ADDIS ABABA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

PUBLIC PROCUREMENT PRACTICES AND CHALLENGES IN

ETHIOPIA:

EVIDENCE FROM SELECTED PUBLIC ORGANIZATIONS

BY

ROMAN LEGESSE W/GIORGIS

THESIS

Submitted for partial fulfillment of the requirements for the degree of Master of Arts in
Accounting in the Department of Business and Finance

Addis Ababa University

Addis Ababa, Ethiopia

June 2017
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 DECLARATION

I, the undersigned, declare that this thesis is my original work and has not been presented for a
degree in any other university, and that all sources of materials used for the thesis have been duly
acknowledged.

Declared By:
Name: Roman Legesse

Signature: ____________

Date: June 2017

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Statement of certification
This is to certify that Roman Legesse W/Giorgis has carried out a thesis on the topic “public
procurement practices and challenges: in the selected public organization of Ethiopia” under my
supervision. In my opinion, this thesis is suitable for submission in partial fulfillment of the
requirements for the award of the MA Degree in Accounting and Finance.

Advisor: Wollela Abehodie (PhD)

Signature: ___________________

Approved by:

Internal Examiner: External Examiner:

Abebaw Kassie (PhD) Demissie Dea (PhD)

Signature: ___________________ Signature: ___________________

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ABSTRACT

The objective of this study is to assess the regulatory framework, practices and challenges of
public procurement in selected public organizations in Ethiopia, and to see the main
procurement procedures in light of public procurement practices in some East African countries.
The study used mixed research approaches: Survey, in-depth interviews and documentary
analysis. The main findings include: some public procurement performances regarding need
identification, selection of procurement methods and planning processes were not in accordance
with the procurement rules and regulations, and lack of effective use of procurement budget. As
the study reviled the causes for the problems were: failure to retain skilled manpower due to
low government salary scale; only one agency (the procurement agency) is mandated to process
all public procurement in all public organizations; and lack of transparency in the contract
administration procedure. Moreover, the result shows that the main procurement procedures in
the three East Africa countries are similar to that of Ethiopia in many aspects. However, some of
the observed gaps should be filled. This needs commitment from responsible government
authorities to improve the public procurement practices and resolve challenges for sound public
procurement practices.

Key Words: Public procurement, procurement procedures, procurement planning, procurement

specifications

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Acknowledgements
First of all, I would like to thank the almighty God, the reason for my success. My sincere
appreciation and thanks go to my research advisor, Assistant Prof. Wollela Abehodie for her
devotion throughout the paper, invaluable comments and inspiration to me to conclude this
paper. My special recognition goes to the Accounting and Finance Department lecturers for their
tireless assistance during the coursework, the Ethiopian Institute of Agricultural Research
(EIAR) Management for giving me the opportunity, and to all the people in the respective
organizations who cooperated and helped me to gather data for my research work.

Finally, my gratitude goes to my husband, Dr. Abraham Tadesse, and my children, Abenezer and
Bethel for making the sacrifices over the past two years, by allowing me the time to conduct this
Masters Degree program. I remain indebted to my parents for the solid foundation they laid in
my life, and my relatives for their on-going encouragements. For all the above various people, I
owe this achievement and I will forever remain sincerely indebted.

Thanks to you all.

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TABLE OF CONTENTS

Title Page
Abstract…………………………………………………………………………………………….i
Acknowledgements………………………………………………………………………………..ii
Table of contents…………………………………………………………………………………iii
List of Tables……………………………………………………………………………………..vi
Acronyms…………………………………………………………………………………….…..vii

Chapter 1: Introduction.……………………………………….……………………….………….1
1.1 Review of Ethiopian procurement system….............................................................................3
1.2 Statement of the problem……………………………..……………………………………….4
1.3 Research objective and research questions………………………………..…………..............4
1.4 Significance of the study……………………………………………………………………....5
1.5 Scope and limitation of the study…...........................................................................................5

1.6 Organization of the thesis…......................................................................................................6

Chapter 2: Review of literature.….………………………………………………………………..7

2.1 Theoretical review….................................................................................................................7
2.1.1 Theories used in public procurement…..................................................................................7
2.1.1.1 Theory of auctions and competitive bidding…………………………………………...7
2.1.1.2 Principal-agency theory…………………………………………………………….......8
2.1.1.3 Transaction cost economic theory……………………………………………………...9
2.1.1.4 Contract theory……………………………………………………………………........9
2.1.2 Public procurement vs. private sector procurement……………………….........................10
2.1.3 Procurement procedure and its cycle………………………………………………………11
Need identification…………………………………………………………….......….........11
Planning and specification of goods or services required……………………...........…….11
Sourcing, awarding, and supplier management…………………………….….…......…...12
2.1.4 Laws and regulations………………………………………………………………...........12
2.1.5 Public procurement organization structure.…………………………………………….....12
2.1.6 Public procurement workforce..……………………………………..…………………….13
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2.1.7 Public procurement principles.…………...………………………………………………..14
Transparency……………………………….....…………………………………………….15
Integrity…………………………….....…………………………………………………….15
Economy………………………….........…………………………………………………...15
Openness……...…………………......……………………………………………………...15
Fairness….....……………………………………………………………………………….15
Competition………………………......……………………………………………………..16
Accountability……………….......…………………………………………………………..16
2.1.8 Challenges in public procurement……….....……………………………………………...16
Market factor………………………..……....……………………………………………….17
Political environment………………….....…………………………………..……………..17
Social, economic and other environmental force…....……………………………………..18
Organizational structure.……….....…..…………………………………..………………..18
2.1.9 Public procurement and corruption……………..………………………………………….18
2.2 Empirical literature…………………………..………………………………………………18
2.2.1 Studies in Ethiopia………..……………………………………………………………......19
2.2.2 Similar studies in other countries………………..…………………………………………21
2.3 Conclusion and knowledge gap…………………...………………………………………....24

Chapter 3: Research methodology……….……………………………………….……………...25

3.1 Research approach…………………………………………………………….……………..25
3.2. Quantitative Approach…………………..………………………………….………..……...26
3.2.1. Sample design......................................................................................................................27
3.2.2. Survey instrument................................................................................................................28
3.2.3 Qualitative approach.............................................................................................................29
3.2.3.1 In-depth interview..............................................................................................................29
3.2.3.2 Documentary analysis…………………………………..……………….……………….30
3.3 Conclusion...............................................................................................................................30

Chapter 4: Results and discussion………….……………………………….…………………....30

4.1 Results......................................................................................................................................30

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4.1.1. Survey results…………………………..…………………………….…………....……....30
4.1.1.1 Respondents profile.....……………………….…………………….………..…..............30
4.1.1.2 Examining public procurement practices and challenges. ..........….....………………….33
Need assessment…………………………........………….……..……….………………...33
Procurement planning and communication...………….…..…….…......………………….34
Specification completeness...……….…….......…….…………….………………………..35
Procurement methods............................................................................................................36
Contract administration…………….....………….……………..........…………………….36
Public procurement challenges…………..……….……….......…….………………….….37
4.1.2 Qualitative results.................................................................................................................38
4.1.2.1 Interview results…………………………………………..……….……………………..38
4.2 Discussion.………………………………………………….…...……………………….......41
Public institutions identification of procurement needs.........................................................41
Development of procurement plan and communication.........................................................42
Quality of specifications.........................................................................................................43
Determination of procurement method...................................................................................44
Contract administration...........................................................................................................45
Challenges of public procurement..........................................................................................46
Chapter 5: Conclusion and recommendations…..…….…………………………………………46
5.1 Conclusions………………………….……………………….………………………………47
5.2 Recommendations………………….…………………….………………………………......49
References…………………………………...………………………………………..................50
Appendix A: Questionnaire for participants of the survey..……………………………....……..53
Appendix B: Ethiopia public procurement procedures in light of east Africa country .............57

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LIST OF TABLES
Table 3.1 Population of the study…..............................................................................................29
Table 3.2 Lee Cronbach’ reliability estimation….........................................................................29
Table 4.1 Gender category of respondents……………………….……………………………...31
Table 4.2 Age ranges of the respondents……………………………….………………………..32
Table 4.3 Educational levels of the respondents ……………….………………………………..32
Table 4.4 Position of the respondents…………………………….……………………………...33
Table 4.5 Work experiences of the respondents…………….…………………………………...33
Table 4.7 Reliability statistics.…...……………………………….……………………………...34
Table 4.8 Need identification………………………………….…………………………………35
Table 4.9 Procurement planning and communication……………….…………………………..37
Table 4.10 Specification completeness.……………………….…………………………………38
Table 4.11 Procurement methods…………………………….………………………………….39
Table 4.12 Contract administration…………………………….………………………………...40
Table 4.13 Challenges of procurement…………………………….…………………………….41

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ACRONYMS

FPPA - Federal Public Procurement and Property Administration Agency

INTOSAI - International Organization of Supreme Audit

FDRE - Federal Democratic Republic of Ethiopia

OFAG - Office of Auditor Genera

RQ - Research question

CIPS - Chartered Institute of Purchasing and Supply

OECD - Organization for Economic Co-operation and Development

GDP - Gross domestic product

PPA - Public Procurement Agency

EMBA - Executive Master of Business Administration

MoFED - Ministry of Finance and Economic Development

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 CHAPTER ONE
1. INTRODUCTION

Procurement encompasses the whole process of acquiring property and/or services. According to
Waters (2004), it begins when an agency has identified a need and decided on its procurement
requirement. Procurement continues through the processes of risk assessment, seeking and
evaluating alternative solutions, contract award, delivery of and payment for the property and/or
services and, where relevant, the ongoing management of a contract and consideration of options
related to the contract. Procurement also extends to the ultimate disposal of property at the end of
its useful life (Waters, 2004). Thai (2001) indicated that procurement encompasses acquisition,
contracting, buying, renting, leasing, and purchasing, to include functions such as requirements,
determination and all phases of contract administration. There are two types of procurements:
private procurement and public procurement. Public procurement is continuing to evolve both
conceptually and organizationally. The evolution accelerated during the 1990s as governments at
all levels came under increasing pressures to “do more with less.” Indeed, all governmental
entities of rich and poor countries are struggling in the face of unrelenting budget constraints,
government downsizing, public demand for increased transparency in public procurement; and
greater concerns about efficiency, fairness, and equity (Thai, 2009). The report further indicated
that irrespective of variations in the existing political, economic and legal environment peculiar
to a specific country, an efficient and effective system of public procurement is ultimately built
upon four basic pillars: procurement laws and regulations, procurement workforce, procurement
process and methods, and procurement organizational structure. Ideally, procurement laws and
regulations should be clear, consistent, comprehensive, and flexible (Thai, 2009).

World Bank (2002)indicated that even rules and regulations have been enacted, successive
review of the public procurement regimes in Ethiopia reveal a lot of short comings such as
procurement laws and regulations are not based on recognized international models, absence of
clearly defined central oversight and public bodies at all levels, shortage of experienced
management and procurement staff, lack of transparency in the procurement processes, absence
of procedures for modern form of procurement activities and unclear institutional and
organizational arrangements required in the management of the public procurement process.
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Based on the abovementioned comments, Ethiopia has already begun implementing major
reform programs since 2009. The Federal Government of Ethiopia Procurement and Property
Administration Proclamation No 649/2009 was enacted by parliament replacing the previous
law. The law led to the establishment and operation of the Federal Public Procurement and
Property Administration Agency (FPPA) and the independent Complaints Board. The law also
emphasizes best practices including value for money, non-discrimination, transparency and
accountability as the major principles of public procurement in Ethiopia. However, still many
sources such as audit reports and newsletters, indicate that there are different challenges to
ensure sound procurement practice in Ethiopia. Some of these challenges include lack of evident
assessment of the actual practices and the level of compliance with international best practices
regarding procurement, lack of alignment of the practices of procurement processes with the
procurement manual of the country (Office of Federal Auditor General(OFAG), 2016).

Different researchers have tried to address some of the problems of public procurement in some
public organizations in the country. These include public procurement reform in Ethiopia: policy
and institutional challenges and prospects by Yirga (2011); procurement planning and
implementation effectiveness in Ethiopia by Anteneh (2015);procurement reform in Ethiopia:
factors leading to effective public procurement implementation by Getnet and Tilahun (2014);
accountability, responsibility, transparency and corruption by Gizachew (n. d), and evaluation of
procurement process at Addis Ababa Water and Sewerage Authority by Yonas (2014). However,
none of the above studies have adequately identified the challenges faced in the field of
procurement in the public sectors; the implementation/practices of the legal frameworks (law,
proclamation, manual) of public procurement were not adequately addressed; and the Ethiopian
public procurement legal framework in light of other east Africa country have not been assessed.

This study assessed the practices and challenges of public procurement in selected public
organizations and the procurement procedures in light of some East African countries’
experiences. The study also reviewed the performances of the procurement units, procurement
methods, and the limitations in implementing the procurement regulation in selected public
organizations in the country.

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This chapter is organized in six parts. Review of Ethiopian procurement system are presented in
section one which is followed by statement of problems in section two. A discussion of research
objective and research questions is shown in section three, Section four is for significance of the
study, while sections five and six present scope of the study and organization of the thesis,
respectively.

