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Where is the value for money in public procurement?

AFIC produces an in-depth Analytical Report on the Status of Uganda’s Public Procurement Disclosure.

Public procurement expenditure in Uganda accounts for 60% of the national budget according to the Public Procurement and Disposal Authority (PPDA). This expenditure that takes such a huge percentage of the budget should indeed translate into effective service delivery for the citizens. However, the data so far disclosed by the government agencies on the Government Procurement Portal (GPP) indicates that the government is not only failing to disclose the information about this spending but they are also incurring a financial loss.

According to the most recent public procurement data report by the Africa Freedom of Information Center (AFIC), the Government of Uganda has registered a financial loss of Sh370.4b in inflated prices for procurement of public goods and services as well as infrastructural works by different government ministries. The report named “The quest for value for money in public procurement” covered four sectors that included health, education, works, and transport, as well as the agriculture, was released on Friday 24th July 2020 at Kampala Sheraton Hotel indicated that the government lost the money between the financial years 2016/17, 2017/18 and 2018/19. The report was based on four key indicators that included transparency, competition, and efficiency in public procurement. The discussion was graced by representatives of key government accountability agencies like the Members of Parliamentary Accountability Committees, Office of the Prime Minister, Ministry of Finance, Planning and Economic Development, PPDA, Heads of Sectoral Agencies, PDEs from the analyzed sectors and Local Government Technical leaders.

Speaking during the release of the report in Kampala, Gilbert Sendugwa, the Executive Director AFIC, said prices for 7040 contracts for the procurement of the goods and services were above the market price in the four ministries mentioned above. In its report, AFIC stated that the total contract price of the contracts was Sh1.3 trillion, while the market price was Sh976.4b, leading to a total inflated cost of Sh370.4b, representing an inflated cost of 27.5%.

“This is a lot of money that could have been put to better use for the improvement of service delivery under the sector,” Sendugwa said.

It is an offense under section 95 (1b) (b) of the Public Procurement and Disposal of Public Assets (PPDA) Act, for an accounting officer to sign a contract above the market price. According to the analysis report, the agriculture sector signed 570 procurement contracts, at 47b whereas the market price was only sh35.1b. This according to AFIC, created a financial loss of Sh11.9b as a result of the inflated contract prices. The works and transport sector, signed 2,161 contracts at Sh316.9b ignoring the Sh142.8b market price, which leads to the loss of Sh174b. On its part, the education sector, signed 2,212 contracts at sh174.5b, despite the market price being Sh76.8b. This created a financial loss of sh97.7b. The health sector, according to the report, signed 2,097 contracts paying sh808.3b and ignored the sh721.6b market price, which leads to the financial loss of sh86.7b. Section 26(4) and (5) of the PPDA Act, provides that entities shall not enter into contracts with providers where the contract price is higher than the market price.

“The rationale for these provisions is to ensure that the government is not paying very high prices for goods services and works. Entering contracts above market price could imply that there is collusion between the bidders and the government officials,” Sendugwa explained.

He added that this could also imply that entities are not carrying out market surveys which he said could lead to potential losses through high contract prices.

However responding to the report findings one of the stakeholders, Alex Kwizera, the Chief Administrative Officer (CAO) Kanungu district, who attended the launch, attributed the variance in contract prices to those on market, to lack of an official government market price to guide government agencies in procurement.

“If PPDA could give us a price list for all materials used in Uganda and beyond so that we are able to determine whether there is inflation in prices because this is not happening for the first time. We can use that average price list to determine before the contracts are signed,” Kwizera said.

Representing the PPDA, Edwin Muhumuza, the Corporate Affairs Manager PPDA acknowledged the inflation in prices for contracts by different government ministries.

He noted that such challenges do still exist in some government systems adding that some market prices could have been changed. Muhumuza however noted that there is a need for the government to create a standard price list, which can be used to determine contract prices.

“There is no standard price on government supplies such as vehicles and laptops. You find different government agencies buying the same type of laptop at different prices,” Muhumuza said.

AFIC further noted that only 7% of the values across the four sectors, was disclosed on the government procurement portal (GPP) in the period 2016/17, to 2018/19, suggesting a substantial level of lack of transparency. The report indicates that over the three years under review, the four sectors including agriculture, works, transport, Education, and Health, disclosed contracts valued at Sh2.23 trillion, which is only 7% of the combined budget allocation of Sh30.6 trillion.

It was also revealed that only two sectors (health, works, and transport) received over 10 bids in the period under review, suggesting bidders could be having challenges to bid in the other sectors such as Education and Agriculture. The report further discovered that at least 89% of the procurement methods used to implement procurements in the sectors reviewed were non-competitive methods.

To enhance disclosure and foster transparency in the procurement system, AFIC recommended that PPDA expedites the implementation of the electronic government procurement (e-GP) system in the sectors analyzed since they together account for about 35% of the national budget. Regarding the procurement delays, PPDA should according to AFIC, cap procurement lead time and provide for sanctions for procurement delays. It should be noted that 60% of the national budget is spent on public procurement. The PPDA was also been advised to enforce the provisions of the PPDA Act sections 95(1b) (b) that prohibits an accounting officer to sign contracts above the market price. Districts were also been advised to fully embrace and step up the use of available disclosure mechanisms such as GPP and public notice boards to disclose procurement information.

One of the officials from the Office of the Auditor-General confirmed that indeed the report findings were similar to what they had discovered in the national audits and thus there was a  need to deal with the issues raised.

Reacting to the report, Hon. Okin PP Ojara (Member of Parliament Chua West), the Vice-Chairperson Parliamentary Committee on Public Accounts Committee (PAC) attributed the challenges in public procurement to attitude by government officials and lack of public participation in procurement.

On his part, Jonathan Odur, a member of the Parliament’s committee on public accounts local government said; “It is worrying that disclosure level is at 8% as a parliament we face the same challenge you go to these districts and you cannot access information, I find it very worrying”. 

By the end of the meeting, nearly all agencies had committed to disclosing further the information on the GPP while the accountability agencies committed to pay more attention to the issues raised in such reports generated by civil society and ensuring that action is taken decisively.

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