CHAPTER 2 LITERATURE REVIEW
4.2 Procurement reports submitted to the ODPP by case study organisations
4.2.1 Implications of results on table 4.4
The analysis of the PPPs reveals that the PPA (2003) processes are faced with a lot of challenges. An overview of this is given below:
An effective supplier selection process is very important to the success of any organisation. This process is based on well-defined supplier selection criteria. The main objective of supplier selection process is to reduce procurement risks, maximise VFM and to develop business relationships between the procurer and suppliers (Bhutta, & Khurrun, 2003). According to Tirchelvam and Tookey, (2011); Qiao and Cummings, (2003); Boer et.al, (2000); Pal et.al, (2013); Tahriri, et.al, (2008) and Obanda, (2010), the government should have well-defined quality of goods and services it wants, and should only accept alternative goods if the price is reasonable. While this principle is very clear, it is very surprising that city councils in Malawi choose to contravene this law.
To begin with, for all the three case studies, there was no evidence suggesting that specifications were undertaken before procurements. Even where they attempted to undertake it, the specifications were very murky signifying some lack of skill and capacity. In short, it
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was difficult to conclude that compliance was there given the absence of such benchmarking activities. Table 4.5 presents the cycle of procurement procedures to be adhered to, and areas of non-compliance.
Table 4.5 Cycle of the PPPs and areas of non-compliance.
Activity Roles Non-compliance Name of Council
Procurement plan and budget User department PU Accounting officer
All the councils had no procurement plans.
There was evidence of
contract splitting to avoid the threshold requiring OT in all councils. Blantyre, Lilongwe and Mzuzu. Procurement Requisition completed with clear specifications User departments No specifications available to enable procurements. In some
cases, specifications were
made around a particular known item, thus preventing competition. Blantyre, Lilongwe and Mzuzu. Confirmation of availability of funds Accounting Officer Finance Office No evidence of confirmation of availability of funds Blantyre, Lilongwe and Mzuzu. Review of procurement method
IPC No evidence of specifications
reviews. No evidence of pre-bid meetings conducted to enhance specifications Blantyre, Lilongwe and Mzuzu. Review of procurement methods
IPC This was ignored Blantyre, Lilongwe
and Mzuzu. Review of evaluation criteria PU IPC User department
No reviews were undertaken. The evaluation criteria are arbitrarily determined by the PU Blantyre, Lilongwe and Mzuzu. Review of potential supply PU User
Evidence of review of supply market being undertaken was available. However, it is
Blantyre, Lilongwe and Mzuzu.
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markets department
ODPP
abused where use of RfQ method is used. Very few suppliers are being considered
for quotations hence
competition is reduced. Poor market research as they rely on list of suppliers from the ODPP. This led to selecting to poor suppliers.
Procurement method approval
IPC PU
Ignored by all councils Blantyre, Lilongwe
and Mzuzu.
Preparation of bid documents
PU Standard bid documents not
used.
Difficult to verify evaluation criteria.
Difficult to know type of evaluation method selected due to absence of bidding documents. Blantyre, Lilongwe and Mzuzu. Preparation of bidding documents – terms and conditions.
PU General terms and condition
set by ODPP. But many feel they are set in favour of suppliers,
This was the catalyst for exorbitant prices.
Blantyre, Lilongwe and Mzuzu.
Approval of
bidding documents
IPC No evidence at all. PUs uses
the bidding documents without
prior approval by the
committee.
Blantyre, Lilongwe and Mzuzu.
Advertisement and invitation of bids
PU There was a great
misunderstanding; some
thresholds needing
advertisement were being
procured using quotation
without prior approval from ODPP. Where claims were made that bidding was open,
Blantyre, Lilongwe and Mzuzu.
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there was no evidence of advertisements on file.
Receipt and bid opening
IPC and PU Poor record management. Blantyre, Lilongwe
and Mzuzu.
Evaluation of bids PU, UD, and
IPC
Detailed bid evaluation is conducted based on murky criteria creating chances for abuse. In some cases, criteria
used was different from
predetermined ones. No
evidence that the evaluation reports were approved by the IPC.
Blantyre, Lilongwe and Mzuzu.
Review of
evaluation reports
IPC The IPC was approving
procurements based on
quotations that were not
evaluated. IPC usurped
powers of the adhoc
evaluation team.
Blantyre, Lilongwe and Mzuzu.
Contract award Controlling
Officer
No evidence of contract
notices to winning bidders.
Blantyre, Lilongwe and Mzuzu.
