stakeholder management in procurement of infrastructure

Report
By
Eng. Ayalew K. Belew
B.SC, C.Eng.,M.Sc Con. Mgmt,MECA
Ag. Director of Procurement and Procurement
Consultant
Uganda National Roads Authority
22 February 2014
1
 INTRODUCTION
 ROLES
AND RESPONSIBILITIES
 INNOVATIVE WAYS TO EXPEDITE
PROCUREMENTS
 COLLABORATIVE STARTEGIES &
FUNCTIONAL TEAMS
 MANAGING CONFLICTS AND SOLUTIONS
2
 The
basic physical systems of a business or
nation. Transportation, communication,
sewage, water and electric systems are all
examples of infrastructure. These systems
tend to be high-cost investments, however,
they are vital to a country's economic
development and prosperity. Infrastructure
projects may be funded publicly, privately or
through public-private partnerships.
http://www.investopedia.com
3
“Person or organization (e.g., customer,
sponsor, performing organization, or the public)
that is actively involved in the procurement, or
whose interests may be positively or negatively
affected by execution or completion of the
project. A stakeholder may also exert influence
over the project and its deliverables.”
4
Establishment of UNRA


UNRA was established by an Act of Parliament; The
UNRA Act, No.15 of 2006.
UNRA became operational on 1st July 2008.
 UNRA’s
Mandate is to:
Develop and maintain the national roads network of
about 20,000km, managing ferries linking the
national roads network and controlling axle
overloading.
 To render advisory services to Government and for
related matters concerning National Roads
Network, among others.

5
UNRA’s Procurement Organization
 In July 2008, PDU was a Department under
Directorate of Finance and Administration headed
by a manager with three procurement officers.
 As of March 2011, PDU has bcome a Directorate
headed by a Director who reports to the Executive
Director.
 The Directorate has two Departments; Engineering
Procurement Department (Works and Services) and
Goods and Supplies Department.
 Each Department is headed by its own Manager
 The Engineering Procurement Department is staffed
with Engineers and the Goods and Supplies with
logistics and procurement professionals.
6
External stake
holders:
Internal
stakeholders:







User Departments
Contracts committee
Accounting officer
Procurement
Department
Evaluation team
Board
Negotiation Team
 Solicitor General
PPDA
Road Fund
MoFPED
Development
Partners/Funders
Contractors/consultants/
Providers
PAC (Parliament)
Auditor General
IGG
State House
OPM
MoWT
CID
Civil Societies/Anti
Corruption Activists
General public, Media
7
The Technical and complex of the Civil works
sector.
 Urgent as it is an input to poverty reduction
and rapid development.
 A project setting(time, cost, quality bound)
 Multi-stakeholder
 Multi-year (spanning over a number of
financial years)
 Involves a number of multilateral and
bilateral
Donors-Various
procurement
procedures and guidelines
 It requires high level of professionalism and
dedication.

8


Variations and changes are the rule than
exception due to ground and environmental
variability.
Capital and risk intensive which requires
specific and innovative best practice
procurement and contracting strategies and
approaches.
9
1.
1. BOARD/MINISTRY OF
FINANCE
Boards /Councils and MoFPED are
responsible for the approval of the
procurement plan and budget.
 Challenges

Underfunding




The underfunding results in the cancellation of
procurements at advanced stage
Delays in the finalization of procurements waiting for
funding.
By this time prices escalate and Government pays
extra charges.
Delays in service delivery to the public
10

Accounting Officer- Accounting Officer" means the Accounting
Officer of a procuring and disposing entity so appointed by the
Secretary to the Treasury, and for the avoidance of doubt
includes the Accounting Officer of a Local Government or a
statutory body.

