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04/01/2012

Research Proposal - The challenges of procurement in third world countries: A case study of Uganda


The challenges of procurement in third world countries: A case study of Uganda

 

 

Aims and Objectives

           

Research aim

Uganda’s economic stability is largely determined by the procurement system its economy had adapted. Therefore, it is imperative to understand that for a third world country like Uganda, the procurement system needs much as attention and effort for it to work progressively, thus a need for better organizational structure, management and legal framework.

The question on hand is, “What were the progressive changes in the procurement system in Uganda since the recommendation were given by the CPAR on February 1999?” Simply asked, is the present framework or system coping well with the pressures and issues in Uganda? Did the changes help in curbing the issues and problems that the procurement system posed?

 

Research objective

The researcher hypothesizes that the fundamental problem in the procurement system is that there is a need for better structural organization, which is necessary for effective management. Once this is fixed, it is consequential that the other issues, which should be considered minor and merely offshoots of the main problem will be dealt with properly during the implementation process.

Specifically, this case study aims to address the following questions:

1.    Is the procurement system of Uganda still suffering from corruption?

 

2.    Was the recommended framework implemented fully? If yes, did it help improve the quality of service?

 

3.    Is the legal framework of the procurement system updated and revised to further improve the system?

 

4.    Have the present procurement policies been revised so as to address the flaws regarding fair and just treatment especially in contracts?

 

5.    Is the present framework stable and consistent in the implementation of policies and regulations?

 

6.    Is there adequate training and career advancement regarding procurement both in the of private and public sector?

 

7.    Is the private sector given opportunities to express their opinions and suggestions for the system’s improvement?

 

This study shall only deal and discuss the problems in the context of management theory and its practices; thus, some issues that may delineate from this scope may be only discussed partially.

Rationale and Contribution

           

Description of Topic

 

Procurement is the process of getting possession or obtaining by particular care and effort. The professional practice of materials and service procurement had been vital to the economy of several third world countries, which are underdeveloped and/or lacking in domestic resources.

Uganda, one of the third world countries involved in active procurement activities, commenced reforms as early as 1997. This was done at the request of the Ministry of Finance, Planning and Economic Development (MOFPED) in Entebbe. The government then created a twelve-man Task Force on Public Procurement Reforms on May 1998, whose report was submitted on May 1999, exposing the deeply-ingrained malpractice and corruption in the procurement system.

The said report suggested several measures to improve the flawed system, which was mostly concentrated with reorganizing the framework so as to enhance quality of service as well as to lessen the chances of corruption.

 

Rationale for choice of Topic

 

Uganda, like other Third-World countries, has its financial budget funded by donor funds to which the biggest percentage (80%) of the funds is spent on procurement during the implementation of the country’s various developmental projects.

The recognition of procurement as a critically important area in both public and private sectors has focused the attention on its effectiveness. In a growing number of companies, cost effective procurement has become a matter of survival as purchased goods and services can account for up to 80 per cent of product cost. Similarly in the public sector, there is an ever-increasing demand for effectiveness and efficiency in the procurement process.

Continually escalating competition, leading to accelerating consolidation and globalization of supply chains, makes it essential that the professional discipline of procurement continue to develop and to enhance its effectiveness and perceived status. Leading companies world-wide have recognized for some time that the issues of sourcing, purchasing, logistics and quality management are major contributors to success in the preparation and implementation of integrated corporate or organizational strategies, and it is on this background that this study is intended to be carried on in this field.

 

Outline of key literature (Primary and Secondary literature)

 

The Uganda economy has performed extremely well, albeit having started from a very low base. It also relies heavily upon agriculture and the majority of the population is subsistence farmers. On the down side, it has poor infrastructure (eg roads) and poor power supply. (Udsholt, 1995) British exports to Uganda include telecommunications equipment, vehicles, spare parts, industrial and agricultural machinery, power generation equipment, industrial chemicals, construction materials, hand tools and pharmaceuticals. Uganda is a small market but the UK is still one of the leading exporters and major investors in the country, with about US$ 500million of UK investment since 1996. (Brett, 1996) British companies have been active in all sectors from agriculture and engineering to banking and consultancy. There has however been a slowdown in investment from the UK as South Africa and Far East countries overtake the UK in terms of investment. Disposable income is still very low. UK companies still feel the market is small with widespread poverty. However there is hope as the economy improves each year and the security situation with the neighboring countries improves. People are keen to but UK products because of quality but because of the strong pound, UK products are not competitive in terms of price as compared to goods from the Far East and South Africa. Uganda has an abundant natural resource base for investors in agriculture and agri-processing industries. There is a favorable climate and good soil in most part of the country. There is an abundant skilled and unskilled labor (English speaking) for cheap production. Trade Partners UK has identified the horticulture and pharmaceutical sectors as showing the best opportunities for UK companies.

According to the CPAR, Nigeria, an Anglophone-African country like Uganda, had five major weaknesses in its existing procurement system.

