Country Procurement Assessment Report - 2003

29055

Vol. 1

GHANA

COUNTRY PROCUREMENT ASSESSMENT REPORT - 2003

June 2003

Ghana Country Department

Africa Region

PREFACE

This Country Procurement Assessment Report (CPAR) was prepared between October 2002 and May 2003 by a team consisting of World Bank staff, a Government Team of senior officials, Development Partners, and Consultants.[1] National consultants carried out data collection, interviews and analysis of the current procurement practices and prepared the reports, except for the reports on Labour Standards and Monitoring and Evaluation, which were done by ILO and OECD consultants, respectively. The assessment benefited from the reports[2] prepared under the ongoing procurement reforms (which include the Public Procurement Bill submitted to Parliament for enactment) and from other fiduciary bills, i.e. the Financial Administration Bill, the Central Internal Audit Agency Bill, the Freedom of Information Bill, and the Protected (Public Interest) Disclosure Bill.

The main CPAR mission took place during March 17-21, 2003, and included a National Workshop. About 110 participants attended from the public and private sectors, civil society, Development Partners and politicians. The National Workshop’s observations and recommendations were taken into account in the preparation of this Report. The National Workshop evidenced the participatory spirit of stakeholders by engaging government officials to pursue sound procurement fiduciary management.

The CPAR Team thanks the Government of Ghana for the valuable support from the MFEP and Economic Planning (MFEP) through the World Bank Desk, the Consultants team for their comprehensive assistance; DFID, ILO and OECD for their advice and financing the participation of their staff and consultants; the Peer Reviewers for their insightful comments, and the Development Partners and all persons who provided information, for their useful contribution and collaboration.

This Report contains an Executive Summary, including the Action Plan and main recommendations; the Main Report, and Annexes with analysis and data.

Disclosure

The Government has given its consent that the CPAR is a public document and that it may be distributed to all interested parties. Broad dissemination of the findings of the CPAR will create the necessary awareness of the importance of good procurement for the national finances and the well-being of Ghana’s civil society.

CURRENCY EQUIVALENTS

Currency Unit=Cedis

Cedis=US$0.0001194

US$1=Cedis 8375

Fiscal Year

January 1 – December 31

Abreviations and acronyms

used in the

Executive summary

BPEMS / Budget and Public Expenditure Management System
CIPS / Chartered Institute of Purchasing and Supplies
CPAR / Country Procurement Assessment Report
DA / District Assembly
GCNET / Ghana Community Network System
GDP / Gross Domestic Product
GIMPA / Ghana Institute of Management and Public Administration
GPRS / Ghana Poverty Reduction Strategy
MDA / Ministries, Departments and Agencies
MDBS / Multi-Donor Budgetary Support Group
MDPI / Management Development and Productivity Institute
PPA / Public Procurement ACT
PPOG / Public Procurement Oversight Group
PUFMARP / Public Finance Management Reform Program
SMMC / Supplies and Materials Management Class
VFM / Value for Money

EXECUTIVE SUMMARY AND RECOMMENDATIONS

Context of the CPAR

1. Importance of Good Procurement for Public Finance in Ghana. Based on the Budget Statement of 2003 estimates[3], total planned public procurement is estimated at Cedis 8.6 trillion or about 14 % of GDP. Excluding donor financed procurement (estimated at Cedis 2.6 trillion), domestic public procurement expenditure of Cedis 6 trillion would amount to 10 percent of GDP. With an estimated total tax revenue of Cedis 11.4 trillion, domestic procurement represent more than 50% of tax revenue. These simple figures illustrate the utmost importance of good procurement as an element of the public expenditure process.
2. The analysis presented in the attached Country Procurement Assessment Report (CPAR), prepared by a team of Government officials, World Bank and donor staff, and national consultants, reveals substantial inefficiency in public procurement and concludes that the principle of “value for money” is not achieved. This is true for both government financed and donor financed procurement. The main findings of the 2002 Country Portfolio Performance Review of World Bank projects were slow project implementation and disbursement, due to a large extent to inadequate procurement planning, non-transparent procurement procedures and poor contract management. A review in 2002 of 132 works contracts which constitute an important part of public expenditure, indicated that some 84% incurred cost-overruns of up to 30% of the initial amount.
3. Ghana’s Poverty Reduction Strategy (GPRP) recognizes the inadequacy of procurement procedures. Estimates of potential savings from improved procurement vary and have not yet been analyzed precisely in quantitative terms, but many among those who are directly involved, including the outcomes of the “Value for Money Assessment Project”, believe that at least 25 % in cost savings could be achieved by better procurement management. If based on the estimated government financed procurement for 2003 alone, this could imply annual savings of some 1.5 trillion Cedis (or close to US$150 million). Such savings from improved procurement practices could help Ghana reduce current fiscal imbalances and increase expenditures required to accelerate poverty reduction.
4. Similar findings of public procurement weaknesses were recorded in the 1996 CPAR. Since then, the Government has followed-up on a number of recommendations. Procurement reforms were launched under the Public Finance Management Technical Assistance Project (1998), which emanated into the Public Finance Management Reform Program (PUFMARP). The Procurement Reforms Proposal (PRP), prepared since 1999 in the context of PUFMARP under the oversight of the Public Procurement Oversight Group (PPOG), included among others the draft Public Procurement Bill (PPA), which the Government, following extensive consultation of the stakeholders, sent to Parliament in early 2003 for enactment, as part of the groundwork for Ghana’s PRSC.
5. Progress made since 1996. Since the 1996 CPAR, a number of positive developments have taken place in the area of public procurement. Considerable investments have been made in the areas of Capacity Building and production of Procurement Procedures Manuals, which have engendered good procurement practices in key sector ministries in Ghana.

