Beruflich Dokumente
Kultur Dokumente
PREFERENCES IN TANZANIA
Reginald G. Mamiro*
ABSTRACT
Preference or discriminatory provisions in public procurement are largely used to encourage
domestic bidder participation in government tender opportunities by deliberately granting them
margins during bid evaluation which make them look competitive against their foreign counterparts
when contesting for public contracts. Governments also use procurement preference schemes to
address the plight of disadvantaged groups such as youth, women and persons with physical
disabilities by reserving for them a quota of the procurement business. Though discriminatory
public procurement practices are internationally discouraged particularly in the procurement
markets of developed countries (at least on paper as there are many inconsistencies on record
when it comes to practice), a number of developing countries have discriminatory provisions built
up in their procurement legislations which limit access to their procurement markets by foreign
suppliers or service providers. The law on public procurement in Tanzania requires procuring
entities (PEs) to apply certain preference margins or points when evaluating bids submitted by
domestic firms or persons; or where bidders are going to supply locally obtained goods and also
exclusive preference for small bids where financial resources have been provided by the
government or an institution of the government. However, the response has not been as good. A
countrys procurement assessment report had disclosed that only 3% of the about 400 preference
scheme eligible - cases had the preference scheme provisions applied ( CPAR, 2006 ). Little is
known as to why this seemingly obvious opportunity remained unexploited. This descriptive
research study sought to find out the reasons for the poor response and whether there has been
any improvement since then.
*Reginald Godfrey Mamiro MBA, FCPA - the former Director of Finance and Administration with the Institute of
Accountancy Arusha Tanzania and now lecturing public procurement and management accounting to undergraduate
and postgraduate students at the same Institute has been extensively involved in public sector procurement and
financial management as a trainer cum consultant. Mr. Mamiro has occasionally been retained by the Public
Procurement Regulatory Authority in Tanzania (PPRA) for dissemination of the countrys Public Procurement Act and
its Regulations. Currently he is also retained by the Belgian Technical Cooperation (BTC) for training of selected local
government authorities on use and application of the Public Procurement Act 2011 and its 2013 Regulations
Introduction
Discriminatory public procurement practices have been applied for many years, strategically as a
governments policy instrument targeting a number of policy objectives. These may include
protecting a countrys domestic industries, expediting the growth of domestic businesses, creating
employment and addressing the plight of marginalized or disadvantaged section of the population.
The republic of South Africa for instance enacted a law in 2003 Black Economic Empowerment
Act no. 53 of 2003 under the Broad Based Black Economic Empowerment (BBBEE) initiative to
address the plight of the black population which had been largely marginalized during the time the
apartheid policy was in force. Many public procurement systems have had discriminatory
provisions or preference schemes built in their procurement laws to address such objectives. The
provisions favour domestic bidders by introducing clauses which make them look relatively
competitive than foreign bidders or other bidders respectively when contesting for public tender
opportunities. For the case of disadvantaged groups such as women, youth and persons with
physical disabilities a number of governments have been setting aside for them some quotas of the
public procurement business. Of late however, most developed countries for example member
states of the European Union (except Greece), or countries whom are signatories to WTOs
Government Procurement Agreement (GPA) have prohibited the use of discriminatory provisions
in their various trade cum economic agreements. Although the agreement prohibits public
procurement discrimination among its members in very absolute terms, it recognizes the special
need which developing countries attach to such preferences and a clause for that inserted i.e.
Article V. It states that, Parties shall, in the implementation and administration of this Agreement,
through the provisions set out in this Article, duly take into account the development, financial and
trade needs of developing countries, in particular least-developed countries, in their need to: (a)
safeguard their balance-of-payments position and ensure a level of reserves adequate for the
implementation of programs of economic development; (b) promote the establishment or
development of domestic industries including the development of small-scale and cottage
industries in rural or backward areas; and economic development of other sectors of the economy;
(c) support industrial units so long as they are wholly or substantially dependent on government
procurement.
public procurement preference schemes currently in use together with their respective applicable
margins.