The first identified problem was the lack of a modern law on public procurement and an oversight entity for guidance and monitoring purchasing bodies. Second, deficiency and faulty implementation of existing procurement regulations created opportunities for bribery and corruption. Third, the authorization of the Tender Boards, due to inflation and the lack of regular adjustments on the thresholds of the approving limits, were being eroded which resulted to abuses, the most common of which is the splitting of contracts. Fourth, there were too many tender boards, which the private sector considered as merely a source of delay and non-transparency, and they seemed to have only limited mandates with power to decide contracts de facto resting with the Permanent Secretary and the Minister/Commissioner. Last, the Customs system and procedures were burdensome and often a major cause of unwarranted delays in clearing the goods, and is often a source of corruption; also, staff who are essentially lacking in proper training often does procurement.

The reforms in Uganda, commenced in 1997, as a process and a key milestone, or the first key event was the National Public Procurement Forum held at the behest of the Ministry of Finance, Planning and Economic Development (MOFPED) in Entebbe. The co-chairmen of the Forum were the Heads of the Central Tender Board (CTB) and the Government Central Purchasing Corporation (GCPC) and representatives of ministries, parastatals and district tender boards participated. No industry representatives or the private sector were involved. UNCTAD/WTO International Trade Centre (ITC) backstopped the Entebbe Workshop with technical advise and financial assistance from the Swiss Government. The World Bank was also in attendance at the Forum, where it indicated its intention to conduct a Country Procurement Assessment Review (CPAR) in 1998. 

There were two sources of pressure on the Government to review the performance of the public procurement system and to generate a restructuring plan. (Udsholt, 1995) One was the realization by the Government itself, that the old system could not deal satisfactorily with the emerging demands on the system in terms of transaction numbers, expanding value of procurement budgets, scale and technical complexity of procurement activities. These demands were being made against a backdrop of a lack of bureaucratic accountability and transparency and the absence of a culture of value for money procurement. (Brett, 1996) Against this weak background, donors began to exert pressure on the Government to put in place the appropriate remedies.

The government found out that the private sector participation in public procurement, particularly goods and services, is very minimal.  Local traders, suppliers, consultants, contractors, architects and engineers have not built enough capacity to participate in tenders advertised internationally and locally particularly when the values are large.  Local suppliers and contractors often do not have the capacity to raise credit, bid bonds and securities from local banks and insurance companies, in part due to the high rates of interest charged. 

Moreover, suppliers who would like to participate in public procurement find the procurement procedures irrational and cumbersome.  (Udsholt, 1995) They are sometimes excluded when the procurement is too big and they are apprehensive of unfamiliar procedures. They are not well informed of how the procurement process functions, which renders the process open to abuse.  The private sector does not believe the public procurement process can move without a push. The private sector, however, would embrace clear, easy-to-follow guidelines if this minimizes costs and facilitates business. (Brett, 1996)

Concurrently, there are indications that over and under-invoicing in imports and local procurement is common practices.  This is attributed to mainly inside dealings.  However, long time lags and delays on the part of government to pay suppliers are some of the causes for over-invoicing.  Under invoicing is due to uncertainties relating to supplier’s chances of winning a tender bid. Moreover, there also is evidence of malpractice that affects public sector procurement; e.g. vehicle repair documents are often not used. Sometimes invoices, receipts and other documents are faked.  In other instances of government procurement, documents are “chased” by suppliers pushing them through the process in person.  The assumption is that “chasing” will not be successful without bribes, commonly known as the “kitu kidogo” or “speed money”.

In terms of the financial sector, the government found out that most banks in the country have international connections. (Brett, 1996)  They are able to issue letters of credit, bid bonds and other guarantees for compliance with tenders. The credit worthiness of the banks is guaranteed in that the Bank of Uganda supervises and ensures that only credit worthy and professionally managed banks are licensed to operate in the country. High interest rates (e.g. 18% – 25%) appear to be a hindrance for national suppliers to access credit. Similarly, some national bidders find the 10% requirement for bid bond too high, and they end up not participating in tenders advertised locally. (Meagher, 1990)

The recommendations given by the CPAR stated that (1) there is a need for a procurement law based on the United Nations Commission for International Trade Law (UNCITRAL) model; (2) there is a need to establish a Public Procurement Commission (PPC) to serve as its regulatory and oversight entity on public sector procurements; (3) the Financial Regulations should be revised so as to make it more transparent; (4) the Tender Boards should be simplified and strengthen their functional authority and powers in awarding contracts; (5) there is a serious need to restructure the procurement and financial management capacity in the public sector; and (6) there should be a comprehensive review of the businesses related to export, import and transit regulations, procedures and practices.

Nigeria is suffering the almost the same plight as Uganda, though one should understand that not all solutions are applicable to similar problems from different localities. While basically they both face corruption, a weak procurement law, and substandard service quality due to lack of proper training and skills development, several aspects differ like in the case of tender boards, stability and consistency of the policies itself during implementation, and the proposed privatization of the procurement system from the government so as to be freed from political interference and corruption.

