CHAPTER ONE: INTRODUCTION

LEARNING OUTCOMES

By the end of this unit you should be able to:

Define public procurement

Describe the principles of public procurement
Describe the objectives of public procurement

KEY WORDS
public procurement public procurement principles
objectives of public procurement value for money
accountability transparency
fairness equality competition
ethical

1.0 Introduction
Public procurement which is also known as government procurement or public sector procurement
is a very important activity in any government. Its importance is due to its in contribution and
support it provides to the government in delivering public services by ensuring that goods, services
and construction works required for performing various government activities are available on time
and at a reasonable cost. An efficient public procurement can lead to delivery of timely, reliable and
better public services. Just as it is the case in private business firms where they must purchase
different types of goods and services they need to keep their operations going and their customers
satisfied, the government also has to do the same.
Government and its agencies are responsible for providing essential public services to its citizens
which includes general public services, defense, public order and safety, health and social
protection, education, water and environmental protection, etc. To deliver these services, the
government and its agencies must procure different types of goods, consultancy and non-
consultancy services, and construction works.

Government needs defense equipments for its army to defend its country, it needs medical
equipment, medicines and drugs for treating its citizens, it needs schools, teaching equipment and
textbooks for providing of education, it needs to construct dams to preserve water for its people and
it also needs to build good roads to facilitate easy transportation in country. All these requirements
can be acquired through the procurement activities, and that it why procurement function is
considered to be a very important function to any government. It is estimated that more then 50%
of the budgets of most governments around the world is spent through the procurement of various
governments’ requirements.

1.1 Definition of Public Procurement

Public procurement has been defined in many different ways and the following are just some of
definitions:-

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 (i) “Public Procurement is function of government that involves using public funds to obtain
goods, works and services to meet the needs of the government as it carries out its
responsibilities to the citizens”. (Dr. Gonzalo de la Cruz Salas) 1

(ii) “Public Sector Procurement is the use of tax revenue to buy goods and services from
third parties either to keep the public sector going or to meet a public service obligation”
(European Union).

(iii) “Public procurement is the process whereby public sector organizations acquire goods,
services and works from third parties. It includes much that supports the work of the
government and ranges from routine items (e.g. stationery, furniture), to complex spend
areas (e.g. construction, Private Finance Initiative projects).” (Office of Government
Commerce – UK)

What is obvious from the above definitions is that public procurement is government activity that is
responsible for making available various goods, services and construction works required by the
government and its agencies to facilitate the delivering of public services and it is done using public
funds.

1.2 The Objectives of Public Procurement

The objectives of public procurement can be grouped in two main categories namely, primary and
secondary objectives. The primary objective of public procurement is to ensure that the government
gets a good deal that will result to acquisition of goods, services and works that meets the specified
quality and quantity requirements (or scope), delivered at the required time and specified place,
from the suppliers, service providers or contractors who are reliable and will meet their
commitments, and at the price that matches the quality and quantity required, so that it can deliver
better public services.
As a supporting activity, public procurement plays a very important role in the performance of
government activities by ensuring that government requirements’ are procured wisely and timely.
Efficient and effective public procurement activities will contribute positively towards a better public
services and good governance while an inefficient procurement function will contribute to losses of
public funds.

The secondary objective of public procurement is that of being a tool for delivering government
policies such as social, environmental and economic issues. From time to time governments set goals
in some sectors of the economy to address certain specific issues. These goals are the desired
outcomes that the government will strive to meet. To achieve this, the government develops policies
to meet these outcomes and devise operational activities to deliver them. Public procurement is
one of a number of mechanisms that is used by the government to deliver its policy. Because of the
enormous purchasing power that the government has, public procurement has been used as a policy
tool in many countries around the world for redressing social and economic imbalances, and
preserving the environment. Public procurement has been used in a number of countries as a tool
for promoting social goals such as giving opportunities to less privileged groups of the society like
ethnic minorities, disables, women etc by giving these groups preferences in public procurement
process up to a certain established limits. Also public procurement has been used to curb the use of
child labour in farming, mining and manufacturing activities and to bring improvement to working
environment by requiring the potential suppliers to abide to these requirements. Public
procurement has also used a tool to protect the environment by requiring the would-be suppliers to

1
Dr. Gonzalo de la Cruz Salas is the Administration Manager of the National Registry of Identification and
Civil Status of Peru.