TABLE 1:
PREFERENCE SCHEME
EXTENT
OF MARGIN OF PREFERENCE
FOREIGN
COMPONENT
National Preference to Local Contractors
0%
10%
50 70%
6%
25 49%
8%
0 24%
NA
10%
Up to 15%
Association
Arrangements
Preference Margin for Goods Mined or
Manufactured in Tanzania
Exclusive
Preference
to
Suppliers
/Contractors
Local
Service
Providers
Works: 10,000,000,000/=
Goods: 2,000,000,000/=
Survey of Literature
In general, literature on discriminatory public procurement practices is fairly rich though empirical
studies on the subject particularly in developing countries which is the focus area of this paper
seem to be limited. Many scholars have been in consensus when it comes to discriminatory public
procurement practices. They accuse them as a barrier to free international trade and constitute an
obstacle to economic integration (Trepte, 2007). Trepte and (Arrowsmith, 2005) also argue that
practicing discrimination in public procurement works against Ricardos theory of comparative
advantage which states that: By specializing in the production and export of goods and services
for which it holds a comparative advantage, a states resources will be used most efficiently and
thus wealth will be enhanced. Continuously the focus is towards opening up procurement markets
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to enable unrestricted access by foreign suppliers, contractors or service providers. Too rigid
application of discriminatory public procurement provisions could also limit the flow of knowledge
across states which embrace the practice, something that could have far reaching negative
economic consequences. Implementation of some of the trade agreements with regard to
accessing public procurement markets among developed countries has never been easy either.
Even for cases where they advocate open public procurement practices still there are attempts by
individual countries to limit access to their domestic procurement markets by foreign bidders that
might be translated as discrimination. The European Commission has been working on a proposal
fora regulation that will give the EU the right to block access to its markets for foreign firms
originating from countries that are not reciprocating enough (Patrick & Sebastian, 2012). Through
discriminatory clauses some countries are using public procurement to achieve foreign policy or
political goals. Opening up of procurement markets seems to have been reduced to a slogan
easier said than implemented for most trading blocks. WTOs GPA which has for many years been
campaigning for a more liberalized international trade and opening up public procurement markets
by removing discriminatory clauses from public procurement legislations and rules across member
countries has not succeeded to do so without reservations. GPAs latest commitments on doing
away with discriminatory practices in public procurement are not open-ended but rather limited to a
list of products. For example Annex 7 of the Agreement under general notes provides that, Korea
will not extend the benefit of their Agreement as regards procurement by the Korea Railroad
Corporation and Korea Rail Network Authority, to suppliers and service providers of Norway and
Switzerland, until such time as Korea has accepted that those countries give Comparable and
effective access for Korean undertakings to their relevant markets. Even the negotiations that have
been going on in the GPA have their outcomes focused on some form of Limited access to
international procurement markets (Article xxiv : 7), assuming a strategic trade Policy than just free
trade. Developed countries stance on whether or not to apply discrimination in their public
procurement markets has never been without inconsistencies despite the strong advances they
make against the practice when they meet for regional trade agreements. Some member states of
the European Union have of late started showing tendencies towards applying protectionist
approaches when purchasing goods, works or services as if to pursue a policy of buy national.
The buy America slogan could also serve as an example of the inconsistency in policy on foreign
trade and public procurement in particular. Some analysts have attached this unusual turn of
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course to the recent global economic crisis, (Schnitzer, 2010). The Cecchini Report, 2007 a study
sponsored by the European Commission revealed that 98 % of public supply contracts were
awarded exclusively to national bidders in EU member states, which revelation casts doubt as to
whether the barriers to a free international trade have really been dismantled. It is as if the desire
for cross border economic integration among EU member states is outweighed by the on - the ground - realities, with or
summarize that though public procurement markets are generally considered to be liberalized, not
more than 7% of procurement markets of the Organization for Economic Cooperation and
Development (OECD) member countries are open to international competition with or without
public procurement discrimination (OECD, 2009). Procurement markets in many developed
countries remain largely inaccessible to foreign suppliers, contractors and service providers, this
being caused possibly by issues like information barriers and a number of undocumented factors
rather than deliberate discriminatory or preference schemes throughout the procurement
processes. Ironically, transparency has frequently been pointed by analysts as among major
factors impeding the growth of cross border trade within the European Union. Woolcock, (2008 )
looks at transparency measures in the developed economies to be more important in opening up
procurement markets than removal of preference clauses imposed through national treatment
commitments. For a number of years according to Woolcock, expectations of enhanced market
access has not been forthcoming, motivating certain sectors such as power equipment and
Telecommunications to press for liberalization of procurement markets. The possibility that the
WTOs GPA objective to dismantle barriers to free trade at international level through opening up
procurement markets will be achieved remains bleak given that the situation of cross border trade
within key regional trade blocks like EU and OECD from whom most of its member states are
drawn does not seem to be promising.
