LGA PROCUREMENT CAPACITY BUILDING STRATEGY FORMULATION WORKSHOP

Transcription

1 PMO-RALG ENHANCEMENT OF PROCUREMENT CAPACITY OF LOCAL GOVERNMENT AUTHORITIES PROJECT (EPC LGAP) LGA PROCUREMENT CAPACITY BUILDING STRATEGY FORMULATION WORKSHOP PROCUREMENT COMPLIANCE & PERFORMANCE AS PER THE AUDIT RESULTS Dodoma, June

2 OUTLINE OF PRESENTATION Introduction Volume of Awarded Contracts in LGAs Procurement Audit Results and LGA Weaknesses Value for Money Audit Results and LGA Weaknesses New Procurement Audit Indicators Concluding Remarks 2

3 SITUATION DURING FY 2011/ procuring entities for procurement carried out in FY 2011/ MDAs, 46 PAs, and 35 LGAs. Special audit to Kinondoni Municipal Council and TANROADS Singida Region 3

4 CONTRACTS AWARDED BY LOCAL GOVERNMENT AUTHORITIES (FY 2011/12) VOLUME OF AWARDED CONTRACTS BY 106 OUT OF 134 LGAs (TSHS BILLION) CONSULTANCY SERVICES 2.70% NON- CONSULTANCY SERVICES 6.34% DISPOSAL OF ASSETS 0.10% GOODS 24.96% WORKS 65.90% 4

5 Million Tshs. COMPARISON OF CONTRACT VOLUMES OVER TIME (LGA) 300, , , , ,000 50,000 - Goods Works Consultancy Non-Consultancy Disposal of Assets FY 2007/08 FY 2008/09 FY 2009/10 FY 2010/11 FY 2011/12 5

6 PROCUREMENT AUDIT COMPLIANCE AND PERFORMANCE INDICATORS (1) Ind. No. Indicator Compliance Data 1. Appropriate establishment and composition of tender boards 2. Appropriate establishment and composition of PMUs Existence of a tender board in accordance with the requirements of the Act and Regulations Existence of a PMU in accordance with the requirements of the Act and Regulations 3. Independence of functions Percentage of tenders in which there was no interference between individual functions 4. Appropriate preparation and implementation of procurement plan 5. Complying to compulsory approvals Prepared and properly implemented annual procurement plan Percentage of tenders/contracts which received all compulsory approvals in various processes 6

7 PROCUREMENT AUDIT COMPLIANCE AND PERFORMANCE INDICATORS (2) Ind. No. Indicator Compliance Data 6. Appropriate advertisement of bid opportunities 7. Complying with publication of awards 8. Adequate time for preparation of bids Percentage of open bidding procedures publicly advertised Percentage of contract awards disclosed to the public Percentage of tenders complying with the stipulated time in the Act and regulations 9. The use of appropriate methods of procurements 10. The use of standard tender documents 11. Proper keeping of procurement records 12. Availability of quality assurance and control systems 13. Appropriate contract implementation Percentage of tenders using authorized methods of procurement in accordance with their limits of application Percentage of tenders using standard/ approved tender documents Percentage of tenders with complete records Percentage of tenders with adequate quality assurance and control systems Percentage of contracts which have been implemented as per the terms of contract 7

8 GENERAL PERFORMANCE ASSESSMENT CRITERIA Good performance: 80 percent Fair performance: > 60 percent but < 80 percent Poor performance: 60 percent NOTE The average per PE is calculated from the scores achieved in each of the 13 indicators. The indicators carry equal weight 8

9 CHALLENGE: STAGNATING PERFORMANCE 9

10 SCORES (%) Audit Results 2011/ COMPLIANCE INDICATORS

11 SCORES (%) COMPLIANCE INDICATORS 14 PEs (40%) Poor Performance; 16 PEs (46%) Fair Performance; 5 PEs (14%) Good Performance Hai District Council 86% Mbozi District Council 53% 68