PPDA Act 26, states that, The Accounting Officer of a
procuring and disposing entity shall have overall responsibility
for the execution of the procurement and disposal process in
the procuring and disposing entity, and in particular, shall be
responsible for (a) establishing a Contracts Committee
 (b) appointing the members of a Contracts Committee
 (c) causing to be established a Procurement and Disposal
Unit staffed at an appropriate level
 (d) advertising bid opportunities
11






(e) communicating award decisions
(f) certifying the availability of funds to support the
procurement or disposal activities;
(g) signing contracts
(h) investigating complaints by providers
(i) submitting a copy of any complaints and reports of
the findings to the Authority
(j) ensuring that the implementation of the awarded
contract is in accordance with the terms and
conditions of the award.
CHALLENGES
 Less empowered to impact the procurement process.
 Ambiguous role such as is responsible for the overall
procurement process the activities specifically defined
to do are small
12

PPDA Act 35 stipulates the functions of the User
Department and these includes;



o
o


(a) initiate procurement and disposal requirements;
(b) recommend Statements of Requirements to the
Procurement and Disposal Unit;
(c) undertake conformity assessments;
(d) propose technical specifications to the Procurement
and Disposal Unit when necessary;
(e) input with technical evaluation of Bids received as
required by the Procurement and Disposal Unit;
(f) issue change orders in accordance with the terms and
conditions of the contract; and
(g) certify invoices for payments to providers.
Challenges;
i.
ii.
iii.
iv.
v.
Late initiation of procurement
Poor specifications/inaccurate specificationsVariations/extension of time
Lack of interest in the procurement process
Reliance on extension of contracts
Tendency of conflict of interest
13

Evaluation Committee (Adhoc) is responsible for evaluation
of bids. According to PPDA Act 37, all evaluations shall be
conducted by an Evaluation Committee, which shall report
to the Procurement and Disposal Unit and the number of
the members of the Evaluation Committee shall depend on
the value and complexity of the procurement requirement,
but shall in all cases be a minimum of three members.

CHALLENGES.
i. Distorted Evaluation System
 The two pillars of public procurement are ensuring value
for money to Government and fairness/transparency to
bidders
 A 100% perfect bid is what may guarantee both value for
money and fairness at the same time.
 However, a 100% perfect bid is practically impossible.
 This suggests that we have to reject every bid with a
deviation so that we can be fair to other bidders.
 However, if we reject every bidder for any deviation, we
are losing competition and value for money to
Government
14




Hence, we are not meeting one of the two
cardinal objectives of public procurement, i.e.,
value for money.
If we accept every deviation by rectifying the
deviation, then we are affecting the competitive
position of other bidders; hence, not meeting the
other cardinal objective, fairness.
Therefore, we should always optimize/strike a
balance between the two cardinal objectives,
i.e., value for money and fairness.
That is why best practice and public
procurement laws stipulate that non-material
deviations should be accepted.
And they also stipulate the three fundamental
parameters to determine non-material deviation.
15
A
non-material deviation is one that does not
in any substantial way
(i) Affects the right of the employer
(ii) Quality of the product
(iii) Competitive position of other bidders.
 There is no mathematical formula for materiality
 It is the professional who determines materiality
 Does every deviation affect the competitive position
of other bidders? NO. Deviation shall be Quantified
to see if it affects the financial comparison of
bidders.
16

The core activity of PDU is to manage the
procurement process for all the procurements.
The PPDA Act (Sections 31& 32), the functions
and powers of the PDU are summarized below:
i.
Plan and manage all the procurement and
disposal activities of the PDE
ii.
Implement the decisions of the CC
iii.
Support the functioning of the Contracts
Committee
iv.
and liaise directly with the Authority on
matters within in jurisdiction and ensure
compliance with the PPDA Act
17
i.Understaffing

The national roads network has doubled in size
from the time UNRA became operational
(10,000 km to 21,000 km).

The human resources level has remained the
same because of the fixed wage bill cap.

This is affecting the management and
supervision capacity of UNRA necessary to
ensure that the projects are delivered within
time, quality and budget.

The understaffing has resulted in delays in the
procurement process particularly in bid
evaluations.
18
ii. Procurement Workload






UNRA Plans 300-400 procurements a year containing
all categories of procurement of Supplies, Services
and Works.
The estimated value of the planned procurement is
UGX 1.2 trillion per year.
The average value of contracts signed was UGX
515.6 billion per year in the past four years
Majority of the procurements are technical and
complex in nature.
The currently 14 staff of PDU are highly
overloaded.
On average a procurement officer handles over 25
procurements and contract amendments.
19

As per PPDA Act 29. A Contracts Committee is responsible
for the authorize following;
 the choice of a procurement and disposal procedure
 solicitation documents before issue
 technical, financial or combined evaluation reports;
 contract documentation in line with the authorized
Evaluation Report; and
 any amendment to an awarded contract;
 recommend for the delegation of a procurement or
disposal function by the Accounting Officer whenever
the necessity arises; and
 award contracts in accordance with applicable
procurement or disposal procedures as the case may
be.
20
 CHALLENGES
 Unbalanced
Power Distribution among the
procurement parties-Power Concentration
on the Contracts Committee.



