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EXAMINING THE RESPONSE TOWARDS PUBLIC PROCUREMENT

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.

Administration of Public Procurement Preferences


There are various preferential public procurement schemes and the way they are implemented
differs across countries. First there are those which are discriminatory in nature whereby domestic
bidders are awarded some predetermined bonus points during bid evaluation, making them look
competitive when compared with their foreign counterparts. The aim here is promotion of domestic
businesses and creation of job opportunities by easing domestic bidders access to the local
procurement market opportunities. The points are awarded during financial evaluation whereby
bidders will have gone through the rest of the qualification criteria. For most countries the points
range between 10 15% and are loaded on the lowest evaluated best foreign bid. Swaziland for
instance allows a national preference of 15% for construction works, 10% for consultancy
assignments and 7.5% for goods in what has been dubbed as Measures to Promote Swazi
Companies. On the other hand Zimbabwe allows a 10% price margin to all locally based suppliers
and an additional 10% to all previously economically disadvantaged contractors. However, there
are some countries where the rates go significantly high like Ethiopia where domestic companies in
the pharmaceutical industry enjoy price preference of 25% when competing with foreign
pharmaceutical companies. The second category of preference schemes are reservations
whereby some quotas of the public procurement business are reserved for economically
disadvantaged groups of the population. Such groups include youth, women and persons with
disabilities. During the past decade the authorities in Kenya for instance have been battling to
implement the 30% public procurement reservations for youth, women and persons with disabilities
as provided for in section 140 of the Public Procurement and Disposal Act, 2005 under a program
dubbed, Access to Government Procurement Opportunity (AGPO). Besides the 30% quota these
groups are also relieved from the requirement for bid bond submission when contesting for
government contracts, only that they shall have to fill out and submit a Tender Securing
Declaration Form failure of which the bidder becomes liable to debarment. For over a decade
contracting authorities in Kenya have been taking their time when it comes to implementation of
the reservations scheme and earlier this year the national treasury was forced to issue a circular
i.e. Treasury Circular No.1/2015 through which all accounting officers have been required to,
among others, implement the AGPO program in adherence to the legal provisions stated in the Act.
This author would not know whether or not issuing of the circular has changed the status quo with
regard to implementation of AGPO in Kenya. Table one hereunder summarizes Tanzanias different
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public procurement preference schemes currently in use together with their respective applicable
margins.

Procurement Preference Schemes in Tanzania

TABLE 1:

PREFERENCE SCHEME

EXTENT

OF MARGIN OF PREFERENCE

FOREIGN
COMPONENT
National Preference to Local Contractors
0%

10%

and Service Providers


Joint Ventures and

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

Less than 40%

Service

Provided Tender Value Does not Exceed


(In T.Shillings):*

Providers

Works: 10,000,000,000/=
Goods: 2,000,000,000/=

Non-Consult. Services: 2,000,000,000/=


Sourse: Public Procurement Act, 2011 (United Republic of Tanzania)
*Footnote: 1 US Dollar was equivalent to about Tanzanian Shillings 2,200/= as at April 2016 .

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

without discrimination. Other interesting statistics on this subject

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.

Three hypotheses were advanced by the researcher:


Hypothesis 1: Poor application of public procurement preference schemes in Tanzania is
influenced by public procurement officers ignorance of the available preference provisions.

Hypothesis 2: Poor application of public procurement preference schemes in Tanzania is


influenced by eligible bidders lack of awareness of the available preference provisions.
Hypothesis 3: There has been absence of enforcement mechanism to compel government
contracting authorities implement public procurement preference schemes.

Study Population and Sample Size


The research covered two study populations and therefore two samples, i.e. contracting authorities
or procuring entities and bidders who had transacted business with the authorities for the previous
three years (Bidder who had transacted the highest procurement volume with the relevant
contracting authority) At the time of conducting the survey the number of contracting authorities in
Tanzania, that is, ministries, departments and agencies including parastatal organizations and
local government authorities was estimated at about 400, scattered all over the country but with
most of them being concentrated in Dar-es-Salaam city. Characters making up the population were
homogeneous and with very insignificant dispersion factor, if any, as all were public bodies and
subjected to similar procurement compliance requirements. The corresponding number of bidders
who had transacted the highest value procurement volume with the contracting authorities was
also set at 400. Again characters making up the population of bidders were largely homogeneous
and expected to have insignificant dispersion factor as they were subjected to similar preference
privileges and other supply requirements. Considering a 5% margin of error and a 95% level of
confidence as statistically acceptable, a compromise of a survey sample size of 196 each for
contracting authorities and bidding firms was arrived at.
Data Collection and Instruments Used
Both primary and secondary data were collected and analyzed.
Primary Data
Two sets of structured questionnaires were developed with enquiries capable of addressing the
research questions. One set of questionnaires was sent to procuring entities to be filled out by
heads of procurement management units or departments (HPMUs) while the other one was sent to
private firms / institutions that had transacted procurement business with government institutions
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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

2007/8 2011/12 13 CPIs


1. Establishment and
Composition of Tender
Board
2. Establishment and
Composition of PMU

2012/13 2014/15 7 CPIs


1. Institutional Set-Up and
Performance
2. Appropriateness of
Preparing and
Implementing Annual

3. Functioning of AO, TB and

3. Functioning of AO, TB and

Procurement Plan (APP).


3. Appropriateness of Tender

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

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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.

TABLE 4: AWARENESS OF PREFERENCE PROVISIONS BY PEs


PEs

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%

TABLE 5: AWARENESS OF PREFERENCE PROVISIONS BY BIDDERS


BIDDERS

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%

Findings and Discussions


This study was able to provide some necessary explanations to the situation of public procurement
preference practices in Tanzania. The findings as summarized in tables 4 and 5 above largely
address the three hypotheses which guided the researcher i.e. the question of procurement
officers knowledge of the legal provisions on public procurement preferences as set out in the
Public Procurement Act 2011, bidders lack of awareness of available public procurement
preferences in Tanzania and inadequate regulatory enforcement which would compel procuring
entities to comply. From table 4 above 58 (72%) out of 81 of the procuring entities studied who
were aware of the requirement to apply the procurement preferences were complying while 23
(28%) out of the 81were aware but were not implementing the preference schemes. 4 procuring
entities (5%) were not at all aware of the public procurement preference schemes in Tanzania and
which they were legally obliged to apply. Relative to the rest, it should be easy to deal with this
group, that is, it requires training. The fact that there were so many procuring entities (28%) aware
of the legal requirements to apply preference schemes in the procurement they undertake but
would not do so presupposes two things according to this researcher. One is lack of knowledge on
the part of procurement officers to understand, interpret and put the provisions into practice and
two, failure by the regulatory body to intervene. However this group seems to be the most
challenging to deal with because during interview a number of excuses for non compliance
emerged. One was lack of incentive to apply the preference schemes as procurement spend
becomes unnecessarily higher than would otherwise not as entities are say, forced to forego the
lowest evaluated substantially responsive bidder who happens to be a foreign bidder for a
domestic one though substantially responsive but not lowest evaluated. Another issue raised by
respondents in this group was that the preference schemes called for tedious computations during
bid evaluation making the evaluation teams lose interest and therefore avoid them. The issue of
awareness of the of public procurement preference provisions on the part of bidders is still an
obstacle towards full implementation of the schemes. The study revealed that a staggering 20% of
domestic firms doing business with the government sector were not informed of the existence of
procurement preference schemes. On the other hand the Public Procurement Regulatory Authority
(PPRA) can not abdicate from the failure to have application of the preference provisions known
and effected. Application of procurement preferences to domestic bidders by government procuring
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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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