1.1. Review of Ethiopian Procurement System

This section will give over view about legal framework of the Ethiopian public procurement
system. Having the objective to achieve better transparency, efficiency, fairness and impartiality
in public procurement, and to enable the utilization of the large sum of public money spent on
procurement in a manner that ensures greater economy and efficiency, the Federal Democratic
Republic of Ethiopian (FDRE) government established a public procurement proclamation. The
proclamation describes the basic procedures and methods of public procurement and has
established an independent public procurement control and oversight Entity i.e. the Ethiopian
Public Procurement and Property Administration Agency (PPA). As mandated in the
Proclamation PPA issued Public Procurement Manual. The manual state that in the public
procurement plan, the user department must raise the procurement needs; this need has to acquire
specification/Terms of Reference of Requirements; it should be clear, precise, complete and well
understood. The specification may further be refined and clarified, by the procuring department,
as per the pertinent rules and regulation. Technical specification is prepared or will be prepared
by end users (PPA, 2011). The Procurement also state that except otherwise provided in this
proclamation, the procuring entity shall use open bidding as the preferred procedure of
procurement. The selection of any procurement method other than Open Bidding should be
recorded in the Records of procurement, stating the reasons and justification for the method
selected (FDRE, 2003). The manual also states about contract administration as Effective
management of contracts is essential to ensure that the objectives of the procurement process are
achieved and that all contractual obligations and activities are completed efficiently by both
parties to the contract. The Procurement Unit must ensure that routine monitoring of all current
contracts is maintained so that swift remedial measures can be taken when problems arise, or
preventative action taken when problems are foreseen (PPA, 2011).

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1.2. Statement of the Problem
The procurement law can be very comprehensive, depending upon countries. Officials must
ensure that public procurement is managed in accordance with the objectives, principles and
procedures defined as conducted on the public interest and is open to public scrutiny
(International Organization of Supreme Audit Institutions (INTOSAI, n. d)). According to
Federal Democratic Republic of Ethiopia (FDRE), 2009),compliance is the key to the attainment
of the objectives of the procurement such as transparency, competition, value for money,
accountability and the efficient use of state resources. On the other hand, non- compliance to
procurement laws is considered as a major hindrance to the effectiveness of the laws (Gelderman
et al., 2006).

In a 2012 speech to business people, the late Prime Minister Meles Zenawi noted that the state
"is fighting with rent seeking, while its hands are tied". The speech, largely an honest reflection
of the level of spoilage within the state, identified land administration, customs and public
procurement as the three pillars of the rent seeking political economy, an arch enemy of the
developmental political economy the ruling EPRDF wishes to establish. Three years since that
bold speech by Meles, the state, under the complete control of the Revolutionary Democrats,
continues to struggle with the bleeding impacts of corruption in the three areas (Yonas, 2015).
However, OFAG (2016) report after auditing 77 offices and five branch offices of public
organizations in order to confirm whether the procurement processes were implemented
according to the public procurement proclamation, regulation and manual or not indicated that
procurements amounting about Ethiopian birr 546,059,763 were carried out in all offices and
branch offices audited in 2007 E. C. without following the proper procurement legal framework.

The above issues in the public procurement system in Ethiopia together with the knowledge gap
Different researchers have tried to address some of the problems of public procurement in some
public organizations in the country. These include public procurement reform in Ethiopia: policy
and institutional challenges and prospects by Yirga (2011); procurement planning and
implementation effectiveness in Ethiopia by Anteneh (2015); procurement reform in Ethiopia:
factors leading to effective public procurement implementation by Getnet and Tilahun (2014);
accountability, responsibility, transparency and corruption by Gizachew (n. d), and evaluation of
4
procurement process at Addis Ababa Water and Sewerage Authority by Yonas (2014). However,
none of the above studies have adequately identified the challenges faced in the field of
procurement in the public sectors; the implementation/practices of the legal frameworks (law,
proclamation, manual) of public procurement were not adequately addressed; and the Ethiopian
public procurement legal framework in light of other east Africa country have not been assessed.
shown in chapter two necessitated the conduct of this study.

1.3. Research Objective and Research Questions

The general objective of this study is to assess the regulatory framework, practices and
challenges of public procurement in Ethiopia and Ethiopian regulatory framework in light of the
other East Africa countries.
Based on the above broad objective the following research questions (RQ) were developed:
RQ 1. How do public institutions identify their procurement needs?
RQ 2. How are plans for procurement developed and communicated to the concerned
bodies in the selected organization?
RQ 3. How is the quality of the specifications set for goods to be procured in terms of
clarity, and accuracy?
RQ 4. How are the methods for procurement determined?
RQ 5. How are the contract administration works performed?
RQ 6. What are the challenges that public institutions and suppliers face in relation to
public procurement?
RQ 7. How do the legal framework related to identification of procurement needs,
contract administration, methods of procurement look in light of the experience in
selected East Africa countries?

1.4. Significance of the study

The intention of this study is to contribute to the existing body of knowledge about public
procurement practices and challenge. The study is expected to shed-light on challenges of public
procurement implementation practices, this can have an immense advantage for different
stakeholders; for the managers to make corrective actions, for policy makers to revise the policy
and review the practices, for researchers to serve as a facilitator for further detail investigations,

5
and particularly, if the management admits the problems and take corrective measures, the study
will contribute a lot to enhance organizational performance.

1.5. Scope and limitation of the Study

Procurement encompasses the whole process of acquiring property and/or services, and also
extends to the ultimate disposal of property at the end of its useful life. Though it will be
important to include all these areas because of infeasibility from resource and time perspectives,
the focus of this study was only assessment of the practices and challenges of procurement
procedures in sample public organizations. The study used eight public organizations viz. the
Ministry of Agriculture, Ministry of Health, Ministry of Education, Ministry of Transport,
Ministry of Trade, Sugar Corporation, Ethiopia Electric Power Corporation and the Ethiopian
Rail-Way Corporation. These organizations are highly budgeted and the government identifies
them as among the major economic development sectors. Ministries and corporations were
selected in order to see procurement practices in these different organizations which are under
different administrative and management structures. This study compared the procurement
procedures in these organizations in light of three East African countries: Kenya, Uganda and
Zambia. According to Nagabiran and Karungi (2014), these countries have recently undertaken
important initiatives to make their public procurement systems more efficient and transparent in
line with international procurement guidelines. Although the current East African Community
(EAC) Treaty does not explicitly address issues related to public procurement, the long history of
co-operation among the three countries and similarities in the institutional framework for public
procurement would make it worthwhile to explore possibilities of joint regional actions in this
area. This, however, crucially depends on the extent to which policies, laws and regulations and
the institutional frameworks in the three countries can be harmonized in the coming years.

1.6. Organization of the thesis

The thesis is organized in five chapters. The first chapter presents the introduction of the study,
the second chapter presents review of literature, the third chapter outlines methodology of the
study and chapter four presents the results, analysis and interpretation. The last chapter contains
conclusions, major finding and recommendation.

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 CHAPTER TWO

LITERATURE REVIEW

Procurement is the business management function that ensures identification, sourcing, access
and management of the external resources that an organization needs or may need to fulfill its
strategic objectives. Procurement exists to explore supply market opportunities and to implement
resourcing strategies that deliver the best possible supply outcome to the organization, its
stakeholders and customers. Procurement applies the science and art of external resource and
supply management through a body of knowledge interpreted by competent practitioners and
professionals (Chartered Institute of Purchasing and Supply (CIPS), 2013).

This chapter presents the review of both theoretical and empirical literature. The first section
reviews the theory while section 2.2 presents the empirical evidence on public procurement. The
conclusion and knowledge gaps are presented in section 2.3.

2.1. Theoretical review

There are different types of theories. Flynn and Davis (2014) examined the types of theories to
be used and found that theory of auctions and competitive bidding is the most singularly used
theory in public procurement. The next most used theory is principal-agency theory followed by
transaction cost economic theory, contract theory and general systems theory. Each of these
theories are described in brief as follows.

2.1.1. Theories in public procurement

2.1.1.1. Theory of auctions and competitive bidding
Philip, et. al. (2011) indicated that auction throughout the community is the generic name that is
assigned to the procurement procedures, represented by direct purchase, direct negotiation,
request for bids and the actual auctions through which goods are procured in the public sector.
For the science of public finance, auction is the key element through which is formed the value
of public assets to be acquired. This value is the result of competition between suppliers of goods
and services, which intends to provide public assets at the lowest price and best quality.
According to Philip et. al. (2011), auction rules are established by public authorities, which set
the values of public assets that are expected to be purchased. These estimated values of public

7
assets are seen as the market values or fair values that values that will be allowed by the public
authority. Over any of these estimated values, the bidders cannot deliver the goods and services
in the auction organized. Hence, the first rule of auctions, namely that the values of goods and
services provided for the needs of public authorities cannot exceed their estimated value.
Therefore, auctions are those that generate competition among bidders of public assets. Auction
rules are established by public authority, which sets the estimated value, eligibility criteria and
the criteria for awarding tenders. Estimated value is often market value, which the public
authority considers it can pay for goods and services that are expected to be delivered. No bidder
may bid values over the estimated value. Estimated value in turn cannot be higher than the
approved budget appropriations. This rules of the game created competition among bidders, are
leading eventually to the purchase of public assets whose value is between the estimated and the
specific cost of each bidder (Philip, et. al., 2011).

2.1.1.2. Principal-agency theory

Hezheng-Qing (2008) stated that the related parties in the government procurement mainly are:
the taxpayer, the government, financial department, state institutions and supplier. Under
centralized purchasing operating mechanism, these parties have formed a principal-agent chain
in the process of government procurement management: (1) Taxpayer is the supplier of
government procurement fund, commits the public funds to the government through the legal
process. So, the first agent relation of the taxpayer and government formed. (2) Since the public
administrative field of the government is very broad, it is impossible that government will do
everything. Under the authority of the functions, financial functions will be further delegated to
the financial department. So, the second agent relation of government and financial department
formed.(3) Financial departments work out law and regulation, supervise the implementation,
work out standard of supplier’s qualification and so on. It is impossible that financial department
takes on everything. So, financial department sets up a special organization (purchasing center)
in its internal. Such the third agent relation of financial department and purchasing center
formed. (4) The concrete government procurement activity is expertise by official, such the
fourth agent relation of purchasing center and purchasing official has formed.

8
According to Hezheng-Qing (2008), the agency chain like “the taxpayer-the government-the
financial department-the special purchasing organization-the purchasing official” is formed in
the process of government procurement. The taxpayer is the initial consignor, and the purchasing
official is the ultimate agent. However, in fact the taxpayer who is the initial consignor do not
manage authority in the process, cannot make purchasing decision and gain profit in the
progress. So, the purchasing official who has professional knowledge is responsible for
purchasing activity, and plays the decisive role in the chain. But the purchasing official is a
rational economic man, he runs after the maximization of self-interest. It is difficult to execute
government procurement law and realize the target of government procurement while conflicts
are occurred between his benefit and the consignor’s benefit. The principal-agency problem is
happened in the agency chain because of the inconformity of interests between the consignor and
the agent. In government procurement activities, asymmetric information, incomplete contracts
and opportunism, led to the dysfunction of principal-agent theory (Hezheng-Qing, 2008).

2.1.1.3. Transaction cost economic theory

According to Jurcik (2011), effectiveness is the main objective of the institute of public
procurement and should be managed by providing better services to the public at a lower price
than it is possible to achieve by the public sector. Comparably, Williamson (www.mendelu.cz)
indicated that the amount of transaction costs which is relevant when deciding on ways how to
ensure certain activities is influenced by three factors: specific activities, measurability of output
and input frequencies. The above described assumptions have serious implications for the
analysis of the relationship between government and market actors in the implementation of
public procurement. The key assumption for the “rational" decision making of public entities is
the ability to realize the contracted goods and further quantify or at least estimate the size of the
transaction costs associated with the implementation of the contract (Jurcik, 2011).

2.1.1.4. Contract theory

What is contract? `A speciation of actions that named parties are supposed to take at various
times, generally as a function of the conditions that hold' (Shavell, 2004).An example is
insurance contract under which (risk-averse) insured's pay premiums and are covered against risk
by an insurer. Some party might have incentive to behave opportunistically at the expense of

9
others. In an ideal world, people can write a complete contingent contract that induces all the
parties to take the `right' actions in every possible state of world, which leads to a paretecient
outcome. Contract theory studies what will or should be the form of contracts in less than ideal
worlds, where there exist;

 Hidden action (or moral hazard): when the involved party's behavior cannot be perfectly
monitored by others.
 Hidden information (or adverse selection): when the involved party has private
information which is not known to others.
 Contractual incompleteness: when contracts do not deal with all relevant contingencies.

According to the author, there are many applications of contract theory, among which the
followings are important: labor contracts, regulation, price discrimination, optimal taxation,
financial contracts, and auctions (Shavell, 2004).

2.1.2. Public procurement and private sector procurement

Compared with the private sector, the public sector’s procurement process differs in several
respects. Fundamental differences exist between the public and private sector in reporting
structure, regulating bodies, funding sources and operating motives (Larson, 2009). First, the
public sector is governed by legislative bodies, laws, and untold numbers of state and federal
regulations. The private sector is guided by boards of directors, business plans and the
organization’s purchasing policies. Second, the public sector funding sources are drawn from
taxes and fees and carry with them innate external regulations regarding their use. Private sector
organizations generate revenue through sale of goods and services and face no external
requirements for use. Third, the scope of public procurement is broader than simply procuring
required goods and services. Public sector procurement considers aspects such as the
development of its local economy and small business therein, job creation, promotion of open
equitable markets and strict adherence to clear procedures, fair competition, and transparency
(Telgen, et al, 1997). In the public sector, transparency is critical to ensure appropriate
accountability, minimize corruption in procurement and promote trust by allowing citizens to see

10
and judge the quality of government actions and decisions (Arrowsmith, 1998; Smith-Deighton,
2004).

Reed et.al. (2005) stated that the private sector is profit driven and though adherence to federal
regulations is important in the private sector, public external transparency can be detrimental.
Despite these differences, the mission of the procurement function, in public and private sector
organizations, is to efficiently manage the forecast, procurement and delivery of goods and
services through the supply chain in a cost effective manner. Notwithstanding the great potential
that private sector strategy and practices hold for public procurement, a careful exploration of the
differences between public and private sector procurement is essential before cross sector
implementation (Reed, et.al., 2005).

2.1.3. Procurement procedures and its cycle

Shaw (2010) pointed out that the procurement process can be wrapped into three steps. These are
need identification, planning and specification of goods or services required, and sourcing,
awarding, and supplier management to facilitate timely delivery.

