LGA PROCUREMENT CAPACITY BUILDING STRATEGY FORMULATION WORKSHOP - - PowerPoint PPT Presentation

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

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SITUATION DURING FY 2011/12

• 122 procuring entities for procurement carried
• ut in FY 2011/12.
• 41 MDAs,
• 46 PAs, and
• 35

35 LGAs.

• Special audit to Kinondoni

nondoni Mu Municipal cipal Council

• uncil

and TANROADS – Singida Region

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CONTRACTS AWARDED BY LOCAL GOVERNMENT AUTHORITIES (FY 2011/12)

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GOODS 24.96% WORKS 65.90% CONSULTANCY SERVICES 2.70% NON- CONSULTANCY SERVICES 6.34% DISPOSAL OF ASSETS 0.10% VOLUME OF AWARDED CONTRACTS BY 106 OUT OF 134 LGAs (TSHS. 395.7 BILLION)

COMPARISON OF CONTRACT VOLUMES OVER TIME (LGA)

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• 50,000

100,000 150,000 200,000 250,000 300,000 Goods Works Consultancy Non-Consultancy Disposal of Assets

Million 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

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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

• f 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

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GENERAL PERFORMANCE ASSESSMENT CRITERIA

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• Good
• d performance: ≥ 80 percent
• Fai

air performance: > 60 percent but < 80 percent

• Poor performance: ≤ 60 percent
• NO

NOTE TE

• The average per PE is calculated from the scores

achieved in each of the 13 indicators.

• The indicators carry equal weight

CHALLENGE: STAGNATING PERFORMANCE

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Audit Results 2011/12

80 74 74 58 78 85 65 90 81 82 63 55 71 10 20 30 40 50 60 70 80 90 100 1 2 3 4 5 6 7 8 9 10 11 12 13

SCORES (%) COMPLIANCE INDICATORS

74 63 72 47 71 77 60 83 73 68 54 55 68 10 20 30 40 50 60 70 80 90 1 2 3 4 5 6 7 8 9 10 11 12 13

SCORES (%) 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%

10 20 30 40 50 60 70 80 90 100 1 2 3 4 5 6 7 8 9 10 11 12 13 SCORES (%) COMPLIANCE INDICATORS

OVERALL MDAs PAs LGAs

ESTAB ABLIS LISHMENT HMENT AND ND COMPOSITION POSITION OF F TEND NDER ER BOARD ARD

• 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.

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ESTAB ABLIS LISHMENT HMENT AND ND COMPOSITION POSITION OF F PMU MU

• 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.

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Major r Weaknesse sses

MDAs PAs LGAs OVERALL Series1 78% 80% 63% 74% 78% 80% 63% 74% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% AVERAGE COMPLIANCE

Inappr ppropriat priate e establi ablishment shment of Procuremen ement t Managemen agement t Un Units ts

ANN NNUAL AL PROCU CUREMENT REMENT PLA LAN

• 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.

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Major r Weaknesse sses

Inappr ppropriat priate e preparat atio ion n of annual al procureme urement nt 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% AVERAGE COMPLIANCE

PUBLI BLICATION TION OF F CONT NTRA RACT CT AWARDS ARDS

• 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;

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Major r Weaknesse sses

Failure ure to publish ish contract tract 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% AVERAGE COMPLIANCE

KEEPI PING NG OF F PROCUREM CUREMENT ENT RECORDS RDS (1 (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;

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KEEPI PING NG OF F PROCUREM CUREMENT ENT RECORDS RDS (2 (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.

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Major r Weaknesse sses

Poor Recor

• rds

ds Keeping ng MDAs PAs LGAs OVERALL Series1 68% 66% 54% 63% 68% 66% 54% 63% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% AVERAGE COMPLIANCE

CONT NTRA RACT CT MANA NAGEMENT GEMENT (1 (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.

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Major r Weaknesse sses

Weak contracts tracts management gement 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% AVERAGE COMPLIANCE LEVEL

VALUE FOR MONEY AUDITS Total: tal: 137 Contrac tracts ts for Mainly inly Bu Buildings ldings and nd Roads ads

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SA SAMPLING MPLING OF PROJE JECT CTS S FOR R VF VFM AUDIT IT

 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%).

OVE VERAL RALL L PER ERFORMAN ORMANCE CE

• Performance criteria:
• > 75 percent: Go

Good

• d
• 50 - 75 percent: Fair
• < 50 percent: Poor
• or
• 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%.

OVE VERAL RALL L PER ERFORMAN ORMANCE CE

 Road

ad-works ks mana anagem gement nt 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 DS Planning 74 86 Procurement 74 86 Contract Administration 61 82 Quality of Works 73 78

OVE VERAL RALL L PER ERFORMAN ORMANCE CE

 Bu

Building ilding contracts tracts management agement in LGAs, PAs and MDAs indicated a slight difference in performance.

 LGAs 68%  PAs 72%  MDAs 82%

LGAs As MDAs As PAs As 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

he way we e def efine ine our req equirements uirements

• 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
• r 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

• Ma

Major weakne aknesse sses: s:

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
• ut 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

• f 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

• r donors;
• Weak monitoring of contracts characterized by lack
• f 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

• f 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

• f 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

• f 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
• r for works not executed.

QUEST STIONABL ONABLE E PAYM YMEN ENTS TO CONT NTRA RACT CTORS ORS (1 (1)

• After joint site inspections and measurements
• f 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.

NE NEW IND NDIC ICATORS ORS FOR PROCUREME OCUREMENT NT AUDIT DITS S (1 (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 10 20 30 40 50 60 70 80 90 1 2 3 4 5 6 7

SCORES (%) 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

mance Tar arge gets ts

• 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.