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AN ASSESSMENT OF PUBLIC PROCUREMENT ACT 2004 ON EMPOWERING DOMESTIC FIRMS IN TANZANIA: A CASE OF SELECTED INSTITUTIONS IN DAR ES SALAAM
i
AN ASSESSMENT OF PUBLIC PROCUREMENT ACT 2004 ON
EMPOWERING DOMESTIC FIRMS IN TANZANIA: A CASE OF
SELECTED INSTITUTIONS IN DAR ES SALAAM
AN ASSESSMENT OF PUBLIC PROCUREMENT ACT 2004 ON
EMPOWERING DOMESTIC FIRMS IN TANZANIA: A CASE OF
SELECTED INSTITUTIONS IN DAR ES SALAAM
By
Freddy Mbeyella
A Dissertation Submitted in Partial/ Fulfillment of the Requirements for Awardof the Degree of Masters of Science in Procurement (MSc PSCM) of Mzumbe
University
2013
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CERTIFICATION
We, the undersigned, certify that we have read and hereby recommend for
acceptance by the Mzumbe University, a dissertation entitled An Assessment of
Public Procurement Act 2004 on Empowering Domestic Firms in Tanzania: A
Case of Selected Institutions in Dar es Salaam, in partial /fulfillment of the
requirements for award of the degree of Masters of Science in Procurement and
Supply Chain Management of Mzumbe University.
Signature
_______________________________
Major Supervisor
Signature
________________________________
Internal Examiner
Accepted for the Board of
_______________________________
Signature
_____________________________________
DEAN/DIRECTOR, DAR ES SALAAM BUSINESS SCHOOL
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DECLARATION
AND
COPYRIGHT
I, Freddy Mbeyella, declare that this dissertation is my own original work that is not
been presented and will not be presented to any other university for similar or any
other degree award.
Signature……………………………
Date…………………………………
©
This dissertation is a copyright material protected under the Berne Convention, the
Copyright Act 1999 and other international and national enactments, in that behalf,
on intellectual property. It may not be reproduced by any means in full or in part
except for short extracts in fair dealings for research or private study critical
scholarly review or discourse with acknowledgment, without the written permission
of Mzumbe University, on behalf of the author.
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ACKNOWLEDGEMENTS
The success of this project would not be possible without support of other people.
The list is of those who provided assistance is long to mention all. Nevertheless I
wish express my sincerer appreciation to the following:
Madam Norah Msuya, for her guidance, support, and effective supervision
To all respondents who spared their valued time to respond to my questionnaires.
To my family for encouraging me to continue with the project
Lastly, but not the least to Mrs. Eva Shumbusho, who assisted me in formatting and
making this document presentable.
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DEDICATION
This work is dedicated to my wife Alice Mbeyella, my children Jacqueline, Joan,
Joseph and Ng’wangula Mbeyella.
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ABBREVIATIONS AND ACRONYMS
APP Annual Procurement Plan
CPI Corruption Perception Index
CPOs Chief Procurement Officers
GDP Gross Domestic Product
GN Government Notice
GPA Government Procurement Agreement
GPL Government Procurement Law
LGAs Local Government Authorities
MoEVT Ministry of Education and Vocational Training
OECD Organization for Economic Cooperation and Development
PE Procuring Entity
PEs Procuring Entities
PMU Procurement Management Unit
PPA Public Procurement Act
PPRA Public Procurement Regulatory Authority
PRC People of Republic of China
RSA Republic of South Africa
R. Regulation
S Section
SME Small Medium Enterprises
UNCITRAL United Nations Commission on International Trade Law
USA United States of America
WB World Bank
WTO World Trade Organization
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ABSTRACT
The objective of the dissertation is to assess the Public Procurement Act 2004 in
empowering domestic firms in Tanzania. The study was set out specifically to
examine the awareness of procurement professionals and supply side; procedure for
procurement and factors specified in the Act for encouraging participation of
domestic firms in public procurement market.
The research methodology that was adopted is this study is case study design. The
choice of this methodology was influenced by the nature of the study and timeframe
to undertake the project. The study was conducted in selected institutions in Dar es
Salaam region where large volume of procurement activities takes place and
accessibility of respondents. Data from population of 40 respondents comprising of
procurement professionals, engineers, consultants and contractors was collected
through questionnaire, analyzed and presented statistically and graphically.
Based on the findings from the study it is concluded that procurement professionals
are aware of provisions for empowering domestic firms though, are less conversant
on implementation or compliance with the Act; conversely awareness on supply side
is limited; procedures for tendering, selecting and awarding tender are clear and
conducive for encouraging domestic enterprises; margin of preference, bid securing
declaration; packaging (splitting) of contracts are significant measures for
empowering domestics firms while tendering document in Kiswahili is insignificant
factor for fostering participation of local suppliers in public procurement market.
The outcome of the study calls for institutions responsible for overseeing
procurement system in Tanzania, to take concerted efforts to enhance capacity to
procurement professionals. Awareness campaign coupled with training in public
procurement to supply side is required to stimulate the participation of domestic
enterprises in public procurement. Lastly, enforcement of law on empowering
domestic firms through PPA 2004 should be in place.
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TABLE OF CONTENTS
PageCERTIFICATION ...................................................................................................... iDECLARATION AND COPYRIGHT .................................................................... iiACKNOWLEDGEMENTS......................................................................................iiiDEDICATION........................................................................................................... ivABBREVIATIONS AND ACRONYMS.................................................................. vABSTRACT............................................................................................................... viTABLE OF CONTENTS.........................................................................................viiLIST OF TABLES ..................................................................................................... xLIST OF FIGURES .................................................................................................. xiLIST OF APPENDICES .......................................................................................... xi
CHAPTER ONE ........................................................................................................ 1INTRODUCTION...................................................................................................... 11.0 Overview................................................................................................................ 11.1 Background of the study ........................................................................................ 11.2 Statement of problem ............................................................................................. 21.3 Objective of study .................................................................................................. 31.3.1 Specific objective ................................................................................................ 31.4 Research question................................................................................................... 31.4.1 The Main question............................................................................................... 31.4.2 Specific questions................................................................................................ 41.5 Significance of study.............................................................................................. 41.6 Scope of study........................................................................................................ 41.7 Organization of study............................................................................................. 41.8 Limitation of study................................................................................................. 5
CHAPTER TWO ....................................................................................................... 6LITERATURE REVIEW.......................................................................................... 62.0 Overview.............................................................................................................. 62.1 Description of Terms............................................................................................ 62.2 Theories and concepts of public procurement: ..................................................... 72.2. 1 Overview of public procurement ....................................................................... 82.2.2 Development of public procurement in Tanzania:............................................. 92.2.3 Principles of public procurement ..................................................................... 102.2.3.1 Economy and efficiency................................................................................. 11
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2.2.3.2 Fair and open competition.............................................................................. 122.2.3.3 Equality of participation................................................................................. 132.2.3.4 Probity and Ethics .......................................................................................... 142.2.3.5 Transparency.................................................................................................. 152.2.3.6 Equity ............................................................................................................. 172.2.3.7 Value for Money ............................................................................................ 172.2.4 Procedures and methods of procurement ....................................................... 172.2.4.1 Procurement cycle.......................................................................................... 172.2.4.2 Methods of procurement ................................................................................ 202.2.5 Domestic firms ................................................................................................ 222.2.6 Factors empowering domestic firms through public procurement .................. 232.2.6.1 Margin and exclusive of preference............................................................... 232.2.6.2 Bid securing declaration................................................................................ 272.2.6.3 Packaging (splitting) of contract ................................................................... 282.2.6.4 Tendering document in Kiswahili ................................................................. 292.3 Empirical part..................................................................................................... 302.4 Conceptual framework and research model ....................................................... 332.4.1 Description of the model/conceptual framework.............................................. 342.4.2 Underlying assumptions.................................................................................... 342.4.3 Description of variables ................................................................................... 342.4.4 Relationship between variables........................................................................ 35
CHAPTER THREE ................................................................................................. 36RESEARCH METHODOLOGY ........................................................................... 363.0 Overview............................................................................................................ 363.1 Research design.................................................................................................. 363.2 Study area........................................................................................................... 363.3 Study population ................................................................................................ 383.4 Sample size and sampling techniques ................................................................ 383.5 Variables and Measurement ............................................................................... 383.6 Types and source of data.................................................................................... 393.6.1 Secondary data .................................................................................................. 393.6.2 Primary data ...................................................................................................... 403.7 Quality of data................................................................................................... 403.7.1 Reliability.......................................................................................................... 403.7.2 Validity.............................................................................................................. 403.8 Data analysis methods........................................................................................ 41
CHAPTER FOUR .................................................................................................... 42PRESENTATION OF FINDINGS, ANALYSIS AND DISCUSSIONS ............. 424.1 Introduction ........................................................................................................ 42
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4.2 Description of respondents................................................................................. 424.2.1 Response rate .................................................................................................... 434.2.2 Gender distribution............................................................................................ 434.2.3 Work experience ............................................................................................... 444.2.4 Education background...................................................................................... 454.3 Awareness of provisions of PPA 2004 empowering domestic firms................. 464.4 Procedures for public procurement .................................................................... 494.5 Factors empowering of domestic firms through PPA 2004 ............................... 524.5.1 Margin of preference......................................................................................... 52
4.5.2 Bid securing declaration.................................................................................... 584.5.3 Packaging (splitting) of contract ....................................................................... 624.5.4 Solicitation documents in Kiswahili ................................................................. 654.6 Conclusion ........................................................................................................ 68
CHAPTER FIVE...................................................................................................... 69SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS. 695.0 Introduction ........................................................................................................ 695.1 Summary of Findings......................................................................................... 695.2 Conclusion ......................................................................................................... 715.3 Recommendations .............................................................................................. 715.4 Areas for Further Studies ................................................................................... 73REFERENCES ......................................................................................................... 73APPENDICES .......................................................................................................... 78
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LIST OF TABLES
Table 3.1: Variables and measurement ...................................................................... 39
Table 4.1: Number of years in service ...................................................................... 45
Table 4.2: Awareness on provisions of PPA 2004 empowering domestic firms...... 46
Table 4.4: The response on procurement procedures................................................. 50
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LIST OF FIGURES
Figure 2.1: Procurement Cycle .................................................................................. 19Figure 2:2 Conceptual Framework Model ................................................................. 33Figure 3.1: Map of Dar es Salaam Region................................................................. 37Figure 4.1: Response rate........................................................................................... 43Figure 4.2: Distribution of respondents according to gender..................................... 44Figure 4.3: Qualifications of respondents .................................................................. 45Figure 4.4: Knowledge of provisions empowering domestic firms’- supply side ..... 47Figure 4.5: Application of provisions of PPA 2004 empowering domestic firms...... 48Figure 4.6: Knowledge of margin of preference........................................................ 53Figure 4.7: Application of margin of preference ....................................................... 54Figure 4.8: Ranking margin of preference ................................................................. 56Figure 4.9: Impact of margin of preference ............................................................... 57Figure 4.10: Ranking of bid securing declaration...................................................... 58Figure 4.11: Application of bid securing declaration................................................. 61Figure 4.12: Reasons for applying bid securing declaration...................................... 61Figure 4.13: Reasons for packaging (splitting) of contract........................................ 63Figure 4.14: Ranking packaging (splitting) of contract ............................................. 64Figure 4.15: Awareness on tender documents in Kiswahili....................................... 65Figure 4.16: Ranking of tender documents in Kiswahili ........................................... 67
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LIST OF APPENDICES
Appendix 1: Methods for Implementing Preferential Procurement Policies ........... 78
Appendix 2: Research Questionaire........................................................................... 80
Appendix 3: The List of Ministries, Public and Private Institutions ......................... 86
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CHAPTER ONE
INTRODUCTION
1.0 Overview
This chapter presents general introduction of study entitled An Assessment of Public
Procurement Act on Empowering Domestic Firms in Tanzania (A Case of Selected
Institutions in Dar es Salaam). The chapter presents background of the study,
statement of problem, objective of study, specific objectives, main research question,
and specific questions, significance of study, scope of study and organization of
study.
1.1 Background of the study
Public procurement refers to acquisition of goods, works, and services using public
funds. Arrowsmith(2010) It is one of the Government activities which have
significant impact economically, socially and political in the country. In provision of
services, governments spent huge sum of money in acquisition of materials and
services. It is estimated that 7-13% of world Gross Domestic Product (GDP) and
30% of world merchandise trade could be available in the public procurement. Most
industrialized countries spend at least 10% of their GDP on public procurement
Trionfetti, (2003). The source of supply of goods/works and services mainly is from
local and foreign private enterprises.
Due to its complexity and importance public procurement is required to be transacted
with economy, accountability, non-discrimination among potential suppliers and
respect for international obligations. To ensure the aforesaid factors are attained,
public funds are effectively and efficiently utilized; public procurement is governed
by rules and principles which are similar across the world. Amongst the principles is
encouragement of domestic firms in participation of public procurement market.
Strengthening of domestic firms through public procurement is requisite as major
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contracts in government procurement universally are awarded to large firms mainly
owned by foreigners and the indigenous firms especially SMEs are marginalized.
1.2 Statement of problem.
The Government established the PPA 2004 to regulate procurement systems and to
empower domestic firms in Tanzania. The Act has provisions which are intended to
encourage participation of local firms in procurement market. Section 49 and 50 of
the Act provides margin of preference and exclusive preference for benefit of local
bidders for certain goods manufactured, mined, extracted, grown in the United
Republic of Tanzania. Section 45 of the same Act allows procuring entities to split
contracts into small lots to enable local bidders with limited resources to participate
in tendering. Section 89 of PPA 2004 grants permission to procuring entities to use
bid securing declaration instead of bid security which have financial implication to
bidders to easy burden to local firms in tendering. Also, the Act through S. 50
permits procuring entities to use Kiswahili bidding document in national competitive
tendering for purpose of removing communication barrier to national firms who are
not conversant with English language. `
Despite the PPA 2004 prescribing measures to stimulate participation of domestic
suppliers, contractors and consultants in procurement through the aforementioned
provisions; large volume of contacts in public procurement are granted to foreign
suppliers or contractors and national firms are sidelined. The Guardian Newspaper of
5th October, 2012 reported that Tanzania has 11,264 registered engineers in various
classes, but 60% of contracts related construction was awarded to foreigners leaving
only 40% for local firms. On top that according to Kiplyango (2012) the monetary
value of contracts that were given to local firms as compared to foreign firms were
also marginal. The studies that have been conducted on the impact of preferential
scheme in public procurement show varied of outcomes. Some argue that the PPA
2004 have contributed very little in promoting domestic firms while, Mbishi (2008)
and others perceive that the problem is not with the law in public procurement, but
lack of knowledge on the part of procurement practitioners. Mbishi (2008) supports
his argument by showing result of Country Procurement Assessment Report (2007)
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which revealed that out of 388 sample cases assessed only 3% of tender documents
had a clause on margin of preference.
