Policy Think Tank, IMANI Ghana has made proposals for the review of the current public procurement system.
According to IMANI, the area of procurement is one which which must be re-evaluated by the government if the fight against corruption is to be successful.
“Given the huge role public expenditure plays in our economy, and the tendency for abuse of public funds by officials, public procurement as a magnet for corruption has become a critical issue that has to be explored in the fight against corruption,’ the statement from IMANI said.
They argue that there are several loopholes in the current procurement law which are being exploited by public officials for personal gain.
“This sole-sourcing provision has turned out to be a loop-hole being exploited by public officials and businesses against the interest of the state,” the statement said.
IMANI believe that scandals such as the one involving the Driver and Vehicular Licensing Authority (DVLA), where “$3.6 million for the supply of equipment to print drivers’ licenses interestingly metamorphosed into $9.9 million” might not have occurred with a more efficient procurement law.
Among other things, the think tank is calling for the establishment of an Institute of Public Projects Excellence to act alongside the Procurement Authority.
The institute they believe should have a panel which consists of “members of recognised governmental and non-governmental bodies, such as chartered organisations, research institutes, labour unions, and specialised government agencies”
Below is IMANI Ghana’s full statement:
IMANI Alert: Institute of Public Projects Excellence; A Better Way to Fight Procurement-Inspired Corruption
Although Ghana’s label as Africa’s second most corrupt country by the Ghanaian media was a wrong interpretation of Transparency International’s “People and Corruption: Africa 2015” report, Ghanaians seem to have resigned themselves to the fate that their country’s leadership has significant challenges in curbing the practice with the speed needed.
We are aware that corruption cannot be limited to activities of the state and for that matter, a government. The willing participants in business, academia and civil society and the citizenry at large should equally be scrutinized. However, the dent high profile corruption can make to an economy can be devastating as it can be long lasting and not least when it can increase the cost of running government business which ultimately has to propped up by higher taxes.
Solutions abound in dealing with the rather amorphous subject called corruption. This publication intends to deal with the hydra headed problem in the corruption industry- Public procurement and emphasize tried and new solutions such as the creations of an Institute of Public Projects Excellence to act alongside the Procurement Authority.
Problematic Public Procurement
Public procurement simply refers to the defined rules, methods, processes and procedures by which government institutions are mandated by law to use to acquire goods, services and works using public funds.
Given the huge role public expenditure plays in our economy, and the tendency for abuse of public funds by officials, public procurement as a magnet for corruption has become a critical issue that has to be explored in the fight against corruption. The Public Procurement Law, 2003, ACT 663 guides the process of public procurement in the public service. This law attempts to fight corruption by ensuring transparency and fairness in the procurement processes. This is to be effected through a competitive bidding process for state contracts. It is assumed that through such a process, the state can obtain the best value for public funds that are expended. This process is expected to eliminate bribery and other corrupt practices as individual firms win bids on the basis of the quality of their proposals.
Ghana’s procurement law however fails to largely meet its mandate. Under the law, the procurement entity (ministry, government agency or department) is largely in charge of the process. Such entities are expected to have a procurement unit in their organization that is expected to manage and facilitate all procurement activities. It is the procurement entity that sets up its own Tender Evaluation Committee. The Public Procurement Board, which assumes some form of supervisory role, is subject to political interference by the political authority since the president makes appointments and removal from the board.
According to Transparency International (2005), every stage of the procurement process is prone to corruption. Public officials in concert with corrupt businesses, seek to bend procurement rules to ensure that preferred bidders win contracts. Even when a contract is subject to a tender process, certain bidders gain advantage through access to important information or exclusion of competitors from a pre-qualified list failing the proper value-for-money and vested interest test that must be done.
The farce that took place at the Driver and Vehicular Licensing Authority (DVLA) where a contract sum (awarded on a non-competitive basis) quoted at $3.6 million for the supply of equipment to print drivers’ licenses interestingly metamorphosed into $9.9 million is just one evidence in a long list of brazen abuse of public funds and the impotence of the procurement law. The DVLA boss blamed the anomaly on human error despite the fact that the state had allegedly overpaid for the contract. The state is now mulling over cancelling the contract although this has sparked fears of the possibility of a huge judgment debt for the country.