Need identification: Procurement is done to desire to accomplish a specific task. Given that
resources are always scarce, the task to be accomplished should be important to an organization
(Nakamura, 2004).

Planning and specification of goods or services required

Once the needs have been identified, the procurement department should develop or
communicate a plan on how to deliver the service or goods required. The plan must be developed
in collaboration with the other functions within the organization, so that it is integrated into the
organization's strategy and therefore provided for adequately (Shaw, 2010). In order to be able to
purchase the right goods or services, the specifications of what the organization needs must be
clear. These specifications are used to communicate to the supplier what is needed and what
should be supplied. It is therefore important to have clear, precise and accurate specifications.
Most organizations have standard specifications for the most regularly procured items and
services such as medical and construction (Shaw, 2010).
11
Sourcing, awarding, and supplier management
Hinson and McCue (2004) stated that sourcing is the process of identifying sources of supply
that can meet the organization's immediate and future requirements for goods and services. The
sourcing process adopted will depend on the situation and on the time available to carry out
sourcing. For instance, in a sudden on-set emergency the need to respond quickly to the
emergency will mean there will be limited time to gather sourcing information and approve
suppliers; therefore, an organization may make use of existing suppliers.

2.1.4. Laws and regulations

A sound public procurement system needs to have good procurement laws and regulations. In
practice and theory, public procurement laws and regulations have been considered as one of the
most important pillars of a sound procurement system, as the author evidenced in past research,
publications, and practices. Procurement laws and regulations lead to procurement efficiency or
inefficiency. There was a debate about a procurement legal framework that hinders or helps
procurement discretion. Ideally, procurement laws and regulations should be clear, consistent,
comprehensive, and flexible (OECD, 2006).

2.1.5. Public procurement organization structure

OECD (2006) indicated that in some countries there may be a central procurement office for the
whole nation, such as Uganda, Kenya, etc. In other countries, public procurement organizational
structure is very complicated. In the United States, at the federal level, although procurement
regulations are applied to all federal agencies, the General Services Administration is a central
procurement office for civilian agencies, except the Department of Defense that does have its
dependent procurement office. According to Choi and Hong, 2002, cited by OECD, 2006),
managers in the private sector simultaneously face three different forms of structural complexity
in supply networks: vertical, horizontal, and spatial. Vertical complexity refers to the number of
hierarchical levels in the whole system (i.e. the number of tiers), horizontal complexity refers to
the number of different entities in the same level of the supply network (e.g. number of suppliers
in each tier), and spatial complexity refers to the average distance between operating locations.
This statement is particularly true in the government institutions.

12
An essential element of the role of the public procurement department in a government entity is
the placement of procurement authority. This is not to be confused with the location of
procurement personnel. Centralization occurs when all of the rights, powers, duties, and
authority relating to public procurement are vested in a central procurement officer. That central
authority often delegates some of these powers to others, but the point remains that they stay
with that central figure. Such delegations are normally carried out within a regulatory or policy
framework by means of specific letters or memoranda to those receiving the delegated powers;
they very precisely delineate the delegated contract approval authority in terms of dollar amounts
and commodities as well as whether or not the assigned authority may be further delegated.
Decentralization occurs when procurement personnel from other functional areas can decide
unilaterally on sources of supply or negotiate with suppliers directly (Dobler and Burt, 1996).
Rarely is an agency fully centralized or fully decentralized; it is usually somewhere in between,
often with very specific exceptions on a commodity basis such as contracting for specialized
professional.

2.1.6. Public procurement workforce

A sound procurement system has to have a competent professional workforce equipped with
defined skills and knowledge for specified procurement jobs (OECD, 2006). The procurement
workforce “permeates virtually every effort within an agency, including successfully acquiring
goods and services and executing and monitoring contracts” (United Government Accountability
Office, 2005). Unfortunately, public procurement has been a neglected area of education. Not
until 2007, was a college degree program in public procurement offered. Thus, public
procurement personnel are mostly on-the-job training or from law schools. Moreover, countries
such as the United States and Canada will face a major problem: the shortage of its procurement
workforce due to retirement and job turnover, which could create an imbalance with regard to
acquisition experience and skill sets. Thus, it is a challenging task for an agency to choose the
right staff in the right numbers applying skills where needed to accomplish the mission
effectively. Creating a procurement workforce with the right skills and capabilities can be a
challenge, given changes to procurement processes, the introduction or expansion of alternative
contracting approaches, and increased reliance on services provided by the private sector (United
Government Accountability Office, 2005). Thus, governmental entities need to have a
13
comprehensive training program, a comprehensive strategic workforce plan to profile the current
staff, and projects staffing needs for the future, to hire, develop, and retain talent.

2.1.7. Public procurement principles

Public procurement principles set the framework for managing public procurement requirements,
and also within which procurement practitioners’ must work. So, as practitioners it is important
not only to have a clear understanding of public procurement principles, but to interiorize them
so that they serve as guiding principles in our decision-making process. By integrating these
principles into our work ethics, the outcome of our decisions will always be in line with public
procurement principles. Being governed by and working in line with public procurement
principles is especially important (Lynch, 2013). Public procurement principles are the
foundation of public procurement and should be addressed in the public procurement rules. They
govern the management of public procurement, and also set the framework for a code of conduct
for public procurement practitioners and all other officials directly or indirectly associated with
the public procurement process. Transparency, integrity, economy, openness, fairness,
competition and accountability are some of the fundamental principles of public procurement.
These are briefly discussed below.

Transparency: Transparency in public procurement is important. Information on the public

procurement process must be made available to all public procurement stakeholders: contractors,
suppliers, service providers, and the public at large, unless there are valid and legal reasons for
keeping certain information confidential.

Integrity: In public procurement integrity is twofold. There is the integrity of the procurement
process, and that of public procurement practitioners. Integrity of the public procurement process
is essentially reliability. Bidders and all other stakeholders must be able to rely on any
information disseminated by the procuring entity, formally or informally. The integrity of the
procurement process assures confidence in the public procurement system. Practitioners working
within procuring entities, and other government officials involved in the public procurement
process, must display personal and professional integrity. Ideally there shouldn’t be any
inconsistency between the two.
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Economy: Synonymous with efficiency, value for money, and commercially reasonable price,
the principle of economy emphasizes the need to manage public funds with care and due
diligence so that prices paid for goods, services and works are acceptable and represent good
value for the public funds expended on them.

Openness: Public procurement requirements should be open to all qualified organizations and
individuals. The public should also have access to information pertaining to public procurement
requirements. Access to public procurement information is not absolute. Confidential and
proprietary information belonging to organizations and individuals participating in process
should not be available publicly, and the extent of their disclosure should be detailed in the
procurement rules or other relevant regulation.

Fairness: There are different interpretations of fairness in public procurement, so rather than
define fairness as treating all bidders equally, better to mention how fairness is achieved in
public procurement. To achieve fairness in the public procurement process:

 Decision making and actions must be unbiased, and no preferential treatment should be
extended to individuals or organizations given that public procurement activities are
undertaken with public funds.
 All offers must be considered on the basis of their compliance with the stipulations of the
solicitation documents, and offers should not be rejected for reasons other than those
specifically stated in the solicitation documents and the procurement rules.
 A contract should only be signed with the supplier, contractor or service provider whose
offer is compliant and best responds to the objectives of the requirement in terms of
technical capability and price.
 Suppliers, contractors or service providers should have the right to challenge the
procurement process whenever they feel they were unfairly treated or that the procuring
entity failed to carry out the procurement process in accordance with the public
procurement rules. Such challenges must be based on the solicitation documents and/or
the public procurement rules.

15
Competition: The public procurement process should not be manipulated for the benefit of any
organization or individual. Given that public procurement is funded primarily with tax payers’
money, all eligible organizations and individuals should be allowed to participate by submitting
offers in response to a specific requirement for which they are qualified.

Accountability: Accountability in public procurement means that anyone involved in the

procurement process is responsible for their actions and decisions with respect to the public
procurement process. As public servants, procurement practitioners, and others involved in the
public procurement process, are accountable and exposed to sanctions as a remedy for any
behavior that contravenes the public procurement rules. You also have an obligation to report
and/ or answer to a designated oversight entity, and the public, on the consequences of your
actions and decisions.

2.1.8. Challenges in public procurement

Krol (2012) indicated that the current economic crisis puts pressure on governments to cut
spending and reduce deficits. With public procurement often accounting for 10-15 percent of a
country’s GDP and for up to 65 percent of public sector budgets, governments are faced with the
challenge to keep adding maximum value while at the same time rigorously reduce their
spending. This implies that many government organizations need to shift from a budget driven to
a value driven way of thinking and acting, but this also means that there is an important role for
the procurement function to fulfill. The public procurement function, however, is faced with a
number of challenges such as:

 The fear for negative publicity has led to a growing emphasis on the legal aspects of the
tendering process.
 Procurement acts in a reactive way and is often not involved until the specifications have
been defined.
 Procurement is seen as an operational department and not perceived as an advisor or
partner of the business.

16
  Procurement is organized around contracts rather than commodities. There are peak
moments when contracts are about to expire, but there is no continuous process to
manage internal and supply market developments and opportunities.
 Procurement does not feel it is responsible for the operational procurement processes;
there is no focus on managing the end-to-end process and closing the procurement loop.

According to Thai (2001), there are also external factors public procurement practitioners have
always faced challenges imposed upon by a variety of environment factors including market,
legal environment, political environment, organizational environment, and socio-economic and
other environmental factors.

Market factor: Market conditions have a great influence on public procurement practitioners’
effort to maximize competition. Moreover, the market determines whether or not socio-economic
objectives of procurement are accomplished, whether or not a governmental entity can fulfill its
needs; the timeliness of fulfillment; and the quality and costs of purchased goods, services and
capital assets. As there are different levels of economic growth among countries in the world,
market conditions are very favorable in industrialized countries, while they may be unfavorable
in developing countries

Political environment: In a democracy many individuals, groups, and organizations in the

private sector including trade associations, professional associations, and business firms or
companies (commonly known as interest groups) are actively involved in all aspects of the
public procurement system. Having various interests, objectives and beliefs, interest groups are
involved in the public procurement system in several ways such as lobbying legislative bodies to
pass or alter procurement statutes, influencing implementation of these statutes, and influencing
budget authorization and appropriations processes. Normally, a government program that is
eventually adopted is a compromise among different views of interest groups, policy makers and
management. In this democratic environment, there are cases of a strong coalition of policy
makers, bureaucrats and interest groups in their effort to get their programs adopted.

17
Social, economic and other environmental force: While some countries impose social policies
on their public procurement practices (such as a policy placing a fair proportion of government
acquisitions with woman/minority-owned small business, or economically disadvantaged areas),
most governmental entities -be it a developed or developing country or federal, state, and local
governments- use their large procurement outlays for economic stabilization or development
purposes by preferring national or local firms over firms from other countries or other
geographic locations. Public procurement practitioners may be in a favorable economic
environment or market (with many competing tenderers in their country or local areas) or an
unfavorable economic environment (where competition hardly exists). This environment would
have a great impact on their practices as they may face an imperfect competitive market.

Organizational structure: Organizational structure may be very simple or very complicated,

depending on the size of government organization. Most state and large local governments have
procurement divisions either within their finance or administrative services departments; and
very few departments, except perhaps transportation or public works departments, have a
procurement function or officer. In the federal government, there are different procurement sub-
agencies within each executive agency, depending on each agency's missions.

2.1.9. Public procurement and corruption

Public procurement has been identified as the government activity most vulnerable to corruption.
As a major interface between the public and the private sectors, public procurement provides
multiple opportunities for both public and private actors to divert public funds for private gain.
For example, bribery by international firms in OECD countries is more pervasive in public
procurement than in utilities, taxation, judiciary and state capture. According to the Executive
Opinion Survey of the World Economic Forum of 2005, public procurement is also a major
economic activity of the government where corruption has a potential high impact on taxpayers’
money. In the European Union, public procurement equaled approximately EUR 1.5 trillion in
2002. In OECD countries, existing statistics suggest that public procurement accounts for 15
percent of Gross Domestic Product. The financial interests at stake, the volume of transactions
on a global level and the closer interaction between the public and private sectors make it
particularly vulnerable to corruption Organization for Economic Cooperation and Development
(OECD) 2007). Mushagalusa and Mushagalusa (2013) stated that corruption in public
18
procurement, which is a global phenomenon affecting countries at all stages of development, has
tremendously negative effects, leading to projects which not only exploit taxpayers’ money or
donated funds, but which may also pose a danger to the health and safety of users. Public
procurement is particularly susceptible to corruption because of the vast sums of money
governments spend on such projects, the relatively high degree of discretion public officials and
politicians typically have in such matters in comparison with other areas of public expenditure,
and the difficulty in detecting and investigating cases of corruption. Specific examples of
corruption in public procurement may be as varied as the procurements and individuals involved.
Generally, corruption in public procurement may involve complicated procedures and detailed
planning; technical complexities; numerous persons; and at times an international dimension.
These characteristics should be duly considered in detecting, preventing and deterring corruption
in public procurement. Because of the complexities of corruption in public procurement,
comprehensive preventive measures are necessary. Clear regulations and transparent procedures
in public procurement, including e-procurement, establishment of procurement boards, education
and public awareness of corruption in public procurement are examples of effective preventive
measures. Despite these measures, corruption in public procurement still persists.

2.2. Empirical Literature

This section reviews empirical studies on public procurement. The first section presents studies
conducted on Ethiopia; this is followed by a review of empirical studies conducted on other
countries’ public procurement systems and procedures.

2.2.1. Studies in Ethiopia

Yonas (2014) conducted a study on procurement process of Addis Ababa Water and Sewerage
Authority. The study used descriptive research design and quantitative and qualitative data
analysis. The findings of the study showed that the authority has no any procurement strategy
and policy. As a result, the researcher recommended that senior managers should protect the
department staff from the misperceptions of the procurement department and assist the
department to avoid the corruption process with little adverse effect. The department with the
involvement of the senior manager should revise the procurement process and evade the

19
unnecessary stage and bureaucratic steps to make the organization material flow effective.
Moreover, the internal controlling system should be revised to be more in effect.