From the studies it was not clear what limited domestic firms in winning large
contracts in public procurement. It was from that gap a study was conducted to
evaluate whether the PPA 2004 has encouraged the participation of domestic firms in
public procurement market.
1.3 Objective of study
The main of objective of the study was to assess the effectiveness of the Public
Procurement Act 2004 in empowering domestic firms and recommend measures to
enhance its applicability.
1.3.1 Specific objective
(i) To assess the extent to which knowledge of procurement practitioners
on provisions of the PPA, 2004 affects the empowering of domestic
firms.
(ii) To assess the effect of procedures stipulated in the PPA, 2004 on
participation of domestic firms in public procurement market.
(iii) To evaluate whether the preferential regulations specified in PPA
2004 are effective in empowering domestic firms.
1.4 Research questions
The research questions which were answered by this study were divided into two
sections: main and specific questions. All questions were based on the research
objectives.
1.4.1 The Main question
The main question was to assess whether the PPA 2004 was effective in empowering
domestic firms.
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1.4.2 Specific questions
(i) To what extent the knowledge of procurement practitioners on preference
factors specified in the PPA 2004 affects the empowering domestic firms?
(ii) Has the procurement procedures of the PPA, 2004 restricted the participation
of domestic firms in public procurement market?
(iii)Are the preferential regulations stated in the PPA 2004 effective in
empowering domestic firms?
1.5 Significance of study
The study aimed at shedding light to policy makers, practitioners, contractors,
suppliers, consultants who are actively involved in public procurement and
development of domestic firms. The study was geared to add knowledge on the
existing literature and stimulate further studies in public procurement.
1.6 Scope of study
The study was conducted in Dar as Salaam region where major public procurement
activities takes place. The choice of this region was influenced by availability of data
related to the study. The survey focused on procurement specialists, engineers’
contractors and consultant who are in one way or another involved in public
procurement process. The inclusion of procurement specialist and engineers
answered research question on extent the PPA 2004 has improved participation of
domestic firms in public procurement market. Contractors and consultants who are
on supply side helped in understanding problems experiencing domestic firms in
procurement process.
1.7 Organization of study
The research comprises of five chapters. The first chapter provides the background
information of study: introduction, statement of problem, objectives of study,
research question, significance of study, and scope of study. The literature review on
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public procurement and domestic enterprises is covered in chapter two. Research
methodology which includes research design, study area, study population, sample
and sampling procedure, variable and measurement, type and quality of and data
analysis is in chapter three. Chapter four presents analysis of data. And chapter five
covers summary of finding, recommendation and conclusion of study.
1.8 Limitation of study
Empowering domestic firms through the Public Procurement Act is broad concept
which involves various aspects. This study aimed at assessing knowledge of
procurement professionals and supply side on provisions of the PPA 2004 which are
geared to empower domestic firms. Considering the timeframe the study was limited
in Dar es Salaam Region only.
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CHAPTER TWO
LITERATURE REVIEW
2.0 Overview
This Chapter presents literature review about the study entitled An Assessment of
Public Procurement Act on Empowering Domestic Firms in Tanzania (A Case Study
of Selected Institutions in Dar Es Salaam Region). The chapter presents description
of key terms, theoretical part of public procurement, empirical part, analytical
framework model, description of model, underlying assumptions, description of
variables, and relationship between variables, conceptual framework and statements
of hypothesis.
2.1 Description of Terms
For the purpose of this study and eliminate confusion relating to use of terms, brief
description of terms are shown below:
“Public procurement” means buying, purchasing, renting, leasing or otherwise
acquiring any goods, works or services by procuring entity spending public funds on
behalf of ministry, department or body and includes function that pertain to the
obtaining of any goods works or services including description of requirements and
award of contract Section 3 of the Public Procurement Act 2004.
“Domestic firms”
Domestic enterprise means a company that is within the country of its own origin.
“Small and Medium Enterprises (SMEs)”
SMEs are economic activities which cover non-farm, manufacturing, mining,
commerce, and services measured by total number of employees, fixed investment
and sales turnover. In the context of Tanzania, Small enterprises are mostly
formalized undertakings engaging between 5 and 49 employees or with capital
investment from Tshs.5 million to Tshs.200 million. Medium enterprises employ
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between 50 and 99 people or use capital investment from Tshs.200 million to
Tshs.800 million this in accordance with the Ministry of Industry and Trade SMEs
Policy 2002
“Margin of Preference”
Margin of preference means the extent to which one person or group is given
favorable treatment than others. www.termwik.com visited 4th October 2012. In
public procurement Margin of Preference is expressed as percentage that local
enterprises are granted in competitive tendering.
“Tendering document”
Tendering document is defined as documents for inviting renderers to participate in
procuring or disposal of public assets.
“Contract packaging”
Contract packaging means grouping of procurement requirements within
procurement category for purpose of acquiring under single contract or into lots
where bidders can submit bids for one, several or all lots as specified in tender
document and where a contract could be awarded for lot
//www.procurementclassroom.com/procurement visited 29th October 2012
“Bid securing declaration”
Bid Securing Declaration is an undertaking by a prospective bidder, committing to
pay the corresponding fine and be suspended for a period of time from being
qualified to participate in any government procurement activity in the event it
violates any of the conditions stated therein.www.gppb.gov.ph/.../Guidelines/ visited
on 5th October 2012
2.2 Theories and concepts of public procurement:
This section presents the theories and concepts on public procurement. It provides
the overview of public procurement, evolution of public procurement in Tanzania,
principles of procurement, procedures and methods of procurement, concept of
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domestic firms, factors encouraging participation of domestic firms in public
procurement, empirical part and conceptual framework.
2.2.1 Overview of public procurement
Public procurement refers to the government’s activity of purchasing of goods,
works and services which it needs to carry its functions. The implication of public
procurement differs from private procurement, as the economic consequences are
measured against more complex and long term criteria. Mlinga (2009) The public
procurement worldwide on top of achieving basic objectives of procurement:
acquisition of supplies of right quality, quantity, price, from right supplier, public
procurement is required to be transacted with of economy, accountability, non-
discrimination among potential suppliers and respect for international obligations, in
order to protect the public interests. Watermeyer (2003).
Internationally the public procurement has been used to support number of social-
economic or political objectives. According to Watermeyer (2003) public
procurement has been used to stimulate economic activities, protection of industry
sector, removing disparate, creation of employment, environmental protection.
Public procurement is considered to be important feature of contemporary financial
management because over 50% of revenue is utilized in acquisition of requirements
for organization. Kandeh (2008) contend that efficient procurement system has
significant social economic and development implication to the country. It is through
public procurement system which governments provides services and demonstrates
accountability and gain legitimacy from its citizen. The scarcity of resources and
pressure from society demanding their rights have contributed towards increase of
need for governance. Adu (2010) asserts that public procurement has direct impact
on successful delivery of government projects and public services, sound financial
management by achieving value for money in government expenditure, reducing
corruption, more competition, budgetary savings, reduce debt levels and encourage
private sector. Further, social impact that accrue from the public procurement
include enhanced respect of Law, improved social services, improved prospects of
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achieving other government objectives, increase access by local market to
government contracts and enhanced reputation for public institutions.
2.2.2 Development of public procurement in Tanzania:
The history of public procurement system in Tanzania trace back to pre and post-
colonial era. Prior to the enactment of the Public Procurement Act No.3 of 2001;
public procurement was regulated by the “Exchequer and Audit” Ordinance of 1961
and the Financial Orders Part III in Public sector adopted from British colonial
masters.
Due to rapid changes of economy, globalization and pressure from international
donors’ old regulations proved to be ineffective. Odhiambo W and Kamau P (2003)
contend that reforms in East Africa were to large extent influenced by external
pressures. The demands for international institutions were to harmonize national and
international procurement systems and eliminate weakness in public procurement.
The main deficiencies in old legislations in accordance with report prepared by the
Crown Agents 1995 were: lack of clear authority for execution and approving of
procurement awards; no provision for discouraging abuse of power by persons in
positions of trusts; no professionalism in the execution of procurement function and
no clear procurement procedures.
In view of the aforesaid weakness the Government of Tanzania in 1989 embarked on
public sector management reform process which consisted of: Civil Service Reform,
Parastatals Sector Reform, Financial Sector Reform, Planning and Budget System
Reform. The objectives of those reforms among others were to improve government
financial management; control of public fund and resources; promote accountability
for collection, custody and review what has covered in previous session.
In 1996 the Country Procurement Assessment Report prepared by the World Bank,
identified a number of weaknesses in public procurement system in Tanzania and
recommended urgent reform. As result of that the Public Procurement Act 2001was
enacted as extension of Public Finance Act 2001 to regulate public procurement. To
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ascertain the execution of PPA 2001 in 2002- Country Procurement Review was
carried out by the World Bank. The survey revealed a number of weaknesses which
include: lack of capacity amongst procurement entities; lack of capacity for Central
Tender Board in monitoring activities of procuring entities.
The recommendations of Country Procurement Assessment Report 2003 resulted to
repeal of the Public Procurement Act 2001 and enactment of the Public Procurement
Act 2004 with the following features: Establishment of Public Procurement
Regulatory Authority (PPRA) in place of Central Tender Board (CTB); decentralize
procurement to procuring entities with no limits; changes the composition of tender
board of which Accounting Officer/Chief Executives are no longer chairperson of
tender boards and changes of membership of Public Procurement Appeal Authority
to include private sector and professional boards. These changes were meant to
increase efficiency, accountability in public procurement and foster participation of
domestic firms in public procurement market.
The establishment of PPRA marked great revolution of procurement system in
Tanzania. To large extent efficiency, effective utilization of funds and value for
money increased. Compared to how public procurement was conducted before
enactment of PPA2004 and at present, there is a remarkable improvement. In the past
public procurement was completely disorganized and corruption was rampant.
Although, the problem has not been completely resolved, at least procurement in
more structured to extent it possible to monitor compliance with the Law. The
outcome of the audits conducted by PPRA in Financial Year 2010/2011 indicates an
overall average level of compliance of 68% with the PPA 2004 against target of
80%. The gap between targets is marginal compared to previous financial years.
2.2.3 Principles of public procurement
The acquisition of goods, works and services government utilizes public funds. To
attain effective deployment of funds and achieve the principal objectives of public
procurement is governed by legislation. Due to diversity of situations law cannot
establish norms for each situation, hence knowledge of public procurement
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principles. Muzina and Vesel (2004) argue that legal rules need to be understood by
means of specific principles constituting both the direction and purpose of drafting a
particular legal norm. In implementing public procurement basic principles which
universally acceptable worldwide must be observed. The principles of public
procurement in accordance with PPA 2004 are:-
i.Need for economy and efficiency in use of public funds.
ii. Providing for the fair and equitable treatment of all suppliers and
contractors
iii. Equality of participation
iv. Probity and ethics
v. Transparency
vi. Equity
vii. Value for money
The above principles are consistent with the United Nation Commission for
International Trade (UNCITRAL 1994) superseded by Model Law 2011 and the
World Bank.
2.2.3.1 Economy and efficiency
Typical of public procurement cycle involves: need identification, planning,
sourcing, evaluation, award and management of contract. The process is lengthy and
costly especially when competitive tendering method as applied. Therefore, public
officers and approving authorities, who are involved in procurement process need to
operate cautiously to ensure goals, are attained at reasonable cost. According to
Mamiro (2010) the performance of each activity is largely influenced by time
management and competence of staff involved in procurement. In undertaking
procurement process, economy must to be considered. In accordance with R. 5 of
G.N. No. 97 economy, means achieving the desired goals at minimum cost, acquiring
goods, works, and services that satisfactory quality, works or services completed
timely. It is evident when procurement is carried out without taking in consideration
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the mentioned aspects, the intended objective will not be achieved. Issues which can
be observed in reducing procurement cost, includes consolidating requirements,
advertisements and tender board meetings.
Efficiency in procurement means usage of funds in such manner that maximize the
goal. According to Mlinga (2009) and other scholars efficiency leads to savings.
When the process of procurement is carried out efficiently project can be completed
timely within the budget amount. Red tape and incompetence of public official
responsible for procurement causes waste of resources. Thus, efficiency and
economy does not only achieve the primary objective of public procurement but
encourages participation local firms.
2.2.3.2 Fair and open competition
Competition in procurement is considered to be one of fundamental principle for
encouraging participation of all suppliers, contractors or consultants in procurements
process. S. 59 of PPA 2004 requires procuring entity in procuring goods, works, and
services to apply competitive tendering method except where it is not feasible. The
applications of other methods which are restrictive normally require justification.
Section 60 of the same Act states that procuring entity wishing to commence
competitive tendering shall provide all eligible prospective suppliers or contractors’
timely adequate notification of requirement through tender advertisement notice in
wide circulation newspapers or other media with exception when requirement is
urgently needed, suppliers have been shortlisted or where there is need to achieve
social objective such as local community participation.