Problem Statement
Introduction of preference schemes in procurement markets of developing countries
particularly in countries where for historical and sometimes political reasons some sections of the
population have not been able to access public procurement opportunities or the access has been
difficult is a rational policy a government could pursue. This will stimulate the domestic economy
and create job opportunities and other benefits from the trickle-down effect. The last Country
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Procurement Assessment Report (CPAR 2006) revealed that out of 388 preference-eligible
procurement transactions in Tanzania only 3% had the preference provisions applied, as required
by the public procurement law. As if that was not enough, the procurement compliance and
performance evaluation carried out by the regulatory agency (PPRA) the following year revealed
that application of preferences to deserving local firms had dropped further to 2%.It is an
unfortunate scenario if really policy makers are serous in using public procurement to fulfill social
economic objectives such as making domestic bidders competitive when contesting for local
tenders with foreign bidders, growth of the domestic industry SMEs in particular, job creation and
poverty alleviation just to mention a few. There is therefore a need to find out the explanation why
the performance of public procurement preferences in Tanzania has not been as impressive
despite the list of social economic benefits behind.
Methodology
Research Questions and Hypotheses.
This was a descriptive research study aimed at finding out factors behind Tanzanias poor
performance in implementing public procurement preference provisions despite being a statutory
requirement. Basing on this premise the study also looked at the extent to which public
procurement preferences are understood, accepted and implemented by public procurement
practitioners in Tanzania and also the extent to which domestic bidders in Tanzania are informed of
the preference schemes and would be ready to ask for them when denied or lodge complaint
where improperly applied. Another research question was whether public procurement compliance
enforcement mechanism has been in place and therefore compelling contracting authorities to
apply the preference schemes provided by law. Answers to these questions would probably provide
an insight into why response to this obvious opportunity to domestic bidders and suppliers of
domestic goods had not been as good over time.
since year 2007, one year after the time the last Country Procurement Assessment Report (CPAR)
on Tanzania come out. There were open ended questions allowing for flexibility in having
respondents freely speak their mind. Most questions were based on frequencies and percentages
and a few were based on a 5-point Likert Scale to allow for easy quantification of the outcomes.
The first category of questionnaires i.e. those distributed to HPMUs had a question requiring the
respondent to indicate whether or not he/she was aware of the legal requirement in Tanzania to
consider procurement preference schemes where applicable; also to indicate their level of
knowledge of the computations involved. Knowing the possibility of some of the respondents not
ready to accept that they were not informed of such provisions in the countrys procurement law or
had little knowledge of the computations involved, the researcher supplemented the questions with
face to face interview. 85 out of the 196 questionnaires dispatched to heads of procurement
units /departments were properly filled out and returned while 83 out of 196 bidders in the survey
sample filled out and sent back their questionnaires, that being a response rate of 43% and 42%
respectively see Table 2 hereunder.
TABLE 2: QUESTIONNAIRE RESPONSE RATE
QUESTIONNAIRE
PE QUESTIONNAIRE
BIDDER
DISPATCHED
196
196
COMPLETED
85
83
RESPONSE RATE
43%
42%
QUESTIONNAIRE
Secondary Data
Secondary data included in particular, PE procurement audit and compliance monitoring reports
released annually by the regulatory body i.e. the Public Procurement Regulatory Authority (PPRA).
The reports picked for the study were those which covered the period between years 2006/7 (the
time the regulatory agencyPPRA started to roll out Annual Performance Evaluation Reports) and
2014/5 inclusive. The consulted secondary data and in particular the annual reports Issued by
PPRA were necessary for addressing the third preposition or research question on the role the
agency played in enforcing legal compliance by contracting authorities. The data was useful for
deriving conclusions on the effectiveness of the regulatory body in ensuring that procuring entities
adhered to the legal requirement of effecting preference provisions where applicable.
