Transcript 4th East African Public Procurement Forum: Improving the

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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
PRIVATE SECTOR VIEWS ON PUBLIC
PROCUREMENT PRACTICES
Eng. Pascal Ncheye
Chairperson – Tanzania Civil Engineering Contractors Association
(TACECA)
7/16/2015
1. Introduction
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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 industry’s 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
• > 70% of the government dev budget is incurred by constr.
• Annual turnover is about $ 1,800 – 2,000 million
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1. Introduction
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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.
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2. Policy, Legal and Regulatory Framework
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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
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2. Policy, Legal and Regulatory Framework
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2.1.1 Policy interventions: Let us pick CIP, 2003 to elucidate the realization of
Vision 2025 via the construction sector
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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
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The government shall ensure both local and donor procurement policies
provide a comprehensive framework for fostering the local construction
industry in Tanzania
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2. Policy, Legal and Regulatory Framework
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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.
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2. Policy, Legal and Regulatory Framework
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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
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2. Policy, Legal and Regulatory Framework
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2.2 Legal and Regulatory Framewok
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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.
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2. Policy, Legal and Regulatory Framework
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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.
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3. CHALLENGES AND PROSPECTS
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
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.
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3. CHALLENGES AND PROSPECTS
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3.1 Bussiness Environment
3.1.1 Globalization
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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.
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3. CHALLENGES AND PROSPECTS
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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.
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3. CHALLENGES AND PROSPECTS
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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.
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3. CHALLENGES AND PROSPECTS
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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.
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3. CHALLENGES AND PROSPECTS
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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.
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3. CHALLENGES AND PROSPECTS
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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
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3. CHALLENGES AND PROSPECTS
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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.
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4. CONCLUSIONS AND RECOMMENDATIONS
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4.1 Conclusions
 It is evident that the construction contracting sector potentially contributes
to the country’s 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 nation’s 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.
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4. CONCLUSIONS AND RECOMMENDATIONS
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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
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construction contracting sector
4. CONCLUSIONS AND RECOMMENDATIONS
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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 nation’s economic growth
thereof. The paper recommends the following strategies:
Enhancement of Local Capacities
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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.
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4. CONCLUSIONS AND RECOMMENDATIONS
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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.
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4. CONCLUSIONS AND RECOMMENDATIONS
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Alleviation of Corruption
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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.
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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
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
7/16/2015