Transcript Public Procurement and Competition

Tshepo Sayed
Economist
PPADB
2016-04-05
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By the end of this presentation, you will be able
to:
◦ Explain the importance of public procurement
as a strategic value-adding activity
◦ Appreciated the objectives of the Act and its
application
◦ Understand competition and concerns in
Public Procurement
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Public procurement refers to acquisition of
goods, services and works by a public sector
entity to achieve certain identified objectives.
Acquisition by any means e.g. purchase, rental,
lease, hire-purchase, licences, tenancies,
franchises etc
It includes procurement planning, choice of
procedure, soliciting offers, evaluation of offers,
award of contract and contract management
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Public procurement has a direct impact on:
◦ the successful delivery of government projects
and public services
◦ sound public financial management aimed at
attaining value for money in government
expenditure
◦ reducing corruption
◦ encouraging private sector growth and
investment
◦ Citizen economic empowerment
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Public procurement is estimated to account, on
average, for 15% of Gross Domestic Product
(GDP) worldwide.
Effective public procurement can therefore have
a significant impact on:
◦ Sustainable development
◦ Good governance
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Social Impact
Economic Impact
Direct Procurement Impact
Procurement
Strengthening
▪ More competition
▪ More transparency
▪ Greater efficiency
▪ Less corruption
▪ More professional
procurement
▪ Greater respect for
public procurement
institutions
▪ Greater value for
money
▪ Budgetary savings
▪ More effective use
of external
assistance
▪ Better coordination of
external assistance
▪ Reduced debt
levels
▪ Stimulus for private
sector growth
▪ Improved prospects
of achieving MDGs
▪ Improved prospects
of achieving other
government
objectives
▪ Enhanced
reputation for
government
institutions
▪ Enhanced respect
for rule of law
▪ Increased access by
local market to
government
contracts
▪ Improved social
sector services
▪ Better
environmental
management
▪ Better conflict
prevention
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To establish the Public Procurement and Asset Disposal
Board and related committees:
• Ministerial Tender Committees
• District Administration Tender Committees
• Special Procurement and Asset Disposal Committee
• Independent Complaints Review Committee
• Special Procurement and Asset Disposal Committee
• Advisory Committees
To provide a legal framework for the:
◦ Procurement of works, services and supplies
◦ Disposal of public assets
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An open, competitive economy
Responding to external obligations relating to
trade and procurement
Standardisation for cost reduction, ease of
maintenance and technological effectiveness
Aggregation of common items to benefit
from economies of scale
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Efficient, competitive procurement to achieve
value for money
Fair and equitable treatment of contractors
Accountability and transparency
Integrity, fairness of and public confidence in the
process
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Open domestic bidding is the default method of
procurement
Deviation from the default method of procurement
requires authority from the Board or its
Committees
Advertising opportunities and awards
Generic specifications i.e. no brand names
Public bid openings
Evaluation criteria disclosed in advance
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Procurement Methods available:
◦ Open Bidding (domestic or international)
◦ Restricted Bidding (domestic or international)
◦ Quotations Proposals Procurement
◦ Micro Procurement
◦ Direct Procurement
All methods available for works, services
(including consultancy) and supplies
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Preferred method of procurement
Maximum competition - open to all (including
resident foreign) bidders subject to registration
requirements
Standard method for high value works, services
and supplies
Will always be used for contracts over P150,000
unless special circumstances apply
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May be used where:
◦ Works, services or supplies only available from
a limited number of providers
◦ Insufficient time for open bidding in an
emergency situation
◦ Other exceptional circumstances justify
departure from open bidding
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May be used where:
◦ Insufficient time for open or restricted bidding in an
emergency situation
◦ Estimated value is less than P100,000
◦ Other exceptional circumstances justify departure
from open or restricted bidding
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For new contracts, may be used where:
◦ Insufficient time for any other method in an
emergency situation
◦ Works, services or supplies only available from
one provider
◦ It is justified in the circumstances
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For contract extensions, may be used for:
◦ Extension for additional, similar items – no
advantage from further competition
◦ Additional items compatible with existing
purchases – purchase from the same provider
is advantageous or necessary
◦ Continuity from same provider – for continued
liability or technical approach
Subject to reasonable prices and value being
less than the original contract
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Micro Procurement
Under P30,000
Quotations Proposals
Procurement
Under P150,000
Open Bidding
Over P150,000
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Competition concerns arising from public
procurement are largely the same as in any
ordinary market such as collusive agreements
between bidders, abuse of dominance, and
creation of entry barriers.
Competition concerns in public procurement can
be seen from the two perspectives:
a) supplier's side and
b) procurer's side.
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Collusive bidding or bid rigging is a kind of fraud,
where bidders agree to eliminate competition
and fix prices in the procurement process.
It is facilitated by faulty bidding procedures and
tender designs.
In addition, inefficient procurement has
detrimental impact on the quality of key public
infrastructure and services and hurt the interests
of the poor largely relying on public provision.
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Often, the number of suppliers may be limited by
the public authority by its own rules, which may
create entry barriers, limit its choice and bring in
anti-competitive impact.
Some examples are restrictive prequalification
criteria, complex process of registration of
suppliers, limited approved vendors, excessively
tedious process for participation and not laying
technical specification in generic terms.
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Level playing field between public entities and
private players may sometimes be lacking in
public procurement markets, which may tend to
be distorted due to preference policy for public
suppliers in the procurement.
Similarly, policy to protect small and medium
enterprises and giving them preference in public
procurement may create entry barriers for other
suppliers.
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In view of the high public expenditure on
procurement, achievement of a meagre 5 per
cent decline in procurement prices by infusing
competition in public procurement has the
potential of significant savings of public
resources.
This would help in avoiding wastage of public
money and curbing fiscal deficit.
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Ensuring effective functioning of public
procurement markets is, therefore, part of good
governance and requires the promotion of
effective competition among suppliers, including
preventing collusion among potential bidders.
The tender process needs to be designed to
maximise the potential participation of genuinely
competing bidders
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Risk of collusion can be reduced when procurement
agency designs tenders with two objectives:
a) reducing barriers to entry and increasing bidders'
participation;
b) reducing frequency of procurement opportunities.
Procurement officials have a very important role to play
both in designing tender documents to allow competition
by removing entry barriers as well as in the detection of
bid rigging, being best placed to monitor bidding
behaviour
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Declaration of shareholding and Directorship by
bidders to avoid multiple bidding
Reviewing mandatory compliance requirements to
avoid unnecessary barriers to competition
Vetting tender documents to guard against locking
out capable bidders
Referring suspicious transactions to competent
bodies for investigation
Suspending and delisting bidders who engage in
anti-competitive behaviours
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CA is responsible for the prevention of, and redress for
anti-competitive practices in the economy and the
removal of constraints on the free play of competition in
the market
PPADB is responsible for ensuring that all public entities
take into account principles of an open and competitive
economy in making their procurement decisions
MOU has been signed between PPADB, DCEC and the
CA to join forces in combating anti-competitive practices
in the procurement process
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The primary objective of an effective procurement policy
is the promotion of efficiency, i.e. The selection of the
supplier with the lowest price or, more generally, the
achievement of value for money.
It is therefore important that the procurement process is
not affected by practices such as collusion, bid rigging,
fraud and corruption as they have a direct and
immediate impact on public expenditures and therefore
on taxpayers resources
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