(i)A number of Senior Officials in Ministries of Health; Education, Youth and Sports; Roads and Transport; Local Government and Rural Development and Food and Agriculture have attended procurement courses supported by the World Bank. These courses have considerably improved the procurement skills of the staff, which has positively impacted procurement performance in their respective agencies. In these Ministries, single source procurement as a practice has been reduced, wherever competition is possible.

(ii)Shopping and selective tender procedures continues to be used extensively in cases where annual budgets for government departments and District Assemblies are in too small sums to warrant open tendering. However National Competitive and International Competitive Tender procedures have generally become the norm in Ministries of Education, Youth and Sports; Health; Road and Highways and in the Ministry of Local Government and Rural Development.

(iii)Use of procurement procedures manuals has improved procurement planning, processing and stores management in a number of Ministries, Departments and Agencies, notably Ministry of Health. The manuals also include codes of conduct for procurement officers. These manuals have made substantial improvements in ensuring transparency, economy and efficiency, in addition to encouraging preparation of more accurate schedules of requirements for restocking and for fast moving consumable items.

(iv)The Ministry of Health has separated procurement functions from stores functions. The separation has enabled the Ministry to develop capacity in the area of stores management. This practice should be adopted by other agencies.

(v)Most senior public managers now pay more attention to procurement as they see it as part of their core business and not a responsibility of junior staff. Senior Managers see the value that the Country derives from efficient use of public funds through good procurement practices. This changed attitude makes them receptive to (and is the driving force behind the) proposed public procurement reforms.

1. The hideous issue of corruption, highlighted in this Strategy, has also been addressed and specific measures have been incorporated in the PPA to deal with complaints and offences in this regard. Paragraph 656 of the 2003 Budget Statement specifically refers to the Government policy of “zero tolerance for all acts of corruption” and states that it “in 2003, will strive to continue to improve good governance in Ghana through an increase in the operational efficiency of the Auditor General’s office, assurance of full staffing of internal audit positions, implementation of the Anti-Corruption Action Plan, including through the passage of a Freedom of Information Act and whistle-blower legislation.” In addition, clear roles and responsibilities will be defined for the Office of Accountability, the Commissioner for Human Rights and Administrative Justice, and the Serious Fraud Office.

Objectives of the CPAR

1. The CPAR is a framework for periodic in-depth analysis of a country’s procurement fiduciary management performance, carried out in close association with Government leaders and specialists. The analytical work carried out for the CPAR constitutes an important input for the Country Assistance Strategy (CAS), which is drawn up with the Government and emphasizes the need for good governance and effective service delivery to Ghana’s citizens. The CPAR measures public procurement against the five basic pillars of a well functioning procurement fiduciary management: (i) existence of a comprehensive and transparent legal and institutional framework, guided by an independent procurement oversight body for policy and quality control; (ii) use of modernized procurement procedures and bidding documents, including transparent bid-evaluation and award procedures, and transparent contract management; (iii)a proficient procurement staff applying the regulations and procedures efficiently and transparently; (iv)existence of an independent control system, with audit and recourse mechanisms separate from the procurement implementation function, with effective enforcement of sanctions, and (v) anti-corruption measures incorporated in the procurement laws and also accompanied by the application of effective sanctions.
2. These five pillars are, in fact, embedded inthe fifth pillar of the GPRP: “Ensuring good governance by improving the transparency and accountability in government operations, strengthening the capacity of the public sector, and decentralizing management of public policy to empower people to participate in and influence the development process”. Transparent and accountable public finance, including the new procurement rules provided for in the PPA, are expected outcomes of the Poverty Reduction Support Credit (PRSC). This leads to the main findings of the CPAR and the recommendations on how to achieve these outcomes. These findings and recommendations are shared by the Government’s CPAR team and the donor participants of the Multi-Donor Budgetary Support Group (MDBS). The recommendations below follow from the premise that good procurement is a condition sine qua non of good fiduciary management and have all a direct impact on an improved quality of the nation’s budget expenditure, in turn contributing to the overall poverty reduction strategy of the government.