The invitation to tender must be made in writing using standard documents prepared
by PPRA. Regulation 83(3) G.N. No. 97 requires procuring entities to use the
appropriate standard tendering documents. The bidding documents must be fair, non-
restrictive, clear and comprehensive. The bidding documents and technical
specification relating to the project should clearly describe the criteria and
methodology for evaluation of bids and selection of successful bidder. Model Law
(2010)
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2.2.3.3 Equality of participation
Equality of participation or equal treatment of those participating in procurement
system is fundamental principle of procurement accepted at national and
international level. According to Arrowsmith (2010) equal opportunity performs two
roles: achieve value for money in obtaining goods, works and services and ensure the
process of procurement is performed efficiently.
This goal is realized through following procedures laid down in Regulation 9 of the
Public Procurement (Goods, Works non-Consultant services and Disposed of Public
assets by tender, 2005. The measures that procuring entity need to undertake in
fulfilling this principle includes to ensure invitation to tender are published in the
PPRA Journal and website, Local Newspaper of wide circulating and any other
appropriate information media. R. 80 G.N. No.97 Procuring entities when inviting
tender are required to eliminate discrimination practice and avoid using technical
specification which are restrictive such as specifying brand name or using
specification which favor a particular supplier /contractor. However, the PPA 2004
and Clause 2.19 0f the World Bank Guidelines permits use of brand name or
catalogue number where it not possible to specify without mentioning brand name.
But in such circumstance the brand name must be qualified with statement “Or
Equivalent” The objective of qualifying statement is to allow substitutes which can
serve same purpose or better version and competitive price. The other factor in
attaining the principle is ensuring criteria for selection of winner are explicitly shown
in bidding document and avoid imposing new criteria during evaluation. R.90 G.N.
No.97
Attainment of fair and open competition is one of the paramount goals of an
acceptable public procurement system. Indeed, procurement systems based upon
accepted national and international standards reinforce competition by opening
market access to potential suppliers and contractors, thereby encouraging the
participation of an increased number of competing bidders. Mlinga (2009). An
effective government procurement system relies almost entirely on fair competition
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among bidders to achieve the best price for the government in acquiring its goods
and services.
2.2.3.4 Probity and Ethics
The PPA 2004 requires all public officers concerned with procurement and disposal
of assets to be scrupulous honest in dealing with suppliers, service providers or
contractors. Further, officials and members of tender board are obliged to conduct
procurement with probity.R.8 of G.N. No.97. It is construed that ethics is
fundamental for administering justice and equality in providing services to the
public. To a large extent credibility of government is demonstrated in the way
officials conduct their operations. Geo (2008) Violation of ethics is manifested in
different aspects such as abuse of power, abuse of human rights, and misuse of
public property, ignoring rules and regulations and corruption. In public procurement
corruption is considered to one of biggest scourge for attainment of basic objectives.
According to the Organization for Economic Cooperation and Development, 2007
(OECD) public procurement is the government activity most vulnerable to
corruption, waste, fraud due to complexity, size of financial flows and interaction
between public and private. Hazier (2011) argue that public procurement is
susceptible to ethical lapse as opportunities for unethical behavior are enormous.
Officials responsible for procurement process are exposed to pressure from suppliers
who compete for business opportunities. Unethical suppliers sometimes corrupt
officials to win business or officials solicit for bribes to favor bidders. The PPA 2004
also recognizes the vice. Section 72 deals with matters concerning fraud and
corruption. Section 73 of PPA 2004 prevents officials responsible for procurement to
receive gratuities or other valuable things to influence tender decisions. The same
section requires declaration of interest to any bidders by public officials in any public
procurement process. Members of Tender Board, Evaluation Committee and
Procurement Management Unit (PMU) are required to fill Personal Covenant Form
to declare interest that may impinge their participation in procurement proceedings.
15
On the other hand the S.74 of PPA 2004 dictates that firms participating in tender
process are required declare any commission paid to any party. Tender documents
oblige bidders to submit an ant- bribery policy pledge. Eligible bidder who fails to
comply with this requirement is considered to be non-responsive and disqualified for
further consideration. In most cases bidders comply with this requirement as matter
of formalities. What is practiced is contrary to the pledge as corruption practices
occur in secrecy. Corrupt practices are difficult to detect and even when suspects, are
taken to the court of law they are normally not punished for lack evidence.
Corruption occurs at different stages of public procurement process. Søreide T
(2002) according to the author corruption practice in procurement may start right
from need identification or selection of project. Officials responsible for procurement
can select project with large financial outlay for sake of kickbacks. At designing
stage official may be manipulated the design for benefit of particular contractor or in
procurement of goods specification favoring a particular supplier proposed. During
evaluation, evaluators may impose criteria to eliminate competitive bid in favor of a
particular bidder to whom they have interest. At execution of contract for
construction works of delivery of goods officials responsible for receiving and
inspection can accept poor quality. This complicates the matter when it comes at
fighting against corruption.
The effects of corruption are numerous in general terms it undermines democratic
institutions, retards economic development and contributes to government instability
(Rajiv A 2008) in public procurement corruption increase contract prices, unsuitable
or defective products, poor services, environmental hazards, delays and hinders
participation of SMEs in procurement market.
2.2.3.5 Transparency
Transparency is central characteristics of sound and efficient procurement system
and is characterized by well-defined regulation and procedures open to public
scrutiny, clear standardized tender documents, containing complete information and
equal opportunity for all in the bidding process”. www.cmi.comTransparency refers
ability of all interested parties to know and understand how the process of purchasing
16
is managed. (Lyons 2006). According to Section 43 of the Public Procurement Act
2004 transparency refers to equality and equal opportunity to all prospective
suppliers, contractors and consultants. It is achieved through competitive
procurement methods, wide advertising, neutral specifications and simple
requirements. Regulation 97 of PPA 2004 demands PEs to publicize in PPRA’s
website and Journal, Government Gazette and in at least two newspapers of wide
circulation and any other appropriate information media result of tender award.
Section 56 of PPA 2004 and Regulation 11 of Public Procurement G.N.No.97
obliges procuring entities and tender boards to maintain adequate written records of
all procurement or disposal proceedings in which they are involved, including
procurement conducted other than competitive tendering. Such records are required
to show which suppliers, contractors, service providers or buyers responded to
advertising or were approached to tender, who was chosen and the reasons. The
purpose of maintaining records is to enable bidders and other interested parties to
access information. However, the experience shows that very few bidders dares to
access of information from procuring entities.
Transparency just takes other principles faces some challenges. According to (OECD
2007) the biggest challenge has been how to define an adequate level of transparency
to ensure fair and equal treatment of providers and integrity. To attain transparency
there is a cost implication in terms of administering the process of procurement. In
accordance with R. 65 of G.N. 97 competitive tendering requires at least 30 days for
advertising national competitive tenders for international minimum of 45 days. The
objective is provide amble time for bidders to prepare and submit competitive
tenders. The process of evaluation up to award of tender can take up to three months.
On the other hand bidders are required to offer bids which must be valid until
tendering process is completed which take up to 120 days before the process is
completed. Due to fluctuation of currency, bidders are forced to inflate the price to as
precaution in event of devaluation occurs. In any case procuring entities need to
strike a balance between transparency and cost.
17
The findings on survey that was carried out by OECD in 2007 show that
transparency accountability are key principles for enhancing integrity throughout the
whole procurement cycle.
2.2.3.6 Equity
Equity means application and observance of government intervention which is
designed to promote firms/persons in countries economic activities Mlinga (2008). It
is the policy of the government procurement universally to allow participation of
procurement proceedings to suppliers/contractors/ service providers and consultants
regardless of nationality. However, this policy though encourage competitive it
marginalizes the local suppliers who have limited capabilities.
2.2.3.7 Value for Money
The concept value for money is associated with deployment of resources against
realization of some expected output values. In broader perspective value for money
associates with economy, effectiveness and efficiency of a product, service a process.
Mamiro (2009) According to Section 43 of the Public Procurement Act 2004 it is the
duty of tender board, procuring entities to strive in achieving highest standard of
equity and fairness in order to obtain the best value of money in terms price, quality
and delivery.
2.2.4 Procedures and methods of procurement
This section presents summary of procurement procedures and methods of
procurement in accordance with the PPA2004. The procedure is presented in form of
cycle showing how procurement is undertaken. The methods that are discussed in
this section are those related to empowering domestic firms.
2.2.4.1 Procurement cycle
The process of public procurement involves sequence of activities which are
performed by different units in procuring entity. According to the PPA 2004 the
18
institutional setup is required to compose of Accounting Officer/Chief Executive
Officer, Tender Boards, Procurement Management Units, User Departments and
Evaluation committee. Each entity operates distinct functions independently in
accordance with Section 38 of PPA 2004. The segregation of duties is intended to
achieve independence and accountability.
The key stages in public procurement include: need identification, planning,
invitation to tender, receiving and opening of bids, evaluation, approval, and award
and contract management.
The procurement cycle begins when need has been identified. Needs arises for
various reasons, to meet daily operations, new project or emergency cases. For
procurement process to take place there must be a requirement. It is the originator
(user department) who is responsible for initiation of procurement process. S 36 of
PPA 2004 has clearly stated the roles of user department which among others include
liaising and providing necessary input to Procurement Management Unit.
Identification of needs determines other key stages in the procurement process such
as details of requirement, specifications, planning, cost estimates methods of
procurement and application of preference to domestic firms. S.45 of the PPA 2004
Procurement cycle in public procurement plays great role in providing guidance on
how to carry out in accordance with PPA 2004. The cycle indicates what activities to
be performed at different stages of procurement. Decision on whether to apply
factors empowering domestics firms are made at planning stage. The subsequent
stages prescribe how provisions will be implemented.
19
Figure 2.1: Procurement Cycle
Source: Own Creation
Figure 2.1, show typical procedure of procurement from need identification to
contract management. Almost all activities namely planning, invitation of bids,
receiving and opening of bids, evaluation, approval, and award and contract
management are functions which are performed by Procurement Management Unit
save for approval which is undertaken by Tender Board.
Invitation ofTenders
Preparation ofProcurement Plan
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2.2.4.2 Methods of procurement
To ensure the principles of public procurement are attained; the PPA 2004 and
related Regulations provides a range of methods of procurement and circumstances
to use. The most preferable method in accordance with Section 59 of PPA 2004 is
competitive tendering. Other methods are used where competition is not feasible and
requires justification on the use.
Section 3 of the PPA 2004 defines competitive tendering or tendering as the method
of procurement of goods, works or disposal of public asset whereby suppliers,
service providers contractors or asset buyers are invited by procuring entity to
compete with each other in submitting priced tender for supply of goods, provision
of services, execution of works or acquisition of assets.
Competition is considered to be key factor for achieving most of basic principles of
public procurement. However, in some cases competitive tendering has resulted to
outcome not desired. Guyo W, Joseph B, Gakure R and Kibassa P (2011 argue that
competition in some occasions has produced to poor quality. There are numerous
reasons for that but the most common in accordance with Brook M (2006) is
personal interest of officials concerned with procurement process. Under normal
circumstances open competition is assumed to be the most appropriate method of
procurement which attains key principles in procurement. However, this can only be
achieved if competition is properly administered. Njuguna (2008)
One of the conditions for applying margin of preference is when national or
international competitive method is used. The logic behind this is to comply with
Sec.59 of PPA 2004which stipulates that procuring entities in procuring requirements
shall apply competitive tendering methods prescribed in Regulations depending on
type and value of procurement with exceptions where suppliers have been pre-
qualified; the requirement is urgent and where there is need to achieve social
objective such as local community participation. The other reasons in to abide to
other principle of procurement-to maximize competition, achieve economy
efficiency, transparency and value for money.
21
To determine successful bidder, tenders must to be evaluated in accordance with S.
67 of PPA 2004 by tender evaluation committee. In accordance with S. 37 of same
Act members of committee are recommended by Procurement Management Unit and
approved by the Accounting Officer. The minimum number of members as per
provisions of procurement is three and maximum five. The appointment of members
of the committee, need to take in consideration qualification, experience seniority
and technical knowledge of type of procurement being carried out. For example,
where procurement is for textbooks, the committee should consist of official who are
familiar with textbooks being procured. In the ease of works such as construction of
a major road or building, the committee should consist of person with background in
engineering, architect or quantity surveyor. Considering the importance process of
evaluation the S. 37(5) of same Act allows procuring entities to co-opt members who
are external to the organization. However, the appointment need to take into take into
account not only competence, but integrity of officials.
Evaluation of tenders is one of critical stage in procurement process; it the phase
where fate of bidders, or winner of tender is determined. Clause 19.1 of World Bank
Procurement Manual of 2003 states that “regardless of how well the other steps in
the procurement process are conducted, if bids are not evaluated correctly and fairly,
the process has failed. Unfortunately, bid evaluation is the step that is easily
manipulated if one wants to favor a particular bidder.” This is because evaluators are
in position to make the process a success or failure. While there are obliged to
follows set rules and regulations, at time discretion is applied as guidelines cannot
provide all details on how to go about because cases are so varied.
Evaluation of tenders involves four main steps which include preliminary
examination to determine responsiveness and detailed evaluation verify whether
bidders demonstrate relevant experience in the undertaking the goods/works being
procured and comparison of prices and post qualification. R.90 of G.N. No. 97.
After evaluating tenders the committee is required to prepare report for submission to
tender board for approval as stated in S.37 of PPA 2004. Depending on nature of
procurement, the lowest evaluated bidder is determined after taking in account
margin of preference if applicable.
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2.2.5 Domestic firms
There is no clear definition of domestic firms in the Public Procurement Act 2004.
For purpose of this study, general definition which states that domestic firms are
companies that are within the country of its own origin is adopted. This definition
encompasses firms of varied business volumes large, medium and small. In
accordance with the Ministry of Industry and Trade SMEs Policy of 2002, SMEs are
economic activities which cover non-farm, manufacturing, mining, commerce, and
services measured by total number of employees, fixed investment and sales
turnover. In the context of Tanzania, Small enterprises are mostly formalized
undertakings engaging between 5 and 49 employees or with capital investment from
Tshs.5 million to Tshs.200 million. Medium enterprises employ between 50 and 99
people or use capital investment from Tshs.200 million to Tshs.800 million. The
PPA 2004 has clear definition of suppliers, contractors and consultants but is silent
on domestic firms. However, the Act stipulates characteristics of respective
enterprises which can participate in procurement process. The Law states that the
firm must qualify by meeting appropriate criteria stipulated by the procuring entity
and where appropriate by approving authority in accordance with Section 46 of PPA
2004.
