Introduction to Public Procurement:
Basic Principles and Concepts
Joel Munyori – Senior Procurement Specialist,
World Bank
Content
A.
Public Procurement: Definition
B.
Legal Framework for Public Procurement Contracts
C.
Key Objectives of Public Procurement
D. Key Principles for Implementing Procurement Objectives
E.
Procurement as a Business Process
F.
Status of Procurement Reforms in East African Countries
G. General Institutional Set-up of the Procurement Function in
the East African Countries
H. Parliament as an Oversight Institution to Public Procurement
I.
Reforms in the Public Procurement Function
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Public Procurement: Definition
 Public Procurement may be defined as the Government’s
activity of purchasing the goods and services which it
needs to carry out its functions;
 Public Procurement process comprises three key Phases:
Procurement
Planning
Procurement
Process
Contract
Management
 Although the three phases are distinct and at times
involves different players, they should be regarded as a
single cohesive “Cycle” for the process to be successful;
 Regulatory rules on public procurement generally focus
on the second stage where legal rules and other
regulatory measures are important tools of policy;
Public Procurement : Definition
 Procurement is divided into three broad categories:
(a) Goods; (b) Works; and, (c) Services
(b) A good procurement law should address each of these
categories separately since the procurement approach is
largely different;
 Distinction between Public Procurement and In-house
provision:
 Public procurement refers to acquisitions of goods, works,
and services from entities outside the procurement entity
itself; while;
 In-house provision of goods, works and services refers to
acquisition through the government’s own employees and
organization (force account);
 Emerging global best practices are such that governments are
moving away from in-house provision to outsourcing;
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Legal Framework for Public Procurement Contracts
 Government contracts are often subject to the ordinary
private law of the state concerned;
 In order to make sensible policy decisions, there is need
to understand the objectives of public procurement, how
they relate to each other, and their relevance to a
particular procurement system;
 The key objectives of public procurement are:
(1) Value for money
(2) Integrity
(3) Accountability
(4) Equal opportunities and treatment for providers
(5) Fair treatment of all suppliers and service providers
(6) Efficient implementation of industrial, social and
environmental objectives in procurement (horizontal policies)
(7) Opening up public markets to international trade; and,
(8) Efficiency in the procurement process
Legal Framework for Public Procurement Contracts
Different procurement objectives would result in
different approaches and rules that governing it; for
example, a system that places great weight on
“accountability” is more likely to provide detailed
“rule-based” system which also allows close public
contract monitoring of the procurement process;
It is however important to mention that the said
objectives compete among each other ; rigid rules that
emphasize accountability may result in reduced
“Value for Money” or “Efficiency” in certain
procurement procedures; It is therefore necessary to
strike the right balance on the relative importance of
each of the objectives in policy formulation;
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Key Principles for Implementing Procurement Objectives
 Transparency
 This principle entails; (a) publicity for contract opportunities;
(b) publicity for the rules governing each procedure; (c)rulebased decision making; and (d) mechanism for verification
and enforcement ;
 Competition
 To ensure that government obtains; (a) best contract terms;
(b) enhance transparency; and (c)regulate the functioning of
the international market;
 Equal Opportunities and Treatment
 Provide all bidders with fair access to (a) bidding
opportunities; and (b) similar treatment during and after
contract award;
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Public Procurement as a Business Process
 Public Procurement is a function that encompasses both
economic and political dimensions; A good procurement
system enhances transparency in the management of public
resources and encourages firms to have confidence in the
process thus attracting the best firms to participate in the
process;
 It is a major economic activity of the government; in most
economies it accounts for 15 percent of the GDP;
 It is a significant factor for achieving development objectives of
the government; It can be used to provide strategic outcomes;
 It is everybody’s business and every citizen must play their
part; stake-holder participation should be encouraged;
 It is however vulnerable to abuse, wastage, corruption, and
most of the time affects government spending; there is
therefore need for continuous reforms and improvement so as
to bring on board emerging international best practices;
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Procurement Reforms in East Africa
Kenya
 Public Procurement law was enacted in 2007;
 The Government is in the process of revising the law to
be in tandem with the new Constitution;
Tanzania
 The Public Procurement Law was enacted in 2004 and
revised in 2011; however, the associated Regulations are
not yet finalized;
 Drafting of the Procurement Policy is progress;
Uganda
 The Public Procurement law was enacted in 2003 and a
major overhaul of the law done in 2012;
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General Institutional Set-up of the Procurement
Function in East Africa
 The responsibility for the management and regulation of
the public procurement function is spread over five
institutions:
 Procurement Entities: Responsible for conducting and
managing the procurement process on a day-to-day basis;
 Public Procurement Policy Unit: Formulates
procurement policies; employment and deployment of
staff; and formulation of capacity development strategies;
 Public Procurement Oversight/Regulatory Authority:
provides implementation oversight, compliance
monitoring and enforcement of the procurement law;
 Public Procurement Appeals Board: Adjudicates on
appeals not resolved by the regulatory authorities
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General Institutional Set-up of the Procurement
Function in East Africa
Procurement and Supplies Professionals:
Responsible for the career development and regulation
of procurement and supplies professionals in both the
public and private sector;
Supplies Branch (Kenya) and Government
Procurement Services Agency (Tanzania):
Administration of framework contracts for common
user items and services;
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Parliament as an Oversight Institution to the
Procurement Function
Debates and passes the Procurement Bill
 This sets the legal and institutional framework, market
practices and the integrity of the procurement function;
due diligence and thorough scrutiny is therefore
required at this stage before enacting the bill into law;
Debates and passes the Fiscal Budgets
 Scrutiny of the budget against Annual Workplan
Activities; Is the planning stage supported by rational
procurement plans? Are the plans linked to the available
budget?; Are all the lines of expenditure in the plan
necessary? How is the cash flow, is it sufficient?
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Parliament as an Oversight Institution to the
Procurement Function
Debates and passes the Financial Audit Reports
 Does the Financial Audit Reports comprehensively
capture procurement management issues? What are the
audit qualifications? Based on previous audit reports, is
there need for integrating procurement reviews with
financial audits?
 Procurement Audit/Review Reports conducted by the
Public Procurement Oversight Authority are submitted
to the Minister responsible for Finance; is there need to
have these reports submitted to and discussed by
Parliament for independent review?
 Are the oversight institutions adequately staffed and
funded to be able to discharge their responsibilities?
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Reforms in the Public Procurement Function is Critical
Automation of operations: This would enhance
overall operational efficiency, improver reporting and
allow structured records management;
E-procurement: This is still at elementary level;
embracing e-procurement would enhance
transparency, minimize transaction costs, and increase
efficiency;
Use of Framework Agreements: used in the
procurement of common user items by a central
agency; it eliminates duplication of effort, wastage,
and reduces costs of goods through economies of scale
and enhances overall operational efficiency;
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Q & A?
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