Yirga (2011) conducted a study on public procurement reforms in Ethiopia. The objectives of the
study were giving a better insight about the challenges and prospects of the public procurement
system and assess the nature and system of public procurement practices and the underlying
factors that hinder public procurement activities in Ethiopia. The study was designed as
descriptive unstructured interviews have been conducted with different stakeholders. In addition,
the researcher uses different secondary data. Consequently, the results of this study showed that a
significant achievement has been made in reforming the Federal Government’s procurement
system. Recommendations in the study are suggested including strengthening the capacity of the
Public Procurement Agency’s workforce, making the legislation more comprehensive; work with
different stakeholders like the civil society organizations and the media on insuring transparency
and combating corruption.

Getnet (2014) in his paper on public procurement reform in Ethiopia to identify factors leading
to effective public procurement implementation in the country with particular reference to
Amhara Regional Bureaus and other government institutions found in Bahir Dar town. The data
had been analyzed using multiple linear regression method. The findings indicate that familiarity
in public procurement rules and regulations, transparency in public procurement processes,
ethics in public procurement and efficiency in public procurement processes have a positive and
statistically significant impaction effective public procurement implementation. The
accountability in public procurement, though have positive associations with effective public
procurement implementation, did not have a significant impact on effective public procurement
implementation. Gizachew (n. d) conducted a study on how public procurement is actually
practiced in terms of efficiency, accountability and transparency. The findings of the study
suggested that the level of efficiency, accountability and transparency observed in public
procurement was low, although the legal and institutional frameworks including detailed
procedures of public procurements are more or less laid down. The researcher recommend that
African countries in general and Ethiopia in particular to (1) recognize the importance of
continuously ensuring efficiency, accountability and transparency in public procurement through
20
establishing procurement monitoring and evaluation unit; (2) improve the level of compliance
with best standards; (3) assure the cooperation of all stakeholders through taking the initiative
and the leadership; (4) undertake complete procurement transformation through business process
reengineering and change management; (5) aggressively implement human capacity
development programs through training, system development and changing ethical behaviors;
and (6)develop and assign women employees in all procurement activities.

2.2.2. Similar studies in other countries

Musnzikwa (2013) conducted a study on public procurement system challenges in developing
countries: the case of Zimbabwe with the objectives to provide an overview of the public
procurement system challenges in developing countries identified a number of challenges in
public procurement that included delays in decision making, corruption, political interference,
incompetence, and a high level of corruption activities in the public procurement. The researcher
recommends that professional procurement practices must be adopted in public institutions for
the benefit of the country.

Kusi, et. al. (2014) conducted a study on assessment of public procurement policy
implementation in educational sector with the objective to review the key principles,
accountability and structure of budgeting system in Thailand. Descriptive survey design was
adopted in the study. The findings of the study proved that Takoradi Polytechnic uses the Ghana
Public Procurement Act 663/2003 in its procurement of goods, works and services from
suppliers through the established procurement unit of the institution. However, there were some
major challenges such as excessive bureaucracy, cumbersome documentation processing,
inadequate storage facilities and others; and it is incumbent on the public procurement authority
to intervene to curtail some of the challenges even as the polytechnic performs certain internal
interventions to counter such challenges in the procurement cycle.

Murray (2014) studied on improving the validity of public procurement argue that the
fundamental difference between private and public procurement, that of politicians, has been
largely overlooked in public procurement strategy and management research. The research was
based on a critical literature review of public procurement strategy and management literature,
21
examining the methodologies used and roles of politicians. The findings suggest that there was
an in-built bias through over reliance on procurement managers as the key respondents, tendency
to focus on private sector procurement research attributes and questions, and a tendency to focus
on operational as opposed to strategic public procurement decision making.

Amemba et.al (2015) on identifying the challenges facing public procurement performance in the
Kenyan public sector study found that the most prevalent challenges in the public procurement
process are the selection of the most suitable procurement methods, with appropriate
justifications and record keeping. The paper recommend that public procurement performance in
Kenya can only be improved through review of existing legislations to encourage extensive use
of technology in the management of the procurement process, fostering of long term buyer-
supplier relations and stakeholder involvement through trainings and sensitization on practicing
ethical behavior when conducting procurements.

Gormly (2014) studied what are the challenges to sustainable procurement in commercial semi-
state bodies in Ireland? provided the first complete insight into the use of sustainable
procurement in Irish commercial semi-state bodies. It explores the extent and type of use of
sustainable procurement plus identifies and examines the challenges to its use. A deductive
approach is utilized to determine the barriers. The research findings show that sustainable
procurement is being practiced in the majority of the commercial semi-state bodies.

Shaw (2010) assessed the City of Austin’s procurement process and programs based on a
practical ideal type framework developed through a literature review methodology for this study
includes document analysis and structured interviews. The results of the case study revealed that
quality ideal type model. He recommended that the department should establish a comprehensive
process and performance measure to gauge the quality of their individual procurement products
and the city of Austin should re-evaluate its current monitoring practices and work with
departments to identify where the deviations in process occur.

22
The analysis of government procurement in the frame of principal agent theory Zheng-Qiang
(2008) this paper uses the model of the principal-agent to analyze government procurement
activity, and proposes some countermeasures to improve principal-agent in government
procurement. The researcher found out the principal-agent dysfunction problem in the
government procurement has three causes - asymmetric information, incomplete contracts, and
opportunism in the supervision of consignors. The researcher recommend that according to the
analysis of principal-agency model, problems can be resolved by the following three
countermeasures: executing the government procurement laws strictly, building effective
accountability mechanism, building perfect supervision mechanism. Pomázi (n. d.) in the study
public procurement as auction theoretical models and practical problems showed how the theory
of optimal auctions can be applied to modeling public procurement. The findings of auction
theory can be applied to model public procurement, and takes a closer look at two practical
problems, choice of the optimal type of procedure, and withdrawal from contracts. From this it
was concluded that from a social viewpoint, it would be desirable for contracting authorities to
be granted greater freedom in their choice of procedure types.

2.3. Conclusion and knowledge gap

In conclusion many scholars have agreed that procurement function is vital to any organization;
procurement strategy have become a business success, in developed and developing countries
spend much in the provision of goods and services that are needed to deliver public policy and
business objectives. Good public procurement outcome is dependent on accurate implementation
of procurement principles, methods and proper understanding of these by the public procurement
practitioners. Different researchers have tried to address some of the problems of public
procurement in some public organizations in the country. These include public procurement
reform in Ethiopia: policy and institutional challenges and prospects by Yirga (2011);
procurement planning and implementation effectiveness in Ethiopia by Anteneh (2015);
procurement reform in Ethiopia: factors leading to effective public procurement implementation
by Getnet and Tilahun (2014); accountability, responsibility, transparency and corruption by
Gizachew (n. d), and evaluation of procurement process at Addis Ababa Water and Sewerage
Authority by Yonas (2014). However, none of the above studies have adequately identified the
challenges faced in the field of procurement in the public sectors; the implementation/practices
23
of the legal frameworks (law, proclamation, manual) of public procurement were not adequately
addressed; and the Ethiopian public procurement legal framework in light of other east Africa
country have not been assessed. However, none of the studies have identified the challenges
faced in the field of procurement in the public sectors; and the implementation/ practices of the
legal frameworks (law, proclamation, manual) of public procurement were not adequately
addressed. Thus, in the current study, the researcher evaluated the practices and challenges of
procurement in line with the procurement regulatory framework in selected public organizations
in Addis Ababa. In addition, the study assessed the performances of the procurement units,
procurement methods, and the limitations in implementing the regulation.

24
 CHAPTER THREE

RESEARCH METHODOLOGY

This chapter presents the methodology used to determine the practices and challenges of
procurement in selected public organizations. This chapter is organized in three sections. Section
3.1 presents research approaches which is followed by methods adopted in and section 3.3 is
about data analysis.

3.1. Research approaches

There are three types of research approaches, qualitative, quantitative and mixed approach.
Quantitative method is a means for testing objective theories by examining the relationship
among variables. Data collected is number and statistics. The data is based on precise
measurements and the final report will be statistical report with correlations, comparisons of
means and statistical significance of the findings. On the other hand, qualitative method is a
means for exploring and understanding the meaning individuals or groups ascribe to a social or
human problem. The processes of the research involve emerging questions and procedures. The
data typically collected in the participants setting and the researcher making interpretations of the
meaning of the data. The final report is narrative report with contextual descriptions and direct
quotations from research participants. The mixed method focuses on collecting, analyzing and
mixing both quantitative and qualitative data in a single study or series of studies. Its central
premise is that the use of quantitative and qualitative approach in combination provides a better
understanding of research problems than either approach alone. It involves philosophical
assumptions, the use of qualitative, quantitative approaches, and the mixing of both approaches
in a study. A strong mixed methods study should start with a mixed method research question to
shape the methods and the overall design of a study, because a mixed method study relies on
neither quantitative nor qualitative method alone (Kothari, 2004).

In this study both quantitative and qualitative approaches were used, To minimize limitations
attached to each of the approaches. According to Creswell (2003) each approach has limitations
which are possible to be minimized using the combined research approach. For example
quantitative approach may cause bias in reliability of findings because of the nature of research

25
problem, non representativeness of sample or the nature of questionnaires that predicts clue. In
addition, it is difficult to minimize the impact of human behavior using quantitative approach.
Joseph (2006) justified that qualitative techniques can increase a research's depth of
understanding of the phenomenon under investigation. Qualitative approach is exploratory and
flexible in nature to identify problems that are affected by human behavior. Regardless of the
above advantage, qualitative research design has its own demerits: lack of standardized rules
reduces the objectivity of the findings, the personal view and stand of the researcher may induce
bias in the interpretation of the data, and the findings cannot be statistically generalized for a
broader population under investigation (Creswell, 2003). Hence, the combined methods are
aimed to complement one another and gather reliable information to draw representative
outcome and conclusion.

3.2. Quantitative aspect of the study

As noted earlier a quantitative approach is one in which the investigatory primarily uses
postpositive claims for developing knowledge, employs strategies of inquiry such as experiments
and surveys, and collect data on predetermined instruments that yield statistics data. Survey
research provides a quantitative or numeric description of trends, attitudes, or opinions of a
population by studying a sample of that population. This study used Survey method because of
advantageous for its merit of economy of design and it enables to gather enough information,
which may not be available from other sources. The purpose of survey research is to generalize
from the sample to the population so that inferences can be made about some characteristic,
attitude or behavior of the population (Creswell, 2009). Also Fowler (1984) noted that the
strengths of survey methods that result in their wider use included the value of statistical
sampling, consistent measurement, and the ability to obtain information not systematically
available elsewhere or in the form needed for analysis. Consequently for its merit of economy
and enables to gather enough information, survey method had been employed in this study.

3.2.1. Sample Design

According to research scholars, sample shouldn't be too large to be economical and shouldn't be
too small to keep validity of findings. Accordingly this study used two sampling stages. The first

26
one is to sample out the Ministries and Agencies and secondly the number of respondents within
the selected Ministries and Agencies. According to the Federal Democratic Republic of Ethiopia
Government portal, currently there are 19 ministries and 20 corporations. From the existing 19
ministries and 20 corporation in Ethiopia five ministries and three corporations were selected for
they are highly budgeted and identified by the Government as development sectors and also
audited by OFAG. The target populations selected were the departments or directorates in the
selected public organizations which were 138. Of these 138 departments, 90 departments which
are directly concerned with procurement were sampled. The target population and the samples
taken for this study are depicted in Table 3.1; the data were obtained from the Human Resource
Department of the respective ministries and corporations.

Table 3.1. Population of the study

No Name of Public Organizations No. of Target No. of Samples
Population Taken (Purposive)
1 Ministry of Agriculture 23 10
2 Ministry of Education 12 12
3 Ministry of Trade 20 16
4 Ministry of Health 20 14
5 Ministry of Transport 32 12
6 Ethiopia Rail Way Corporation 16 10
7 Ethiopian Electric Power Corporation 24 10
8 Sugar Corporation 11 6
Total 138 90
Source: Human resources departments of the Ministries and Corporations covered.

3.2.2. Survey Instrument

The survey instrument contains closed ended questions. The study used self-administered survey
to collect the primary data. The questionnaire was designed according to the objectives of the
study with mostly close-ended questions the respondents on their degree of agreement or
disagreement with each of the questions on a five-point Likert response scale that ranged from 5
“strongly agree (scored as 5) to “strongly disagree” (scored as 1). The expected mean for a sound
27
public procurement component is 5 or close to 5. However, the analysis is based on how the mean
response of the respondents is close to this expected value. A large amount of researchers use this
methodology, because it is relatively easy for respondents. For all questions a positive mean
response more than 3 statistically suggests agreement with the statement/question, a positive
mean response less than 3 implies disagreement and a mean response close to 3 indicates
indifferent or offsetting differences. All of the questions are coded in such a way that a positive
mean response of 4 and greater display that strongly agree with the statement or question. This
method of data collection was considered appropriate because the information sought is not
publicly available.

3.2.3. Qualitative Approach

The purpose of using qualitative research approach is because the study intends to have deep
understanding about the legal framework, practices and challenges of public procurement in
Ethiopia in light of the experience in other countries. The study used both in-depth interviews
and documentary analysis. The subsequent sections present details about these two components
of the qualitative study.

3.2.3.1. In-depth interviews

In order to understand the phenomenon under investigation, the study used in-depth interviews
with key informants. The primary advantage of in-depth interviews is that they provide much
more detailed information than what is available through other data collection methods, such as
surveys. They also may provide a more relaxed atmosphere in which to collect information
people may feel more comfortable having a conversation with you about their program as
opposed to filling out a survey (Boyce and Neale, 2006).