S.14 of PPA 2004 further states that local suppliers’ contracts or consultant must
satisfy requirements of registration with appropriate professional statutory bodies in
Tanzania. This implies the suppliers, contractors or consultant must meet minimum
qualification of respective boards to be registered. It is assumed that where supplier
has passed the requirement of appropriate board qualifies to participate in
procurement proceedings. To some extent this philosophy appears to unrealistic as
different profession emphases different aspects in execution of duties. For example
the understanding of economical for engineer may not be the same to procurement
specialists.
Registration with professional bodies for foreign suppliers’ contractors or consultants
normally, applies to lowest evaluated bidder. The assumption is that when
suppliers/contractors/service providers/consultants meet minimum qualifications are
likely to deliver to satisfaction of procuring entity. On top of registration by
23
professional bodies, bidders must be registered by PPRA in accordance with
Regulation 37 of PPA 2004. To avoid duplication the information of contractors or
suppliers who are registered by statutory body shared by PPRA.
2.2.6 Factors empowering domestic firms through public procurement
Governments takes different measures to encourage local firms to participate in
economic activities within the country such as establishing policies favoring
domestic firms, capacity building, subsides , financial support and enactment of law
to govern public procurement which spell out specific provisions to promote
domestic enterprises. Thai (2001
The Public Procurement Act 2004 have framework for encouraging the participation
of domestic firms in public procurement which includes margin of preference;
packaging contracts; bid securing declaration; solicitation and forms in Kiswahili;
improvement of payment system; and framework contracts managed by the
Government Procurement Agency Services (GPSA). The factors are discussed in
length in subsequent paragraphs.
2.2.6.1 Margin and exclusive of preference
Preferential procurement or discriminatory, affirmative procurement is of different
forms, but all are geared to achieve similar objective of empowering or correcting
imbalance between the have and have not. According to Watermey (2003) there are
nine methods used to implement preferential procurement policies. The table
showing methods and associated action is in Appendix 1. The methods for
preferential stated in Appendix I are discussed on how they contribute to social
economics benefits hereunder.
Set aside. This method sets criteria which hinders participation of foreign firms in
bidding process. It specifies qualification requirements which favor local suppliers in
all aspects. The argument for applying this method is based on fact local firms who
are small and medium sized, lack capacity to complete favorable with foreign firm.
24
A qualification criterion is a form of reservation scheme where firm are excluded by
inability to meet specified requirements. This method is often referred as selective
purchasing. In the PPA 2004 Regulation 67 of G.N. No. 97 it is termed as restrictive
tendering.
Offering back involves offering tenderer that satisfy criteria relating to policy
objectives and opportunity to undertake whole or part of contract if the is willing to
match prices and quality of best tender received.
Contractual conditions involves formulating policy which is conditional requiring
foreign firm to sub contract certain percentage of works to local firm or employing
certain number of local personnel for the period of contract.
Under preference at short listing stage suppliers/service providers/contractors are
invited to tender through open competitive tendering procedure. However, the
criteria for short listing are limited by qualifications for example Section 50 of the
PPA 2004, grant exclusive preference to domestic enterprises.
Award criteria (tender evaluation) under this method all bidders all invited to tender
irrespective on nationality. During evaluation, domestic bidders are granted margin
of preference. It can be either by reducing certain percent of bid price or adding
percentage to foreign lowest bidder. The objective is to enable local bidder to be
more competitive.
Product/services specification is procedure whereby requirements are specified in
such way the seller on top of supplying goods/services transfers extra economic
benefit to buyer as condition of purchase from that firm, Ssennoga F (2010) There
are various forms which are applied such as transfer of technology, reciprocal trade,
specifying labour intensive construction methods and encouraging foreign firms to
associate with domestic consultants. Regulation 12 and 13 of G.N. No. 98 of 2005
encourages consultants to associate so as to complement their respective expertise
and transfer of knowledge.
General assistance policy is one of strategies which entail government making
deliberate move to enhance the capability of domestic firms through policies,
25
capacity building, or subsidies. The government of Tanzania for example has various
policies geared toward support of SMEs which include Tanzania Development
Vision 2005; the Sustainable Development Policy SIDO (1996-2020) The National
Micro Finance and Mineral Policy.
Marginal of Preference in context of Tanzania is governed by the PPA 2004. This
law requires procuring entities when procuring goods, works or services by means of
international and national competitive tendering to grant margin of preference for the
benefits of tenderers for certain goods manufactured, mined, extracted or grown in
Tanzania or works performed by Tanzania contractors. The objective of margin of
preference and exclusive preference is to encourage domestic firms to participate in
public procurement market. The application of margin of preference is permissible
when bidding documents specifically outline the procedure for applications. The
margin preference may also apply to buyers of used public assets.
Where the procurement is fully financed by government of Tanzania, Exclusive
Preference in accordance with S.50 of same Act is granted to domestic firms. The
exclusive preference is applicable for national firms and association of national and
foreign firms in which the contribution of the national firm to the association is more
than 75%. However the value of procurement should not exceed the ceiling specified
in Regulations.
Margin of preference is applicable to firms which are incorporated in the United
Republic of Tanzania, at least fifty of shares owned by Government or by citizen of
Tanzania. S.49 of PPA 2004 states that if local company decides to sub contract for
one reason or another should not sub contract not more than ten percent of contract
price. For joint venture of local firms the criteria to qualify is stipulated in S.49 (iii)
of PPA 2004. It states that individual member of companies are incorporated or
registered in United Republic of Tanzania at least fifty percent of ownership of
company are held by Tanzanian, the joint venture is registered in Tanzania; The firm
do not subcontract more than ten percent of contract price; net profit that accrue from
the business will not be repatriated to foreign country. For firms or individuals
engaged in consultancy services the Law requires majority share of the company are
held by Tanzanian.
26
The application of margin of preference normally takes place after carrying out
preliminary and detailed evaluation of tenders. Only bidders who have passed this
stage are considered for comparison of prices and margin of preference.
According to Regulation 91 G.N. No.97 for comparison of responsive bids are
classified in three groups:-
(i) Group A: Bids exclusively offering goods manufactured in Tanzania
where Labor account 30% or more of the Ex Works (EXW) price of
product. The manufacturing facilities have been in operation since the
time of submission of bids.
(ii) Group B: Bids offering goods manufactured locally.
(iii) Group C: Bids offering goods manufactured abroad have been already
imported.
In order to determine most competitive tender the following steps are undertaken: All
bids are evaluated in each group to determine the lowest bid. The lowest evaluated
bid is compared with each other and if as result of comparison, a bid from Group A
or Group B is the lowest, it shall be selected for award. If the comparison under
group A & B does not bring out winner i.e. the lowest bid is from Group C, Group C
shall be compared with the lowest bid in Group A after adding the evaluated price
offered in the bid from Group C, for purpose of further comparison only a % of
margin of preference. The Margin of preference in accordance with fourth schedule
range from 4-10% it varies with input of national firm in association. The rates of
margin of preference are stipulated in the Fourth schedule of Regulations GN. No. 97
The biggest challenge facing domestic firms when competing with international
bidders’ is inability to qualify the preliminary stages of evaluation. Many bidders are
disqualified for non-compliance with administrative requirements of bidding
documents. This is something beyond the control of the governing law in public
procurement.
27
2.2.6.2 Bid securing declaration
Bidders are required to make commitment for adhering with procedures of tendering
by submitting tender security as stipulated in S.53 of PPA 2004. Normally, tender
securities have financial implications. R.88 G.N. No. 97 requires bidders to submit
security in form of bankers’ checks or letter of credit or bank guarantee which entails
tying capital or making cash outlay prior to submission of tender. The amount of bid
security can be fixed or percent of contract price not exceeding two percent. Bid
security For SMEs who have limited resources is barrier for participation in public
procurement.
To relieve the financial burden to SMEs; Bid Securing Declaration was introduced in
place of bid security where applicable by PPRA through Circular No.
PPRA/CPR/253/43 in 2007 as mandated in S.89 of PPA 2004. Bid securing
declaration is undertaking by prospective bidder committing to pay the
corresponding fine and be suspended for period of time from participating in public
procurement activity in event violates any of the conditions stated in tendering
document.
The main objective for introducing bid securing declaration is to remove barriers of
local SMEs in penetrating the public procurement. According to Mlinga (2006) Bid
securing declaration is bid security of different form. He argues that despite of not
involving money, bid securing declaration is more binding in terms of sanctions, than
bid security which only involves loss money. With bid securing declaration bidder
who defaults is restricted to participate in public procurement for period of time at
discretion of bidder but not less than one year.
Blacklisting suppliers who violate bidding procedures at face value appears to be
more punitive; however, the challenge is how to make it effective. In Tanzania some
suppliers operate several companies dealing with same products or services but
registered firms using different names. Therefore, barring a company which has
violated procurement procedure may not be punitive to the person who has many
companies. Perhaps this difficult will be resolved once national identity cards are
operational.
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2.2.6.3 Packaging (splitting) of contract
Contract packaging means grouping of procurement requirements within a
procurement category for the purpose of acquiring them under a single contract or
the separation of one requirement into several lots, where bidders can submit bids for
one, several or all lots as would be stipulated in the solicitation documents, and
where a contract could be awarded for each lot. Njuguna (2010). According to
Regulation 50 of the G.N.No. 97 packaging of contracts can be made based on
similar items, geographical location, funding by same donor and timing of delivery
or completion.
In principle S. 45 of the PPA 2004 requires procuring entities to aggregate
requirements whenever possible both within procuring entity and between procuring
entities so as to reduce procurement cost and obtain value for money. However, for
purpose of enabling domestic/local firms who are fairly small and lack capability for
large contracts the same Act S.45 (d) allows PES to split contract in sizes which
firms can afford. Further, Regulation 28(2) of G.N. No 98 of 2005 permits procuring
entities to split contracts to facilitate participation of local consultants in procurement
process. The other reasons for packaging components include realizing optimum
economy, efficiency and transparency.
The size and scope of individual contract depends on nature and location of project.
In accordance with Clause 2.3 of the Procurement Guidelines under Contract
International Bank for Reconstruction and Development (IBRD) Loans and
International Development Association (IDA) credits (2010) for projects requiring a
variety of goods and works, separate contract can be awarded to different suppliers.
For example procurement of particular equipment which requires installation and
training may be awarded to separate bidders one bidder awarded contract for supply
of equipment and other bidder for installation and training.
Knowledge of the scheduling of procurement requirements and of the timeline of
each key milestone in the process of procurement is crucial to effectively package
procurement requirements. According to Masaburi (2006) factors which need to be
considered include appropriate period for determination of packaging, normally this
29
is undertaken at need identification and planning; ability to manage several contracts;
scheduling of requirement required simultaneously and timing of requirements.
Professionals who are responsible for procurement on top of knowledge they are
required to be honest as splitting of contracts may be abused by unscrupulous
officials.
2.2.6.4 Tendering document in Kiswahili
The other barrier purporting to be hindering participation of domestic firms in public
procurement market in Tanzania is language used in tendering process. Most of
instruments for public procurement are in English. It has been argued in number of
debates that Kiswahili should be used as official of language in all correspondences
as it widely spoken. The Guardian of 2nd November 2012 reported that Tanzania is a
Swahili nation, but the current constitution does not recognize it. It was further
reported that Members of Parliament who were debating on tabled motion that seeks
house’s endorsement on formation of East Africa Swahili Commission were on
opinion to enforce the use of Kiswahili all laws should be enacted in Swahili.
To overcome the shortfall of language and enable domestic bidders participate
effectively in procurement process PPRA has issued a number of documents in
Kiswahili including invitation for quotation for goods, works and non- consultancy
services more documents are expected to be developed.
Currently, documents in use include:
“Mwaliko Sanifu wa Kotesheni (Zabuni ndogo ndogo) UnunuziBidhaa”(Invitation for Quotation for Procurement of Goods)
“Mwaliko Sanifu wa Kotesheni kwa ajili ya Ujenzi Kazi ndogo ndogo”
(Invitation for Quotation for Procurement of Works)
“Mwaliko Sanifu wa Kotesheni kwa ajili ya ununuzi Huduma Zisizoza
Ushauri wa Kitalaamu” (Invitation for Quotation for Procurement of Non-
Consultancy Services)
30
The introduction of bidding documents and other forms in Kiswahili it is anticipated
will enable domestic firms to participate in submitting responsive bids. The
challenge that is envisaged will be how to specify requirements, technical
specifications, and knowledge in preparing tenders and major instruments including
Act and Regulations are still in English
2.3 Empirical part
Vincze M (2007) in study titled Evaluation of SMEs Access to Public Procurement
Market in Europe Union; examined the trend of SMEs in accessing public
procurement contract in 25 member states for period 2002-2005. The author
surveyed large and small SMES to identify factors influencing access of SMEs to
public procurement. Vincze further examined the structure and effectiveness of
policies in public procurement. The author found that member states had governing
laws in public procurement. There were clear directives specifying policies and
procedures for tendering. The objectives of policies were to ensure transparency,
efficiency and equal access between large and small enterprises. However, the author
observed that the public procurement tenders emphasized price as main award
criteria, information flow on tenders was not efficient; full potential of e-
procurement was not widely exploited; general procurement notices to alert bidders
on potential business opportunities were not publicized; excessive use guarantee with
financial implication and limited measures explicit in promoting SMEs.
Vincze concluded that medium sized firms had reasonable access to government
procurement especially when they operate joint venture businesses. The statistics
showed that the proportion of value of procurement to SMEs increased from 29% to
43% in year 2001 and 2005 respectively. The growth was attributed from
improvement of governing law in procurement. The author concluded that further
developments were possible if improvement of information flow through application
of internet and e- procurement and training on staff involved in awarding of contracts
and SMEs were implemented.
