LGA PROCUREMENT CAPACITY BUILDING STRATEGY FORMULATION ... · authorities project (epc – lgap)...
Transcript of LGA PROCUREMENT CAPACITY BUILDING STRATEGY FORMULATION ... · authorities project (epc – lgap)...
ENHANCEMENT OF PROCUREMENT CAPACITY OF LOCAL GOVERNMENT AUTHORITIES PROJECT (EPC – LGAP)
LGA PROCUREMENT CAPACITY BUILDING
STRATEGY FORMULATION WORKSHOP
PROCUREMENT COMPLIANCE & PERFORMANCE
AS PER THE AUDIT RESULTS
Dodoma, 11-13 June 2013
1
PMO-RALG
OUTLINE OF PRESENTATION
Introduction
Volume of Awarded Contracts in LGAs
Procurement Audit Results and LGA Weaknesses
Value for Money Audit Results and LGA Weaknesses
New Procurement Audit Indicators
Concluding Remarks
2
SITUATION DURING FY 2011/12
122 procuring entities for procurement carried
out in FY 2011/12.
• 41 MDAs,
• 46 PAs, and
• 35 LGAs.
Special audit to Kinondoni Municipal Council
and TANROADS – Singida Region
3
CONTRACTS AWARDED BY LOCAL GOVERNMENT
AUTHORITIES (FY 2011/12)
4
GOODS24.96%
WORKS65.90%
CONSULTANCY SERVICES
2.70%
NON-CONSULTANCY
SERVICES6.34%
DISPOSAL OF ASSETS0.10%
VOLUME OF AWARDED CONTRACTS BY 106 OUT OF 134 LGAs (TSHS. 395.7 BILLION)
COMPARISON OF CONTRACT VOLUMES OVER TIME (LGA)
5
-
50,000
100,000
150,000
200,000
250,000
300,000
Goods Works Consultancy Non-Consultancy Disposal of Assets
Mill
ion
Tshs
.
FY 2007/08 FY 2008/09 FY 2009/10 FY 2010/11 FY 2011/12
PROCUREMENT AUDIT COMPLIANCE AND PERFORMANCE
INDICATORS (1) Ind. No. Indicator Compliance Data
1. Appropriate establishment and composition of tender boards
Existence of a tender board in accordance with the requirements of the Act and Regulations
2. Appropriate establishment and composition of PMUs
Existence of a PMU in accordance with the requirements of the Act and Regulations
3. Independence of functions Percentage of tenders in which there was no interference between individual functions
4. Appropriate preparation and implementation of procurement plan
Prepared and properly implemented annual procurement plan
5. Complying to compulsory approvals
Percentage of tenders/contracts which received all compulsory approvals in various processes
6
PROCUREMENT AUDIT COMPLIANCE AND PERFORMANCE
INDICATORS (2) Ind. No. Indicator Compliance Data
6. Appropriate advertisement of bid opportunities
Percentage of open bidding procedures publicly advertised
7. Complying with publication of awards
Percentage of contract awards disclosed to the public
8. Adequate time for preparation of bids
Percentage of tenders complying with the stipulated time in the Act and regulations
9. The use of appropriate methods of procurements
Percentage of tenders using authorized methods of procurement in accordance with their limits of application
10. The use of standard tender documents
Percentage of tenders using standard/ approved tender documents
11. Proper keeping of procurement records
Percentage of tenders with complete records
12. Availability of quality assurance and control systems
Percentage of tenders with adequate quality assurance and control systems
13. Appropriate contract implementation
Percentage of contracts which have been implemented as per the terms of contract 7
GENERAL PERFORMANCE ASSESSMENT CRITERIA
8
Good performance: ≥ 80 percent
Fair performance: > 60 percent but < 80 percent
Poor performance: ≤ 60 percent
NOTE
The average per PE is calculated from the scores
achieved in each of the 13 indicators.