 

Contribution of the research to development of management theory and practice

 

The necessity of this case study is not only confined to its applicability to the present challenges that Uganda is facing in its procurement system, but to other countries as well who share the same experiences and problems in procurement. Most importantly, this study will be focusing on the importance of organizational soundness, correct and systematic procedures in procurement, and the indispensability of cooperation and coordination in both the public and private sectors in achieving their goals.

The application of management theories and practices to the present challenges in the procurement system in Uganda makes this study therefore essential in further developing and understanding the value of effective management and organizational framework.

 

Methodology

     

Research methodology and techniques for data collection

The descriptive research method uses observation and surveys. In this method, it is possible that the study would be cheap and quick. It could also suggest unanticipated hypotheses. Nonetheless, it would be very hard to rule out alternative explanations and especially infer causations. Thus, this study will use the descriptive approach.  This descriptive type of research will utilize observations in the study.  To illustrate the descriptive type of research, Creswell (1994) will guide the researcher when he stated: Descriptive method of research is to gather information about the present existing condition.  The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study.

 

Proposed subject population and sample

The general population for this study will be composed of selected personnel in both the public and private sector numbering one hundred fifty (150) respondents. Moreover, the researcher shall also provide interviews for managers whose function is directly related to procurement of their respective institutions.

 

Data analysis techniques

For validation purposes, the researcher will initially submit a sample of the set of survey questionnaires and after approval; the survey will be conducted to five respondents.  After the questions were answered, the researcher will ask the respondents for any suggestions or any necessary corrections to ensure further improvement and validity of the instrument.  The researcher will again examine the content of the interview questions to find out the reliability of the instrument.  The researchers will exclude irrelevant questions and will change words that would be deemed difficult by the respondents, to much simpler terms.

 

When all the survey questionnaire will have been collected, the researcher will use statistics to analyse all the data.

The statistical formulae to be used in the survey questionnaire will be the following:

 

1.     Percentage – to determine the magnitude of the responses to the questionnaire.

            n

% = -------- x 100        ;           n – number of responses

            N                                 N – total number of respondents

 

 

 

 

 

 

 

2.     Weighted Mean

 

            f1x1 + f2x2  + f3x3 + f4x4  + f5x5

x = ---------------------------------------------  ;

                        xt

 

where:            f – weight given to each response

                        x – number of responses

            xt – total number of responses

 

The researcher will be assisted by the SPSS in coming up with the statistical analysis for this study.

 

 

 

Resources, confidentiality and other considerations

The research described in this document is based fundamentally on qualitative research methods. This permits a flexible and iterative approach. During data gathering the choice and design of methods are constantly modified, based on ongoing analysis. This allows investigation of important new issues and questions as they arise, and allows the investigators to drop unproductive areas of research from the original research plan.

The primary source of data will come from a questionnaire and interviews conducted by the researcher.

The secondary sources of data will come from published articles from social science journals, theses and related studies on third world countries and their methods of procurement.

For this research design, the researcher will gather data, collate published studies from different local and foreign universities and articles from social science journals; and make a content analysis of the collected documentary and verbal material.  Afterwards, the researcher will summarize all the information, make a conclusion based on the null hypotheses posited and provide insightful recommendations on the dealing with organizational management.

 

 

 

 

Project time plan

The project shall last for more or less five months. The first two months shall comprise the gathering of secondary data. These shall be obtained through libraries and other online articles. The succeeding month shall be consumed for the collection of primary data. Questionnaires and interviews shall be conducted with the use of a researcher-made questionnaire and interview questions. The information obtained from these tools shall be statistically treated to coherently answer the study’s hypothesis and problem statements. The remaining months shall be dedicated to the writing of the final draft of the study.

 

References

Creswell, J.W. (1994) Research design. Qualitative and quantitative approaches. Thousand Oaks, California: Sage.

 

E. A. Brett, "Uganda," in P. Engbert Pedersen, et al., eds., Limits of Adjustment in Africa: The Effects of Economic Liberalization, 1986-94 (Oxford: Currey, 1996).

 

Holger Bernt Hansen, Michael Twaddle, Changing Uganda: The Dilemmas of Structural Adjustment & Revolutionary Change, James Currey, London 1991

 

K. Meagher, "The Hidden Economy: Informal and Parallel Trade in Northwestern Uganda," Review of African Political Economy, 47 (1990).

 

L. Udsholt, (1995) The Worm Bank and Poverty Reduction in Uganda. Copenhagen: Centre for Development Research, 1995. p. 6.

 

Merriam-Webster Dictionary, http://www.m-w.com/cgi-bin/dictionary

 

Public Procurement Reforms: Issues and Challenges: The Case of Uganda, Government Procurement Workshop, World Trade Organization, Dar Es Salaam, Tanzania, January 2003, http://www.wto.org accessed: 05/27/2003

 

S.A. Ekpenkhio, Public Procurement Reforms: The Nigerian Experience, Regional Workshop on Procurement Reforms and Transparency in Government Procurement for Anglophone African Countries, Tanzania, January 2003

 

Uganda Local Government Development Program, Institute of Public Admistration, http://www.theipa.org/ accessed: 06/03/2003

 

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