Main Findings and Recommendations

Pillar 1: A Strong Legal and Institutional Framework

Findings

1. New Strengths in the Procurement Function. The Government’s efforts to strengthen procurement fiduciary management are based in the PPA now before Parliament. This is a major achievement compared to the status of the findings of the 1996 CPAR and the fruit of extensive discussions at all levels of Government and civil society during the past years. With this Act, a Public Procurement Board (PPB) will be created as a central oversight function, as well as Tender Review Boards and Procurement Units in the Procurement Entities (Ministries. Departments and Agencies – MDAs and District Assemblies - DAs), which will apply the policy and procedures developed by the PPB. As stated in the Letter of Development Policy of the PRSC, “the Procurement Board will be vested with the requisite autonomy to determine the strategic focus of future procurement policy, set standards and practice, ensure compliance with policies, enforce sanctions, evaluate effectiveness of national procurement practices, and oversee the development of requisite skills within the implementing agencies.” A solid basis for effective procurement fiduciary management has thus been laid, solidifying the Government’s commitment to procurement reform.
2. Trust towards Making the Legal Framework – and in general the Procurement Function - Work. Recognizing the conceptual progress in Ghana’s public procurement reform, the onus is now on its successful implementation. Enactment of the PPA, creation of the PPB, Tender Review Boards, Procurement Units in Procurement Entities, and the auditing mechanisms will only yield the desired results if they receive the unrelenting and consistent support from the Ministry of Finance and Economic Planning (MFEP), the guardian of public expenditure control, as well as the broad cooperation from civil servants and civil society. Donors may assist with finance and advice, but the core of the actions will have to come from within, since the civil servants responsible for the new framework and its implementation, and the private sector responsible for adequate bidding and contract execution, ultimately share the collective accountability for the success of the new framework. In this regard, the leadership of the MFEP will be paramount to keeping the momentum thus far achieved, creating a culture of compliance in general, and accomplishing this critical part of the GRSP/PRSC.

Recommendations

1. Transition towards the New Framework.

(a)With the PPA before parliament, and the new institutional framework pending, all efforts should be made to maintain the momentum to refurbish the public procurement function. It will, therefore, be important to give broad support to MFEP, which played such a pivotal role in the preparation of the procurement reforms. MFEP should ensure that the implementation of the procurement reforms succeeds, i.e. (i) pursue the enactment of the Procurement Act with the necessary revisions that have beendiscussedand still need to be made, (ii) oversee and motivate the implementation of priority actions, including the determination on the chairmanship and staffing of the PPB, Tender Review Boards, and separate Procurement Units in the Procurement Entities, starting with the Ministries, Departments and Agencies (MDAs) with the largest budget expenditure, and (iii) begin with capacity building where needed most immediately.

(b)A strongly committedTask Force should be created in the MFEP to support the work of carrying out the priority tasks mentioned above.

(c)Important clarifications still to be made in the PPA include:

(i)the limitation on bidders participation on the basis of nationality (art.24 (1)) which should be clarified as it – as currently drafted - conflicts with the general principles of transparency and equal access to bids;

(ii)under “National Competitive Tendering” (art. 43), the PPA should clarify that national competitive bidding shall not exclude foreign firms from consideration, except where the Government has made -- and publicly disclosed -- specific exceptions to this rule in their regulations;

(iii)in the section on Evaluation and Comparison of Tenders (Sub-part III), the PPA should mandate the use of bid evaluation criteria quantified in monetary terms and of objective bidders qualification criteria (past experience, managerial, technical and financial capability) as part of the determination of qualifications of the successful bidder prior to contract award;

(iv)as regards the Margin of Preference (art.59), a) the PPA should require that all details pertaining to the application of domestic preference shall be disclosed; b) the PPA should specify the percentage of, and eligibility for, the margin of preference which domestic bidders would be given in international competitive bidding, for example, by defining the level of national intrants and the percentage to be added to the price offered by foreign bidders when compared to the prices offered by domestic bidders; and c) the preference shall be applied only when specified in the bid invitation.

These improvements are standard procurement requirements practiced internationally and the Government is acting to include the necessary changes in the Bill.

Pillar 2: Good Procurement Procedures and Practices

Findings

1. The CPAR highlights a broad array of poor procedures and practices throughout the tendering and contract management process[4], which have been the cause of many of Ghana’s public procurement problems, and where most of the leakages in public procurement funding occur and substantial savings could be realized. Although most of the procedural anomalies are now being corrected by the PPA, which includes the new regulations for the procurement of goods, works and consulting services to be applied by all Procurement Entities, the provisions for Standard Tender Documents and Standard Request for Consulting Proposals, which are being completed, will detail the general principles embedded in the PPA, including evaluation and selection criteria. Standard Contract documents, also being completed, will streamline current problems with contracting and payment procedures, labor standards, and dispute resolution. Good procurement manuals and training should leave no room for lack of understanding by procurement staff. The positive results on the ground depend largely on how well the new policies are put into practice and the extent to which this is done without political interference to the contrary.

Recommendations

(a)Improve Procurement Planning and Budgeting. Procurement Entities and Budget authorities should collaborate closely in preparing the procurement plans in the early phases of expenditure preparation. This could be done in the context of the Budget and Public Expenditure Management System (BPEMS). This will facilitate timely budgetary appropriations and avoid the use of exceptional procedures circumventing the normal competitive tendering process and causing unnecessary cost increases and delays.