The indicators carry equal weight
CHALLENGE: STAGNATING PERFORMANCE
9
Audit Results 2011/12
8074 74
58
7885
65
90
81 82
63
55
71
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8 9 10 11 12 13
SCO
RES
(%)
COMPLIANCE INDICATORS
74
63
72
47
7177
60
83
7368
54 55
68
0
10
20
30
40
50
60
70
80
90
1 2 3 4 5 6 7 8 9 10 11 12 13
SCO
RES
(%)
COMPLIANCE INDICATORS
14 PEs (40%) – Poor Performance;
16 PEs (46%) – Fair Performance;
5 PEs (14%) – Good Performance
Hai District Council – 86%
Mbozi District Council – 53%
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8 9 10 11 12 13
SCO
RES
(%)
COMPLIANCE INDICATORS
OVERALL MDAs PAs LGAs
ESTABLISHMENT AND COMPOSITION OF TENDER BOARD
Average level of compliance: 74 percent
9 out of 35 audited LGAs: unsatisfactory
performance in this indicator
Weaknesses:
Failure to inform PPRA on the composition of TB
and the qualification of its members pursuant to
Section 29(1) of PPA 2004;
Tender board members have limited knowledge on
application of PPA and its Regulations.
13
ESTABLISHMENT AND COMPOSITION OF PMU
Average level of compliance: 63 percent
18 out of 35 PEs (51%): unsatisfactory
performance in this indicator
Weaknesses:
PMU established as a committee rather than a fully
fledged and staffed unit;
Limited knowledge on application of PPA and
Regulations;
Staff of PMU lack the necessary qualifications;
Inadequate office space and working tools.
14
Major Weaknesses
MDAs PAs LGAs OVERALL
Series1 78% 80% 63% 74%
78% 80%
63%
74%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AV
ERA
GE
CO
MP
LIA
NC
E
Inappropriate establishment of Procurement Management Units
ANNUAL PROCUREMENT PLAN
Average level of compliance: 47 percent
26 out of the 35 audited (74%) had unsatisfactory performance, 9 PEs scored 20 percent and less;
Weaknesses:
Not using appropriate APP template;
Incorrect tender numbering and referencing;
APP hardly followed during implementation;
TB meetings not properly planned;
Requirements not properly aggregated;
Tender processing times not properly allocated.
16
Major Weaknesses Inappropriate preparation of annual procurement plans
MDAs PAs LGAs OVERALL
Series1 68% 57% 47% 58%
68%
57%
47%
58%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AV
ERA
GE
CO
MP
LIA
NC
E
PUBLICATION OF CONTRACT AWARDS
Average level of compliance: 60 percent;
17 out of the 35 audited (49%) had
unsatisfactory performance, 5 PEs scored 0
(zero) percent in this indicator.
Weaknesses:
Failure to disclose to the public (newspapers, notice
boards) the awarded contracts;
Sometimes unsuccessful bidders are not notified;
Failure to notify PPRA;
18
Major Weaknesses Failure to publish contract awards
MDAs PAs LGAs OVERALL
Series1 65% 68% 60% 65%
65%68%
60%65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AV
ERA
GE
CO
MP
LIA
NC
E
KEEPING OF PROCUREMENT RECORDS (1)
Average level of compliance: 54 percent
22 out of the 35 audited (63%) had
unsatisfactory performance, 16 PEs scored
below 50 percent;
Weaknesses:
Lack of a comprehensive list of records for all tenders
managed by PMU;
Tender records had not been systematically filed, but
scattered in many different files, audit trail made difficult;
Failure to maintain a register of all awarded contracts;
20
KEEPING OF PROCUREMENT RECORDS (2)
Weaknesses:
Project files miss: Annual Procurement Plan (APP) or General Procurement Notice (GPN)
Tender Board approval for draft advert and bidding document
Bids submitted by bidders
Minutes of tender opening: Tender Opening Register, read out prices, tender opening checklist, etc
Letters of appointment of evaluation committee
Signed personal covenants forms for TB as per Section 86(6) and Reg. 101(6) of GN No.97,
Negotiation plan
Names and appointment of negotiation team
Handing over report
Progress Reports;
Final certificates;
Inspection and Acceptance Reports.
Drawings
Complaints register
Claim management and
Payment records.
21
Major Weaknesses Poor Records Keeping
MDAs PAs LGAs OVERALL
Series1 68% 66% 54% 63%
68% 66%
54%
63%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AV
ERA
GE
CO
MP
LIA
NC
E
CONTRACT MANAGEMENT (1)
Average level of compliance: 55 percent on Quality Cotrol and 68 percent on Contract Management
25 out of the 35 audited (71%) had unsatisfactory performance, 9 PEs scored 20 percent and less;
Weaknesses: Inspection and acceptance committees not appointed;
No quality assurance plan for works, consultancy and non-consultancy services;
Lack of supervision of consultancy services;
Interim and contractual certificates not issued properly;
Variation orders issued without following proper procedures;
Extension of time granted without justifiable reasons;
Most of the payments to service providers not made on time; and
Payments for work not undertaken or substandard work.