Records show that procurement performance evaluation carried out annually by PPRA has been
based on Compliance and Performance Indicators (CPIs) throughout the period covered by the
study see table 3 hereunder:
TABLE 3 (A): COMPLIANCE AND PERFORMANCE INDICATORS USED INCLUDING PE
LEVEL OF COMPLIANCE.
2006/7
Number
2007/8
2008/9
13
of
CPIs Used
Number of
14*
PEs
20
Evaluated
Overall
Compliance
3*
70
3
9%
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
13*
13*
13*
7*
7*
7*
30
99
4
3%
106
121
120
76
80
64%
65%
69%
66
%
55%
63%
74%
Level (%)
Source: PPRA Annual Performance Evaluation Reports 2006/7 2014/15
*TABLE 3 (B): CPI KEY
2006/7 14 CPIs
1. Establishment and
Composition of Tender
Board
2. Establishment and
Composition of PMU
PMU
4. Preparation of Annual
PMU
4. Preparation of Annual
Processing.
4. Appropriateness of Contract
Procurement Plan
5. Approvals
Procurement Plan
5. Approvals
Management.
5. Management of
6. Advertisement of Bid
6. Advertisement of Bid
Procurement Records
6. Implementation of Systems
10
Opportunities
7. Publication of Awards.
8. Time for Preparation of Bids
9. Method of Procurement
10. Use of Standard Tender
Opportunities
7. Publication of Awards
8. Time for Preparation of Bids
9. Method of Procurement
10. Use of Standard Tender
Documents
11. Record Keeping
12. Quality Assurance
13. Contract Implementation
14. Application of Preferences
Documents
11. Record Keeping
12. Quality Assurance
13. Contract Implementation
Prepared by PPRA.
7. Handling of Complaints.
to Local Firms.
Source: PPRA Annual Performance Evaluation Reports - 2006/7 - 2014/15
Data Analysis
Being a descriptive research data analysis mostly employed descriptive statistics
such as frequencies and percentages.
AWARE
&IMPLEME
AWARE
BUT
DID
NOT
AWARE
81
95%
NTED
58
72%
IMPLEMENT
23
NOT
5%
NA
NA
NA
NA
AWARE
TOTAL
85
100%
58
72%
23
28%
28%
WOULD ASK
WOULD NOT
FOR
ASK
PREFERENCE
PREFERENCE
MARGINS
66
FOR
MARGINS
0
AWARE
66
80%
NOT AWARE
17
20%
NA
NA
NA
NA
TOTAL
83
100%
66
80%
NA
NA
11
100%
entities had initially formed one of the regulatory bodys key compliance performance indicators i.e.
number 14 on the list (Table 3A). However, the indicator has been dropped since the year 2007/08.
Conclusion
The study was different from previous works as it focused on failure by government contracting
authorities to exercise statutory compliance requiring them to implement public procurement
preference schemes by applying the relevant clauses prescribed in the public procurement Act
when carrying out bid evaluation. It also looked at what seemed like failure by bidders not taking
full advantage of the seemingly obvious opportunities and may be laxity by the regulator in
enforcing compliance. Previous works had concentrated on other dimensions of procurement
preferences such as their role in obstructing free access to international procurement / supply
markets, financial losses and benefits and their working against the Ricardos law of comparative
advantage where they are accused of generating economic inefficiencies. Otherwise the study
should be of interest to policy makers in Tanzania due to the public procurement reforms currently
going on and increased public expectations particularly the local business community (contractors
in particular) who have for a long time been exerting pressure on the government for enhanced
preferential treatment when contesting for public tenders.
References
1. Country Procurement Assessment Report Tanzania 2006 www.ppra.go.tz
2. Schnitzer 2010 -Regulating Public Procurement Law at Supranational level: The Example
of EU Agreements on Public Procurement. Journal of Public Procurement Vol 10 No. 3 Fall
2010 PrAcademics Press
3. Public Procurement Act 2011 - Tanzania Government Printers, Dar es Salaam
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