Interviews were conducted with selected officials from eight selected public organization. In
addition, to understand the issues in public procurement from the perspective of suppliers, the
private sector in general, interviews were conducted with six private suppliers in Addis Ababa.
Three persons from each of the eight public organizations, and one person from each of the six
private suppliers were interviewed so the total sample size were 30 KI. The study used
unstructured interviews.
28
In this study purposive sampling method was used. The idea behind qualitative research is to
purposively select participants or sites that will best help the researcher understand the research
problem and questions (Creswell, 2003). Three key informants from each of eight selected public
organizations and one from each of six private suppliers were selected purposefully. These
informants were managers, internal auditors, and purchasers. Each KI was interviewed using
unstructured questionnaire prepared for the study.

3.2.3.2. Documentary analysis

Document analysis is one of the two research methods selected for this study. According to Yin
(2009), the most important use of documents is to corroborate and augment evidence from other
sources. Document analysis brings certain strengths to research. First, it is non-volatile
information can be reviewed repeatedly (Yin, 2009). Documents are also broad and cover
extended period of time. The documents analyzed for this study include procurement manuals,
law, procedures and contributory enablers in implementing procurement practices in the selected
public organizations. Hence, descriptive research approach was used for this study. This is
because the researcher could not control the variables but to describe the phenomenon that exist
at the time of the study. According to Marczy, et. al., (2005), descriptive research studies are
designed to obtain information which concerns the present status of phenomenon. The use of
descriptive research enabled the researcher to bring to light the factors that contribute to the
effectiveness of sound procurement practices. It also describes the extent to which these elements
stated above can affect the procurement processes in the selected public sectors.

3.3. Conclusion
This chapter has presented the methods appropriate to address the research questions. To sum up,
based on the main research problem stated in the earlier chapter, seven research questions have
been forwarded. With respect to methodology, the principles of qualitative, quantitative, and
mixed methods research approaches were shown. Based on the underlying principles of research
methods the mixed method approach were chosen as appropriate to this research. More
specifically, to address the research questions, survey, in-depth interviews and documentary
analysis were selected to be the appropriate methods of inquiry for this research.

29
 CHAPTER FOUR
RESULTS AND DISCUSSION

The previous chapter discussed appropriate methodologies of evaluating public procurement

practices and challenges. This chapter explains and discusses the results and findings based on
the analysis done on the data collected. The results of the study are discussed by triangulating the
different source results: questionnaire results, interview and document review results. The
discussion attempts to accomplish the objectives of the study, and answer the research questions.

4.1. Results
In this section, first survey results are presented; this is followed by results of in-depth interview
and review of documents.

4.1.1. Survey results

The survey was conducted with 90 respondents representing 65% of the population. The purpose
of this section is to present respondents’ profile and responses of participants on aspects of
public procurement.

4.1.1.1 Respondents' profile

It is necessary to analyze the demographic profile of the respondents to validate reliability of
data collected. Accordingly, the respondents were asked to respond to their gender category, year
of experience, level of education and field of qualification.

Table 4.1 Gender

Frequency Percent
Female 23 25.6
Male 67 74.4
Total 90 100.0
Source; Survey Results and Own Computation

As indicated in the above table the gender proportion of female respondents is 25.6%, while the
male respondents is 74.4%. Though the ratio of the respondents is not proportional and varied,

30
both category of gender participated in the survey. The age distribution of the respondent who
participated in the study is provided in Table 4.2. The sample age categories were divided with a
range of 10 years except the age category above 55. Accordingly, the results showed that 33.3%
were aged between 26 and 35 years old and 33.3% were between 36 and 45 years of age while
27.8% were between 46 and 55 years. Respondents in the group of above 56 years old were 5.6%
(Table 4.2).

Table 4.2. Age

Age range (years) Frequency Percent
26-35 30 33.3
36-45 30 33.3
46-55 25 27.8
56 year and above 5 5.6
Total 90 100.0
Source; Survey Results and Own Computation

The educational level of the different respondents is shown in Table 4.3. As summarized in the
table, the respondents’ educational levels were diploma, degree, Masters and PhD with the
respective proportion of 7.8, 63.3, 25.6 and 3.3% (Table 4.3). This is an indication that the
respondents are also at adequate education level to understand the concept of public
procurement.

Table 4.3. Education level

Education level Frequency Percent
Diploma 7 7.8
Degree 57 63.3
Master 23 25.6
PhD 3 3.3
Total 90 100.0

Source; Survey Results and Own Computation

31
Public procurement is primarily the responsibility of management. The broader category of
procurement is operational and accounting controlled. Obviously the respondents were with
required knowledge of management and accounting to understand the concept of procurement
system than others. Thus, the survey made to assess the positions of the respondents indicated
that 22.2% of the respondents were directors, 22.2% were team leaders and 55.6% were experts
(Table 4.4).

Table 4.4 Field Of Qualification

Position Frequency Percent

Directors 20 22.2
Team leaders 20 22.2
Experts 50 55.6
Total 90 100.0
Source; Survey Results and Own Computation

The other parameter considered was work experience. Experience is one of the competences to
understand the procurement system in an organization. In this survey it was found that 22.2% of
the respondents were with less than two years experience, 34.4% of the respondents were 2-5
years of experience, 20.0 % of the respondents were between 6-10 year and 23.3% were with
over 10 years of experience (Table 4.5).

Table 4.5. Experiences of the Respondents

Work experience Frequency percent
less than 2 year 20 22.2
2-5 year 31 34.4
6-10 year 18 20.0
over 10 year 21 23.3
Total 90 100.0
Source; Survey Results and Own Computation

32
4.1.1.2. Survey results on aspects of public procurement
This section discusses the survey results of public procurement practices and challenge in respect
of procurement procedures : need assessment, planning and communication, specification
completeness, procurement methods, and contract administration. To accomplish this a total of
about 90 questionnaires which dealt with procurement practices and challenges were distributed
to selected public organizations middle level managers. All of the respondents were located in
Addis Ababa.

Need assessment
The first step in the public procurement process is to identify requirements. All procurement
requirements begin with the perception of a need. The survey made is based on those
components of need identification and the result is scaled as shown in Table 4.8 below.

Table 4.8. Need identification.

N Minimum Maximum Mean S. Deviation

Before you prepare your procurement need you must 1.0931

consider your need can not be met by using unused 90 1.0 5.0 3.48 1.09
resources or property available in your organization 395
Goods and services be procured within approved
budgets except in case of emergencies, which has to be 90 1.0 5.0 3.77 1.03
approved by the executive director
Your department procurement needs should be raised
90 1.0 5.0 3.56 .97
on time
Lack of qualified staff and the right number is
90 1.0 5.0 3.71 1.07
problem for procurement need assessment
You should identify goods, works and or services to
which the public body gives priority and special 90 1.0 5.0 3.62 1.07
attention
It can be assumed that annual procurement needs are
90 1.0 5.0 3.34 1.02
achievable (standard items which are widely available
You are sure that your department need does not
involve items which shall be of no use to your
90 1.0 5.0 3.51 1.05
organization and cause the organization to incur
unnecessary cost
You consider that your need is not harmful to the
90 1.0 5.0 3.67 1.02
environments (environmentally friendly)
The procurement unit properly prioritizes the
90 1.0 5.0 3.28 1.16
departments procurement need
SD = standard deviation, Source: survey results and own computations

33
As indicated in Table 4.8 above, the mean value of the response computed based on Likert scale
indicated the average agreement of respondents on existence and practice of each element of
need identification. The overall mean of the need identification can be approximated to 3.5
which indicates an agreement within elements of the need assessment. The highest mean of 3.85
indicates that the majority of respondents agreed that goods and services be procured within
approved budget. Lack of qualified staff and the right number is problem for proper need
assessment. The result of the current survey is in line with this fact which is indicated by the
mean value of 3.76. This means the majority of the respondents agreed that the clear line of
responsibility enables achievement of objectives. The above table also indicated where the need
identification is not effective. The least mean of 3.2 indicates that the majority of the respondents
disagreed that the procurement unit properly prioritizes the departments’ procurement needs. As
the result spend the budget for purchase of items which are not of priority.

Procurement planning and communication

Procurement planning is a process of determining the procurement needs of an entity and the
timing of their acquisition and their funding such that the entities operations are met as required
in an efficient way. The result of the current survey indicated that the degree of agreement
ranged from 1 to 5 by respondents in all criteria of procurement planning (Table 4.9). The overall
mean of the planning activities for the six questions can be estimated at 3.6 which is good. The
highest standard deviation of the responses was shown in question number one which is about in
procurement planning. The highest mean of 4.4 obtained confirmed that the majority of
respondents agree that procurement planning is important for the organizations. Moreover, the
mean of 4.0 also indicated that majority of the respondents agree that the urgency of work
programs is a challenge to procurement planning.

34
 Table 4.9. Procurement planning and communication
N Minimum Maximum Mean SD
You have been involved in
procurement planning 90 1 5 3.54 1.15
activities
Procurement planning is
vitally important for your 90 1 5 4.43 .88
organization
Urgency work program is a
challenge to procurement 90 1 5 4.07 .91
planning
A standard format to prepare
90 1 5 3.53 1.05
procurement plan is used
Senior managers in all
departments are involved in
90 1 5 3.55 .86
procurement planning in the
organization
Market or other source of data
are used to estimate cost/price 90 1 5 3.52 1.09
in the procurement plan
SD = standard deviation,
Source; Survey Results and Own Computation

Specification completeness

In the current study it was found that most of the respondents agreed on all items of questions
with a mean of above 3 and standard deviations of about 1 (Table 4.10) which showed that the
perception of respondents with regard to the elements of specification completeness are similar.
It was found that mean 3.6 with 1.1 standard deviation shows the respondents, agreed and
strongly agreed that preparation of clear and precise specification for goods to procure.

Table 4.10. Specification completeness

N Minimum Maximum Mean SD

Specifications prepared for goods to be 90 1 5
procured 3.68 1.10
Specifications are prepared unambiguously 90 1 5
(clarity, precision and accuracy) 3.42 0.99

Specified source of information is used to 90 1 5

3.54 1.00
prepare specifications
SD = standard deviation, Source; Survey Results and Own Computation

35
Procurement methods
The result of the survey indicated in the table below the degree of agreement ranged from 1 to 5
by respondents in all criteria's of selection of procurement method. The overall mean of the
control activities for the three questions can be estimated to 3.6 which is good. The highest
standard deviation of the response was showed in two questions about selects and indicates the
appropriate procurement methods to be used and use open bidding as the preferred procedure of
procurement. The highest mean (3.67) indicated in Table 4.11 confirms that majority of
respondents agree that public bodies shall use open bidding as the preferred procedure of
procurement.

Table 4.11. Procurement method

N Minimum Maximum
Mean SD
Your organization selects and indicates the
appropriate procurement methods to be used 90 1 5
3.63 0.90
in respect to each type of procurement
methods
Public bodies shall use open bidding as the
preferred procedure of procurement 90 1 5 3.67 0.90

Your organization record a statement of the

grounds and circumstances on which it relied 90 1 5
3.57 0.89
to justify the use of other procurement
methods
SD = standard deviation, Source;
Survey Results and Own Computation

Contract administration
For the survey 10 questions were distributed to assess the contract administration exercise in
their organization (Table 4.12). All questions had a mean response of more than 3.00. The
standard deviations of some questions were less than 1.00. This indicates that the respondents’
perceptions were more or less similar indicating that all of the respondents agreed on the criteria
of contract administration.

36
 Table 4.12. Contract administration
N Minimum Maximum Mean SD
Tender opportunities are advertised
adequately 90 1 5 3.67 0.84
Your organization implements any
procurement contract signed with 90 1 5 3.54 1.00
supplies
Your organization identifies the duties
of a supplier under a contract and 90 1 5 3.40 0.88
insures for the performance
Tenders are awarded within the tender
validity period 90 1 5 3.70 0.81
Your organization identifies the party
responsible for following up the 90 1 5 3.82 0.77
performance of the contract
Proper follow up is maintained and
appropriate decision is taken in regard to 90 1 5 3.36 0.94
securities and warranties.
Price fluctuation adjustment provisions
are provided in the contract 90 1 5 3.24 0.97
Sufficient provision on delayed works or
goods delivery is provided in the 90 1 5 3.36 0.87
contract and implemented
There is monitoring mechanism that
works are completed on schedule agreed 90 1 5
in the contract, goods are supplied or 3.31 0.93
services are rendered within the time
Adequate control provisions are
provided for effecting payments to 90 1 5 3.52 0.83
suppliers or contractors
Source; Survey Results and Own Computation

Public procurement challenges

The result of this survey indicated that the degree of agreement ranged from 1 to 5 by
respondents (Table 4.13). The overall mean of the challenges of procurement for the six
questions can be estimated to 3.6 which is good. The highest standard deviation of the response
was calculated for question number 5 which is inquires whether or not the procurement
procedures are bureaucratic and has complex steps. The highest mean of 3.78 indicated in Table
4.13 confirmed that the majority of respondents agree that inadequate planning and linking the
demand to the budget are among the major challenges of procurement; while the lowest mean of
3.31 indicated that the delegation of authority for approval does not delay decision making for
37
procurement. It was expected that delegated authority hesitate to make some sensitive decisions
of procurement requests.