12 SCORES (%) COMPLIANCE INDICATORS OVERALL MDAs PAs LGAs

13 ESTABLISHMENT AND COMPOSITION OF TENDER BOARD Average level of compliance: 74 percent 9 out of 35 audited LGAs: unsatisfactory performance in this indicator Weaknesses: Failure to inform PPRA on the composition of TB and the qualification of its members pursuant to Section 29(1) of PPA 2004; Tender board members have limited knowledge on application of PPA and its Regulations. 13

14 ESTABLISHMENT AND COMPOSITION OF PMU Average level of compliance: 63 percent 18 out of 35 PEs (51%): unsatisfactory performance in this indicator Weaknesses: PMU established as a committee rather than a fully fledged and staffed unit; Limited knowledge on application of PPA and Regulations; Staff of PMU lack the necessary qualifications; Inadequate office space and working tools. 14

15 AVERAGE COMPLIANCE Major Weaknesses Inappropriate establishment of Procurement Management Units 100% 90% 78% 80% 80% 74% 70% 63% 60% 50% 40% 30% 20% 10% 0% MDAs PAs LGAs OVERALL Series1 78% 80% 63% 74%

16 ANNUAL PROCUREMENT PLAN Average level of compliance: 47 percent 26 out of the 35 audited (74%) had unsatisfactory performance, 9 PEs scored 20 percent and less; Weaknesses: Not using appropriate APP template; Incorrect tender numbering and referencing; APP hardly followed during implementation; TB meetings not properly planned; Requirements not properly aggregated; Tender processing times not properly allocated. 16

17 AVERAGE COMPLIANCE Major Weaknesses Inappropriate preparation of annual procurement plans 100% 90% 80% 70% 68% 60% 57% 58% 50% 47% 40% 30% 20% 10% 0% MDAs PAs LGAs OVERALL Series1 68% 57% 47% 58%

18 PUBLICATION OF CONTRACT AWARDS Average level of compliance: 60 percent; 17 out of the 35 audited (49%) had unsatisfactory performance, 5 PEs scored 0 (zero) percent in this indicator. Weaknesses: Failure to disclose to the public (newspapers, notice boards) the awarded contracts; Sometimes unsuccessful bidders are not notified; Failure to notify PPRA; 18

19 AVERAGE COMPLIANCE Major Weaknesses Failure to publish contract awards 100% 90% 80% 70% 65% 68% 60% 65% 60% 50% 40% 30% 20% 10% 0% MDAs PAs LGAs OVERALL Series1 65% 68% 60% 65%

20 KEEPING OF PROCUREMENT RECORDS (1) Average level of compliance: 54 percent 22 out of the 35 audited (63%) had unsatisfactory performance, 16 PEs scored below 50 percent; Weaknesses: Lack of a comprehensive list of records for all tenders managed by PMU; Tender records had not been systematically filed, but scattered in many different files, audit trail made difficult; Failure to maintain a register of all awarded contracts; 20

21 KEEPING OF PROCUREMENT RECORDS (2) Weaknesses: Project files miss: Annual Procurement Plan (APP) or General Procurement Notice (GPN) Tender Board approval for draft advert and bidding document Bids submitted by bidders Minutes of tender opening: Tender Opening Register, read out prices, tender opening checklist, etc Letters of appointment of evaluation committee Signed personal covenants forms for TB as per Section 86(6) and Reg. 101(6) of GN No.97, Negotiation plan Names and appointment of negotiation team Handing over report Progress Reports; Final certificates; Inspection and Acceptance Reports. Drawings Complaints register Claim management and Payment records. 21

22 AVERAGE COMPLIANCE Major Weaknesses Poor Records Keeping 100% 90% 80% 70% 68% 66% 63% 60% 54% 50% 40% 30% 20% 10% 0% MDAs PAs LGAs OVERALL Series1 68% 66% 54% 63%

23 CONTRACT MANAGEMENT (1) Average level of compliance: 55 percent on Quality Cotrol and 68 percent on Contract Management 25 out of the 35 audited (71%) had unsatisfactory performance, 9 PEs scored 20 percent and less; Weaknesses: Inspection and acceptance committees not appointed; No quality assurance plan for works, consultancy and nonconsultancy services; Lack of supervision of consultancy services; Interim and contractual certificates not issued properly; Variation orders issued without following proper procedures; Extension of time granted without justifiable reasons; Most of the payments to service providers not made on time; and Payments for work not undertaken or substandard work. 23