23
Major Weaknesses Weak contracts management
MDAs PAs LGAs OVERALL
Quality Contr 56% 55% 55% 55%
Contracts Man. 72% 74% 68% 71%
56% 55% 55% 55%
72% 74%68% 71%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%A
VER
AG
E C
OM
PLI
AN
CE
LEV
EL
VALUE FOR MONEY AUDITS
Total: 137 Contracts for
Mainly Buildings and Roads
25
SAMPLING OF PROJECTS FOR VFM AUDIT
89 contracts audited in LGAs with a total value of Tshs. 19,186,353,909.50 (8% by value)
20 contracts audited in Public Authorities (PAs) with a total value of Tshs. 69,969,468,937.80 (29%) and
28 contracts audited in MDAs with a total value of Tshs. 150,112,803,252.54 (63%).
OVERALL PERFORMANCE
Performance criteria: > 75 percent: Good
50 - 75 percent: Fair
< 50 percent: Poor
Average PEs performance indicated
14 of the audited 36 PEs performed well (above 75%);
Remaining 22 entities performed fairly (between 50% and 75%);
LGAs performed fairly at a score of 70% while
PAs performed fairly at score of 71%; and
MDAs performed fairly at score of 74%.
OVERALL PERFORMANCE
Road-works management in LGA’s and TANROADS indicated a significant difference in performance.
LGA’s Performance was rated fair at 71% while in TANROADS it was rated good at 80%.
LGAS TAN
ROADS
Planning 74 86
Procurement 74 86
Contract Administration 61 82
Quality of Works 73 78
OVERALL PERFORMANCE
Building contracts management in LGAs, PAs and MDAs indicated a slight difference in performance. LGAs 68%
PAs 72%
MDAs 82%
LGAs MDAs PAs
Planning 70 74 74
Procurement 70 77 81
Contract
Administration
54 77 69
Quality of Works 72 87 70
PLANNING
The overall score
for planning was
assessed to be
fair at 73%.
LGAs 73%
while
PAs 72% and
MDAs 73%
Performance in Terms of PEs
PLANNING
Major weaknesses:
Poor packaging of works contracts;
Inadequate designs;
Unrealistic pre-tender estimates;
inaccurate computation of quantities in the bills of quantities
due to inadequate or lack of assessment of site locations;
incomplete and ambiguous drawings;
The deficiencies in the designs, drawings and bills of quantities
caused unnecessary variations to the works thus increasing
projects costs.
Unrealistic contract period established by the PEs;
contract durations were not estimated based on the nature and
complexity of the works as well as location of the site.
Needs assessment, planning and budget
Is our needs assessment adequate?
How do we budget ? Is it realistic, or is it deficient?
Is our procurement planning proper? Is it aligned
with the PE’s overall investment/spend decision
making process?
Any interference in the decision to procure? By
whom, and whether authorized?
Do we have formal contracts? Checked and
Validated by Legal Officer?
PRE-BIDDING STAGE OF PROCUREMENT (1)
The way we define our requirements
Technical specifications:
Are they vague or not based on performance or
functional requirements?
Targeting a particular brand or economic operator?
Selection and award criteria:
Are they clearly and objectively defined?
Are they established/announced before the closing of
the bid?
PRE-BIDDING STAGE (2)
PRE-BIDDING STAGE (3)
Choice of procurement method/procedure
Procurement strategy: do you consider the value,
complexity and administrative costs?
Abuse of non-competitive methods/procedures:
deliberate splitting, emergency, and running
contracts
Time given to bidders
Is the timeframe consistently applied to all bidders
or some get information earlier than others?
Is the timeframe provided sufficient to ensure a level
playing field
PROCUREMENT
The overall score for
procurement was
assessed to be fair
in LGAs and PAs
and good in MDAs:
LGAs - 73%
PAs – 74%
MDAs – 80%
Performance in Terms of PEs
PROCUREMENT
Major weaknesses:
Inappropriate procurement planning causing delays
in implementing PE’s plans, ad-hoc procurements,
and use of inappropriate procurement methods
(excessive use of direct contracting/single source
procurement);
Improperly prepared tender and contract documents
- Standard tender/contract documents were not
used for of the reviewed tenders contrary to
Regulation 83(3) of GN. No. 97/2005.