The powers of the Contracts committee should
be reduced and be rationally distributed to the
other parties like User Department, Accounting
Officer and Procurement and Disposal Unit
The Power to make decisions should be
reallocated to each party with the corresponding
accountability.
This reduces delay and increases efficiency and
accountability at all levels.
21
 Development
Partners aim at promoting
cheap, efficient and reliable road transport
services with the specific objectives of:



Providing a national road network capable of
meeting the present and future traffic demands
while harmoniously integrating road safety and
environmental protection requirements;
Establishing and developing a strong road
administration for effective and efficient
management of the national road network and;
Enhancing and developing the local construction
industry.
22
i. Need to comply to both PPDA and Donor Rules
(Stakeholders);






For projects that are funded by the donors their
respective financing agreements with the Government
require that their procurement guidelines should be
used.
Article 4 of the PPDA Act (2003) requires that the PPDA
procedures are also applicable unless there is a conflict
between the PPDA and Donor’s procedures.
This duplicates the procurement effort as almost all the
steps in the two procedures should be used at a time.
This has created a lot of delay and confusion in the
procurement process especially when the procedures
contradict each other.
The donor gives its approval declaring that it is in line
with its rules. PPDA rejects it saying that it does not
meet the PPDA rules.
Whose decision shall be implemented. The Donor or
PPDA? Or the work should be abandoned?
ii. Delays at getting No-objection from Development
partners.
23

It is a statutory requirement that solicitor general clears
contracts above 50 million Uganda shillings.
CHALLENGES
 Delays of approvals of deviations and Clearnces
 There are no statutory timelines forcing SG to respond
within a certain specified time.
 Taking UNRA’s submissions for clearance in 2012/13, the
minimum, maximum and average clearance durations in
days are 3, 333 and 24 respectively.
 The comments and requirements are not consistent and
they vary from person to person.
 Unclear role-SG questioning procurement need, Value for
money, evaluation process which should have been the
mandates and powers of the PDES
24
9. PPDA
It
is also a requirement that PPDA grants deviations
to procurement methods/procurement process
,amendments and variations to the existing
contracts.
 Taking the submissions made to PPDA in 2012/13,
the minimum, maximum and average approval
durations in days are 3, 183 and 33 respectively.
 CHALLENGES
i. Procurement Delays
 Currently open bidding for works and services may
take up to 9-15 months including Government and
Donor approvals.
 Open
bidding
through
Expression
of
Interest/Prequalification for works and services
may take up to 15-24 months including Government
and Donor approvals
 This time is unacceptable in any best practice
25
ii.







Rejection of approvals for retrospective grounds
PPDA and SG do not consider the issue of retrospective
approval on a case by case basis.
There are instances where retrospective approvals may be
needed due to the nature of the business.
Donor guidelines acknowledge retrospective decisions on a
case by case basis.
Rejection of submissions for retrospective grounds before
evaluating the circumstances in which the delay has occurred
is not appropriate.
E.g. A contract is due to expire this evening at 24:00. A heavy
rain has occurred at 23:59 and damaged part of the
constructed road.
If the contractor didn't sleep by that time, he will start to
assess the level of the damage and make a claim/addendum
request to the Engineer.
The Engineer assesses the validity of the claim/addendum and
sends it to the Contract Management.
26






The Contract Manager reviews it and makes a
submission to PDU.
PDU reviews it and makes a submission to Contracts
Committee.
The Contracts committee approves it and sends it
sent to PPDA/SG.
All these should have been done by the remaining one
minute before the contract expired at 24:00.
As this is humanly impossible, the contract has
already expired when the claim/addendum reached
PPDA/SG.
PPDA/SG will declare that it was retrospective and
reject the addendum. A fact of life.
27
iii. Prescriptive nature of the PPDA Act and
Regulations