Contract signing Controlling
Officer
The controlling officers signed no purchase orders. However, there was no evidence of debriefing to losing suppliers
Blantyre, Lilongwe and Mzuzu.
Contract
Administration and Monitoring
PU and UD Some contracts were given
without signed contracts.
Blantyre, Lilongwe and Mzuzu.
Payments Controlling
Officer
No evidence about suppliers having been paid. This created the risk of councils losing
money through interest
charges where payments were delayed.
Blantyre, Lilongwe and Mzuzu.
The above table revealed that public procurement is faced with problems across the entire cycle. This is in conformity with the observations by O’Neil, et.al, (2014) that established that in Malawi, public procurement in councils is confronted by massive corruption, although he
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did not pinpoint the exact area. In addition to inferred corruption, this study found out that lack of proper structural alignment of the procurement function is also one of the many problems that lead to noncompliance. It will not be surprising to see many suppliers protesting for their bids performance.
Table 4.6 Summarised effects of non-compliance with the PPPs
Main area Key indicator Main reasons Effects
Organizational alignment, culture leadership and management systems Effectiveness of leadership Poor alignment of procurement function.
Poor training programmes for procurement staff and IPC members.
No capacity to carry out internal procurement audits. Poor record keeping.
ODPP limited in terms of capacity to train PEs.
Poor understanding of
PPPs
Fraud and corruption
cannot be detected
Lack of transparency and accountability
Increased level of non- compliance.
Human Resource Development
Procurement staff in place
without procurement
qualifications
Internal auditors in place
without training in
procurement
No evaluation of staff
performance in procurement
Risk of loss of resources due to wrong procurement
Fraud and corruption
cannot be detected. Same problems recur
Monitoring and
Control systems
No proper payment systems for contracts
No procurement transaction captured in cash budgets
No quality control
mechanisms
Suppliers paid twice
Loss of funds through interest on late payments
Government cash-flow
pressured
Poor supplies are accepted Complaints
system and
No proper fairness and
transparency resolution
mechanisms in place for cases
Many court cases due to unfair treatments
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structure established within the legal
system. Information and communication Procurement information searching and dissemination
Lack of awareness to use
procurement websites,
procurement internal notice boards and newspapers
Lack of capacity to use
procurement information
dissemination systems.
Few suppliers participate in tenders
Councils buy at high prices
Interaction with
the marketplace
Lack of knowledge of the market place
Lack of interaction with all procurement stakeholders
Few suppliers participate in tenders Lack of trust in procurement process Procurement processes Procurement planning
Lack of knowledge to define procurement plans
Lack of knowledge to publicise procurement plans
Haphazard procurement
leading to loss of money.
Procurement publicity
Lack for use of OTs
Lack of ODPP website for entities to send placement information
Lack of internal notice boards
Poor feedback
Many stakeholders not
aware about procurements Loss of money
Bid preparation
and invitation
Lack of understanding on how to use SBDs
Lack of clear evaluation criteria in bid documents Lack of specific bid opening date and time
Loss of money through wrong bids
Bidders protest during
contract award stage Cancellation of bids
Submission,
opening and
evaluation of bids
Lack of clear date, time, and venue for bid submission Lack of date, time and venue for bid opening
Lack of minutes for bid opening
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Award of
contracts
Lack of notice of contract award
Lack of public notice for contracts awarded
Lack of knowledge to debrief the losers.
Transparency compromised
Suppliers make same
mistakes
Contract administration
Project planning and mobilisation
Lack of works programmes from contractors
Taking advance payments on very small projects
Projects managed
haphazardly
Loss of money through uncompleted projects
Expediting and
supervising contract
implementation
Lack of project monitoring Lack of project operations reports
Lack of analysis of works versus actual works
Projects performance not properly known
Projects completed outside agreed delivery period Loss of money through fraud
Inspection of
procurements and stock control
Lack of handover certificates
Lack of completion or
delivery reports
Lack of delivery notes and GRNs
Loss of money through liquidated damages
Loss of money through double payments
From tables 4.3 and 4.4, it is easy to deduce that compliance remains a challenge in all the councils. In spite of the existence of the PPA (2003), city councils are not able to comply with its provisions partly because some of the provisions are vague. For example, the PPA (2003) mandates the IPC to open bids, examine, evaluate and compare bids. This function is contrary to the overall mandate of the IPC that it should approve the evaluation and make comparison of the bids. In essence, the law is allowing the IPC to approve its own decisions. The IPC becomes prosecutor and judge at the same time.