24 AVERAGE COMPLIANCE LEVEL Major Weaknesses Weak contracts management 100% 90% 80% 72% 74% 70% 68% 71% 60% 56% 55% 55% 55% 50% 40% 30% 20% 10% 0% MDAs PAs LGAs OVERALL Quality Contr 56% 55% 55% 55% Contracts Man. 72% 74% 68% 71%

25 VALUE FOR MONEY AUDITS Total: 137 Contracts for Mainly Buildings and Roads 25

26 SAMPLING OF PROJECTS FOR VFM AUDIT 89 contracts audited in LGAs with a total value of Tshs. 19,186,353, (8% by value) 20 contracts audited in Public Authorities (PAs) with a total value of Tshs. 69,969,468, (29%) and 28 contracts audited in MDAs with a total value of Tshs. 150,112,803, (63%).

27 OVERALL PERFORMANCE Performance criteria: > 75 percent: Good percent: Fair < 50 percent: Poor Average PEs performance indicated 14 of the audited 36 PEs performed well (above 75%); Remaining 22 entities performed fairly (between 50% and 75%); LGAs performed fairly at a score of 70% while PAs performed fairly at score of 71%; and MDAs performed fairly at score of 74%.

28 OVERALL PERFORMANCE Road-works management in LGA s and TANROADS indicated a significant difference in performance. LGA s Performance was rated fair at 71% while in TANROADS it was rated good at 80%. LGAS Planning Procurement Contract Administration Quality of Works TAN ROADS

29 OVERALL PERFORMANCE Building contracts management in LGAs, PAs and MDAs indicated a slight difference in performance. LGAs 68% PAs 72% MDAs 82% LGAs MDAs PAs Planning Procurement Contract Administration Quality of Works

30 PLANNING The overall score for planning was assessed to be fair at 73%. LGAs 73% while PAs 72% and MDAs 73% Performance in Terms of PEs

31 PLANNING Major weaknesses: Poor packaging of works contracts; Inadequate designs; Unrealistic pre-tender estimates; inaccurate computation of quantities in the bills of quantities due to inadequate or lack of assessment of site locations; incomplete and ambiguous drawings; The deficiencies in the designs, drawings and bills of quantities caused unnecessary variations to the works thus increasing projects costs. Unrealistic contract period established by the PEs; contract durations were not estimated based on the nature and complexity of the works as well as location of the site.

32 PRE-BIDDING STAGE OF PROCUREMENT (1) Needs assessment, planning and budget Is our needs assessment adequate? How do we budget? Is it realistic, or is it deficient? Is our procurement planning proper? Is it aligned with the PE s overall investment/spend decision making process? Any interference in the decision to procure? By whom, and whether authorized? Do we have formal contracts? Checked and Validated by Legal Officer?

33 PRE-BIDDING STAGE (2) The way we define our requirements Technical specifications: Are they vague or not based on performance or functional requirements? Targeting a particular brand or economic operator? Selection and award criteria: Are they clearly and objectively defined? Are they established/announced before the closing of the bid?

34 PRE-BIDDING STAGE (3) Choice of procurement method/procedure Procurement strategy: do you consider the value, complexity and administrative costs? Abuse of non-competitive methods/procedures: deliberate splitting, emergency, and running contracts Time given to bidders Is the timeframe consistently applied to all bidders or some get information earlier than others? Is the timeframe provided sufficient to ensure a level playing field

35 PROCUREMENT The overall score for procurement was assessed to be fair in LGAs and PAs and good in MDAs: LGAs - 73% PAs 74% MDAs 80% Performance in Terms of PEs

36 PROCUREMENT Major weaknesses: Inappropriate procurement planning causing delays in implementing PE s plans, ad-hoc procurements, and use of inappropriate procurement methods (excessive use of direct contracting/single source procurement); Improperly prepared tender and contract documents - Standard tender/contract documents were not used for of the reviewed tenders contrary to Regulation 83(3) of GN. No. 97/2005.

