Challenges faced by the procurement function

The PPA (2003) number 8 regulates procurements. This law promotes fairness and transparency during public procurement. Like in Uganda, city councils in Malawi have been faced with several challenges. For instance, the Law in Section 9 and 10 requires that all procuring entities employ qualified experts to achieve its objectives. This assumed that experts would easily understand procurement issues and trends. However, the complex nature of the councils makes it hard for the procurers to discharge their functions (Kanyongolo, et,al., 2014). Against this background, emerged the decentralisation of public procurement in the Local Government (LG). This did not mean that the Local Government Act (1998) was not available. Rather, the then law placed procurement at the Secretariat of the LG and it was centralised. The reason for decentralizing

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procurement was that it should provide more support to end-users, reduce bureaucracies, improve coordination, and empower departmental heads to buy what they really needed in time (Maoni, 2013 & Obanda, 2010). According to O’Neil and Cammack, (2014) despite these developments, procurement functions are still no way near Sections 9 and 10 of the PPA, (2003) which requires that the function be strategic, and play advisory role to management (Kanyongolo, 2013; Obanda, 2010; Basheka, 2008; Agaba & Shipman, 2015). Furthermore, the ODDP’s mandate is still limited to recommendation, even though it has made significant strides in trying to mitigate the challenges that were common in the LG Secretariat. Likewise, the efforts by the ODPP have paid insignificantly.

There are also some studies that have identified the reasons that stifled compliance with PPPs at the LG and these are:

Nature of funding for some projects like the CDF and LDF. The CDF was initiated in 2000 when President Mutharika was faced with political resistance from the opposition MPs, who wanted to impeach him based on their numerical power. Desperately agitating for their support, Mutharika initiated the CDF to hood wink the MPs. Today, MPs get MK18 million per annum for their constituencies. This money is spent on projects identified by the MP at constituency level. Many MPs however, take this money as their own and spend it willy-nilly (O’Neil & Cammack, 2014) and spend them without following procurement Laws. O’Neil and Cammack, (2014) also added that CDF projects are used to harness votes from the electorate. The result is that the funds are abused by the MPs since they are not held accountable by any Law enforcement agencies.

On the other hand, LDF replaced the Malawi Social Action Fund (MASAF). The LDF basket receives much of its funding from donors. LDF aims to empower local communities to take part in the decision-making processes through improved local governance and development. This also seeks to reduce poverty and improve service delivery according to (O’Neil, T. et.al., 2014). Village development committees (VDCs) manage the projects and do all the buying. Unfortunately, VDCs lack technical capacity to manage these funds (Moyo, 2015). They also lack public procurement skills resulting into bad procurements and no VFM. Fraud and corruption are common of the VDCs (Thombozi, 2015).

2.6.1 Political interference

Political interference is a big challenge in the councils. The councillors together with some MPs affect implementation of public procurement reforms in councils. They think that they have the right to interfere with the procurement processes without any penalties.

2.6.2 User departments interference

The end-users play a very important role in procurement processes, and are key stakeholders. They are responsible for initiating procurements and prepare specifications of their requirements. At tender evaluation, end-users maybe consulted to mitigate errors in the supplies. As soon as the bidder is selected, the procurement department manages the administration of the contract. Since this is operational, it sometimes is easy to assign it to the end-users. Such an arrangement VFM as it increases compliance with technical specifications. However, this may mislead end-users into

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assuming procurement roles. When users assume the role of procurers, they solicit bids and select suppliers thereby contravening the PPPs.

2.6.3 Lack of capacity in procurement auditors

One of the major mandates of the ODPP is to monitor compliance levels. I cases where violations of the law are discovered, they are supposed to be referred to the Auditor General and the ACB S5 (2e & h) of PPA (2003) for action. However, Malawi does not have enough qualified human resource to conduct procurement compliance audits (SGS, 2011). The SGS also observed that there was lack of technical knowledge among the ODPP staff hence not enough attention is paid to technical specifications during bid evaluation. The ODPP has 24 workers: 11 procurement professionals, a lawyer, two engineers, two HROs, two accountants, four registry officers and two IT officers. Procurement compliance and functions here revolves around the 11 professionals who are involved in PPPs trainings and compliance audits. However, there is high-rate of turnover among procurement professionals at the ODPP. Most of them have resigned for greener pastures elsewhere. Even then, meaningful procurement audits can enhance compliance levels and professionalism but this becomes possible when staffing levels are sufficient.