Sole Sourcing Blues
The procurement law allows the award of certain contracts without a competitive bidding process. Such processes are supposed to be the exception and not the norm. They would typically involve national security concerns, cases where specific expertise is required (which only one company possesses) or where the contract has to be expedited due to emergencies. The procurement board must however authorize such processes.
This sole-sourcing provision has turned out to be a loop-hole being exploited by public officials and businesses against the interest of the state. The procurement board does not seem to be strong enough to clamp down on the abuse of this provision as any contract can virtually be given out without a tender process. It is extremely difficult to comprehend how contracts such as the branding of buses gain approval by the board to be sole-sourced. Such processes are not transparent.
Almost every major scandal involving the state over-paying for a contract involved sole-sourcing. In a ministerial report on GYEEDA, arguably Ghana’s biggest corruption scandal in recent times, it was noted that the contracts, which were all sole-sourced, were heavily lopsided towards companies owned by just two individuals. It is estimated that contract sums to these individuals and their companies were in excess of GHc 150 million.
The state is in the process of retrieving some of the monies due to the non-performance of work.
An Attorney General’s report into the bus-branding saga also showed that the state overpaid by GHc 1.9m (later reviewed to GHc 1.5m). Anti-corruption crusaders have identified this provision in the law as the biggest threat in the fight against corruption when it comes to public procurement.
Emphasizing Tried and Test Solutions
To defeat corruption in the public procurement process will require strong political will. The decision of the Auditor-General to begin surcharging heads of MMDAs (after its engagement with Occupy Ghana) identified to have misapplied funds is a step in the right direction. Punitive actions against individuals who flagrantly disregard the procurement process in the award of contracts will serve as deterrence.
Transparency is vital in the fight against corruption. It is imperative to know that even advanced countries are also battling corruption in the procurement process. Ghana can adopt some of the steps these countries are taking particularly with regard to transparency. The USA for instance passed the Federal Funding Accountability and Transparency Act that requires recipients of federal contracts and grants exceeding $25,000 to publish the names of all subcontractors they intend to hire. The information is on a public website to allow American citizens to track the chain of a federal contract to its end to know where every dollar is going. The Obama administration created a website in 2009 to track money that was spent on stimulus projects within his economic recovery programme.
Ghana has to start making progress towards such levels of transparency if we are serious about protecting the public purse. Details of contracts awarded, including sub-contracts must be public knowledge. It is also important that Ghanaians are aware of persons behind companies that win such contracts. Such level of transparency allows the public to track where every cedi of public funds is going and for them to raise the necessary red flags. It goes a long way to also discourage corruption.
Finding a better way- Institute of Public Projects Excellence
We also need an Institute of Public Projects Excellence to act alongside the Procurement Authority. This institute needs to have a panel, which by law will have rotating members of recognised governmental and non-governmental bodies, such as chartered organisations, research institutes, labour unions, and specialised government agencies.
To avoid capture, no member should serve on this institute for more than 6 months. All government projects costing more than 10,000 units (with a unit equivalent to 1 GHS in 2016) will require a certificate of sound value before theaward of contract. A Value for Money report must accompany the certificate of sound value and should be published on a public website.
Panel hearings should be open to the public. Where the panel has no expertise in a particular project domain at hand, a call for input from external assessors should be placed on the internet and published in leading dailies. If at the end of this extended period of evaluation the expertise remains unavailable, the matter should be referred to the Auditor General for pre-project auditing. The provision of a certificate of sound value should be time-bound, perhaps 30 calendar days upon receipt of the notice of an intent to sole-source or award enter into negotiations with the winner of a public bid from the Procurement Committee of the public agency or enterprise. There should be room for extension if a referral becomes warranted as above.
The Chairman of the Institute of Public Projects Excellence should have ombudsman powers, and the panel should have the capacity to subpoena documents. This suggestion may seem politically difficult to implement, but it is quite clear that to safeguard public funds, the procurement regulations are no longer, by themselves, fit for purpose, as they provide no real means of benchmarking costs, preventing collusion among bidders, and addressing information asymmetry among bidders, due to favouritism; and, also because sole-sourcing cannot be completely abolished.
These measures proposed above will require strong political will to implement them. If we are to confront corruption head on however, these measures are necessary.
This IMANI Alert was inspired by discussions with IMANI’s Honorary Director of Development, Bright Simons. It was compiled by IMANI’s intern, Roland Johnson.