IMPROVING PROCUREMENT AND

IMPLEMENTATION OF PROJECTS

DR. L. M. SHIRIMA
CHIEF EXECUTIVE OFFICER
PPRA

CONTENTS
Preparing for procurement and execution of
projects;
Procurement governance and independence
of functions;
Typical challenges in managing procurement
processes and contracts and solutions;
Concluding remarks

PLANNING FOR PROCUREMENT

Requirement not budgeted for (cost estimates)
in the particular FY;
Inadequate budget for the requirement:
Potential disputes with economic operators

Requirements not in the approved APP;

Many projects especially ICT are not included in APP
CAG report for 2014/15: TZS 8.5 bn not in the APP

FEASIBILITY STUDY
Lack of or inadequate feasibility study;
Inadequate identification/establishment of actual
project requirements;
Failure to use official/correct statistics;
When done by potential bidder (e.g. intended for
execution of the project:
Potential conflict of interest;
Common in some infrastructure and ICT projects

Project implemented under undue pressure from the

economic operator (EO):
Requirements tailored to EO needs rather than those of
the PE;
Main concern over unsolicited proposals

ESTABLISHING REQUIREMENTS
Failure to involve key stakeholders:
Institutions that would have provided advice:
E.g. ICT projects: compatibility with other systems
already in use by Government or in the country

User departments not adequately involved:

Poor or inadequate specifications, terms of reference

Lack of harmonisation of requirements with

ongoing public infrastructure, systems or projects
Unnecessary duplication of efforts (misuse of
resources)

TECHNICAL SPECS. AND DESIGN

Inadequately prepared technical specifications, design or

TORs:
Failure to meet the project requirements

In some cases, a tenderer:

has been involved in preparing technical specifications or TOR
prepared for himself specifications, TOR or bidding
documents (PE adopts)

Negligence in preparing specifications or working

drawings:
attracts huge variations and disputes during implementation

When specs in the contract differ from those in drawings:

Contractor will opt for what favours him
E.g: To convert wagon axles from 1000 mm to 1435 mm
gauge (330 wagons to cost over USD 5.6 mn or TZS 12 bn)

HOW REALISTIC ARE THE COSTS?

Costs not related to realistic project requirements:
EO proposes a USD 10 mn construction without any
drawings (size and system of the building);

Unproductive costs if a contract is entered into:

Goods, works, services, operation and maintenance
E.g. Maintenance costs of USD 23 mn over 3 years;

Lack of review of relationship between the project

and other existing projects or infrastructure:
Attempt to purchase goods worth USD 44.3 mn (while
the PE has them and not used)
Spending on new systems while the available ones not
being used

Not taking advantage of negotiating price proposed

by the EO in case of non competitive procurement

INSTITUTIONAL ARRANGEMENT (PART IV)

BUDGET APPROVING AUTHORITY

ACCOUNTING OFFICER

Reports
to AO

TB submits to AO approved
bidder for notification of intention to award
Provisions to
Handle
disagreements

TENDER BOARD
PMU Submit Recommendations
to TB for Approval

PROCUREMENT MANAGEMENT UNIT

Evaluation report submitted to PMU

User Departments
initiate Requirements, inputs to
specifications and in evaluation

Evaluation
committees
8

DELEGATION OF PROCUREMENT AUTHORITY

TENDER BOARD
R48

ACCOUNTING
OFFICER - R47

SUB- DIVISION
OF A PE

MEMBER
OF STAFF
Shall not delegate:
Establishment and
Appointment of members
of Tender Board;
Establishment of PMU;
Investigation of complaint
by bidders;
Submission of reports of
findings in respect of
complaint to PPRA;

PROCUREMENT MANAGEMENT UNIT

R48, R48 AND R 50

ANOTHER PE

DELEGATED TB

ENTIRE PROCUREMENT

DELEGATED PMU

PARTIAL PROCUREMENT

Obligated to
Submit Progress
reports;
Submit copies of
minutes;
Seek advise from
HQ

Disciplining of staff
implicated of wrongdoings

DELEGATION

Must prepare and

enter into an
agreement and
submit a copy to
PPRA

PROCUREMENT
AGENT

May not contract

out both
procurement and
contract
management
functions if there
will be conflict of
interest
May not contract
out TB and AO
functions