Table 4.13. Challenges of procurement

N Minimum Maximum Mean SD
Inadequate planning and linking
demand to budget are challenges of 90 1 5 3.78 1.05
procurement
In your organization non-compliance
with policies and regulations or 90 1 5
unethical behavior is a challenge for 3.54 0.88
effective procurement
Professionalism or quality of
procurement workforce is a challenge 90 1 5 3.55 1.05
of procurement
Delegate authority for approval delays
decision making for procurement 90 1 5 3.31 0.96
Procurement procedures are
bureaucratic and has complex steps 90 1 5 3.36 1.07

Endorsing committees give due

attention in carrying out their duty 90 1 5
3.51 0.95
properly, and where necessary, take
corrective measures
SD = standard deviation, Source; Survey Results and Own Computation

4.1.2. Interview results and review of documents

This research includes results of interviews made with senior managers , procurement
department heads, and internal auditors in selected governmental offices concerning the
performance problems associated with procurement process. Senior managements are
responsible to have knowledge of public procurement manual and procedures in order to apply
the directive. When asked if they have sufficient knowledge of the directive or if they ever had
took part in procurement training, their responses were similar underlined that they understood
the need for the knowledge of procurement but admitted that they never had sufficient training in
the field. The reason they have cited for missing the trainings, is the fact that they are usually
assigned on a particular assignment during the training sessions and they tend to be busy. They
have further noted that before decision is made on procurement, the concerned heads review
whether a particular procurement is in line with the procurement manual by assigning
employees which have better understanding of the manual and as such procurement decisions

38
fall mainly on such employees. On the other hand, some other managers stated that the
procurement process of their office is a bit different from that of other public organization so for
better performance they have requested permission to revise the procurement manual based on
the official procurement manual of the government and applied the revised manual.

The other question asked to the managers was whether the procurement department is staffed
with the required number and skill of staff. The response was unanimous among the respondents.
They expressed there is a problem to retain skilled employees at a government office since the
salary rate is low. Some of them indicated that failure to organize procurement department with
skilled staff resulted in risk of exposure of corruption, here off the efforts were made to upgrade
the employee's skill with short term trainings. Responses of some other offices stated that a
committee, Nominated to director general of the organization, is formed in order to fulfill the
skill gap of the department and increase performance efficiency. Concerning the procurement
approval committee, the response of the supervisors is also unanimous. All of the respondents
stated that all the offices have procurement approval committee consisting of employees that are
believed to possess better skill and knowledge and they further noted that the committee has term
of two years.

For the questions raised regarding the kind of problems they have encountered during the
application of the manual, the respondents said that since the procurement manual of the country
was designed based on practices of other countries with excellent track record it does not have
any drawbacks in this regard. However, the main problem related to the application of the
manual, accordingly to the respondents, is that most of the government’s procurements are
undertaken through the agency. However, concerning the local bulk purchase, which worth more
Ethiopia’s annual budget and involving participation of all juridical suppliers, it is only one
agency that handles the process. As it is known the government procurement tasks should be
completed within the budget year. Thus there are problems being observed in the agency
overload work since it was quite recently that agency become operational. Moreover, when the
supplier notifies that they could not supply requested items, the agency take more time to inform
the public body to take other opportunity to use their budget timely. The agency also deals with
such complaints arising between public organizations and suppliers as such there is delaines of
39
response. As the respondents state because of these problems our work is affected by not
procuring the required items and services within the budget time.

The responses of department heads to the question related to procurement need identification and
specification completeness were as follows, Concerning the need identification for procurement
the problem associated with is requesting purchase for goods without checking in warehouse or
other departments and delay to submit goods requisition form on time.

Concerning the preparation of specifications they responded that most of purchase requests are
not describe the specification clearly or they have not attach perfect sample of goods to procure
this has created a problem in obtaining the required goods. In order to resolve this problem they
are trying to create coordination between the procurement committee personnel and the
requesting department. Nevertheless, they provided that such kind of procedure entails wastage
of resources.

Regarding the responses of auditors to the question on the problems they frequently encounter,
they have indicated that lack of procurement plan and purchase requests for items already
available in stores are the major problems. This was stated to be due to the reason that only the
government procurement agency is mandated to purchase goods.

Concerning the responses of suppliers to the question of problems associated with performance
of procurement, they indicated that there is lack of transparency in the specifications submitted
from the government organizations, and the procurement process is tedious and frustrating. They
noted that they face with difficult scenarios in order to deliver the items that they have won the
tender for and this has and is still creating misunderstanding and dispute between the parties. The
suppliers further cited that such process of procurement is causing them wastage of resources.
The other response of suppliers was that there is a problem in contract administration and it takes
some time to complete a certain procurement process. Although suppliers participate in the bid
process for government purchase requests, the goods may ran out of store until the final delivery
order is issued due to the lengthy process. Furthermore, they noted that the tenders are floated
after a long time and this poses a problem for a company that imports materials with foreign
exchange. They quoted that the government procurement manual does not consider this scenario.

40
In addition to interviews with key informants, the study reviewed the Ethiopian major
procurement procedures in light of those of other East African countries. The review is based on
comparing each significant step in the procurement procedures of the countries considered in this
study as provided in the respective public procurement manuals. The results showed that most
procedures are similar. Kenya gives more attention for multiyear procurement planning which is
not found in the other countries, and Zambia states about publication of annual planning in one
daily newspaper. More details are given in Appendix B.

4.2. Discussion
As it has already been indicated above, the broad objective of this study was examining public
procurement practices and challenges in selected public organizations and Ethiopian main public
procurement procedures in light of some other East African countries. This broad objective was
systematically broken down in to specific research questions as presented in the previous
chapters. This section presents the discussion based on data gathered from different sources.

Public institutions identification of procurement needs: As stated in literature review the first
step in the public procurement process is to identify requirements. All procurement requirements
begin with the perception of a need. At this stage it is necessary to clearly define the need, and
this may be done by way of a study to determine the best. The study should include if the need
can be satisfied in-house or contracted out, quantification of the initial budgetary estimate, and
an idea of the procurement lead-time. At the end of the requirements definition stage, a clear
determination of the terms of reference, technical specifications or statement of work should be
articulate. in order to be able to purchase the right goods or services, the specifications of what
the organization needs must be clear. These specifications are used to communicate to the
supplier what is needed and what should be supplied (Shaw, 2010); and in the procurement
manual before need identification is filed, the required item should be check whether it is stored
in the warehouse or other departments. After confirmation of the unavailability of the item, need
identification shall be filed. The survey result in Table 4.8 shows the overall mean of the need
identification is approximately 3.5. However, the response given during the interview with the
procurement supervisors indicated that a request for a particular item is made even though the

41
material is available in the store, and also that purchase requests do not reach them on time. The
transaction cost theory which is stated in literature review state that effectiveness is the main
objective of the institute of public procurement and should be managed by providing better
services to the public at a lower price than it is possible to achieve. To give better service at a
lower price need identification performance should be improved. Generally, result of the need
identification processes assessment showed that to certain extent the need identification is
consistent with the manual but there is a problem of considering unused resource during need
identification processes.

Development of procurement plan and communications

To accomplish the organization’s objectives, the most important tool is effective procurement
plan. Procurement plan that aligns to the objective of the organization programs and budgetary
process can expedite the accomplishment of the goals. It is one of the pre-requisites for the
effectiveness and efficiency of the procurement function, thus leading to the ultimate success of
the organization (Namusonge, et. al., 2013). The Public Procurement and Property
Administration Agency (PPA) guideline also proposes that effective planning allows
requirements to be aggregated into larger purchases at lower unit costs, rather than frequent
sourcing of quotations for identical items and issuing many individual local purchase orders. It
allows the private sector to respond more effectively to the requirements and specifications of the
Government (PPA, 2011).

Survey results showed that the overall mean of the planning activities for the six questions can
be estimated at 3.6 which is good. The highest standard deviation of the responses was shown in
question number one which is about need for procurement planning is in consistent with the
procurement manual. The highest mean of 4.4 obtained confirmed that the majority of
respondents agree that procurement planning is important for the organizations. Moreover, the
mean of 4.0 also indicated that majority of the respondents agree that the urgency of work
programs is a challenge to procurement planning.

42
The interview results showed that urgent and unplanned work programs which were not
considered at the beginning of the physical year create problems for procurement planning. This
is because it causes budget deficit since the unplanned work program was not budgeted.

Regarding the use of standard format to prepare procurement plan, the mean was 3.5 with
standard deviation of about 1.04. This result shows that most of them prepare procurement plan
using other format which is in consistent to the government manual. As indicated in the result of
the interview absence of procurement plan results in failure to use their budget effectively.

The audit summery of PPA (Public Procurement Agency) for the 2000 E.C budget year indicated
that of the 59 government offices audited, eight have not prepared procurement plan. Similarly,
in the 2008 E.C budget year, 26 governmental offices were audited and seven of them did not
adopt procurement plan.

Despite the common belief that performing planned tasks along with utilizing budget timely
helps to prevented wastage of public resources, data gathered and audit reports demonstrated that
there is some public organizations which are not prepare and timely submit to their procurement
plan. Additionally the review result shows, Kenya gives more attention for multiyear
procurement planning which is not found in the other country and Zambia states about
publication of annual planning in one daily newspaper. More details are given in Appendix B.

Quality of specifications
As indicated elsewhere in this paper, specifications are among the most important elements of
the procurement process. As it is shown in Table 4.10, in this study it was found that the
perception of respondents with regard to the elements of specification completeness is similar.
The mean of 3.6 with 1.1 standard deviation shows that the respondents have agreed with
requirements of specification but suggested that some improvement in the preparation of clear
and precise specification for goods to be procured. Concerning specification completeness, the
result of the interview showed that, most of the procurement request is not accompanied with
specification and when it does, it is unclear and ambiguous creating problem like, less
competition because potential suppliers may choose not to submit offers, a commodity that does
not meet expectations create additional costs due to subsequent changes made to the
43
specification, poor relationships between the supplier, end user, and others involved parties on
the procurement process of the organization. In order to prevent this problem, some government
bodies have formed a committee comprised of professionals from the requesting department and
conduct the purchase process together, but this in turn has created additional wastage of resource.
The suppliers who responded on this issue stated that they don’t receive clear specifications of
the required goods from government bodies and that after winning a certain bid, there is often
serious dispute over the quality and delayed delivery causing them additional costs. As stated in
literature review Shaw, (2010)in order to be able to purchase the right goods or services, the
specifications of what the organization needs must be clear. These specifications are used to
communicate to the supplier what is needed and what should be supplied. It is, therefore,
important to have clear, precise and accurate specifications. Most organizations have standard
specifications for the most regularly procured items and services such as medical and
construction.

The information provided in the foregoing paragraphs, as gathered from various data, the
suppliers and procuring organizations are at risk of incurring additional cost as specifications are
not often clearly stated and perform against principal agent theory which is stated in previous
section.

Determination of procurement methods

The purpose of identifying and selecting an appropriate procurement method is to find the best
way to obtain the result to satisfy the needs of the end user for goods, works and services by
obtaining the most advantageous pricing and contractual conditions According to the survey
results, there is some gap to justify when using procurement methods other that the preferred
methods permitted by the government. As stated in literature review under theory of auction, for
the science of public finance, auction is the key element through which is formed the value of
public assets to be acquired. This value is the result of competition between suppliers of goods
and services, which intends to provide public assets at the lowest price and best quality. Further
the procurement manual, approved methods of procurement are open bid, restricted bidding,
request for quotation and single source (direct procurement). Direct procurement as stated in the
manual except provided in the proclamation and directives public bodies shall use open bidding

44
as preferred method of procurement, if they use other than open bidding, they shall record
statement of the grounds and circumstances on which it relied to justify the use of that method.

Despite the clear statement of a directive, as provided in the finance audit authenticity report of
the federal government bodies 2007 budget year, one of the audit findings indicated that there
were some procurements conducted outside what is provided under the manual of the
government such as procurements that were supposed to be performed through bid has been
processed through other means that is with Performa invoice as well as direct purchase instead of
Performa invoice purchase. In addition, the 2007 budget audit of the agency stated that there
were some incidents where by some government bodies processed procurement on other
methods other than the preferred method by the government. The overall result has shown the
manner selection of procurement method and using preferred method is not consistent with the
manual. The procurement methods used by the three countries are largely similar to Ethiopia
with minor procedural differences. More details are given in Appendix B.

Contract administration
Contract administration involves all activities related to the monitoring of suppliers, contractors
and service providers’ performance in the fulfillment of their contractual obligations Table 4.12
showsall questions with a mean response of more than 3.00. The standard deviations of some
questions were less than 1.00. This indicates that the respondents’ perceptions were more or less
similar indicating that all of the respondents agreed on the criteria of contract administration.

Contract administration phase is very important because it is where the results of the
procurement process are obtained and the requesting entity is in a position to finally receive the
expected benefits of their procurement request. hence, as stated in literature review public
entities would usually appoint staff members or, preferably a team of qualified individuals, to
take the responsibility of administering the contract. Although public procurement manual state
that most government entities do not require a formal contract administration body , public
procurement professionals are responsible for ensuring that the parties have complied with all
terms and conditions of the contract. So at minimum, the procurement professional should
therefore track receipt of the deliverable acceptance, performance of the service, or payment
45
under the contract this condition create difficulty for effective contract administration. The
manual also state public bodies have to implement any procurement contract they have signed
with supplier promptly. But the response of the suppliers concerning contract administration,
expressed that due to items not clearly specified and shortage of foreign exchange they often
encounter problem to effective performance of the contract.

The manual states that price fluctuation provision is to be included in the contract. During the
survey for the issue whether price difference is included in the contract, the result was 3.24 mean
with 0.97 standard deviation. However, some of the suppliers indicated that one of the challenges
to perform according to the signed contract is price differences since the contract does not have
provisions for such incidence. In general, the data obtained showed that there are difficulties in
contract administration despite the encouraging performance in this regard.

Challenges of public procurement

In a developed or developing country, public procurement practitioners have and will face
always many challenges. Each country has its own economic, social, cultural and political
environment, and each country’s public procurement practitioners face different types of
challenges, or the same types of challenges but at different levels from their counterparts (Thai,
2007). The survey results showed that in adequate planning and lack of linkage of demand to the
budget were challenges of procurement in the selected public organizations. The supervisors
interviewed noted that a procurement that is not planned properly cause challenges in the
procurement process. Most of the responses of the auditors showed that the main finding during
conducting procurement audit is procuring more than what has been planned. Moreover, non
compliance with policies and regulations and unethical behavior were also challenges for sound
procurement performance.

46
 CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS

The purpose of this chapter is to pinpoint the major findings of the study and indicate
recommendations that can help in the improvement of procurement practices in the selected
public organizations. Thus, presents conclusions, major findings of the study, and
recommendations based on the findings as follows.