31
Vincze’s study was conducted in Europe where market conditions are developed.
However the challenges facing SMEs in accessing public procurement contracts are
similar across the world. Thus similar study can be undertaken in Tanzania.
Gerson B and Metical (2010) in their article titled Can China’s Government
Procurement Market be Cracked examined how public procurement law in China
foster local firms stated that China has two main strategies for promoting domestics
firms: defining domestic products and indigenous innovation strategy. “Domestic”
product in accordance with Chinese policy is one that is made within China’s
boarders and which domestic manufacturing costs exceed certain percentage of final
price. The prescribed ratio of domestic is difference between the products ex-factory
price and import price divided by products ex factor price. The second method which
PRC government applies to limit foreign competition and promote indigenous is
through innovation of products. Gerson B and Metical urged that the remarkable
gains in industrialization and development have been attributed to great extent from
concerted effort in capacity building financially and manpower and public
procurement policies which explicitly propagate buy Chinese products. The
Government Procurement Law (GPL) in china states that Peoples Republic of China
government agencies and entities must purchase domestic goods, work and services
except in rare circumstances when: The required items cannot be obtained within
China under reasonable commercial terms”
Gerson B and Metical conducted a study in China which has very restrictive policies
on fostering domestic firms through public procurement contracts. However, the
author did not assess how the governing law in public procurement empowers
domestic firms when competing with international firms for products or services
which are not available locally. Hence need for carrying out assessment on public
procurement under open economy like Tanzania.
Nano N(2008) in research tilted Evaluation of the Implementation of Preferential
Policy Framework (No.5 of 2000) with Reference to Selected Municipalities in
Province of Eastern Cape surveyed the level of awareness of officials responsible for
procurement about preferential procurement; institutional arrangement for
implementation of preferential policy; the process of selection and award of tenders
32
and the extent preferential procurement contributed towards empowerment of
historical disadvantaged individuals.
The author acknowledged that the Republic of Southern Africa had clear provisions
for encouraging participation of local firms in public procurement specified in
Preferential Procurement Policy Framework Act No 5 of 2000. According to Nano
the primary objective of government procurement of RSA is redress past imbalance
of economy between minority whites and majority blacks who were marginalized
during era of apartheid. The author found that the preferential scheme is well
articulated in public procurement acts and other policy documents. Nevertheless the
policies were not implemented effectively for number of reasons. Nano (2008)
attributed the failure from poor monitoring and reporting system, lack of seriousness
and integrity on public officials involved in procurement.
Nano’s study assessed the public procurement in empowering disadvantaged people
in RSA. The predicament facing domestic enterprise in competing for business
opportunity with foreign firms are the same across the world thus similar study can
be carried out in Tanzania.
Ssennoga F (2010) in his thesis tilted Discrimination Public Procurement Policies
analyzed public procurement in Uganda. The author focused in analyzing public
sector expenditure and access of domestic suppliers to meet the public procurement
demand. Ssennoga found that to efficiently implement discriminatory scheme, it was
necessary to undertake a sector analysis in order to determine schemes to be applied
in different situations. This aspect is relevant in other countries including Tanzania
with provision in public procurement which favor domestic firms. Nevertheless,
Ssennoga’s study has left out gaps which require investigation. For instance the
supply side was not examined. There is need to carry out study establish the extent
suppliers or contractors are affected by governing law in public procurement.
Kipilyango L (2012) in his paper tilted Empowering Small and Medium Enterprises
(SMEs) through Public Procurement Opportunities which was presented at
Procurement and Supplies Professional and Technician Board Annual Conference
held in Arusha Tanzania, conveyed result of case study conducted at Medical Store
33
Department on empowering of SMEs through public procurement opportunities. In
his study he divided firms into two main categories large and SMEs. His findings
revealed that large enterprises maintained large share in terms of value of business
while SMEs increased in number but taking minor business share. The enhancements
in business were attributed from enabling environment stipulated in The Public
Procurement Act 2004. Nevertheless the sample studied by author was limited one
firm taking thus similar study can be conducted in other institutions to assess the
trend.
2.4 Conceptual framework and research model
The conceptual framework was designed to link between independent and dependent
variables. In this study margin of preference, bid securing declaration, contract
packaging and bidding documents in Kiswahili are independent variables while
depend variable is participation of domestic enterprises in public procurement
market. The conceptual framework is displayed in Figure 2.2
Figure 2.2: Conceptual Framework Model
Source: Researcher, 2013
Margin of Preference
Bid Securing Declaration
Contract Packaging
Bidding Document in Kiswahili
IncreaseParticipation of
Domestic Firmsin of PublicProcurement
34
2.4.1 Description of the model/conceptual framework
Margin of preference, bid securing declaration, contract packaging, and bidding
document in Swahili contribute towards increase of participation and growth of
domestic enterprises. Margin of preference enable domestic bidders to be more
competitive when participating in international and national competitive tendering.
Bid securing declaration remove financial burden for domestic firms during
tendering. Contract packaging (splitting) in small lots enables domestic bidders with
limited capability to participate in bidding process; the introduction of bidding
document in Swahili is anticipated to remove the barrier of language to majority of
Tanzanian who are not fluent in English.
2.4.2 Underlying assumptions
The underlying assumption of this framework is that Public Procurement Act 2004 is
responsible for fostering the participation of domestic enterprises and preferred firms
will execute contracts to the satisfaction of procuring entities.
2.4.3 Description of variables
Margin of preference means the extent to which a person or firm is given favorable
treatment than others. Preferential procurement aims at promoting objectives
additional to those associated with immediate objectives public procurement.
Watermeyer, (2003) urges that there are different approaches to administer margin of
preference. The most common schemes include reasonable preferencing and supply
side. Preference procurement is mostly commonly exercised as it also takes into
account other principles of public procurement. It can be administered by limiting
number of suppliers, contractors, service providers and consultants on the basis of
qualifications, of awarding bidding during evaluation by giving certain weight to
local bidders; product/service specification. The basic objectives for granting margin
of preference to domestic suppliers/service providers, contracts and consultants are
empowering local firms, protect domestic firms, create jobs, and meet political
motives.
35
Bid securing declaration means undertaking by prospective bidder committing to
pay the corresponding fine and suspended for a period of time from participating in
government procurement. Bid securing is a form of bid security which does not have
financial implication during tendering process.
Bidding security requires bidder to certain amount in form of bank check, bank
guarantee or any other financial instrument. A fixed amount of percentage of contract
price must be furnished along with bidding document. The objective of bid security
or bid securing declaration is to deter irresponsible bidders and encourage bidders to
fulfill the condition of bids. Bid securing declaration was introduced as to bid
security with intention of removing barriers of SMEs in penetrating the public
procurement market.
Packaging (splitting) of contract means sub categorization of requirements
according to similarities of items and size. It also refers to breaking contract in
appropriate size to obtain maximum competition. On top of competition packaging
aims at enabling local SMES to participate in public procurement
“Solicitation documents” in accordance with section.3 of PPA 2004 means
tendering documents or any other documents inviting tenders to participate in
procuring or disposal by tender proceeding. Section 52 of PPA 2004 provides that
the tendering documents shall be written in English with exception when
participation is limited to Tanzanian nationals tender documents can be in Kiswahili.
The purpose of using tender documents in Kiswahili is to encourage domestic
enterprises to participate in public procurement.
2.4.4 Relationship between variables
The relationship between variables refers to connection between two or more
variables that can be measured systematically. For this study the variables that will
be examined are public procurement, domestic firms, margin of preference, bid
securing declaration, contract packaging and bidding document. The variables will
be assessed in increasing participation of domestic enterprises in public procurement
36
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Overview
This chapter covers the research methodology that was used in this study. The
chapter is organized into subsections namely research design, study area, study
population, sample size and sampling techniques, variables and measurement, types
of data, quality of data and data analysis methods.
3.1 Research design
The research design which was applied to collect information from respondents is
case study of selected public and private institution in Dar es Salaam region. The
choice of case study was influenced by nature and limited timeframe of study.
3.2 Study area
The study was carried out in Dar es Salaam Region. The region was chosen due to
availability and proximity of potential respondents. The study was conducted in
selected ministries, public and private institutions. The list of institutions is shown as
Appendix 1I. The choice of Ministries and Public institutions was inclined by their
size of annual expenditure and participation in public procurement market.
Consultants and contractors were included in the study based on their involvement in
public procurement. The selected institutions facilitated collection of data related to
the study. The map of Dar es Salaam is shown below.
37
Figure 3.1: Map of Dar es Salaam Region
Source: http://maps.google.co.tz/maps?gs_rn
38
3.3 Study population
The target population for this study included procurement specialist, engineers,
contractors, and consultants who are involved in procurement process. The inclusion
of procurement specialist helped to explain the extent PPA 2004 has increased
participation of domestic firms in public procurement market. Engineers represented
user department as initiator of requirement and evaluation of tender, contractors and
consultants enabled in understanding problems experiencing domestic firms in
procurement process.
3.4 Sample size and sampling techniques
The selection of samples for this study applied both probability and non-probability
sampling techniques. The non-probability sampling technique was used to select
procurement specialist and engineers. This is because all respondents being in same
caliber were expected to respond to research questions similarly. Simple random
sampling technique was applied to select consultants and contractors. This technique
was considered appropriate as it provided equal chance for all respondents. The list
of respondents for private institutions was drawn from Contractors Registration
Board. The sample size comprised of 40 respondents from public and private
institutions.
3.5 Variables and Measurement
The table below shows the variables and measurement that was applied in this study.
39
Table 3.1: Variables and measurement
Variable MeasurementIndicators
Sources
Margin of preference Number ofcompetitivetenders
Annual Procurement Reports
Bid Securing Declaration Number of tenders -Tender Documents
- Evaluation report
Contract Packaging Number of lots intender document
-Procurement plan
- Contract award
Bidding documents inKiswahili
Number of tenders Tender Documents
Table 3.1 shows the variables, measurement and sources that were applied in this
study. The variables are margin of preference; bid securing declaration, contract
packaging and bidding documents in Kiswahili. The measurements indicators that
were used are number of tenders. The sources of data were extracted from annual
procurement reports, tendering documents and evaluation report.
3.6 Types and source of data
The study was governed by two types of data namely secondary and primary data.
3.6.1 Secondary data
Secondary data was collected from different documents related to role of public
procurement in promoting participation of domestic enterprises in public
procurement. The major variables that were examined include Margin of Preference,
Bid Securing Declaration, Contract Packaging and Solicitation Documents in
Kiswahili. The literature review was based on concepts, theories and empirical
40
studies from different works related to studies obtained from libraries, internet search
books, journals, newspaper magazine, various publications, reports and publications
of associations, reports prepared by research scholars, universities etc. Secondary
data was obtained from higher learning institutions, public libraries, professional
boards, and The Public Procurement Regulatory Authority (PPRA)
3.6.2 Primary data
The instrument that was used to collecting data was questionnaires. The
questionnaires were open ended and closed with check boxes for respondents to tick
their responses. The choice of this instrument was influenced by level of literacy of
respondents; it assumed questionnaires will be responded unaided. Also the
instrument was expected to provide same responses. Questionnaires were
administered by hand and email depending on convenience of targeted respondent.
The questionnaires that were administered in the study are shown as Appendix II.
3.7 Quality of data
The data that were used in this were valid and reliable.
3.7.1 Reliability
To ensure reliability of data test was undertaken. To avoid participant error data was
collected during the day at neutral time when respondents have fresh mind.
Appointments were fixed at the convenient of respondents. Respondents who
preferred to be contacted by email were provided sufficient time to respond. Follow
ups were made by phone calls. Reliability, was further be tested by finding details
about source of data, confirmation if were collected using appropriate method, time
data was collected accuracy and if are not biased.
3.7.2 Validity
To ensure validity of data, measuring instruments were tested.
41
3.8 Data analysis methods
The study applied qualitative and quantitative data analysis methods. The results
were computed into percentages using Microsoft excel and presented in form of pie
charts, bar charts and tables. The open ended questions were analyzed by listing all
important responses provided by respondents in accordance with relevance to study.
42
CHAPTER FOUR
PRESENTATION OF FINDINGS, ANALYSIS AND DISCUSSIONS
4.1 Introduction
This chapter presents findings, analysis and discussions on the study entitled An
Assessment of the Procurement Act, 2004 in Empowering Domestic Firms in
Tanzania. The first part deals with the response rate and background information of
respondents. The second part reveals findings, analysis and discussions based on
research objectives.
The data collected was entered and analyzed statistically and results presented by
descriptive statistics; frequency distribution tables, percentages and charts. The data
of each objective of study based on theoretical and empirical study is hereby
presented.
4.2 Description of respondents
This section describes the characteristics of respondents who were involved in the
study. The features that were analyzed and discussed include rate of response,
gender, years of working experience and education background.
The study targeted procurement specialist and engineers who practice as contractors
and consultants involved in procurement process. The survey involved both senior
and lower level officials and all genders. Senior staffs included directors and
managers who head directorate and departments responsible for procurement.
Respondents at lower level included professionals who are registered with broad
experience in the field. The respondents from private sector included senior and
middle level practitioners in field of engineering who possess vast experience in
public procurement and contract management. The findings are presented based on
characteristics hereunder.
43
4.2.1 Response rate
A total of forty questionnaires were distributed to respondents in public and private
institutions. Separate questionnaires were administered to each group however; the
contents of main questions were uniform. Ten questionnaires were directed towards
public procurement professional in Ministries; ten to public institutions; twenty
questionnaires were administered to private institutions comprising of contractors
and consultants.
The response rate shows that majority of respondents returned questionnaires. Out of
40 questionnaires distributed 31 questionnaires were returned while 9 respondents
did not return for unknown reasons as shown in Figure 4.1.
Figure 4.1: Response rate
Source: Researcher’s Field Survey 2013
The findings indicate majority of the respondent representing 77 percent of
participants positively responded. Based on sample population the response rate was
considered to be adequate for the study.
