Chamber Research Blasts Government Procurement

Tayitu 14th

Authorities dismissive of it as one-sided, but admit gaps in system

A week after of the 11th Public Private Consultation Forum (PPCF) focusing on challenges of the manufacturing sector was held, the fifth round of PPCF between the businesses and the Public Procurement Administration Agency (PPAA) addressed the hurdles faced by the four sectors in government procurement process.

At the same time, the research was criticised by the Agency’s officials as a one-sided research only, by covering the problems on the government side all the while ignoring the business community.

Co-chaired by Solomon Afework, president of the Ethiopian Chamber of Commerce Sectoral Association (ECCSA), and Tsegaye Abebe, director general of the PPAA, the half-day long discussion was started by a presentation of a research by Fikadu Petros, senior consultant of the PPCF on the hurdles faced by businesses from metal engineering, construction, information technology (IT) and textile and garment sectors while they participate in the procurement processes to purchase products for government institutions.

The fifth round forum was held after the first two forums were held on the construction sector. The third round then followed with problems of textile and garment sectors while the fourth round was on major problems of government procurements in general.

The current forum, supported by the International Financial Corporation (IFC) and the Sweden International Development Agency (SIDA), was held on Tuesday December 31, 2014 at Hilton Addis Hotel, with the attendance of 300 businesspeople and representatives from the Agency, including regional offices.

“We still may have gaps in the process of procurement and we are conducting research to solve the problems by making amendments on the procurement proclamation,” admitted Tsegaye.

He attributed problems by the Agency in implementing the laws stated in the procedures of government purchase and limited human resource capacity and some corrupted staff.

The procurement process has problems of excluding local businesses with standards and specifications that are difficult to attain by local companies, Fikadu said in his presentation.

There are also such problems as low preference margin in supporting local suppliers; absence of manuals in the process of procurement; taking dispute between businesses and the government to the Court rather than taking it to arbitration and making down payments for foreign suppliers rather than for local businesses as general problems of the four sectors, the research claimed.

The research also mentioned that universities were becoming major challenges for the IT sector as they are given priority to develop software for government institutions without a tender process.

“Following the price variation in the market, the government refused to make amendments on the price, which led the case to be taken to court, which finally led to the project delay and prolonged time in court, demanding us to pay money for the legal procedure,” said one contractor.

The research recommended that the Agency should reduce the 35pc rate of value addition on textile products to 30pc; avoid the 12 months to 18 months range to make the price amendment if the price escalation occurs; improve down payment for the 30pc that is practiced now to 75pc to 90pc, which the World Bank (W.B) recommends for construction materials that have been brought to the construction site; design a prequalification evaluation; handle disputes between government and businesses at arbitration rather than court; support local IT businesses by avoiding purchasing from foreign suppliers for simple software and equipment.

While addressing the problems mentioned by the research, the officials from the Agency criticised the research, stating that it only aimed at emphasizing problems with the government, by completely ignoring the problems that the government faced from businesses during the procurement process, including delay in delivering the products or construction equipment and delivering products and services out of the contract both in quality and quantity.

The other comment from government officials was that they cannot get the full research to understand the real problems, rather they are given a matrix of the research.

Yigezu Daba, director general of Public Procurement Property Disposal Service (PPPDS), which makes purchases for 174 government institutions, mentioned they are facing problems in getting competent and efficient local suppliers.

“Our main challenge is getting competent local suppliers as we want to procure most of the products locally,” he claims.

“We do not have a problem of capacity,” countered an IT businessman. “The government should conduct research to prove that.”

The half-day discussion between the businesspeople and the PPAA was finalized with the agreement that the Agency will consider the problems mentioned from the research as well as the businesspeople for amendments of some procedures and strong follow-up on the implementation of the existing laws.

“We will all take this as input for further research to understand if the problems really exist and to make changes as a solution. In addition, as some of them need a policy decision, we will evaluate the case before adding to the amendment of government procurement and property administration proclamation we are working on,” said Tsegaye.

PPCF was established in 2011 and organises a forum with the government after conducting researches by hiring international consultants and using its research wing named P.S.D Hub.

Improvements made so far, following meetings with the Agency, include the establishment of public private partnership (PPP) and the amendment of government procurement proclamation along with its implementation directive and regulation.

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