37 BIDDING STAGE Invitation to bid Is information on the procurement opportunity provided in a consistent manner (public notice)? Is sensitive or non-public information disclosed? Is there adequate competition? Are collusive bidding or illegal price fixing prevalent? Award of contract How is the evaluation process free of conflict of interest and corruption? Is there sufficient access to record on the procedure used? Can unsuccessful bidders challenge a procurement decision?

38 CONTRACT ADMINISTRATION (1) The overall score on contract administration was assessed to be fair at 60%; 4 LGAs which performed poorly. Performance in Terms of PEs

39 CONTRACT ADMINISTRATION (2) The situation is alarming in LGAs where only 18 out of 89 projects (20%) with a total value of Tshs 3,409,676, (18% by value) had good performance in contract administration. That means, 80% of the audited contracts with a total value of 15,766,677, (82% by value) were assessed to have unsatisfactory contract administration.

40 CONTRACT ADMINISTRATION (3) Major Weaknesses: Performance securities were not submitted as per terms and conditions of the contract leaving the PEs with no leverage in cases where contractors failed to perform; Extension of times were granted without extending the Performance Securities; Performance securities expired without extending them. Site possessions were not given as per terms and conditions of the contract which led to extension of time for most of the contracts.

41 CONTRACT ADMINISTRATION (4) Major Weaknesses: Delayed payments of contractors and consultants caused by erratic cash flows from the government or donors; Weak monitoring of contracts characterized by lack of project progress reports, lack of site management meetings, and lack of project completion reports; Non-enforcement of liquidated damages clause.

42 CONTRACT ADMINISTRATION (5) Major Weaknesses: Issuing variation orders without following appropriate procedures; There were cases where the supervising engineers/technicians issued instructions to vary the works without getting prior approval of the tender board and Accounting Officer. Issuing extension of time without justifiable reasons and without following appropriate procedures; Incomplete and inadequately prepared payment certificates; they lacked measurement and take-off sheets to justify the quantities paid, and in some cases certification was made for works which did not exist. Poor records keeping.

43 CONTRACT ADMINISTRATION (6) Major Weaknesses: Variations orders not sanctioned by the appropriate Tender Boards as per Regulation 117 of G.N. No. 97 of 2005; Advance payments without guarantee although it was stipulated in the contracts; Non-enforcement of performance securities and insurance covers although they were stipulated in the contracts; Site management meetings were not held as per terms and conditions of the governing the contracts.

44 CONTRACT ADMINISTRATION (7) Major Weaknesses: Delays in contracts execution; small contracts were executed for three years; resulting in huge cost overrun; Final inspection reports prior to issuing practical completion reports were not done to prepare a snag list of the works to be rectified during Defect Liability Period; Inadequate supervision of the consultant contracts; Consultants failure to produce complete designs and specifications; Consultants not mobilizing all key personnel earmarked for the assignment and PEs not taking any action as per provisions of the contract; Consultant not submitting reports on time or not submitting the report at all.

45 QUALITY OF WORKS (1) The overall score on quality of works was assessed to be fair at 73%. Performance in Terms of PEs

46 QUALITY OF WORKS (2) Major Issues Lack of/or inadequate quality control system in checking and approving the designs, drawings, specifications, bills of quantities, payment certificates, pre-tender estimates, etc; and Weak / Inadequate supervision of construction contracts and consultancy services caused by inadequate qualified staff and inadequate supervision vehicles/ motorcycles.

47 QUALITY OF WORKS (3) Major Issues Lack of quality control tools and equipment leading to failure to test materials and completed works, i.e. simple tools like camber board; ditch template, etc; Vandalism of the road furniture i.e. road signs; Lack of honesty/integrity among the supervising engineers and technicians. Although poor quality works were observed by the audit team, most of them had already been certified by the project supervisors and paid.