4.2.2 Gender distribution
44
To obtain fair representation on gender, the study involved males and females. The
distribution of questionnaire was based on proportion of gender as the statistics show
that males are dominant in many organizations. In view of aforesaid out of 40
questionnaires, 25 were provided to male and 15 to female. The data on gender
distribution in Figure 4.2, show 67 per of respondents were male and 37 of
respondents were female.
Figure 4.2: Distribution of respondents according to gender
Source: Researcher’s Field Survey 2013
The findings though show gender disparate did not affect the study as responses were
based on representation. Further, gender in this study was not significant factor of
discussion.
4.2.3 Work experience
In this section the study sought to establish from respondents the experience in the
field. Respondents were asked to indicate number of years in service on their
respective areas of specialization. The outcome of findings presented in Table 4.1
show that 50 percent of respondents have been in service for period of 1-5 years; 30
percent of the respondents 5-10 years and 20 percent of respondents above 10years.
45
Table 4.1: Number of years in service
Years Frequency Percentage
1-5 16 50
5-10 9 30
Over 10 6 20
Total 31 100
Source: Researcher’s Field Survey 2013
The findings from the study revealed that the majority of respondents had adequate
working experience in the field. Therefore, were considered to be capable in
responding to questionnaire and presenting reliable data.
4.2.4 Education background
Similarly, the study examined the education background of respondents. In this unit
respondents were asked to provide their education qualification. The result in Figure
4.3 indicates that 67, percent of the respondents hold first degree, 20 percent of the
respondents have master degree and 13 percent of the respondents possess advanced
diploma.
Figure 4.3: Qualifications of respondents
Source: Researcher’s Field Survey 2013
46
Based on outcome of analysis, it can be generalized that most of respondent had
adequate qualification to respond to questionnaire accordingly.
4.3 Awareness of provisions of PPA 2004 empowering domestic firms
The first objective of this study was to determine the awareness of procurement
practitioners and the supply side on provisions stated the PPA 2004 for empowering
domestic firms. Asking this question was considered to be crucial as awareness on
law has direct implication of implementation. Geo (2008) According to the author,
lack of knowledge or familiarity with procurement rules and regulations, has direct
consequence on compliance with procurement procedures. Further, this question was
necessary to test understanding of procurement professionals on contemporary issues
on public procurement as the Act has undergone some reforms since establishment.
The findings from the study revealed that 100 percent of the respondents from
procurement side are familiar with provisions of the PPA 2004 which encourage the
participation of domestic firms in public procurement market as shown in Table 4.2.
Table 4.2: Awareness on provisions of PPA 2004 empowering domestic firms
Response Frequency Percentage
Absolutely yes 16 100
Yes but not completely 0 0
Do not know 0 0
Total 16 100
Researcher’s Field Survey 2013
The positive response is indication that procurement practitioners have clear
understanding on the governing law in public procurement. The awareness could be
attributed from training attained during their career path development and attending
seminars conducted by institutions responsible for public procurement.
47
However, the finding seems to contradict the result of study which was undertaken
by the World Bank on Tanzania Country Procurement Assessment (CPAR) in year
2006. In that study the report revealed that procurement professionals are not aware
on provisions in PPA 2004. The reason for different results could be due
dissimilarity in focus of studies or with lapse of time the skills of professionals has
been enhanced.
On the other hand the supply side was found to be less familiar with provisions of the
PPA 2004 for empowering domestic firms. The outcome shown in Figure 4.4,
indicate that only 33 percent of the respondents are aware while 67 percent of the
respondents are not familiar.
Figure 4.4: Knowledge of provisions empowering domestic firms’- supply side
Source: Researcher’s Field Survey 2013
The result from study suggests that majority of respondents from supply side have
limited or lack knowledge on provisions of the PPA 2004. This result may be
attributed from the age of governing law in public procurement in Tanzania. The Act
is still at infancy stage to become widespread. The other reason it appears there is no
specific organization which responsible for promoting awareness of domestic firms
on public procurement business opportunities. In accordance with Nyongera Y
(2012) lack of knowledge about entrepreneurship, business techniques, marketing,
48
technology development and information hinder local firms to compete in public
procurement market.
The lack of awareness on supply side has direct implications in participation in
public procurement market. It means even when procuring entities advertise tenders
with provisions for empowering domestic firms they will not participate or the
response will be limited.
To assess the level of implementation of provisions of PPA 2004, additional question
was asked to respondents. In this case the study sought from respondents whether
they are conversant with implementation of provisions stipulated in the Act and
related Regulations. The findings in Figure 4.5 revealed that 75 percent of the
respondents from public institutions had partial knowledge. Only 25 percent of
respondents indicated that they were familiar. On supply side on the same question
the result revealed that only 13 percent of respondents are familiar, 67 percent of
respondents are less aware while 20 percent of respondents unfamiliar..
Figure 4.5: Application of provisions of PPA 2004 empowering domestic firms
Source: Researcher’s Field Survey2013
From the findings it can be generalized that the majority of respondents are less
conversant in implementing provisions of PPA 2004. Having difficulty in
application of provisions of Act it implies that procurement specialists are unlikely to
include provisions for empowering domestic firms in bidding document. They could
be other reasons for excluding the provisions but Eya and Oluka (2011) pointed out
49
other reasons for noncompliance to include professionalism, familiarity with
procedures and institution factor. On the other hand Tukamuhabwa (2012) asserts
that organization culture, political interference, corruption, low employee motivation;
inadequate regulatory enforcement contributes to noncompliance. In this particular
study to large extent lack of knowledge on application of factors appeared to be
attributed from awareness though other reasons cannot be ruled out.
Nevertheless, the weakness on inability to apply factors for empowering domestic
firms cannot sorely be on procurement professionals. As the institutions responsible
for regulating public procurement have their contribution on this. Since the inception
of the PPA 2004 the emphasis has been on ensuring procurement system is managed
efficiently to achieve value for money. Records show that no specific training has
been conducted on empowering domestic firms through public procurement.
4.4 Procedures for public procurement
The second question was geared towards establishing whether procedures for
tendering, selecting and award of contracts are conducive in empowering domestic
firms. This question was considered to be crucial in assessing procedures if there any
ambiguities and testing the ability of procurement officials on implementation of
provisions stated in Section 44(b) of PPA 2004. Further, having in place procedures
which are conducive, it was perceived to be a factor for stimulating participation of
domestic firms.
The results from the study are varied. The response from procurement side
indicated that 75 percent of the respondents agreed that procedures for tendering,
selecting and awarding tenders are conducive for fostering domestic firms while 25
percent of the respondents did not fully agree. On the supply side the result revealed
that 13 percent of the respondents positively responded; 67 percent of respondents
partially agreed, while 20 percent of the respondents did not agree. The findings are
displayed in Table 4.4
50
Table 4.4: The response on procurement procedures
PUBLIC PRIVATEFrequency Percent Frequency Percentage
Yes 12 75 2 13
Yes but not absolutely 4 25 4 67
Not at all 0 0 3 20
Total 15 100 16 100
Source: Researcher’s Field Survey 2013
Based on findings from study it can be generalized that the procedures of
procurement according to procurement professionals are understood and favorable
for empowering domestic bidders. On the other hand majority of respondents from
supply side consider procedures of public procurement are not encouraging domestic
firms. These findings are consistent with those in paragraph 4.3 on awareness of
factors for empowering domestic firms. Having different outlook on procedures has
some implications in execution of procurement process as discussed in subsequent
paragraphs.
Procurement professionals though responded positively on procedures raised a
concern on their role on implementation of procedure of procurement as stipulated in
the PPA 2004. In accordance with the S. 35 of the same Act, procurement
professionals are responsible for managing procurement process which involves
different parties starting from user department, procurement management unit,
evaluation committee; tender board and accounting officer. Unlike in private firms,
practitioners have authority to exercise certain level of professionalism.
Public procurement officials have very little room to play as they obliged to comply
with law otherwise face penalties. Dobler D (1996) argue that public procurement
officials are motivated by a merit promotion system rather than profit oriented
system as such it is difficult to reward innovative and risk taking to public
procurement professionals. To some extent this limits creativity and discretion of
procurement professionals in government. Kibasa (2011) contended that the problem
with accountability in public procurement does not consider professional principles.
51
According to the authors procurement officials are experts who have no delegated
authority. The author further contends that procurement officials have greater
experience and knowledge and know what to be procured but have no power. Their
role is to make recommendations to tender board or approving authority. In principle
Accounting Officer, Tender Board, Procurement Management Unit, User
Department and Evaluation Committee are required to operate independently of in
relation to their decision to respective functions in accordance withS.38 of PPA 2004
But, decision approve the award of contract is vested on tender board. When process
of procurement is accomplished smoothly, there is no problem to procurement
officials, but when recommendations results to a problem procurement official in
most of the time are held accountable.
Preferential procurement just like other measures in public procurement has some
risks as discussed in proceeding paragraphs. Much as procurement specialist desires
to apply preferential in procurement to favor domestic firms they held up by
eventuality of their recommendations. To play safe, they prefer to deal with larger
firms which have capabilities. On the other hand the PPA 2004 has stipulated clearly
punishment for officials who violates procedures but, it is silent on protection of
procurement practitioners.
On the hand negative response on procedures of public procurement from supply
side is justifiable. Generally, procedures for public procurement are bureaucratic for
obvious reasons. Unlike in private sector where procurement is guided by policies
which are flexible public procurement is regulated by governing law which
compliance in not optional. On top of that public procurement is required to be
transacted taking into account not only economy but attain transparency and
accountability. As discussed in preceding paragraph, the law of public procurement
is at yet to be well established some reforms are still in progress. The Public
procurement Act 2011 has been enacted and preparation of accompanied regulations
is under preparation to make it operational. However, something need to done by
Government to ensure on awareness on public procurement is enhanced on supply
side. The importance of supply side especially local firms needs not to be
emphasized as supply side plays not only plays great role in meeting requirements of
52
buying entities but contribute to economic growth of the national. To operate
procurement system efficiently, all players need to have common understanding.
4.5 Factors empowering of domestic firms through PPA 2004
The third objective of this study was focused at assessing the factors which
encourage participation of domestic firms in public procurement as stipulated in PPA
2004. This inquiry was geared at examining in detail measures for empowering
domestic firms in accordance with the Act for purpose of revealing any ambiguities,
perceptions of respondents, determining significant factors, reasons thereof and how
those are insignificant can be improved to bring same impact. Further, it was found
necessary to examine each factor because of uniqueness. The factors which were
evaluated are margin of preference; bid securing declaration; packaging (splitting) of
contracts and tendering documents in Swahili. The outcomes of findings based on
each factor are shown in separate Tables and Figures and discussed underneath.
4.5.1 Margin of preference
In this section four issues were examined. First, the study sought to find out from
respondents whether they are aware of margin of preference as prescribed the PPA
2004. This question was considered necessary to test the understanding of
respondents on one of key factors for empowering domestic firms and if there are
any uncertainties on the provision. The outcome of the findings shown in Figure 4.6
revealed that 75 percent of the respondents are familiar, while 25 percent of the
respondents are not familiar with margin of preference.
53
Figure 4.6: Knowledge of margin of preference
Source: Researcher’s Field Survey 2013
The findings from study suggests that margin of preference is well understood by
procurement practitioners. This inference is consistent with study which conducted
by Nano (2008) in Republic of South Africa on evaluation of implementation of
preferential procurement. In his study he discovered that professionals responsible
for procurement were familiar with provisions stated governing law in RSA for
correcting economic imbalance between minority whites and blacks which was
created during apartheid era.
For procurement officials being familiar with the margin of preference, it is
indication they are capable of implementing the factor as required by PPA 2004.
Further having clear understanding is beneficial to suppliers as this factor is
considered to be the most appropriate measure for fostering domestic firms. This
factor accomplishes basic principles of public procurement while favoring domestic
firms. Nevertheless, if margin of preference is not applied properly it results to
negative outcome in terms of quality of output. Selected firm may deliver poor
quality or fail to complete if it service or works timely. In some instances it
associated with malpractice.
54
For margin of preference to be effective, supply side need to be aware and well
prepared to execute contracts. From the outcomes of study it was revealed supply
side lack awareness on this measure. This is a setback, because if suppliers have no
knowledge it is unlikely they are going to take advantage of preference. Further,
they will not raise concern to respective authorities responsible for overseeing public
procurement when procuring entities violate procedures specifically meant to
empower domestic firms. The awareness of provisions of PPA 2004 on the supply
side will not only enhance capability of preparing responsive bids but increase the
number of participants.
Second, the implementation of margin of preference was evaluated. In this aspect
respondents were asked whether they are conversant in application of the provision
in accordance with requirement of PPA 2004, the purpose of asking this question
was geared to test ability to comply with requirement of governing Law in public
procurement and establish if procedure are understood.
From the findings of study, it was revealed that procurement professionals are less
conversant on implementation of margin of preference, 75 percent of the
respondents negatively responded, 12.5 percent of respondents were familiar and
12.5 percent of respondents were ignorant as depicted in Figure 4.7
Figure 4.7: Application of margin of preference
Source: Researcher’s Field Survey 2013
55
The outcome from the study show that majority of procurement professional have
limited knowledge on application of margin of preference. The incapability on
respondents could be associated with number of reasons which include lack of
training, unclear procedures, reluctance to comply or enforcement by authorities
responsible overseeing public procurement.
The implication of procurement specialists having difficulty with application of
margin of preference; it is unlikely they will include the factor in tendering document
as stipulated in S. 49 of the Public Procurement Act 2004. Similarly, they will not be
able to take into account during evaluation as specified in Regulation 93 of the
Public Procurement (goods, works, non-consultants and disposal of public assets)
G.N. No. 97. Inability to apply the measure may be attributed from factors stated in
section 4.3 which has discussed awareness.
According to Mbishi (2008) the challenge facing procurement professionals is how
to compute lowest price where margin of preference is included. Normally, the
process of evaluation follows standard procedures stipulated in regulations and
evaluation guidelines. But when margin of preference is applied some extra steps
need to be adhered to arrive at final output. For inexperienced professionals it is
rather cumbersome. Perhaps that is reason for excluding the measure right from
preparation of tendering documents.