BIDDING STAGE
Invitation to bid
Is information on the procurement opportunity provided in a consistent manner (public notice)?
Is sensitive or non-public information disclosed?
Is there adequate competition?
Are collusive bidding or illegal price fixing prevalent?
Award of contract
How is the evaluation process free of conflict of interest and corruption?
Is there sufficient access to record on the procedure used?
Can unsuccessful bidders challenge a procurement decision?
CONTRACT ADMINISTRATION (1)
The overall score on
contract
administration was
assessed to be fair at
60%;
4 LGAs which
performed poorly.
Performance in Terms of PEs
CONTRACT ADMINISTRATION (2)
The situation is alarming in LGAs where only 18
out of 89 projects (20%) with a total value of
Tshs 3,409,676,109.15 (18% by value) had
good performance in contract administration.
That means, 80% of the audited contracts with
a total value of 15,766,677,800.35 (82% by
value) were assessed to have unsatisfactory
contract administration.
CONTRACT ADMINISTRATION (3)
Major Weaknesses:
Performance securities were not submitted as per
terms and conditions of the contract leaving the
PEs with no leverage in cases where contractors
failed to perform;
Extension of times were granted without extending
the Performance Securities;
Performance securities expired without extending
them.
Site possessions were not given as per terms and
conditions of the contract which led to extension
of time for most of the contracts.
CONTRACT ADMINISTRATION (4)
Major Weaknesses:
Delayed payments of contractors and consultants
caused by erratic cash flows from the government
or donors;
Weak monitoring of contracts characterized by lack
of project progress reports, lack of site
management meetings, and lack of project
completion reports;
Non-enforcement of liquidated damages clause.
CONTRACT ADMINISTRATION (5) Major Weaknesses:
Issuing variation orders without following appropriate procedures; There were cases where the supervising
engineers/technicians issued instructions to vary the works without getting prior approval of the tender board and Accounting Officer.
Issuing extension of time without justifiable reasons and without following appropriate procedures;
Incomplete and inadequately prepared payment certificates; they lacked measurement and take-off sheets to justify the
quantities paid, and in some cases certification was made for works which did not exist.
Poor records keeping.
CONTRACT ADMINISTRATION (6)
Major Weaknesses:
Variations orders not sanctioned by the appropriate
Tender Boards as per Regulation 117 of G.N. No. 97
of 2005;
Advance payments without guarantee although it
was stipulated in the contracts;
Non-enforcement of performance securities and
insurance covers although they were stipulated in
the contracts;
Site management meetings were not held as per
terms and conditions of the governing the contracts.
CONTRACT ADMINISTRATION (7) Major Weaknesses:
Delays in contracts execution; small contracts were executed for three years; resulting in huge cost overrun;
Final inspection reports prior to issuing practical completion reports were not done to prepare a snag list of the works to be rectified during Defect Liability Period;
Inadequate supervision of the consultant contracts;
Consultants failure to produce complete designs and specifications;
Consultants not mobilizing all key personnel earmarked for the assignment and PEs not taking any action as per provisions of the contract;
Consultant not submitting reports on time or not submitting the report at all.
QUALITY OF WORKS (1)
The overall
score on quality
of works was
assessed to be
fair at 73%.
Performance in Terms of PEs
QUALITY OF WORKS (2)
Major Issues
Lack of/or inadequate quality control system in
checking and approving the designs, drawings,
specifications, bills of quantities, payment
certificates, pre-tender estimates , etc; and
Weak / Inadequate supervision of construction
contracts and consultancy services caused by
inadequate qualified staff and inadequate
supervision vehicles/ motorcycles.
QUALITY OF WORKS (3)
Major Issues
Lack of quality control tools and equipment
leading to failure to test materials and completed
works, i.e. simple tools like camber board; ditch
template, etc;
Vandalism of the road furniture i.e. road signs;
Lack of honesty/integrity among the supervising
engineers and technicians. Although poor quality
works were observed by the audit team, most of
them had already been certified by the project
supervisors and paid.
POST-BIDDING STAGE (1)
Contract management
How is the performance of the economic operator
monitored? Is there sufficient supervision?