CONTRACTING OUT

TYPICAL STAGES OF A COMPETITIVE PROCUREMENT PROCESS

Assessing the
PEs Requirements

Specifications
SOR or TOR

Identify the potential

tenderers

Evaluation of
Contract
Performance

Managing the
contract

User depts identify demand

for goods and service and
manage and evaluate
suppliers performance

PMU manage procurement

process and liase with user
depts throughout the
procurement process

Inviting tenders

INTERFACE
Managing how
the contract is
put in place

Suppliers, service provider

or contractor to provide
goods, works or services

Awarding the
contract

Evaluation of
tenders

PROCUREMENT FUNCTIONS (1)

PMU:
Negligence in preparation of APP (esp. Methods of
procurement),
Recklessness during opening of tenders (procedure &
records/minutes),
Not reviewing properly evaluation reports prior to
tabling before TB,
Weak management of APP implementation,
E.g: Tender advertising: ICB (USD 2.56 mn) only
locally;
E.g: Mishandling of tender modification;
A bidder submits a modified bid and asks PMU to use some
of the documents he submitted earlier; Evaluation done on
modified tender against the procedure

PROCUREMENT FUNCTIONS (2)

Tender Board:
Hardly scrutinizing tender adverts or documents;
Not careful when adjudicating tenders: e.g. reviewing
recommendations of the EC;
Endorsing deficient negotiation plan (lacking clear
objectives and scope parameters);
Approving even negotiated issues outside the endorsed
negotiation plan

User Departments:
Inadequate involvement in identifying needs, preparing
specifications or TOR, and evaluation;
Not preparing contract implementation reports;
Negligence in handling preparation of technical
specifications and designs (working drawings)

PROCUREMENT FUNCTIONS (3)

Internal Audit Unit:
Inadequate monitoring controls in PEs procurement
functions using systems provided by PPRA;
Not submitting reports on PEs compliance with the Act,
Regulations and procedures;
Even when submitted, the reports are incomplete

Accounting Officers:
Improper appointment of TB, PMU, and other
committees;
Not appointing contract supervisors;
Not timely or properly handling complaints or disputes;
Not taking appropriate action against those violating the
law

INDEPENDENCE OF FUNCTIONS
Cabinet directs firm XX to be awarded a USD Q
mn contract;
Minister orders AO to award of contract to firm
YY (transaction advisor: USD 2 mn);
Minister orders AO to award of contract to firm
ZZ (major infrastructure construction project );
HPMU signs 2 contracts for a multibillion TZS
building project without AOs authorization;
In a major ICT project:
AO (not TB) removes a bidder from the process;
AO participates (lead) in post-qualification of a bidder;

ADVERTISING AND BID OPENING

Advertising:
Not in accordance with methods of procurement;
Inadequate time for bidders to prepare bids

Not considering Regulations and Guidelines, e.g. GPN,

SPN, PQ, and EoI;

Bid closing/opening:
Timing of clarification, issuing of addenda and extension
of time for submission;
Location for bid submission and opening;
Procedure for bid opening and rejection of bids during
opening many disputes
Bids opened by persons not authorised by the law
Tender opening committee not signing/initialling all read out
bids during tender opening ceremony
Late bid passed for evaluation and later rejected

TENDER EVALUATION
Not in accordance with the Guidelines and criteria in the
bidding documents;
Correction of errors not following procedures;
Questionable reasons for disqualifying bidders;
E.g. Abnormally low tender; non responsiveness
Inconsistency in applying criteria, e.g. TZS 3 bn project:
Bids rejected for not having anti-bribery pledge but one
with expired business license accepted;
Bidder puts a condition of 15% advance payment while
bidding documents state 10%;
Post-qualification done by Management instead of
evaluation committee;
Correction of errors done during contract negotiation
rather than during evaluation

AWARD OF CONTRACT
Procedure for issuing LoA not followed:
Before or after contract negotiations?
Without the approval of the tender board;
Not communicated on time;
Copies of LoA not sent to relevant authorities (AG,
PPRA, CAG, IAG);

ENTERING INTO A CONTRACT

Procedures not followed:
Vetting of draft contract by AG;
Time which to sign a contract after issuing a LoA;
Suitability of the contract type (goods or service?);
Without or before performance security;
Availability of funds for the contract not ensured;
Copies of the signed contract not sent to relevant
authorities