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use raw materials which are not harmful to the environment in their manufacturing processes and to
encourage the use raw materials wisely so as not to deplete the ecological system.

1.3 Public Procurement and the Use of Public Funds

Public procurement is conducted using public funds. The use of any public fund has to comply with
the established legislations, regulations and procedures to ensure proper usage of such funds. It is
because of this that public procurement is subjected to the public expenditure management controls
in order to ensure that public funds allocated for procurement of various government requirements
are properly used. Since the main source of governments’ revenue is taxes it is right to say that the
public funds used in public procurement represent taxpayers’ money and therefore it should be
properly and wisely spent. Since it is not possible for taxpayers to monitor how their money is being
spent, they rely on the public finance and procurement legislations and regulations and also on
regulatory authorities or bodies bestowed with the responsibility of overseeing the compliance to
these legislations and regulations to ensure that the funds are properly spent. Public procurement
function is subjected to regular audits that are carried out by Government bodies with the
responsibilities of overseeing public funds management to ensure compliance to the laid down
procurement procedures and proper utilization of funds.

1.4 Principles of Public Procurement

One of the key features of public procurement is its fundamental principles which form a foundation
of which the whole procurement process is resting on. The fundamental principles of public
procurement are the same in almost all of the public procurement systems around the world
including those of the World Bank and other multilateral financial institutions (World Bank
Procurement Guidelines), European Union (EU) – (EU Procurement Directives), World Trade
Organisation (WTO) – (Government Procurement Agreement) and United Nations Commission on
International Trade Laws (UNICITRAL) - (Model Law on the Procurement of Goods, Construction and
Services). However, some of these procurement systems have in addition to the basic principles
adopted other principles which they consider also to be important for guiding public procurement
activities.
The key principles of public sector procurement that seem to be recognized by most procurement
systems around the world are discussed here below.

1.4.1Transparency:
Transparency is an essential requirement of any public procurement system. The principle of
transparency calls for openness and clarity of regulations and procedures by all public bodies when
undertaking public procurement activities. To achieve this, public bodies are required to ensure that
regulations and procedures applicable in the procurement process are clearly defined, are known
and understood by all interested suppliers, services providers and contractors. Also public bodies
need to ensure that all those who have shown interest in the advertised procurement opportunity
are provided with procurement documents which contain information that is complete to help them
make necessary decisions. In complying with this principle, the practice is for the public bodies to
advertise tenders opportunities in the newspapers and in their websites, to make public the
evaluation criteria to be applied, to conduct public tender opening ceremony, and to make public
the names of the firms awarded contracts through public advertising in the newspapers

1.4.2 Competition:
There is a belief that any form of competition if administered properly and fairly can help to improve
the quality of performance of those taking part in it. The same belief also prevails in public
procurement. Competition among suppliers, service providers and contractors can make them

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improve their efficiency and also offer the most economical price. It is emphasized that public
procurement should as far as possible be carried out in competitive manner by involving as many
suppliers, service providers or contractors as possible to compete for government procurement
opportunities. This can be best achieved through the use of competitive tendering method and
competitive quotation method where the circumstances allow. Through the competition the public
institutions stand to benefit by getting goods, services or works of a better quality and also at a
reasonable cost. The suppliers, service providers or the contractors once they know that they are
competing with each others for the contract they will ensure that they win the contract by promising
to provide a better product, service or works and also by offering a reasonable price.

1.4.3 Accountability:
To ensure that taxpayers’ money is spent properly and wisely in the procurement of the goods,
services and works it is necessary to hold all those public officials entrusted with the procurement
responsibility accountable for their actions and decisions and for the resulting outcomes. If there is
adequate accountability, public officers are more likely to undertake procurement activities in an
effective, efficiency, legal and ethical manner. Where there is inadequate accountability waste of
public funds, abuse of trust and fraudulent practices become a common part of public procurement
process. So a public officer(s) who has decided to use a direct procurement method (dealing directly
with one supplier, service provider or contractor) where the appropriate procurement method
should have been an open competitive tendering method, may be held accountable for his or her
decision if it is proved that he or she has contravened the laid down procedures.