The PPDA Act and Regulation provides no room
for the procurement professional to think outside
the box.
A lot of details and guidance notes which should
have been included in manuals and guidelines are
included in the Act and Regulations
This gives little room for flexibility and
adaptations as the Act and Regulations are issued
by parliament.
The law should only give a framework.
Other details and guidance notes should be
included in a procurement manual which does
have less legal priority and can be modified or
adapted easily.
28
Procurement of works/goods and services by
infrastructure public entities is considered to be
a very high risk area because huge or substantial
amounts of money –Sometimes over 80% of the
entity budget.
 Procurement audit, enables management to
assess the extent to which goals and objectives
of the procurement department are balanced
with its resources.
CHALLENGES
 UNRA is faced with Multiple and Over lapping
Audits/Investigations.
Major
statutory,
administrative
and
overseeing
bodies
investigate,

29
This include;












Auditor General(AG)
Criminal Investigation Department (CID)
Inspector General of Government(IGG)
Public Procurement and Disposal of Public Assets
Authority (PPDA)
State House
Parliament (PAC, Infrastructure Committee)
Road Fund
MoFPED
Development Partners’ Integrity Departments
Anti corruption Forums & Initiatives
Media
General Public
30
The audits are usually concurrent and a number of
audits on one thing.
ii. Up to five auditing institutions at a time.
iii. Sometimes procurement files are dismantled due to
repetitive handling.
iv.
Roads are dug repeatedly.
v.
These concurrent audits, coupled with the
understaffing of UNRA, are consuming a lot of
professional time and inputs
vi. The professional inputs should have been saved to
manage and supervise other procurement and
contract management activities.
vii. One does not rely on the other’s findings.
Duplicating effort. For instance, PPDA is a specialist
in procurement compliance auditing, OG is
specialized in Value for Money Audits. Why do we
duplicate effort?
viii. The audits are based on procedures than impact
i.
31



Consultants/contractors have a big stake in the
procurement management of infrastructure projects. Well
Qualified with experience and financial capability is a
major influence in the performance and execution of
infrastructure projects.
Consultants participate in preliminary designs, feasibility
studies, detailed designs, institutional reforms and
capacity building.
 During construction, the role of consultant is to
administer the contract as described in the “Contract
Documents” with no temporal or other restrictions on
the provision of its services.
 Involving the consultant at an early stage of the
construction project is often beneficial for the employer.
A contractor is assigned to a construction project once the
design has been completed or in progress or at the
beginning of the project if it is a design and build contract.
32
i. Lack of Capacity of the domestic construction
industry






The local contractors do not have sufficient
personnel, equipment, technical and managerial
capability
The participation of domestic contractors on road
upgrading rehabilitation and reconstruction works
remained limited.
Even in the road maintenance operations, where the
domestic
contractors
participate
fully,
the
performance of the domestic contractors remained
unsatisfactory due to limited technical, managerial,
financial and skilled manpower capacity.
The awarded contracts are delayed and many times
abandoned before completion.
This has made the Government to rely on foreign
contractors
It has also resulted in losses of additional money due
to inflation from delayed completions.
33
ii. Unmanaged relationship between PDEs
and Providers







There is no partnership and symbiotic
relationship between providers and the PDES.
The relationships are mainly tense and
adversarial.
Providers work to discredit and dismantle PDES.
Because of this, work is not flowing out from
PDES regularly.
Due to this, the providers are dying out there for
lack of continued business.
Government programs are delayed
Both PDEs and Providers are the losers.
34
iii. Get that Contract or Kill it Attitude





Those bidders who are not Best Evaluated, first
pledge complaints and administrative review
applications
Even after appropriate responses were given,
they go ahead to maliciously allege the process
for irregularities and fraud
They allege the Best Evaluated Bidder for
incompetence
The intention is to frustrate the process, stop the
tender and get it cancelled.
By this, they kill the tender so that it does not
become any one’s as it was not theirs.
35
iv. Anonymous Allegation




Losing Bidders they first try to reinstate
themselves
through
Complaints
and
Administrative Reviews
If not they go anonymous and whistle blow to
overseeing bodies and the media.
Although ultimately the allegation might be
found baseless and rejected, those who made
the false allegation and sabotaged Government
Programs remain unpunished.
This is also tarnishing the image and trust on the
PDEs.
36
v. Lack of Confidentaility