WEAK CONTRACT MANAGEMENT (1)

Advance payment security:
Accepting insurance bond instead of bank guarantee
(TZS 7.17 bn contract)
Payment without any security

Performance security:
Who should sign it;
Its validity period (expiry before the end of contract);
Value of the security

Violation of LoC:
Supplier paid 100% instead of contractual 40% in a
USD 1.28 mn contract;
Approval granted at speed by an unauthorized person

WEAK CONTRACT MANAGEMENT (2)

Technical specifications not complied with;
Plant or machinery manufactured or assembled
abroad:
Is the quality of materials and workmanship
throughout the process monitored (inspected)?
Is proper inspection done before shipment to
ensure compliance with contractual requirements?
How about training of the would be responsible for
operation and maintenance?
Who is responsible for maintenance and repair
during the commissioning and warranty period?

WEAK CONTRACT MANAGEMENT (3)

Liquidated damages: USD 28.5 mn contract
Rate: 0.1% - 0.2% per day;
PE set a max. 2% instead of 10% of the contract
value as per the Regulations;
Contractor failed to deliver on time and was
charged USD 84,660 instead of USD 423,300;
Loss to the PE: USD 338,640 (> TZS 700 mn)

Import duty and tax exemptions abused:

Additional 1585 tons reinforcing bars (TZS 620
mn);
13,444 pcs marine boards (TZS 227 mn);

WEAK CONTRACT MANAGEMENT (4)

Advance payment:
Contractor claims TZS 14 mn interest for delayed
advance payment and was paid;
PE extends time by 29 days;

Interest on delayed interim payments:

Using commercial lending instead of borrowing
rates;
Inclusion of days during which the claims are being
processed; (TZS 28 mn);
Inclusion of materials on/off site in the IPC costs the
client:
6 IPCs worth TZS 1.83 bn worth of materials on/off site

WEAK CONTRACT MANAGEMENT (5)

Retention amount:
If 5% instead of 10% of the certified interim
payment is deducted as retention amount;
Client is at a disadvantage when such payments are
delayed as more interest will acrue;
E.g. a PE was charged TZS 367 mn as interest on
delayed payments because of this omission

Variations in a building project (TZS 1.36 bn):

TZS 708 mn paid without tender boards approval;
TZS 652 mn was certified to be paid without the
tender boards approval

WEAK CONTRACT MANAGEMENT (6)

Extension of time: 1462 days

Delayed advance payment (29 days);

Increased scope of works (122 days);
Adverse weather condition (48 days); and
Delayed payment of interim payment certificates/ delayed
procurement of materials (1,263 days);

It was very wrong to grant extension of time for delayed

interim payments:
Client should have paid interest or
The contractor could terminate the contract

Extension of time together with associated costs requires:

Tender boards approval
Approval by AG
Approval by PMG

Contractor claimed losses and expenses TZS 1.4 bn, however

PPRA established that the rightful amount to be TZS 407 mn.

ABUSE OF IMPORT DUTY & VAT

EXEMPTIONS FOR IMPORTED GOODS
Contractor imported:
Additional 1585 tons steel bars (TZS 620 mn);
13,444 pcs of marine boards (TZS 227 mn);

PE did not deduct exempted VAT & import duty

from interim payments to contractor: TZS 1.38 bn;
Overpayment due to wrong application of
exchange rates:
Importation of steel bars (TZS 369 mn)

Following PPRAs intervention a large part of this

amount had to be recovered by the PE

DAYLIGHT THEFTY
Construction of a bus station: DDD Council
Scope: Contractor to supply paving bricks for
7,000 m2 at a cost of TZS 182,000,000;
Contractor supplied the whole quantity as per the
contract;
Council admitted to have received the amount
and paid the full amount due to contractor;
Audit by PPRA shows only 3,561m2 paved
equivalent to TZS 92,586,000;
Where did the 3,439m2 worth TZS 89,414,000 go?

CONCLUDING REMARKS
Be careful with any project without a proper
feasibility study;
Make a comparative analysis of the cost of a
project with similar projects;
Consider available systems and infrastructure to
avoid unnecessary duplication of efforts;
Comply with the Act, Regulations and procedures
when undertaking projects;
Contracts should be properly prepared and
effectively managed;
Short of all these, it will be hard to achieve VFM
and desired project outcomes