such goods and therefore help the entities to avoid handling challenges, storage problems and other hidden costs
• In emergency situations an existing framework contract is a ready avenue for supplies
TYPES OF FRAMEWORK CONTRACTS
Framework contracts can be between one or more entities and one supplier, one entity and more than one supplier, or more than one entity and more than one supplier, over agreed periods. All the options can be applied within the public sector; economy is the major determining factor.
BRIEF, SIGNIFICANCE AND BENEFITS OF SPP
With the government being the largest single buyer in the country, it is evident that what and how government buys and acquires in terms of goods, services and works contribute significantly, both to its ability to deliver sustainable development and to its credibility with its development partners. PP carried out purely on the basis of upfront costs demonstrates unsustainable economy, since the cost of ownership will far outstrip the upfront cost.
Brundtland in his Report to the World Commission on Environment & Development defines Sustainable Development as the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Buyers have a lot of control over what is manufactured, and how it is manufactured. Each time a product is purchased, the buyer is effectively “electing” or “voting” for the company that has provided it. When products are purchased from companies that are ethically irresponsible, e.g. companies that exploit their workers, or companies that degrade the environment through their operations, then these companies engaged in such unsustainable practices are being encouraged to continue. The purchasing power should rather be used to support companies that produce sustainable products, e.g. recycled paper.
Government procurement therefore needs to consider sustainability issues as it is the only way it can be sure to offer real value for money over a longer term without compromising environmental and social responsibilities. This would ensure that development targets are achieved through the acquisition of goods, works and services without much damage to society and the environment.
With these considerations, SPP seeks long term impact on economic, social and environmental issues by helping to:
Achieve value for money;
Sustain economic development;
Improve ethical behaviour of suppliers/contractors especially, and the general public at large;
Reduce harmful emissions and waste generation;
Improve air and water quality;
Make local industries applying SPP internationally competitive;
Increase the wealth and health of the society (hence improve living standard);
Improve working conditions- health and safety , labour standard;
Reduce labour agitation;
Improve condition of disadvantaged groups in the country,
Help accelerate the achievement of the Millennium Development Goals and
Create a better society, among other things.
In accordance with the 3-year strategic plan of the PPA, a number of programmes and activities have been set out for 2007-2009. These include:
• Formulating and sensitising all stakeholders about the guidelines and policies for Public Procurement in the country.
• Mainstreaming issues of Public Procurement into Public Sector Financial Management in close collaboration with the Ministry of Finance and Economic Planning, Controller and Accountant General Department, the Internal Audit Agency and the Ghana Audit Service.
• Intensify Supervision, Monitoring and Evaluation of Public Procurement across the various entities using the PPME Tool to ensure compliance;
• Establish a vibrant and dynamic professional association to protect the interest as well as monitor the performance of its members.
• Institutionalise capacity building programmes in Public Entities to make them more efficient in Public Procurement and
• Establish a career path for procurement personnel in the public and civil service.
CONCLUSION
Hon. Minister, ladies and gentlemen I wish to conclude by saying that the influence of good procurement on effectiveness of public spending is seen by its impact on development of the private sector. A government’s procurement behaviour impacts directly on the private sector considering that the government is often the largest investor and purchaser of services, especially in developing nations. Thus, the way it manages its commercial relations with the business community has profound influence on whether acceptable business practices will evolve or not.
The PPA establishes the legal and institutional framework for ensuring transparency, probity and accountability in public construction procurement. The wider reform programme will guarantee the rule of law and the protection of private property rights. These reforms create an investor-friendly environment in a country where there is an acute shortage of infrastructure services.
We expect that you as the media will collaborate with us in disseminating information on public procurement in a judicious and responsible manner that will help in enhancing transparency and efficiency in Ghana’s procurement process. In view of that, I will recommend that you study the Public Procurement Act (663), visit our website, read our newsletters and Bulletins which will enrich your reportage on public procurement issues in the country.
Once again I wish to express PPA’s gratitude to the Ministry of Information and National Orientation for this opportunity to be part of this “Meet-the-Press Series”.
Thank you for your attention.