The providers through unethical staffs of PDEs
obtain information that is premature for public
consumption or a confidential business matter.
After getting the confidential information, the
providers and their collaborators, pledge
untimely complaints and allegations
They intervene/frustrate the decision making
process of the PDE.
There are no strong procedures to prevent the
internal
staff
from
leaking
confidential
information and discipline them when they are
found culprits.
There is confusion between the obligation to
maintain confidentiality in the procurement
process and the right to whistle blow.
37
vi. Poor performing providers






Consultants produce incomplete designs which
increase
variations
and
changes
during
implementation
Providers do not finish the contracts within the
agreed times.
This exposes projects for additional inflations
It results in loss of economic benefits which
should have been obtained if the projects were
completed in time.
Termination of these contracts is also costly in
that it requires time for re-tendering.
Settlement of disputes and litigations to wind up
terminated contracts also takes its own time and
cost.
38
vii. Unethical practices by providers




Providers
forge
bid/performance/advance
securities
They inflate experience and financial figures in a
bid to win contracts.
These unethical practices are limiting the
participation of the providers
The practice is consuming procurement times in
order to verify and scrutiny the authenticity of
the submissions.
39
1.INDEPENDENT PARALLEL BID EVALUATION (IPBE)








UNRA’s procurement process was marred by compaints
and administrative reviews.
UNRA established an off-shore bid evaluation system
The objective is to increase public and stakeholder
confidence on UNRA’s bid evaluation process and ensure
value for money.
The IPBE evaluates bids in paralel to the in-house
evaluation comittee
The IPBE is an advisor to the contracts committee
The Contracts Committee uses the IPBE bid evaluation
report as a reference to adjudicate the in-house
evaluation.
Over 95% of the time the in-house and IPBE evaluations
are in agreement
Independent Parallel Bid Evaluation system is a good innovation to
expedite the procurements .This provides confidence on the quality of
UNRA’s bid evaluation.
40





There were repeated complaints from Government
and the public that the road sector did not ensure
value for money for Government.
It was realized that the national road sector
needed an accredited alternative procurement
procedure/system which addresses organizational
and sector specific issues.
This is to assist the sector to ensure Value for
Money for Government and Fairness and
Transparency to the Bidders.
The
accredited
alternative
procurement
procedure/system
will
take
into
account
international best practices.
The alternative procurement procedure/system will
be implemented after accreditation by PPDA in
accordance with Regulation 342 of the PPDA
Regulations (2003).
41




A consultant has been engaged to “Review
UNRA’s Procurement Procedures for Works and
Services” which commenced on 1 March 2012 and
will run for 3 years.
The consultant is currently finalizing the
alternative Procurement Procedures/System for
UNRA, and will assist UNRA in applying for
accreditation of the alternative procurement
procedures/system by PPDA.
The project also includes comprehensive
training program for UNRA staff in procurement
best practices, and in the application of the
accredited
alternative
Procurement
Procedures/System.
The system being established includes a realtime performance measurement for bid
evaluation. The system includes a contractor
classification system.
42






E-Procurement system has been procured and
the Service commenced on 4th February 2013.
The system is a web-based system
It will automate the procurement process.
The system focuses on helping UNRA to provide
cost savings, better responsiveness, increased
efficiency, compliance tracking and flexible cost
control solution.
The service is at system design stage.
It is expected that the E-procurement system will
be finalized in June 2014.
43








COST is a governance initiative that employs a multistakeholder approach to improve transparency in the
construction sector.
It involves government procuring entities and oversight
agencies, private sector consultants and contractors, and civil
society groups working together.
It encourages, demand and pressure for transparency by
bringing together interested stakeholders from the public,
private, and civil society sectors.
The ultimate result is a new governance and accountability
mechanism that builds on existing government institutions,
regulations.
COST uses the disclosure of key non-sensitive information to
improve transparency and complement other oversight bodies.
The relevance and local importance of the infrastructure is to
generate public demand for better management and delivery.
COST was successfully piloted in eight countries between 2008
and 2011 with funding from the UK Department for
International Development and support from the World Bank.
The COST programme is currently being scaled up and UNRA
has applied for participation.
44