How do we handle variations and change in
contract conditions?
Do we certify product substitution, sub-standard
works or services?
Are sub-contractors chosen in a transparent
manner, and are they kept accountable?
POST-BIDDING STAGE (2)
Contract payment
False accounting and cost misallocation;
Late payment of invoices;
False invoicing for goods or services not supplied
or for works not executed.
QUESTIONABLE PAYMENTS TO CONTRACTORS (1)
After joint site inspections and measurements
of actual works by the auditors questionable
payments were revealed:
Payments for items of works not done;
Double payment for an item;
Payments for items whose specifications were;
changed not prior approved;
Payment for inflated quantities;
Overpayments; in 2010/11 VFM audit.
NEW INDICATORS FOR PROCUREMENT AUDITS (1)
Appropriateness and efficiency of the Institutional setup (15 points);
The appropriateness of the established TB;
Appropriateness of the established PMU;
Knowledge of the TB members and PMU staff in applying the PPA and procurement regulations;
The efficiency of the AO, TB, PMU, and UD in performing their responsibilities stipulated in the PPA;
Interference of responsibilities and powers; and internal control systems.
NEW INDICATORS (2)
Appropriate preparation and efficiency in
implementing the annual procurement plan (15 points)
The use of appropriate templates;
Appropriate tender numbering;
Appropriate allocation of tender processing time;
Aggregation of requirements;
Arrangement of TB meetings;
Approvals;
Advertisement of the plan to the public;
Adherence to the plan; and
Efficiency in implementing the plan.
NEW INDICATORS (3)
Appropriateness of the tender process (30 points)
Preparation of tender documents;
the use methods of appropriate procurement methods;
Appropriate publication of bid opportunities;
adequacy of time given to bidders to prepare bids;
submission of tender adverts to PPRA;
receiving and opening of bids;
evaluation of bids;
mandatory approvals;
award communication;
publication of awards;
notification of unsuccessful bidders; and
submission of contract completion reports to PPRA.
NEW INDICATORS (4)
Appropriateness of contract implementation
(20 points)
Proper signing of contracts;
Existence and qualifications of contracts
managers;
Management of contract performance securities;
Management of time control issues;
Management of quality control issues;
Management of scope control issues; and
Management of cost control issues.
NEW INDICATORS (5)
Records keeping (10%)
Availability of complete records;
Arrangement of procurement information;
Location of procurement information;
Availability of adequate space for keeping
procurement documents; and
Availability of adequate shelves, cabinets, etc.
NEW INDICATORS (6)
Implementation of systems prepared by PPRA
(PMIS and/or CMS) (10 points)
Submission of APP;
Timely submission of APP;
Submission of procurement reports for individual
tenders;
Submission of monthly procurement reports;
Submission of quarterly procurement reports; and
Submission of annual procurement report.
NEW INDICATORS (7)
Handling of complaints and application of margin of preference (-10 points)
In addition to the above six main indicators, PEs will be assessed whether:
they have handled properly and timely complaints properly submitted by bidders; and
they have allowed and applied where applicable, margin of preference in accordance to the provisions in the PPA and Regulations.
Depending on the number of mishandled cases, PEs can be penalized to the maximum of ten points.
73
67
77
70
50
20
00
10
20
30
40
50
60
70
80
90
1 2 3 4 5 6 7
SCO
RES
(%)
COMPLIANCE INDICATORS
Av. Compliance 65%
NEW INDICATORS
Average level of Compliance 65%
MDAs - 69%;
PAs – 67%
LGAs – 57%
Performance of PEs
37 (30%) – Poor Performance;
72 (59%) – Fair Performance;
13 (11%) – Good Performance
NEW INDICATORS
Performance Targets
Baseline = Current score using new indictors –
65%
2012/13 = Baseline + 5% = 68%
2013/14 = Baseline + 10% = 72%
2014/15 = Baseline + 15% = 75%
2015/16 = Baseline + 20% = 80%
CONCLUDING REMARKS
Let us establish:
What capacity is necessary in LGAs in order to
improve compliance and performance from 57% to
> 80%;
What is lacking in capacity and the root causes;
What should be the priority areas;
What actions are necessary to fill the gap in the
priority areas; and
What resources are required and how they will be
prioritized and allocated by LGAs to strengthen their
procurement performance.