1.4.4 Value for Money:

The main objective of public procurement is to acquire goods, services and works needed by the
government at the best possible deal. This would mean procuring goods, services and works of the
require specifications for the intended purpose in a required time frame at the most economical
price. The principle of value for money emphasize the need for ensuring that whatever that is being
procured must reflect the true value of funds spend to acquire it. The amount of money spent in
procuring goods, services or works should match the quality that the public body is getting in return.
In other words, the quality of the goods, services or works procured should as far as possible
represent the value the money paid for. This is an important principle as it challenges the
procurement officers and other public officers involved in procurement process to ensure that they
procure wisely to avoid paying more for the goods, services or works whose quality do not match
with its value in return for personal financial gains.

1.4.5 Fairness and Equality:

The principle of fairness and equality requires public institutions to treat all suppliers, service
providers and contractors who have shown interest in competing for government procurement
opportunities fairly and without discrimination. All potential suppliers and contractors should be
given equal opportunity to compete. Public bodies should not impose unnecessary requirements
that will limit the participation of potential suppliers and contractors and thus restricting open
competition and the attainment of fairness. To enhance fairness and equality, public bodies are
required to advertise their tender opportunities in the newspapers of wide circulation and in their
websites (if they have) so that all interested suppliers, service providers or contractors become
aware of the existing opportunities and also be given the same information regarding the advertised
opportunities. Public bodies should also ensure that evaluation criteria are known in advance and
adhered to and the award of contract is not based on personal interest. If any request for
clarification in respect of the advertised opportunities is received from a supplier or service provider
or contractor, the clarification given should be circulated to all those whose responded to the tender

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advertisement so that they can also benefit from the additional information provided. If this is done
then the suppliers, service providers and contractors would then have been treated equally.

1.4.6 Integrity:
The principle of integrity emphasizes on the need for both integrity of the procurement process and
integrity of the public officials who are involved in the procurement process. Procurement process
should at all times be conducted in such a manner that will be seen by the bidders and all other
stakeholders to be reliable so that they can have confidence in it and not to doubt its outcome or
any information provided by the procuring entity. If the procurement process is consistent in all its
actions and is conducted with honesty and integrity, it will bring confidence in the public
procurement process.
On the integrity of the public officials involved in procurement, they should always be perceived by
the bidders and the general public to be honest, trustworthy, responsible and reliable.

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 CHAPTER – TWO
PUBLIC PROCUREMENT REFORMS

LEARNING OUTCOMES

By the end of this chapter you should be able to:

Explain the meaning of public procurement

Describe the basic principles that apply to public procurement
Describe how public procurement is regulated in Tanzania

KEY WORDS
Public procurement Government Procurement Principles of public Procurement
Value for money Accountability
Transparency Equality and Fairness

1.0 Introduction
Public procurement is the life line of any government in the world as it provides it with the necessary
requirements for its survival regardless of whether it is a developed or developing country. Because
of its importance, public procurement has always been and will continue to be reformed as it affects
the performance of the governments. Public procurement has gone through a lot of changes and
improvements over the years which aimed at making it for efficient and effective so as to ensure
that value for money procurement is achieved.

In 1990’s the world witnessed a wave of reforms in public procurement that were brought about by
the desire by countries particularly in Africa and Asia to reform their outdated procurement systems
to become more efficient and effective and also the emergence of new economies in the Eastern
Europe following the collapse of the Soviet Union. Emerging economies refers to those countries
that were former Soviet Union states that broke away to become independent countries and which
adopted the market economy system. The former Soviet Union followed a planned economy system
under which the government decided what to be produced, what quantities to be produced and
how it is distributed as all the manufacturing and business firms were owned by the government.
Market forces of demand and supply which are a pre-requisite for practicing public procurement
that is guided by its fundamental principles of value for money, competition, transparency,
accountability, integrity, fairness and equality had no role to play in the planned economy. So it is
right to say that public procurement in its true meaning was almost non-existed in the former Soviet
Union. So when these countries become independent they had to establish new government
systems including public procurement system, that are compatible with the market economy
system.

