PUBLIC PROCUREMENT REGULATION
The procurement process when not managed properly can lead the organization to incur cost in the form of:
- inflation of orders,
- payment of private purchases,
- overpayment of invoices,
- acquisition of poor quality goods,
- theft of goods,
- delays in the supply of goods and services etc.
- Standardization of procurement process and ensuring value for money in all acquisitions by organizations are pertinent benefits from regulating the procurement activity.
Why is procurement important?
Many decisions taken by departments have a procurement implication that can impact on the overall cost of carrying out the decision. Here cost includes the total cost of the good or service and not simply the price that is paid.
In the private sector, procurement is viewed as a strategic function working to improve the organisation’s profitability. Procurement is seen as helping to streamline processes, reduce raw material prices and costs, and identifying better sources of supply.
In essence, helping to reduce the ‘bottom line’. Indeed, in many organisations the importance of procurement is recognised by having their head of procurement placed at an Executive Board level.
In the public sector, the concept of a ‘bottom line’ is less well defined – there are no shareholders’ dividends to be paid out or publicly declared profit (or loss) announcements. There is however a need to maximise the output, in terms of teaching within the available funds.
These funds come, substantially, from public funding in the form of grants, student fees etc. We are the sector’s shareholders as tax payers, students and/or staff. This, therefore, places an inherent requirement that the funds provided are managed in a manner that is accountable and demonstrates both probity and value for money.
At higher levels of expenditure, this need for openness, transparency and non-discriminatory action is required by legislation. The European Procurement legislation, implemented in the UK, means that all requirements for supplies, services and works that exceed the value thresholds defined in the Regulations are advertised and tendered in accordance with published rules.
Within an institution, its expenditure is made up of two distinct elements – pay (salaries and wages) and non-pay (all other expenditure). Procurement is concerned with the management of a significant proportion of the non-pay expenditure and ensuring that the best possible value for money is obtained when committing this expenditure. Non-pay spend includes the day-to-day running costs of the institution as well as its capital expenditure.
This expenditure can be further divided into that which is used to obtain goods and services from suppliers and other expenditure such as payments made to other educational establishments or to HM Revenue and Customs.
The procurement function is concerned with obtaining the required goods and services from appropriate suppliers to enable the institution to meet its strategic objectives in an economic, efficient and effective manner.
Research has shown that within an institution, its non-pay expenditure is usually between 30 – 40% of its total expenditure.
PUBLIC PROCUREMENT ACT 2003 (ACT 663) AND PUBLIC PROCUREMENT AMENDMENT ACT, 2016 (ACT 914)
The major regulation for public sector procurement is the Public Procurement Act 2003 (Act 663). The Act is divided into nine (9) parts dealing with the following major issues: establishment of the public procurement board; procurement structures; methods of procurement; tendering procedures; methods and process to engage the services of consultants; review; disposal of stores, plant and equipment; and miscellaneous topics respectively.
Effective 1st July, 2016, the Public Procurement (Amendment) Act 2016 (914) was passed and became operational, amending Sections of Act 663. According to the public procurement authority, highlights of the new provisions include:
- Revised Approval Thresholds;
- Re-Constitution of Entity Tender Committees;
- Dissolution of District and Ministerial Tender Review Boards;
- Categorization of Entity Tender Committees;
- Revised Thresholds for Procurement Methods;
- Introduction of New Procurement Structures for Local Government Agencies;
Scope of Act 914
Section 14 states that Act 914 applies to
(a) the procurement of goods, works and services, financed in whole or in part from public funds;
- b) functions that pertain to the procurement of goods, works and services including the description of requirements and sources of supply, selection and award of contracts and the phases of contract administration;
(c) the disposal of public stores, vehicles and equipment; and
(d) procurement with public funds including loans procured by government, grants, foreign aid funds and internally generated funds except as exempted under section 96. Meanwhile, section 96 states that
(1) Despite the extent of the application of this Act to the procurement, procurement with international obligations arising from a grant or concessionary loan to the Government shall be in accordance with the terms of the grant or loan subject to the prior review and “no objection” of procurement procedures by the Authority.
(2) Procurement arising from an external loan and commercial facility, secured by Government, other than a concessionary loan and grant which specifies particular procurement procedures shall be subject to the prior review and “no objection” of those procurement procedures by the Authority.”
Thus, sections 14 and 96 define the scope of Act 914. The Act mandates all procurements with public funds, loans, grants and disposal of public stores, vehicles and equipment to follow the procedures outlined in it except where they relate to international grants, concessionary loan, external loan and commercial facility by Government with special procurement procedures.
But even in such exceptional cases, the Procurement Authority shall subject the procurement procedures to prior review and “no objection” of those procedures.
Also, in addition to following procedures enshrined in the Act 914, all procurement entities are mandated to follow all other procedures specified in manuals, regulatory notices and guidelines issued by the Board.