48 POST-BIDDING STAGE (1) Contract management How is the performance of the economic operator monitored? Is there sufficient supervision? How do we handle variations and change in contract conditions? Do we certify product substitution, sub-standard works or services? Are sub-contractors chosen in a transparent manner, and are they kept accountable?

49 POST-BIDDING STAGE (2) Contract payment False accounting and cost misallocation; Late payment of invoices; False invoicing for goods or services not supplied or for works not executed.

50 QUESTIONABLE PAYMENTS TO CONTRACTORS (1) After joint site inspections and measurements of actual works by the auditors questionable payments were revealed: Payments for items of works not done; Double payment for an item; Payments for items whose specifications were; changed not prior approved; Payment for inflated quantities; Overpayments; in 2010/11 VFM audit.

51 NEW INDICATORS FOR PROCUREMENT AUDITS (1) Appropriateness and efficiency of the Institutional setup (15 points); The appropriateness of the established TB; Appropriateness of the established PMU; Knowledge of the TB members and PMU staff in applying the PPA and procurement regulations; The efficiency of the AO, TB, PMU, and UD in performing their responsibilities stipulated in the PPA; Interference of responsibilities and powers; and internal control systems.

52 NEW INDICATORS (2) Appropriate preparation and efficiency in implementing the annual procurement plan (15 points) The use of appropriate templates; Appropriate tender numbering; Appropriate allocation of tender processing time; Aggregation of requirements; Arrangement of TB meetings; Approvals; Advertisement of the plan to the public; Adherence to the plan; and Efficiency in implementing the plan.

53 NEW INDICATORS (3) Appropriateness of the tender process (30 points) Preparation of tender documents; the use methods of appropriate procurement methods; Appropriate publication of bid opportunities; adequacy of time given to bidders to prepare bids; submission of tender adverts to PPRA; receiving and opening of bids; evaluation of bids; mandatory approvals; award communication; publication of awards; notification of unsuccessful bidders; and submission of contract completion reports to PPRA.

54 NEW INDICATORS (4) Appropriateness of contract implementation (20 points) Proper signing of contracts; Existence and qualifications of contracts managers; Management of contract performance securities; Management of time control issues; Management of quality control issues; Management of scope control issues; and Management of cost control issues.

55 NEW INDICATORS (5) Records keeping (10%) Availability of complete records; Arrangement of procurement information; Location of procurement information; Availability of adequate space for keeping procurement documents; and Availability of adequate shelves, cabinets, etc.

56 NEW INDICATORS (6) Implementation of systems prepared by PPRA (PMIS and/or CMS) (10 points) Submission of APP; Timely submission of APP; Submission of procurement reports for individual tenders; Submission of monthly procurement reports; Submission of quarterly procurement reports; and Submission of annual procurement report.

57 NEW INDICATORS (7) Handling of complaints and application of margin of preference (-10 points) In addition to the above six main indicators, PEs will be assessed whether: they have handled properly and timely complaints properly submitted by bidders; and they have allowed and applied where applicable, margin of preference in accordance to the provisions in the PPA and Regulations. Depending on the number of mishandled cases, PEs can be penalized to the maximum of ten points.

58 SCORES (%) Av. Compliance 65% COMPLIANCE INDICATORS

59 NEW INDICATORS Average level of Compliance 65% MDAs - 69%; PAs 67% LGAs 57% Performance of PEs 37 (30%) Poor Performance; 72 (59%) Fair Performance; 13 (11%) Good Performance

60 NEW INDICATORS Performance Targets Baseline = Current score using new indictors 65% 2012/13 = Baseline + 5% = 68% 2013/14 = Baseline + 10% = 72% 2014/15 = Baseline + 15% = 75% 2015/16 = Baseline + 20% = 80%

61 CONCLUDING REMARKS Let us establish: What capacity is necessary in LGAs in order to improve compliance and performance from 57% to > 80%; What is lacking in capacity and the root causes; What should be the priority areas; What actions are necessary to fill the gap in the priority areas; and What resources are required and how they will be prioritized and allocated by LGAs to strengthen their procurement performance.