5.1. Conclusion
Public procurement is different from private procurement, Public procurement is governed by
basic rules and guidelines that spell out what can be done or not done on certain procurement
processes. Furthermore, public procurement must be transacted with other considerations in
mind, besides the economy. These considerations include accountability, non-discrimination
among potential suppliers and respect for international obligations. The government agencies
engaged in procurement represent the interests of the society and must allocate budget funds with
utmost efficiency in order to deliver high standard service for the public. The public, being the
main consumer or the end user of the services and goods procured by the government, is
interested in obtaining quality products.

The business, producing goods and services, is certainly motivated to sell them to the
government and the public as the end users. now days public entities reduces its reputational
because of uncivilized competition environment with its lack of transparency, clear-cut rules and
procedures and sufficient time table comfortable for the business. The need to improve the
public procurement system is important, all government stakeholders, business and general
public should be participated in improvement work for better results.

 This study found a number of interesting findings: The process of procurement starts
from need identification where users submit their input for the procurement plan. The
procurement unit source through advertisement or request for quotation based on the
threshold. The results show during need identification there is problem of request for
particular item even though the material is in store and that the purchase need does not
reach to purchasing department on time.
47
 Procurement planning is one of the most important steps in the public procurement cycle.
The procurement plan is expected to list all the requirements that are under the
responsibility of a particular procurement entity and that are expected to be procured
over a period of time (usually one year, but could be longer when dealing with project
procurement). In public organization, where the study was conducted procurement plan
is not fully prepared and the plan is failed short to be presented based on the standard and
on appropriate time.
 A precise specification of the physical characteristics, quality, or desired outcomes of a
commodity to be procured should be formulated as accurately and precisely, which a
supplier must be able to produce or deliver to be considered for award of a contract the
study revealed that there is a problem in preparing clarified and complete specifications.
 Procurement methods are the procedures used by the procuring entity to acquire goods,
services and works. These methods can be competitive and non competitive. There's a
preference for using competitive methods of procurement given that they tend to promote
transparency, economy and efficiency, and limit favoritism. The findings showed that
the procurement performance is by other methods than the preferred method by the
government.
 Systematically managing contracts can lead to significant cost savings and efficiency of
the public procurement process, and reduce the risk of poor contract performance. This
study showed that there is deficient contract management due to contract administration
procedure, which are non transparent and not in line with current situation.
 The public procurement workforce so important to the work of government. The survey
result manifested that there is lack of skilled manpower in the purchasing departments of
the organizations studied because of low government salary scale.
 The procurement agency is the only agency mandated to process procurement of all
public organizations of the government including compliant resolution from both party,
procuring entity and suppliers.
 The regulation and manual of public procurement systems in the three East African
countries are similar in many ways.

48
 5.2. Recommendations
Based on the findings the following, recommendations are forwarded in order to improve
public procurement practices and reduce some of the challenges:

 Procurement plan is important because it lists all requirements expected to be

procured over a period of time and, It enhances the transparency and
predictability of the procurement process. The procuring entity must: Plan,
manage and fully document the process to acquire goods, works and services, and
submit the plan to concerned party.
 Specifications are one of the most important elements of the purchasing process.
Poorly written specifications may result in less competition, potential offerors
may choose not to submit offers, a commodity that does not meet expectations,
additional costs due to subsequent changes made to the specification, poor
relationships with the supplier and end user, and others involved, Inappropriate
contract awards and potential unfair competitive advantages, and protests.
Consider this result of poorly written specification public organization gives
caution when developing their specifications.
 The purpose of identifying and selecting an appropriate procurement method is to
find the best way to obtain the result to satisfy the needs of the end user. A
procuring entity should select an appropriate alternative method of procurement
as provided in the regulation. In the case when open tendering would not be the
most economic and efficient method of procurement, justification shall be given
in sufficient time to enable the agency to make decision.

 Creating a procurement workforce with the right skills and capabilities leads to sound
public procurement. The governmental entities need to retain skilled personnel by
revising their salary scale, employment of qualified procurement practitioners, provision
of short and long term trainings, development of an effective monitoring and evaluation
tool, and the creation of incentive programs to motivate good performance.

 The operating decisions in a decentralized setting tend to be of higher quality. Decisions

should be more appropriate, timely and quick because they are made nearest to the points
49
of the problem, information and actions. Decisions should also be democratic and
acceptable as these are made by the people who are responsible for implementing them.
So the public procurement agency is advised to decentralize their decision making
authority to reduce the burden and facilitate public procurement processes for effective
and efficient use of scarce public resources.

50
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Procurement and Property Administration Proclamation No. 649/2009.
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Flynn, A and Davis. 2014. Journal of public procurement, Volume 14, issue 2.
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52
 APPENDIX A: QUESTIONNAIRE FOR PARTICIPANTS OF THE SURVEY

Addis Ababa University

College of Business and Economics
Department of Accounting and Finance

Questionnaires for MA Thesis Research Work

Dear respondent,
I am a student in the Addis Ababa University College of Business and Economics, Department
of Accounting and Finance pursuing a Masters Degree in Accounting and Finance. As part of the
requirement for the degree, I am carrying out a thesis research work entitled "public procurement
practices and challenges: A case study in selected public organizations". Your organization is
one of the organizations selected for this study. This questionnaire is, therefore, issued purely for
academic purpose. Hence, you are kindly requested to cooperate by filling in questionnaires
attached herewith. All the information you provided will remain strictly confidential and will be
used for the intended purpose only. Your cooperation in ensuring that the questionnaires are
answered is highly appreciated.

Thank you in advance.

Sincerely,

Roman Legesse
MA Student (2017)
Addis Ababa University

53
Ⅰ. Background Information

Please tick your appropriate choice.

1. Gender of the respondent

Male Female

2. Indicate your age group

25 year or less
26-35 years
36-45 years
46-55 years
56 years and above

3. Your educational level

Diploma PhD
Degree Other
Masters (please specify).......................................................................

4. What is your job title (position)? ...............................................................................................................

5. How long have you been in your current title (position)?

Less than 2 years
2-5 Years
6-10 Years
Over 10 years

54
 Strongly Strongly
Disagree Disagree Neutral Agree Agree

Before you prepare your procurement need you must consider your need
can not be met by using unused resources or property available in your
organization

Goods and services be procured within approved budgets except in case of

emergencies, which has to be approved by the executive director
Your department procurement needs should be raised on time
Lack of qualified staff and the right number is problem for procurement
need assessment
You should identify goods, works and or services to which the public body
gives priority and special attention
It can be assumed that annual procurement needs are achievable (standard
items which are widely available
You are sure that your department need does not involve items which shall
be of no use to your organization and cause the organization to incur
unnecessary cost
You consider that your need is not harmful to the environments
(environmentally friendly)
The procurement unit properly prioritizes the departments procurement need

You have been involved in procurement planning activities

Procurement planning is vitally important for your organization
Urgency work program is a challenge to procurement planning
A standard format to prepare procurement plan is used
Senior managers in all departments are involved in procurement planning
in the organization
Market or other source of data are used to estimate cost/price in the
procurement plan
Specifications prepared for goods to be procured
Specifications are prepared unambiguously (clarity, precision and
accuracy)
Specified source of information is used to prepare specifications
Your organization selects and indicates the appropriate procurement
methods to be used in respect to each type of procurement methods
Public bodies shall use open bidding as the preferred procedure of
procurement
Your organization record a statement of the grounds and circumstances on
which it relied to justify the use of other procurement methods
Tender opportunities are advertised adequately
Your organization implements any procurement contract signed with
supplies

55
Your organization identifies the duties of a supplier under a contract and
insures for the performance
Tenders are awarded within the tender validity period
Your organization identifies the party responsible for following up the
performance of the contract

Proper follow up is maintained and appropriate decision is taken in regard

to securities and warranties.
Price fluctuation adjustment provisions are provided in the contract
Sufficient provision on delayed works or goods delivery is provided in the
contract and implemented
There is monitoring mechanism that works are completed on schedule
agreed in the contract, goods are supplied or services are rendered within
the time
Adequate control provisions are provided for effecting payments to
suppliers or contractors
Inadequate planning and linking demand to budget are challenges of
procurement
In your organization non-compliance with policies and regulations or
unethical behavior is a challenge for effective procurement

Professionalism or quality of procurement workforce is a challenge of

procurement
Delegate authority for approval delays decision making for procurement
Procurement procedures are bureaucratic and has complex steps
Endorsing committees give due attention in carrying out their duty
properly, and where necessary, take corrective measures

56
 APPENDIX B: ETHIOPIA PUBLIC PROCUREMENT PROCEDURES IN LIGHT OF
EAST AFRICAN COUNTRIES
Procurement Planning
Table 4.14. Planning procedures of some East African countries
Kenya Zambia Uganda Ethiopia

- procurement planning mandatory. -A Procurement Unit shall, in -Act requires Procurement Entities -Any public body and other entities
The procurement plans are prepared consultation with a user to prepare a procurement accountable to such public body shall
as part of the annual department, prepare a plan for each fiscal year, and prepare be required to prepare a procurement
budget preparation process as they are procurement plan for the quarterly updates for approval by plan supported by action plan
necessary to inform the cash flow procuring entity, for each the enabling them to execute in
preparation. financial year, containing the Tender Committee. due time, the procurement necessary
-The annual procurement planning is information required . -The Regulations require that the to implement their work program.
an integral part of the budget - A procuring entity shall procurement planning process is
processes. It can be based on integrate its annual fully - This plan shall be updated on an
indicative or approved budgets, as procurement integrated with applicable budget annual basis and in a rational manner
appropriate. planning with the budget processes and circulars issued by the having regard to expected flow of
-In the case of the Medium term processes and shall base the Public Procurement Board and the funds.
Expenditure framework, it does not plan on the budget preparation instructions of
provide an approved budget but an indicative or approved budget the Ministry of Finance. -The Procurement Plan shall be
estimate that is a sufficient of the procuring entity, as -Adequate procurement planning incorporated into the
basis for planning appropriate. and prioritization of needs by each Project Performance of the capital
-procurement with multi-year - A procuring entity shall revise Procurement Entity is an essential project.
incidence. It is important to or update its procurement plan, prerequisite to effective purchasing -For procurement under the recurrent
appropriately plan multi-year as appropriate, after the -Procurement Plan will be budget a public body shall prepare an
procurements and to integrate them approval of the budget during undertaken with the assistance of the Annual Procurement Plan.
into the medium term budgetary the course of each financial Procurement Unit. -Preparation of Procurement Plan is
frameworks. year. -Preparation of the Annual mandatory for all public bodies. Any
-Plan should be deemed sufficient for - A procuring entity shall Procurement Plan should be procurement object irrespective of
initiating multiyear procurement publish, in at least one daily commenced at least four months value and/or methods should be
requirements. Newspaper of general before the start of the Financial Year included in the Procurement Plan.
-For allowing sufficient time to circulation in Zambia or post to allow sufficient time for a -At the beginning of each financial
integrate all procurement plans into on the procuring realistic and accurately coasted plan year all public bodies shall prepare
the budget, the Heads of Procuring entity’s website and on the to be compiled. Procurement Plans reflecting both
Entities are required to submit their procuring entity’s notice board, -If insufficient budget funding is updated annual plan for the capital
signed annual procurement plans to certain available following notification of budget and annual plan for the
their Accounting Officers at least information relating to the the recurrent budget.
thirty days before the close of each procurement plan. approved Annual Budget, instruct -The head of a public body or an
fiscal year. the Procurement Unit to review the officer authorized by him/her shall
-A procurement plan is not static. Procurement Plan according to approve the Procurement Plan.
Each Procuring Entity will need to service priorities. -A public body shall publish on their
revise -Receive notification of the final Notice Boards and, where applicable
and to update their procurement approved Annual Procurement Plan in their website, at the beginning of
plans. and the financial year the estimated total
budget and use this as an essential procurement by
guideline for all procurement category of goods and related services
processes and works.
to be undertaken in the new
Financial Year.