Information management is a crucial function in
UNRA




It supports timely decision making, planning and
reporting as well as monitoring and evaluation.
UNRA was unable to effectively utilize all the data and
information collected relating projects/contracts
This was due to the lack of Management Information
System that collate this useful data into actionable
information.
The establishment of an Integrated Contract
Management Information System is intended to
achieve the following major goals: 




Effective Project/Contract Document Management
Easy Program Monitoring
Easy Project life cycle Monitoring/Tracking
Systems Integration
Performance Accountability
45
Integration
of the budgeting and
procurement planning tools helps to
avoid including a procurement item in
the plan when there is no budget.
Each procurement officer reports the
status of each procurement weekly. The
follow-up
sheet
includes
the
procurement plan for live update of the
procurement plan .
46
 Design
and Build
 Design-Build-Operate
 Design-Build-Operate-Maintain
47
 Junior
experts are employed to work under
senior professionals(Junior Bridge, Materials,
Highways Engineers to be employed under
their respective seniors)
 Encouraging Joint ventures between foreign
and local contractors
48

Collaborative strategies involves staff working
together.
 All the stakeholders shall collaborate for a
common goal

Establish PDE Provider-forum- where
formative issues are shared for continuous
improvement between the entity and the
contractors/providers.
49
 Establish
feedback mechanisms from the
procurement
process
to
future
specifications, bidding documents
 Out source Evaluations.
 One-to-one coaching to fine-tune skills.
 Collaborative meetings in PDU to share
challenges and way forward
 Open communication system
 Engaging the procurement team into out
door activities.
50
1. Determine Minimum size of PDU staff

Some PDEs may deliberately or due to lack of budget under
staff their PDUs

PPDA through the monthly procurement reports submitted
by each PDE should determine the volume of work load at
each PDE

Accordingly, they can recommend the minimum number of
staff required in relation to the workload.
2. Train the Evaluators and Auditors on Bid Evaluation and the
concept of materiality

There is no formula for materiality.

It is the professional in the field who can determine
whether the deviation is material or not based on the three
materiality parameters.

There should be regular training on bid evaluation
particularly on the interpretation of materiality.
51
3.Redistribution
of
procurement parties


power
among
The parties in PDE .i.e. Accounting Officer,
Contracts Committee, Procurement and Disposal
Unit, User Department and the Evaluation
Committee should be rationally empowered.
Each party shall be made responsible for its own
actions/inactions.
4. PDE’s and Overseeing bodies should have
a mix of professionals


Procurement involves
technical, economical,
commercial, business and legal matters.
Hence, PDES, and procurement overseeing bodies
should be adequately staffed to have a mix of
professionals including Economists, Engineers,
Business Professionals and Lawyers
52
5. Delegation and Statutory time limits for
Solicitor General
 There is need to decentralise the powers of
the Solicitor General to PDES that have an
internal legal team.
 A statutory time limit should be given for SG’s
clearance.
6. PDES and Providers shall discuss and agree on
their common issues using the PDE-provider
forum.
7. Theinfrastructure secor shall have an accredited
procurement system
53
8. Overseeing/Auditing bodies should work
together to integrate their activities





The numerous auditing bodies should rely on the
audit reports of fellow auditors.
Auditors can share information than duplicating
effort.
PPDA is a procurement specialized overseeing body.
Other overseeing bodies should take the findings of
PPDA than carrying out a number of independent
procurement audits on the same document.
Other bodies should take financial and value for
money audits from the Auditor General and so on.
This will reduce on the valuable time that is lost in
preparing files for these audits and at the same time
responding to their audit reports produced.
54
9. Retrospective Approval shall be considered on a
case by case basis
10.Introduce a system which punishes unethical
staff
11.Suspend unethical and poor performing
providers
12. Build the capacity of local construction
industry
13. Provide more funding to the road sector
14. Redefine the PPDA Act and Regulations
15. Allow donor finnaced projects to be governed
by the Donor’s guidelines
16. Strike a balance between the right to whistle
blow and maintaing confidentiality of the
procurement process.
55
THANK YOU VERY
MUCH FOR LISTENING
56

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