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Sunday, April 7, 2013

Prescription for Tanzania's procurement regime

Transparency is important in government procurement By Dr Richard Mshomba, professor of Economics at La Salle University, Philadelphia, Pennsylvania, US.

The Doctor is in:
According to a report by the Tanzanian ministry of Finance, total central government procurement for 2010/11 was Sh4,532 billion ($2.83 billion) – 40 per cent of the central government budget. The central government procurement is 12 per cent of the GDP.

Given its size, government procurement policies can be significant in fostering development and addressing income inequalities. However, to achieve those objectives, government procurement must be transparent. Currently, government procurement processes are not sufficiently transparent and the rules are not adequately enforced.

For example, there are rules that make it unlawful for the government to procure goods and services from civil servants, but those rules are not always adhered to. Likewise, as reported by Transparency International, “the Public Procurement Act makes provision for blacklisting companies, but these regulations are not enforced.”

A recent report by Transparency International suggests that the situation might be even worse with procurement associated with the ministry of Defence and National Service. Tanzania received a D- grade for its apparent high level of corruption in the defence sector. Overall, it is estimated that at least 20 per cent of the government budget is lost annually to corruption.

Many people have been calling for policies that foster efficiency, transparency, and accountability. The following should be used as criteria for ideal government procurement policy: the end goals of procurement; integration of procurement goals with broader socio-economic goals; competitiveness; clarity and transparency in the selection process; flexibility; and administration of the process and enforceability.

It’s imperative to be clear about what is being procured. Otherwise, the government will be at the mercy of the potential bidders. This criterion is becoming increasingly important regarding the natural gas industry, where the government is dealing with aggressive foreign companies that have extensive technical and manipulative experience and, of course, whose only motive is profits.

Social goals must guide government procurement. Government procurement can be used, for example, to develop industries in the context of “affirmative action” programs to promote the inclusion of women and to promote development in historically marginalized regions of the country. But even the pursuit of industrialization or important social goals such as empowerment of women must be balanced with an eye to competition and market-induced outcomes – efficiency and flexibility.

At best, a well-devised government procurement program intended to support women’s businesses would be an incentive for the number of women-owned businesses to grow and, thus, increase competition and efficiency. At worst, government procurement can be a safe haven for a few businesses owned by women who are well-connected to government officials.

New rules may be necessary for more transparency in the bidding process and awarding contracts. Of course, changing government procurement rules too often can create confusion, unnecessary transaction costs, and loopholes for corruption.

The ability to learn from experience requires a transparent recordkeeping and a process that can be evaluated against its stated objectives.

Of course, transparency alone is not sufficient. To be effective, transparency must be accompanied by accountability. There must be severe legal and career ramifications for violating the rules. Thus the process should be administered by an autonomous, independent body that is at the same time accountable to a democratic political system of checks and balances.
Good medicine for any procurement regime.

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