57
 Specification
Table 4.15 Specification procedure Touchstone
Kenya Zambia Uganda Ethiopia
-Specifications are procurement of goods shall The description of goods to be a)Public bodies shall be required to draw up
so crucial to the success be accompanied by a complete, precise procured shall accompanied by a detailed technical specification specially for
of procurement and the and unambiguous description of the complete, precise and unambiguous complex and high cost procurements in
following points should goods required, in the form of a description of the goods required. The accordance with article 29 of the Proclamation
be noted: statement of requirements. Specifications shall include: b) A technical specification shall be prepared
(a) Specifications must The specifications referred shall (a) the purpose and objectives of the in accordance with the need of end users and
be prepared by qualified include, where appropriate: goods; in such a manner that it allows wider
staff. (a)the purpose and objectives of the (b) a full description of the competition on the basis of performance,
(b) The responsibility goods; requirement; function, technical or design characteristics
for preparation of the (b) a full description of the (c) a functional description of the depending on the type of the procurement.
specifications is shared requirements; goods, including any environmental c) Being an integral part of the contract, the
by the user and (c )a generic specification to an or technical specification shall be used to verify
technical departments appropriate level of detail; safety features; the conformity of the supply with the stated
and coordinated by the (d) a functional description of goods, (d) performance parameters, technical requirement.
procurement unit. including any including outputs and any indicators d) The technical specification of goods,
(c) Specifications must environmental or safety features; or criteria consultancy service, works or services shall be
be updated and based (e) the performance parameters, by which satisfactory performance drawn up by the department which has
on adequate market including outputs, time scales can be judged; identified the need or by the staff of the Public
trends. and any indicators or criteria by which - process and materials descriptions; Body who have adequate knowledge of the
(d) A procurement satisfactory - dimensions, symbols, terminology procurement in question. For the procurement
agent or consultant may performance can be determined; language, packaging, marking and of high cost and/or complex goods or services,
be engaged to prepare (f) the process and materials labeling requirements; public bodies may seek the advice and
complex specifications. descriptions - inspection and testing requirements; assistance of experts outside the Public Body
(e) Specifications form (g) the dimensions, symbols, and or higher consultants.
a very critical part of terminology language, packaging, -any applicable national or e) A specification shall not prescribe a
the bidding documents. marking and labeling requirements; international standards required. particular product, brand or service provider.
(h) the inspection and testing (e) Use of Brand Names However, where it is difficult to draw up a
(f) The evaluation requirements; and Descriptions of goods shall not specification giving an accurate description of
criteria which must be (i) any Zambian or other applicable include any reference to a particular the requirement, where the procurement is for
disclosed in the bidding standards. trademark, brand name, patent, spare parts for a particular item of proprietary
documents shall be A statement of requirements for goods design, type, specific origin, plant or equipment, or where there is known to
partly based on the shall not include producer, manufacturer, catalogue or be only one manufacturer or provider of the
specifications. any reference to a particular trademark, numbered item, unless there is no goods or services in question, the name of the
brand name, patent, design, type, other sufficiently precise or manufacturer or service provider and the term
(g) Specifications must specific origin, producer, intelligible way of describing the “Or Similar” may be incorporated in the
include packing if manufacturer, catalogue or numbered requirement, in which case the words specification.
necessary. item, unless there is no other “or equivalent” shall be included and f) The technical specification should be
sufficiently precise or intelligible way the description shall serve only as a prepared in such a manner that it incorporates
(h) Preparation of the of describing the requirement, in which benchmark during the evaluation use values needed to satisfy the current and
bidding documents case the words “or equivalent” shall be process. future demand of the Public Body in question
should not be included and the description shall Notwithstanding the above, where a and should avoid the inclusion of non value
commenced before the serve only as a benchmark during the particular trademark, brand name, adding features.
specifications are ready. evaluation process. patent, design, type, specific origin, g) When preparing technical specification,
Notwithstanding sub regulation producer, manufacturer, catalogue or public bodies may incorporate standards set by
(i) Specifications should where a particular numbered item is essential for Ethiopian Quality and Standard Authority or
take into account total trademark, brand name, patent, design, reasons of technical compatibility, by other similar institutes depending on the
cost of ownership. type, specific origin, producer, servicing, maintenance or type of procurement and as appropriate
manufacturer, catalogue or numbered preservation of warranty conditions, h) Technical specification shall form part of
item is required for reasons such description may be used, subject the bidding document and shall be sufficiently
of technical compatibility, servicing, to inclusion of the words “or detailed and comprehensive to provide a
maintenance or preservation equivalent”. The requirement needs to complete and exact basis for the formulation
of warranty, such description may be be fully identified with detailed of bids by those suppliers wishing to
used, subject to written technical specifications. participate in the bid.
justification.

58
 Procurement methods
Table 4.16. Procurement methods in some East African countries
Kenya Zambia Uganda Ethiopia
The following procurement method is A procuring entity shall use one of the following The procurement methods The following are the choice
shall use in procuring entity in procurement methods, as specified in the Act and that can be used for the of procurement methods
Kenya: these Regulations, in undertaking the procuring procurement of Goods are: applicable in Ethiopia.
(a)Open Tendering Method entity’s procurement activities: (a)International (a)Open bidding
(b)Restricted tendering method (a)open bidding, which may be national or Competitive Tendering (b)Restricted bidding
(c) Direct procurement method international; (ICT) (c)Request for quotations
(d)Request for quotations method. (b)open selection, which may be national or (b)National Competitive (d) Single source/ direct
(e)Request for proposals international; Tendering (NCT) procurement
Procurement method Procedure for (c)limited bidding; (c)Two-Stage Tendering (e) Request for proposal, and
low-value procurements (d)limited selection; (National or International) (f)Two stage bidding
Specially permitted procurement (e)simplified bidding; (d)Restricted Tendering Except as otherwise
procedure (f)direct bidding; (National or International) provided in the Proclamation
The Open tender Method is the (g)force account; (e)Single Source (Direct and Directive, public bodies
preferred method of procurement and (h)purchases from other procuring entities; or Procurement) shall use open bidding as the
alternative Procurement methods are (i)community participation in procurement. (f) Request for Quotations preferred procedure of
used only if specific conditions are (2) A procuring entity shall undertake public (RFQ) procurement.
met. The Procurement Threshold procurement under Competitive tendering Public bodies may use a
Matrix has to be adhered to when a selected method of procurement in accordance using ICT or NCT is the method other than open
using this method. with the public preferred method for bidding only where
Open Tender Method should thus be procurement planning process, procurement Government procurement conditions for use of such
considered as the default method process, contract and the use of alternative other method stipulated in
when no special circumstances permit award process and contract management process methods is strictly limited the Proclamation and
the application of restrictions to the as specified under to the provisions of the Directive are satisfied.
level of competition and when the the Act and these Regulations. Public Procurement Act A Public Body using a
estimated value is not below the (3) A procuring entity shall not use any alternative method of procurement other
thresholds permitting the application procurement than open bidding, pursuant
of a restricted competition method unless such method has been approved by to article 33/3 of the
such as Request for Quotation or the Authority Proclamation. Shall record a
Restricted Tender for efficiency prior to its use. statement of the grounds and
purposes A procuring entity shall select the most circumstances on which it
appropriate relied to justify the use of
method of procurement for each requirement, as that method.
part of the procurement planning process.

Contract administration
Table 4.16. Contract administration in some East African countries
Kenya Zambia Uganda Ethiopia
-In a procuring contract the - A controlling officer or chief executive Effective management of contracts -Unless faced with a situation
contractor has the officer may appoint is essential to ensure that the preventing or postponing the
responsibility of performing the a contract manager, or members of the objectives of execution of a contract, public
contract as per the terms and contract management team, the procurement process are bodies have to implement any
conditions of the contract. from the Procurement Unit, the user achieved and that all contractual procurement contract they have
- The procuring entity has the department, a stores obligations and activities are signed with suppliers promptly.
responsibility of meeting its department or any other relevant part of completed efficiently by both parties -A Public Body has to fulfill
obligation of paying the the procuring entity, except to the contract. The conditions established in a
contractor as per terms and that the contract manager or a member of Procurement Unit or the Technical contract to expedite the
conditions of the contract. the contract management Department concerned must ensure implementation of the contract
These are the basic team may be external to the procuring that as provided in article . These

59
responsibilities of the parties. entity, where the required skills or routine monitoring of all current conditions may include the
For the purpose of ensuring experience are not available within the contracts is maintained so that swift following:-
that both parties perform and procuring entity. remedial measures can be taken a) If the contract provides for
meet their obligations - A contract manager, or contract when problems arise, or advance to be paid to the
procurement management team, shall preventative action taken when supplier, effect such advance
-contracts must be managed. be of an appropriate level of seniority and problems are foreseen. payment to the supplier against
On the part of the procuring experience for the contract to be managed There are many post-contract issues advance payment guarantee in
entity the procurement contract and have skills appropriate to the contract that need to be dealt with, monitored accordance with the provision
must be managed with an aim to be managed and the deliverables and resolved before the contract of this article.
of obtaining goods, works and required under the contract. reaches its conclusion including: b) Open letter of credit (L/C)
services A Procurement Unit shall, in selecting a - Contract Effectiveness; promptly in respect of a
as per contract and achieve contract manager, - Delivery and Inspections of procurement requiring the
value for money or contracts management team, take into Goods; issuance of letter of credit in
-For each contract entered into, account the need for— - Insurance Claims; favor of a supplier.
the Procuring Entity must (a) user department or end-user - Payments to the Supplier; c) Fulfill such other conditions
designate a member of staff, or representation, especially - Contractual Disputes; as are stipulated in the contract.
a team of staff, as the Contract where the delivery of services involves the - Delays in Performance; - Public bodies have to identify
Administrator responsible for user or user training is required; - Claims for Damages; the duties of a supplier under a
administering the contract . (b) technical skills relevant to the goods, - Installation and Commissioning of contract and insure that the
-The Procuring Entity must works or services, Equipment; supplier performs such duties
issue a signed letter naming especially where technical supervision or - Release of Performance Securities in due time.
and appointing the Contract inspection is required; and Retentions; - Public bodies have to record
Administrator that must be (c) receipt of goods into stores or - Contract Closure. the date on which the actual
included in the procurement installation of goods at a particular Although the Contract may have implementation of the contract
files and contract. location; or(d) contracting legal or been signed by both parties, the has began upon fulfillment of
-It is the responsibility of the financial management skills. legal precondition set forth in the
Contract Administrator to - The procurement of an external contract effectiveness of the Contract may be contract for the actual
perform the obligations and manager or dependent on one or more of the implementation of the contract
duties concerning contract. member of the contract management team following conditions: and, if necessary, notify this to
The Contract Administrator is shall be treated as procurement for - Receipt by the Procurement Entity the supplier.
responsible for: consulting services and shall be done in of the Performance Security; -Payment for contractors in the
i. Monitoring the performance accordance Regulations. - Receipt by the Procurement Entity performance of works contract
of the contractor, to ensure that - A contract manager shall be responsible of an Advance Payment Security; shall be effected in accordance
all delivery or performance for— - Receipt by the Supplier of the with the following procedure,
obligations are met or (a) monitoring the performance of the Advance Payment; or based on the progress of the
appropriate action taken by the supplier to ensure that - Receipt by the Supplier of an work to be performed under the
Procuring Entity in the all delivery or performance obligations are acceptable Letter of Credit. contract.
event of obligations not being met or appropriate action is taken by the The Head of Procurement Unit a) Payment for construction
met; procuring entity in the should ensure that: works shall be made on the
ii. Ensuring that the contractor event of obligations not being met; -Any Performance Security basis of the progress of work
submits all required (b) ensuring that the supplier submits all specified in the contract is received against payment certificate to
documentation as specified in required documentation; by the Procurement Entity; be verified by the consulting
the bidding documents, the (c) ensuring that the procuring entity meets -Any Advance Payment specified in engineer supervising the work.
contract and as required by all its payment the contract is paid immediately b) For all construction works,
law; and other obligations on time and in when in addition to what is stipulated
iii. Ensuring that the Procuring accordance with the Advance Payment Security is under article 16.26 (9) of this
Entity meets all its payment the contract; received from the Supplier or directive, 5% shall be retained
and other obligations on (d) ensuring that there is adequate cost, Contractor; from payment indicated in each
time and in accordance with the quality and time control, -Any Letter of Credit required is payment certificate. 97
contract. where required; issued promptly. c) 50% of the amount retained
iv. Ensuring that there is (e) preparing any required contract pursuant to (b) above, shall be
adequate cost, quality and time variations or change orders Contract supervision and released up on completion of
control, where required; and obtaining all required approvals before administration will be undertaken by the works and issuance of
v. Preparing any required their issue; the provisional acceptance
contract variations or change (f) referring any required contract Procurement Unit and the Technical certificate. The remaining 50%
orders and obtaining all amendments to the Department as appropriate. shall continue to be retained for
required Procurement Unit for preparation; Supervision and administration is one year period of warranty.
approvals before their issue. (g) managing any handover or acceptance straightforward in most procurement However, such sum may be
Such variations or change procedures; of released on condition that the
orders must be clearly (h) referring any recommendations for goods but monitoring delivery suppliers submits unconditional
justified in writing backed by contract termination schedules, processing of documents guarantee valid for 12 month.
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supporting evidence; to the Procurement Unit; and the d) The consulting engineer
vi. Managing any handover or (i) ensuring that the contract is complete, inspection of goods are essential to shall complete verification of
acceptance procedures; prior to closing the ensure that the correct goods are the payment certificate
vii. Making recommendations contract file; delivered prepared and submitted by the
for contract termination, where (j) ensuring that all contract management on time. contractor within seven days of
appropriate, obtaining all records are kept its receipt
required approvals and and archived as required; The parties to the contract normally
managing the termination (k) ensuring that the supplier and the have the right to terminate the e) The Public Body shall effect
process; procuring entity act in contract, but to protect the the payment within 14 working
viii. Ensuring that the contract accordance with the Act, these Regulations Procurement Entity, advice of the days of receipt of the payment
is complete, prior to closing the and the contract; and Legal Department should always be certificate verified by the
contract file including all (l) keeping the Procurement Unit informed sought if the Procurement Entity is consulting engineer.
handover procedures, transfers of the status and considering such action.
of title if need be and that the progress of the contract. Contracts should not be terminated f) The consulting engineer shall
final retention payment - A contract manager shall, in managing without examining all possible be responsible for any request
has been made; the contract, use existing systems, alternatives, unless the termination made by the contractor to
ix. Ensuring that all contract procedures and resources within the is mutually agreed by all parties to receive additional payment
administration records are procuring entity and, in particular, the the contract. from the procuring entity due
complete, up to date, filed and contract manager shall use existing Public Procurement to the consulting engineer’s
archived as required; and disbursement systems for making failure to verify the payment
x. Ensuring that the contractor payments to suppliers. certificate within prescribed
and the Procuring Entity act in A contract shall state that the procuring period stated in sub-article “d”
accordance with the entity has above. However, the
Provisions of the Contract. the right to inspect goods, works and responsibility of the consulting
xi. Discharge of performance services at any reasonable engineer shall not exceed the
guarantee where required time or place, service fee payable for its
In large procurement contracts . services.
the contract management plan -A contract may, where appropriate, in
should provide for review order to g) The Public Body shall be
meetings. Review meetings are facilitate adaptations to unanticipated responsible for any additional
held periodically as found events or changes in payment request made by the
necessary for the purpose of requirements, permit— contractor in accordance with
face (a) the contract manager, supervising the contract, due to its failure to
to face communications of engineer or other effect payment within the
contract performance and designated official to order variations to period specified under sub
discussing the way forward and the statement article “e” above without any
preparing status reports. of requirements for goods, works or good reason.
services, the price
or the completion date of the contract; or
(b) defined compensation events to justify
variations in the
price or completion date of the contract.

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