Prior to these reforms many developing countries had procurement systems that were inefficient
and ineffective which were supported by outdated legislations, regulations and procedures and
therefore allowed corruption in public procurement to mushroom and resulted to poor performance
of government activities which in turn resulted into poor delivery of public services. International
financing agencies led by the World Bank were at the forefront in the bringing these reforms as part
of their drive to help developing countries to institute good governance system. They provided
incentives to these countries in a form of grants to meet the cost implementing these reforms and
technical supports such as experts in writing legislations and regulations. These reforms also had a
support of the United Nations through one of its bodies known as United Nations Commission on

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International Trade Laws (UNCITRAL) which is mandated to harmonize the international laws on
trade to eliminate those laws which hinders international trade. UNICITRAL has developed a model
law on public procurement best known “Model Law on Procurement of Goods, Works and Services”
as one of its accomplishments, and provided to emerging economies (former Soviet Union states)
and those developing countries that need to reform their procurement systems to adopt and
customize it to suit their requirements instead of writing their own laws. Many former Soviet Union
states and developing countries including Tanzania adopted this Model law and its customization
was supported by technical experts from the UNCITRAL.

Tanzania and many other developing countries have in recent years embarked on program to
transform their public procurement systems to comply with the international accepted best
practices which are being practiced in developed countries. The table below shows the public
procurement reforms trends in Africa in recent years:

Country The Public Procurement Legislation and Public Procurement Regulatory

the Year Enacted Body
Tanzania Public Procurement Act, 2001 which was Public Procurement Regulatory
repealed by the Public Procurement Act, Authority (PPRA)
2004
Kenya Public Procurement and Disposal Act No. 3 Public Procurement Oversight
of 2005 Authority (PPOA)
Uganda Public Procurement and Disposal of Public Public Procurement and Disposal of
Assets Act No 1 of 2003 Public Assets Authority (PPDA)
Nigeria Public Procurement Act No. 14 of 2007 Bureau of Public Procurement (BPP)
Botswana Public Procurement and Asset Disposal Act Public Procurement and Asset
No.10 of 2001 Disposal Board (PPADB)
Ghana Public Procurement Act No. 663 of 2003 Public Procurement Board (PPB)
Gambia Public Procurement Act No. 94 of 2001 Gambia Public Procurement Agency
(GPPA)
Malawi Public Procurement Act No. 8 of 2003 Office of Director of Public
Procurement (ODPP)
Zambia

2.0 Public Procurement Reforms in Tanzania

The enactment of Public Procurement Act of 2001 and that of 2004 marked the new beginning in
transforming procurement system in the country but does not mean that procurement activities
were not taking place in the government and state owned enterprises. Also it does not mean that
there were no legislations and regulations governing public procurement in the country. The
enactment of Public Procurement legislations was part of the big picture of transforming Tanzania’s
public procurement system to be in line with the internationally accepted procurement good
practices. The public procurement reform programme focused not only on establishing effective
procurement legislation, institutional and regulatory framework, but also aimed at:
 Ensuring that procurement is carried out according to the internationally accepted good
practices and principles;
 Developing professional procurement experts in the country through capacity building and
training programme;
 Attracting private sector to participate in competing for Government contracts by
demonstrating that procurement is conducted according to the fundamental principles of
fairness, transparency and accountability;

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  Making public procurement contribute towards economic growth in the country by creating
opportunities which will boost economic activities.

Prior to the enactment of the Public Procurement Act No 3 of 2001 which came in force on 1 st July
2001, procurement in the government and its agencies were governed by different legislations which
were applicable to specific organizations. Many of these legislations were outdated and not robust
enough to effectively regulate the procurement activities in the current environment due to a
number of reasons including the changes and developments in political, economical and social fronts
that took place since when the country got its independence from the Britain in 1961.

Legal Framework from 1961 to 2001

The government procurement policy during the period preceding the enactment of the Public
Procurement Act No. 3 of 2001 was that requiring government ministries, regional authorities and
departments to procure their requirements from specialized central procurement agencies which
were established to procure, store and supply specialized (specified) goods to government
institutions requiring those goods. These specialized central procurement agencies included the
Government Stores Department which specialized in procurement and supply of general common
items such as stationery, fuels, office furniture, Maji Stores Departments that specialized in plumbing
equipment and supplies, Veterinary Stores Department that specialized in veterinary vaccinations,
drugs and medical supplies, Medical Stores Department which specialized in procurement and
supply of medical supplies and Government Press which was responsible for printing of government
documents and forms. For those requirements that were not supplied by these specialized
procurement agencies, ministries and departments were required to procure them through
competitive tendering and other appropriate methods and the final contract award must have been
approved by the tender board. The following are some of the legislations that governed
procurement in different sub-sectors of public sector during the period preceding the enactment of
the Public Procurement Act No. 3 of 2001:

1. The Exchequer and Audit Ordinance Cap 439 of 1961:

This legislation was enacted in 1961 to regulate the public finances and audit roles. The legislation
was amplified by three regulations (financial orders), and it is Financial Regulations Part III (Store
Regulations) which regulated the procurement, storage and supply of goods (stores). This legislation
was applicable only to government ministries, departments and regional authorities.