Further, the response from respondents on their opinions indicated that most of
procuring entities do not include the issue of preference in bidding document; even
when they included the provision, they experienced difficulties during evaluation of
tenders. Margin of preference is not mandatory but rather discretion of procuring
entities.
Third, the study examined how procurement professionals perceive margin of
preference in empowering domestic firms. They were asked to gauge the factor in
terms of its significance. The findings shown in Figure 4.8 indicated that 87.5
percent of the respondents strongly agreed while 12.5 percent of the respondents
56
moderately agreed that margin of preference is significant factor for empowering
domestic firms.
Figure 4.8: Ranking margin of preference
Source: Researcher’s Field Survey 2013
The result from study shows that the majority of respondents consider margin of
preference as significant factor for empowering domestic firms. The reason for
ranking highly this factor could be attributed perhaps from the way the measure is
expressed in S. 49 and 50 of the PPA 2004 and related regulations. Unlike other
provisions for encouraging domestic firms, this provision is well documented.
The other reason for rating highly margin of preference could be the way this factor
is popularized. The experience show that preferential procurement or discriminatory,
affirmative procurement is the mostly commonly used measure by governments
worldwide for empowering or correcting imbalance between the have and have not.
As discussed in chapter two, margin of preference has many options which include
price, qualification criteria, offering back, foreign bidder subcontracting certain
percent to local firms, product or service specifications. Watermeyer(2003)
However, the PPA 2004 seems to be emphasizing only two options: pricing and
qualification criteria in form of reservation. The options though are effective in
empowering local firms they appear to be favoring large firms who are sometimes
57
having relations with foreign firms. In accordance with requirement of competitive
tendering for supplier to win a tender must pass preliminary examination which
basically examines compliance with administrative issues such as documentation and
formalities on tendering. For most of SMEs studies show they are disqualified at this
stage. To bring meaningful intervention to domestic firms other options such as
contractual conditions requiring foreign firms to subcontract certain percent to local
firms; product/service specification requiring foreign firm to use local material or
labor intensive in construction where applicable may be applied subject to
amendment of PPA 2004.
Fourth, the impact of applying margin of preference to of bidders was assessed.
Respondents were asked whether application of margin of preference increased
participation of domestic firms in public procurement market. The outcome of study
displayed in Figure 4.9 revealed that 88 percent of the respondents agreed that
margin of preference increased participation of domestic firms whereas 6 percent of
respondents partially agreed and 6 percent of the respondents disagreed.
Figure 4.9: Impact of margin of preference
Source: Researcher’s Field Survey 2013
The findings from study revealed that majority of respondents agree margin of
preference encourages domestic firms to participate in public procurement business.
However, the result seems to be inconsistent with responses in Figure 4.6 showing
58
level of awareness. One wonders if respondents are not applying or have difficult in
implementing the provision how they can reply the measure foster participation of
domestic firms in public procurement. It seems respondents replied based on their
theoretical knowledge and not from practical experience. This outcome may be
attributed from the way the questionnaire was set. In this study respondents were
asked whether margin of preference increased participation of domestic firms in
public procurement. Perhaps future research should be designed to go beyond by
seeking data from procurement records prove responses.
On the other hand the studies that were conducted by Procurement Research Group
in Ireland (2012) Pudderphat and Kaspar(2012) indicated application of preferential
procurement contributed to the participation of SMEs in public procurement market
but the value of contracts awarded to SMEs was relatively lower as compared to
large firms..
4.5.2 Bid securing declaration
In this segment the study examined three aspects. First, respondents were asked to
rate securing declaration in terms of significance for encouraging participation of
domestic firms in public procurement market.
In respect to ranking the factor, the study revealed that 50 percent of the
respondents’ ranked bid securing declaration as very significant factor for
empowering domestic firms, 25 percent of respondents rated the factor as significant
whereas 25 percent of the respondents negatively responded. The result of findings is
presented in Figure 4.10
Figure 4.10: Ranking of bid securing declaration
59
Source: Researcher’s Field Survey 2013
The outcome from the study revealed that majority of respondents considers bid
securing declaration as significant factor for encouraging participation of domestic
firms. The reasons for ranking highly the factor could be attributed from publicity
and simplicity in its application. Bid securing declaration was introduced by PPRA
in 2007 and guidelines for application was circulated to procuring entities and posted
in website.
However, the study exposed that this factor in some instances was not used by
procuring entities in accordance with requirement of PPA 2004 and related
Regulations. The respondents revealed that some procuring entities demanded
submission of bid security and bid securing declaration at the same time contrary to
regulations of procurement. Incapability in preparation of tendering document not
only affects the submission of responsive tenders by bidders, but also affects the
evaluation process hence unfair selection of winner of tender. This suggests there is
gap of knowledge on procurement professionals which require to be addressed.
Second, the study sought from respondents’ incidence of using bid securing
declaration. Respondents were asked how regularly they used the factor in
procurement of requirement. Further, respondents were requested to express
challenges if were any on implementing the factor.
The findings from the study as shown in Figure 4.11 revealed that 56 percent of the
respondents replied that they often used bid securing declaration when required. 44
60
percent of the respondents replied that they occasionally applied bid securing
declaration.
Figure 4.11: Application of bid securing declaration
Source: Researcher’s Field Survey 2013
The findings from the study indicate that majority of respondents often used bid
securing declaration as when required. Bid securing declaration as stated in literature
review was introduced in place of bid security which was considered to be
prohibitive for participation of domestic firms with limited capital. Essentially, it was
introduced to reduce financial burden of local bidders during tendering process.
However, from the study one of the challenges that were noticed is the limit of value
of tenders for applying the bid securing declaration. In accordance with 4th Schedule
of the Public Procurement( goods, works, non-consultants and disposal Public
Assets) G.N. No. 97of 2005, bid securing declaration is applicable for tenders falling
below Tshs one Billion for works, Tshs. 250 Million for goods and Tshs. 150 Million
for Non- consultancy services. Based on inflation and devaluation of currency the
amounts appear to be outdated.
These thresholds are not conducive for encouraging participation of domestic firms
especially SMEs. For instance, in the Daily News of May 10th 2013 the Prime
Minister’s Office, (Regional Administration and Local Government) advertised
tender for procurement of desks for primary schools in Tanzania mainland. This
61
tender was financed by cash refunded by the government of United Kingdom
through BEA System Plc which was involved in radar scandal. The method of
procurement was national competitive tendering under normal circumstance bid
securing declaration would be applicable.
Due to limits of application of bid securing declaration stated in Regulations, it
compelled the Ministry to request bidders to submit tender security amounting to
Tshs. 2,405,000 per lot. For majority of local suppliers the amount of bid security
was considered to substantial taking account some tenders had 8 lots. This implies
something need to done on limit of bid securing declaration to broaden the
participation of domestic firms in public procurement.
Thirdly, the study also sought to establish from procurement professional reasons for
applying bid securing declaration. The findings in Figure 4.12, shows that 50 percent
of the respondents applied bid securing declaration to comply with the PPA 2004; 37
percent of the respondents used the provision to encourage the participation of
domestic enterprises in public procurement market and 13 percent of the respondents
applied the provision for other reasons.
Figure 4.12: Reasons for applying bid securing declaration
Source: Researcher’s Field Survey 2013
62
The result shows that procurement professionals have varied interpretation on bid
securing declaration. One can say that, procurement professionals are not certain
with purpose of bid securing declaration.
Based on this feedback one is inclined to wonder why majority respondents are
aware with bid securing declaration, but are not applying the factor for intended
objective. In fact application of this measure is supposed to be straight forward.
According to Regulation 88 of G.N. No. 97 bid securing declaration is supposed to
be used when national and international competitive tendering is the mode of
procurement. Procuring entities when preparing tender document are required to
select either bid securing declaration or bid security and indicate which of the two
will prevail. During evaluation the process is simple. It is matter of testing
compliance by yes or no. It is seems there is a problem with procurement system
which hinders government institutions from complying with law. The purpose of bid
securing declaration is to stimulate the participation of domestic enterprises in public
procurement.
4.5.3 Packaging (splitting) of contract
In this section two aspects were assessed. First, the participants were asked to
mention reasons for packaging (splitting) contracts during tendering. The aim of
asking this question was geared to establish whether procuring entities package
contracts in accordance with requirement of the PPA 2004. Respondents were
provided three options to select: Allow participation of SMEs, contracts are scattered
and maximize competition.
The response from the study in Figure 4.13 displays that 56 percent of the
respondents applied contract packaging to allow participation of SMEs. 25 percent of
the respondents applied the factor because projects are scattered and 19 percent of
the respondents used the provision to maximize competition.
63
Figure 4.13: Reasons for packaging (splitting) of contract
Source: Researcher’s Field Survey 2013
From the study it can be generalized that majority of respondents split contracts to
encourage participation of domestics firms. It seems procurement professional are
aware of challenges facing domestic firms when competing with foreign bidders.
Most of local firms mainly SMEs have limited capital which hinders them to
participate in large contracts.
Contract packaging if properly administered has potential of stimulating participation
of domestics firms as it allows bidders with limited capability to submit tenders for
lot size they can afford. However, regardless of efforts to favor domestic firms
through splitting of contacts studies show that most of local bidders when they
participate in competitive tenders are disqualified during preliminary examination.
Nyongera Y. (2012). According to the author the reasons for disqualification are
mainly due inability to meet administrative requirements such as lack of signature
from authorized person, non-submission of guarantee documents and poor
presentation of documents.
64
Early exit of local bidders during evaluation of tenders for aforesaid reasons is
indication of limited capacity on supply side in tendering process. This calls for
intervention by the government and other stakeholders to address the weakness.
Second, the study examined whether respondents consider packaging (splitting) of
contract as significant factor for empowering domestic firms. The outcome in Figure
4.14, show that 50 percent of the respondents indicated that splitting of contracts is
very significant factor for empowering domestic firms; 13 percent of the respondents
rated the factor as significant, whereas 37 of the respondents replied that the
provision is slightly significant.
Figure 4.14: Ranking packaging (splitting) of contract
Source: Researcher’s Field Survey 2013
The findings from study demonstrate that majority of procurement practitioners rate
contract packaging (splitting) as significant factor for empowering domestics firms.
The result is line with requirement of the PPA 2004 and study conducted in
European Union and Sweden by Anderson (2002). The report of evaluation of SMEs
access public procurement in Europe revealed that splitting contracts into lots
contributed substantially towards participation of SMEs in procurement market.
65
Generally, breaking of contracts into small lots where appropriate widens the
participation of many bidders with different capability. However, this study revealed
that though the measure is effective tool for fostering participation of local bidders
sometimes, it does not directly favor domestic firms. The reason for that is
application of uniform qualification for all bidders. In many cases local firms
especially SMEs find difficult to win package as are disqualified for lack of
qualification. For example if tender require contractor with class one, it means even
when contracts are split is small chunks, lower class contractors will not qualify. But
if qualification were set based on lot size, it would be possible for bidders to compete
and win tenders in lot based on qualification. This implies that the application for
contract packaging needs to be improved by inserting conditions where appropriate
to favor SMEs.
4.5.4 Solicitation documents in Kiswahili
In this section three issues were examined. First, the study sought to establish
whether respondents are familiar with tender documents in Kiswahili. In terms of
awareness the study revealed that 44 percent of the respondents replied that they are
absolutely aware, 44 percent of the respondents responded that they were partial
aware and 12 percent of the respondents are not aware of tender documents in
Kiswahili as displayed in Figure 4.15
Figure 4.15: Awareness on tender documents in Kiswahili
Source: Researcher’s Field Survey 2013
66
From the findings it can be generalized that the procurement professionals are not
familiar with bidding document in Kiswahili.
This result may be attributed from the fact that S. 50 of the PPA 2004 provides that
the appropriate language for solicitation documents is English. Using Kiswahili
tender document is optional. On the other hand PPRA who are mandated by S.7 of
the same Act to prepare documents are yet to develop tender documents in Kiswahili
for competitive tendering. So far PPRA has released documents for noncompetitive
procurement methods which include Invitation for Quotations for Goods and Works
but, according to the Authority the job is in progress.
In absence of relevant documents in Kiswahili renders the measure ineffective and is
a setback to local suppliers who are not fluent in English. The most disadvantaged
are SMEs which are owned by majority of Tanzanian. From the experience most of
large contracts are won by foreigners and Tanzanian Asians who are fluent in
English based in urban areas. The potential beneficiaries of the PPA 2004 the SMEs
owned by indigenous Tanzanian especially those based in rural areas are
marginalized. To correct the imbalance the preparation of Kiswahili tender
documents using simplified version need to be hastened.
Second, the study examined the significance of tender document in Kiswahili for
empowering domestic firms. The outcome of ranking of tender document in Figure
4.16 shows that 63 percent of respondents replied that the tender document is not
significant factor in empowering domestic firms. The rest of respondents which
represent 37 respondents positively responded.
67
Figure 4.16: Ranking of tender documents in Kiswahili
Source: Researcher’s Field Survey 2013
The outcome of the study show that majority of respondents consider tender
document in Kiswahili is not significant factor for empowering domestic firms. This
suggests that procurement professionals do not consider language as barrier for
participation of local suppliers in public procurement market.
However, the finding from this study is contrary to studies that were conducted by
Lu and Zhou (2009) in Sweden and China. In their study they revealed that the use of
national language in public procurement was instrumental for empowering domestic
firms and stimulated innovation and economic development. Further the application
of national language in public procurement is in line with Article 13 of The
UNITRAL Model Law on Procurement (2011) which is considered to be foundation
of enactment of public procurement laws in the world. The Article specifies that the
solicitation documents should be formulated in States official languages or in
customary language used in international trade international. As informed in
preceding paragraphs PPRA is mandated to develop procurement documents in
Kiswahili, but this not easy task as most of government correspondent and education
system in Tanzania is in English.
68
4.6 Conclusion
This chapter has presented findings, data analysis, interpretation and discussions of
result based on data collected from the study entitled an assessment of the PPA 2004
in empowering domestic firms. The chapter started by presenting the profile of
respondents who were involved in the study. It was revealed that respondents were
gender balanced, experienced in their field with good education background.