2.6.4 Limited number of schools offering procurement courses

Following the reforms in public procurement in Malawi, there was need for the country to have adequate procurement professionals. Since 2004, there has been a limited qualified procurement professional in Malawi. Most procurers hold certificates and diplomas from the CIPS. Much as the CIPS is the ultimate authority in procurement, it is high time Malawi Universities introduced degree programmes in procurement to fill the gaps. The Malawi Polytechnic has nonetheless courses in Logistics and Supply Chain but this is not really procurement. It produces nearly 25 graduates each year but even then, this figure is a far cry. Figure 2.8 presents the total number of procurement professions grouped according to their highest qualification as at the end of 2014. The information presented is based on annual membership records from CIPS, the ODPP and the Malawi Polytechnic.

Figure 2.8. Changes in buyer education levels since 2004 – 2014

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2.6.5 Lack of procurement planning

Procurement is a constitutional requirement for all procuring entities as S21 reads, “Procuring entities shall plan procurement with a view to achieving maximum VFM and other objectives set- forth in this Act, and in accordance with the applicable budgetary procedures”. However, the ODPP (2011) report revealed that there was lack of procurement planning in the councils, which has affected compliance levels.

2.6.6 Lack of goodwill by top management

Wide spread consensus has emerged in the procurement field arguing that procurement activities might be allocated to the categories of strategic levels (Ramsay & Croom, 2008). Activities such as assisting user departments in preparing detailed specifications, negotiating with suppliers, and outsourcing none core functions of the firms have given the procurement function sufficient time to concentrate on other important functions. This fact is also supported by the PPA, (2003) which stipulates that the procurement function should be at strategic level and be managed by well- trained officers (Ss 10 & 11). However, in the city councils the procurement structure may not positively contribute effectively due to the organic structures. For example, (O’Neil & Cammack, 2014) revealed that the structural level of procurement function is below other functional departments. There is also lack of support from the CEOs to promote the function as anticipated by the PPA (2003).

2.6.7 Lack of knowledge in the PPPs

The assessment report of Malawi Government on public procurement revealed that most members of staff at the councils responsible for procurement are not conversant with their roles (SGS, 2011). The report contended that, application of the PPA and Standard Tender and Contract Documents would not be successful without proper training. The SGS report also spotted lack of training for procurement managers as a problem that affected the implementation procurements.

2.6.8 Corruption

It is important to distinguish corruption from inefficiencies in procurement. Since these problems go together trade-offs must come into play. For example, choosing to speed up procurement by choosing incompatible method with a threshold might compromise fairness, competitiveness and transparency. It would of course be speedy but not transparent and fair. There are many solutions available to these problems. The procurement cycle needs to be monitored continuously as a mitigation strategy. Supervision plays a key role since good rules are necessary but not always enough to curb corruption. It is therefore important to have clear procedures and audits by qualified parties (SGS Report, 2011). Moreover, the audit report conducted by SGS (2007 and 2011) revealed that councils were not making progress in PPPs leaving them open to fraud and corruption (ODPP/03/130/2011/1)

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2.6.9 Lack of training for service providers

Many suppliers lacked basic knowledge of the basic law on standard tender documents, access to tender information and technical skills to be competitive bidders (ODPP Annual Report, 2007 & ODPP Audit Report, 2011).

2.6.10 Lack of proper structure and poor salaries

There was also lack of proper structure for the procurement staff in the councils despite the existing structures created by the PPA. The result was that career development for staff did not have a proper path. Their salaries were likewise very low. Capacity building was very limited or non-existent. This had a negative connotation on levels of compliance. Under Sections 10 and 11, it was a constitutional requirement for procurement function to be in place and have proper structures for them to realise VFM. Twelve years after the PPA, the LG is still struggling to properly recognise the procurement function. The figure below shows the current structures in the councils:

Figure 2.9: Basic LG structures and relationships

Source: O’Neil & Cammack (2014)