2. Local Government (District Authorities) Act No.7 of 1982 and Local Government (Urban
Authorities) Act No. 8 of 1982:
In 1972 the government abolished all local authorities for what was claimed to be inefficiencies and
mismanagement in local authorities. In their absence the central government established Regional
and District directorate in the regions and districts took over the responsibility for providing of basic
public services and for planning and implementation of development projects at the local level. In
1982 the government decided to re-introduce the local government authorities after realizing that
the changes instituted could not bring the desired results. The Government passed a number of
legislations to implement the decision the decision to introduce local governments including the
Local Government (District Authorities) Act No. 7 of 1982, Local Government (Urban Authorities) Act
No. 8 of 1982 and Local Government Finances Act, 1982, No. 9 of 1982. These legislations
transferred the administrative authority from central government to the local authorities to make
decisions necessary for promoting economic, health, education and social developments in their
respective districts.

3. General Regulations for the Procurement of Works, Services and Supplies under the Integrated
Roads Projects:

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In 1991 Tanzania Government with the support of development agencies embarked on rural roads
rehabilitation and maintenance programme under the Integrated Roads Project (IRP) which was
carried out in a number of regions in the country including Tanga and Mbeya. In order to regulate
procurement activities in this project, the Government issued specific procurement regulations
which were known as General Regulations for Procurement of Works, Services and Supplies. These
regulations incorporated some good practices advocated by development agencies.

4. Public Corporations (Parastatals):

In 1967, following the decision of the then ruling political party TANU (Tanganyika African National
Union) of putting all economic activities under the control of the government, a number of private
enterprises that were operating in different sectors of the economy were nationalized and there
their operations were taken over by the newly established public corporations. These corporations
included the State Trading Corporation which took over the import and export operations, National
Milling Corporation, National Food Corporation, Mwananchi Engineering Company (MECCO), just to
mention few of them. To establish these corporations, the government enacted a legislation that
established each of them supported by regulations that governed staff, financial and procurement
matters. So it is fair to say that procurement activities in these public corporations were all regulated
by different regulations.

5. Executive Agencies
In 1991, Tanzania Government with the support of development agencies including UNDP, DFID,
SIDA, DANIDA, USAID, EU, NORAD, FINNIDA Netherland and Switzerland, launched a Civil Service
Programme to reform its Civil Service and its implementation started in 1993. The overall objective
of this programme was “to achieve a smaller, affordable, well-well compensated efficient and
effectively performing civil service”2. This programme was later re-launched as Public Service
Reform Programme (PSRP) following the limited impact on the quality of service delivery of its
predecessor. As part of PSRP, the Government decided to transform selected departments
performing public functions to carry out executive function as Executive Agencies. “Executive
agencies are government organizations established to perform essential public functions that do not
have to be carried out by the Government ministries” 3. The primary objective of establishing these
agencies is “to improve the efficiency and effectiveness of delivery of public service through better
business management and financial management, thereby contributing to economic growth in the
country by reducing the total cost of public services”4. To establish these Executive Agencies, the
Government prepared policy and legal framework within which they will be established and
operated. In 1997, Government enacted Executive Agencies Act, No. 30 of 1997 to regulate the
agencies and this legislation clearly spell out the powers to establish Executive Agencies, their
functions and operational principles. The Act was supported by regulations that directed how staff,
financial and procurement matters in agencies should be conducted. Therefore procurement
activities in Executive Agencies were all regulated by the same legislation and regulations following
the same rules and procedures.

2
Tanzania Civil Service Reform Programme – Case Study by Graham Teskey and Richard Hooper, 1999, page
3; http://unplan1.un.org/intradoc/groups/public/documents/UNPAN010583.pdf
3
The Public Service Reform Programme – Executive Agencies Programme: Information Flier Issued by Public
Service Department, 1999.
4
As footnote No. 3.