The main body of this chapter provided analysis, interpretation and discussions based
on objectives of study: awareness on provisions; procedures of procurement and
factors for encouraging participation of domestic firms in public procurement
market. The outcome of study revealed varied results in terms awareness and
procedures of procurement. Procurement professionals were found to be familiar
while supply side was not. Margin of preference, bid securing declaration and
packaging of contract were found to significant factors for empowering domestic
firms.
It can be concluded that all key features essential for generation of general
conclusion and recommendation were identified.
69
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction
This chapter presents the summary of findings from analysis of primary and
secondary data collected. It also presents conclusion, recommendations on
empowering domestic firms through the PPA 2004 and areas for further studies.
5.1 Summary of Findings
The following is the summary of findings in this study.
The study revealed that procurement professionals are familiar with provisions of the
PPA 2004 for empowering domestic firms; but are less conversant in application of
provisions.
Similarly, respondents from the supply side were also found to be less familiar with
measures of governing law in public procurement which are meant to empower
domestic firms.
In regard to procedures for tendering, selecting and awarding contracts, the surveys
revealed that procedures were clear and conducive for empowering domestic firms.
Again, procurement practitioners were found to be less aware or reluctant in
complying with governing law in public procurement.
The study revealed that procurement officials who are responsible for managing
procurement process lacked authority though were accountable for their decisions.
This kept officials in awkward situation especially on implementation of preference
procurement geared to empower domestic firms.
70
Margin of preference; bid securing declaration and packaging (splitting) of contracts
were ranked as significant factors for fostering participation of domestic firms in
public procurement market. In respect to application of the provisions, procurement
professionals were found to be inept or less familiar.
Bidding document in Kiswahili was rated as insignificant factor in empowering
domestic firms though it is potential for stimulating participation of domestic firms
in public procurement. The study further revealed that tendering documents and
related forms in Kiswahili were not available as such application of the factor was
difficult.
The study revealed that there was no specific organization which is responsible for
development of local suppliers.
The study discovered that despite of applying provisions of PPA 2004 for
empowering domestic firms sometimes domestic firms did not benefit as uniform
qualifications during evaluation were applied for both large and small firms.
The limit of values specified in PPA 2004 and related Regulations for applying bid
securing declaration and margin of preference were outdated considering the
devaluation of currency and time factor of money.
The application of provisions for empowering domestic firms stated in the PPA 2004
was optional.
In general it was observed that capacity within procurement entities and supply side
on provisions empowering domestic firms through the PPA 2004 is limited.
71
5.2 Conclusion
The significance of participation of domestic enterprises in public procurement need
not to be emphasized as local firms contributes to economic growth and employment
of country. Cognizant to that the Government of Tanzania established the Public
Procurement Act 2004 to regulate procurement system and stimulate growth of
domestic firms. Founded on diverse reaction on empowering of domestic firms
through the Act, prompted this study to assess the law. The study specifically
examined awareness of provisions, procedures of procurement and factors fostering
domestic firms through PPA 2004.
Based on the findings evidenced by empirical study in chapter four, it can be
concluded that the objective of study was achieved. The study revealed that the PPA
2004 is potential for empowering domestic firms; procurement professionals are
aware of provisions stated in Act; procedures for tendering, selecting and awarding
tenders are understood; the provision for fostering participation of domestic firms:
margin of preference, bid securing declaration and contract packaging are significant
factors empowering domestic firms. However, procurement professionals were found
to be less familiar on implementation or reluctant to comply with law and supply side
has limited knowledge public procurement Act.
To make the governing law in public procurement effective on fostering participation
of domestic firms in public procurement; the imperfections on procurement
professionals need to be resolved through training and enforcement of law. On
supply side the government ought to craft long and short term strategies which
include sensitization on business opportunities in government and establishment
institution specifically to deal with development of domestic firms.
5.3 Recommendations
Founded on the findings from the study, the researcher recommends a number of
interventions to enhance the effectiveness of PPA 2004 in empowering domestic
firms as shown in subsequent paragraphs.
72
The knowledge on provisions for empowering domestic firms through PPA 2004
should be enhanced to procurement professionals through institutional training,
seminars, information sharing, mentoring and workshops.
Awareness campaign on role of the public procurement to the society should be
enhanced to stimulate the participation of domestic enterprises in public
procurement. This can be done by conducting seminars, workshops and
dissemination through television and radio.
Institution for development of local suppliers should be established by the
government
PPRA and other institutions responsible for public procurement should prepare
manuals to supplement public procurement regulations and guidelines.
The Authorities that are responsible for overseeing public procurement should also
device mechanism for enforcing of provision the Act which foster domestic firms.
Implementation of measures for empowering domestic firms should be included
among indicators for monitoring compliance with PPA 2004
PPRA should hasten the preparation of tender documents for competitive tendering
and related documents in Kiswahili. This should also involve creating simplified
documents which can be easily understood.
The PPA 2004 and related regulations should be revised to allow application of
dissimilar qualifications for bidders when contracts are split in small lots.
The limits of value for applying margin of preference and bid securing declaration
ought to be revised regularly or removed to broaden scope of participation of
domestic firms in public procurement market.
73
5.4 Areas for Further Studies
Based on results from this study, the researcher recommends, further research be
conducted by the following areas:-
• Factors which limit SME in accessing public procurement market
• The impact of frequent changes on governing law in public
procurement in empowering domestic firms
• Challenges of facing SMEs in competing with large firms in Tanzania
74
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PPRA Procurement Audits (2011)Round table on collusion and corruption in Public Procurement 2010organization for Economic Corporation and Development (OECD)
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Ssennoga, F. (2010). Discriminatory Public Procurement Policies Uganda. PHDDissertation
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78
APPENDICES
Appendix 1: Methods for Implementing Preferential Procurement Policies
Scheme Type Methods Action associated with the method
Reservation # 1 Set asides Allow only enterprises that have prescribed
characteristic to compete for the contracts or portions
thereof, which have been reserved for their exclusive
execution
# 2 Qualification
criteria
Exclude firms that cannot meet a specified requirement,
or norm, relating to the policy objective from
participation in contracts other than those provided for in
the law.
# 3 Contractual
conditions
Make policy objective a contractual condition e.g. a
fixed percentage of work must be subcontracted out to
enterprises that have prescribed characteristics or a joint
venture must be entered into
# 4 Offering back Offer tenders that satisfy criteria relating to policy
objectives an opportunity to undertake the whole or part
of the contract if that tenderer is prepared to match the
price and quality of the best received.
Preferencing # 5 Preferences at the Limit the number of suppliers/service providers who are
79
Scheme Type Methods Action associated with the method
short listing stage invited to tender on the basis of qualifications and give a
weighting to policy objectives along with the usual
commercial criteria such as quality, at the short listing
stage.
# 6 Award criteria
(tender evaluation
criteria)
Give a weighting to policy objective along with the usual
commercial criteria, such as price and quality, at the
award stage.
# 7 Product/service
specification
State requirements in product or service specifications
e.g. By specifying labour-based construction methods.
# 8 Design of
specification,
contract
conditions and
procurement
processes to
benefit particular
contractors
Design specifications and/or set contract terms to
facilitate participation by targeted groups of suppliers.
Supply side # 9 General
assistance
Provide support for targeted groups to complete for
business, without giving these parties any favorable
treatment in the actual procurement.
80
APPENDIX 2: RESEARCH QUESTIONAIRE
Direction:
Please read and answer question by ticking appropriate box and providing
description on the space provided where necessary.
Part I Profile of respondents
Please, fill some information about yourself as follows:
1. Gender : Male { } Female { }
2. Choose education background
{ } Advanced Diploma
{ } First degree
{ } Master Degree
{ } None of the above
3. Choose years of experience in service
{ } 1-5
{ } 5-10
{ } Over 10 years
PART II Questionnaire directed to officials responsible for procurement.
Procedures for Public Procurement
1.0 Are you familiar with procedures for procurement stated in the Public
Procurement Act 2004 and related Regulation?
Absolutely Yes { } Yes but not completely {} Do not know { } Not at all {
}
1.1 In your opinion would you say procedures of PPA 2004 are clearly
understood?
81
Absolutely Yes { } Not at all { } Yes but not absolutely { }
Do not know { }
Research Variable- Margin of Preference
2.0 Are you aware of provisions of PPA 2004 which encourage participation ofdomestic firms in Public Procurement?
Yes { } Yes but not absolutely { } Do not know { }
2.1 In your view would you say procedures for application of margin of referenceeasily understood?
Yes { } Yes but not absolutely { } Do not know { }
2.2 In your opinion do you agree that margin of preference stipulated in PPA2004 encourage participation of domestic enterprises public procurementprocess?
Yes { } Yes but not entirely { } Do not agree { }
2.2 If your answer is “NO” what do you think should be done?
……………………………………………………………………………..…
…………………………………………………………………………………
…………………………………………………………………………………
Research Variable – Bid Securing Declaration
3.0 Are you familiar with Bid Securing Declaration?
Yes { } Yes but not absolutely { } Do not know { }
3.1 For what reason do apply Bid Securing Declaration?
To comply with Act { } to encourage participation of domestic firms { }others { }
3.2 How frequently do you use Bid Securing Declaration?
82
Often { } rarely { } Not at all { }
3.3 In your opinion can you say that the application Bid Securing Declaration hasincreased participation of domestic bidders?
Yes { } No change { } Slight increase {
Research Variable Contract Packaging (Splitting)
4.0 Are you conversant with contract packaging?
Yes { } Yes but not absolutely { } Do not know { }
4.1 If your answer is “yes” for above have you ever applied it?
Never { } occasionally { } in all contracts whereappropriate { }
4.2 For what reason did you split contract?
To allow participation of SME { } Procurement scattered {} to maximizecompetition { }
4.3 Do you think splitting of contract increase participating of local firms inPublic Procurement Market?
Yes { } Yes but not absolutely { } No { } slightly increased {}
Research Variable – Solicitation Documents in Kiswahili
5.0 Are you familiar with solicitation documents in Kiswahili?Absolutely Yes { } Yes but not completely {} Do not know { } Not at all {
}
5.1 Have you ever used bidding documents in Kiswahili?
Never { } occasionally { } in all contracts whereappropriate { }
5.3 If “yes” what was the response of bidders?
Very high { } High { } Very Low { }
83
5.4 What challenges did you encounter using bidding documents in Kiswahili?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
6.0 The following is a list of factors considered to encourage participation ofdomestic firms in public procurement.
Rank on scale of 1-4 the factors in accordance with significance in youropinion.
1. Not significant 2. Slight significant 3. Significant. 4Very significant
No FACTORS RANKING
1 2 3 4
1. Margin of preference
2. Bid Securing Declaration
3. Contract packing(splitting)
4. Bidding documents in Kiswahili
7.0 In your opinion what other factors contribute to participation of domesticfirms in public procurement contracts?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Questionnaire directed to consultants and contractors
Part I Profile of respondents
84
Please, fill some information about yourself as follows:
1. Gender : Male { } Female { }
2. Choose education background
{ } Advanced Diploma
{ } First degree
{ } Master Degree
{ } None of the above
Part II General Questions
1. Which professional field do you belong?
Architecture { } Engineering { } Quantity Surveying { } Others { }
2. Which occupation do you belong to?
Consulting { } Contractor { } Both { } Others { }
3. Are you familiar with procedures of the Public Procurement Act 2004 and
related Regulations?
Yes { } Yes but not absolutely { } Do not know { }
4. In your opinion would you say procedures of PPA 2004 are clearly
understood?
Absolutely Yes { } Not at all { } Yes but not absolutely { } Do not
know { }
5. Have you been involved in preparation of specifications and tenders?
Yes { } Yes but occasionally { } Not all { } partlyinvolved { }
85
6. Are you familiar with provisions in the PPA 2004 which encourage
participation of domestic firms in public procurement market?
Yes { } Yes but not absolutely { } Do not know { }
6.1 If your answer is yes on the above question please, list down provisions
which encourage the participation of domestic firms.
…………………………………………………………………………………
…………………………………………………………………………………
6.2 In your opinion would you say the PPA 2004 foster participation of domestic
firms in public procurement market?
Absolutely Yes { } Not at all { } Yes but not absolutely { }
Do not know { }
6.3 If your answer is no what should be done?
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
86
APPENDIX 3: THE LIST OF MINISTRIES, PUBLIC AND PRIVATEINSTITUTIONS
A. Ministries
1. Ministry of Finance and Economic Affairs
2. Ministry of Education and Vocational Training
3. Ministry of Health and Social Welfare
4. Ministry of Natural Resources
5. Ministry of Works
6. Ministry of Industry, Trade and Marketing
7. Ministry of Agriculture, Food Security and Cooperative.
8. Ministry of Defense and National Service
9. Ministry of Land, Housing and Human Settlement
10. Ministry of Energy and Minerals
B. Public Institutions
1. Tanzania Road Construction Agency
2. Tanzania Communication Regulatory Authority
3. Medical Store Department
4. Bank of Tanzania
5. Tanzania Education Authority
6. Tanzania Commission for Universities
7. Tanzania Electrical Supply Company Ltd
8. Tanzania Revenue Authority,
9. National Examination Council of Tanzania
87
10. National Housing Corporation
C. Private Institutions
1. Mekon Arch Consult Ltd
2. Qd Consult (T) Ltd
3. Nosuto Associates
4. Plan Associates
5. Y&P Architects (T) Ltd
6. K.J. & Associates Ltd
7. AQE Associate Ltd
8. Perka Builders Ltd
9. AMAK Consulting
10. Prolaty Consult Ltd
11. Goch Consult Co. Ltd
12. Lawi Civil Works Contractors
13. SABUCO Ltd
14. K.J. Enterprises
15. Kwizumbe Builders Ltd
16. Nandhra Engineering & Construction Co. Ltd
17. Lukumbula Investment Co. Ltd
18. Estim Construction Co. Ltd
19. B. H. Ladwa
20. Caspian Ltd
