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Public procurement regulation in Tanzania: Key driver of investments and economic growth?

2016-11-29 10:03:13

By Paul Kibuuka

PUBLIC procurement is the process whereby the Central Government, local government authorities, and public bodies or entities, established and mandated by law to carry out public functions, acquire goods, services and works from local and/or international contractors, suppliers or service providers.

It includes a great deal of needs and requirements that sustain the work of the Government of Tanzania and ranges from basic, low value items, such as, stationery and furniture, to complex, high value spend areas e.g. airport, harbour, railway, road, and bridge construction and expansion projects.

With nearly a month into the 2015/16 fiscal year of the Government; and with more than 50 per cent of public expenditure reportedly going into contracting and procurement of works, goods and services, local and international firms should prepare to bid and sign government contracts for new business opportunities and projects to follow suit in the fiscal year, in respect of which Parliament has already approved the 23-trillion shilling (US$10.6 billion) National Budget.

The development of Tanzania’s public procurement system, currently governed by the Public Procurement Act No. 7 of 2011 (the third national consolidation Act on public procurement), has been commended in some donor-commissioned review reports as a critical means for ensuring good public financial management and achieving value-for-money (VFM) for the taxpayer. President Jakaya Mrisho Kikwete assented to this Act on 13 December 2011, so it’s been in enforce for just about four years.

Confutably, prior to the promulgation of the first national consolidation Act on this subject, the Public Procurement Act No. 3 of 2001, the Tanzanian public procurement system was inadequate, inefficient, ineffective and outdated, as it was based on scattered and fragmented laws and regulations, which lacked an enforceable penalty regime. As a result of this, retired President Ali Hassan Mwinyi’s Government in 1992 commissioned the Public Procurement and Supply Management study, in order to pave the way for public procurement reforms in Tanzania.

The findings of the study, published in the 1996 World Bank Country Procurement Assessment Report (CPAR), pointed to a number of serious weaknesses and proposed drastic reforms to improve the efficiency and effectiveness of public procurement. Some of the proposals in CPAR 1996 were incorporated in the 2001 Act, which intended to align the Tanzanian regulatory framework for public procurement with the United Nations Commission for International Trade Law (UNCITRAL) model, and other international standards and best practice guidelines.

However, CPAR 2003, bringing up-to-date CPAR 1996, identified additional areas for improvement. Many of the key recommendations of CPAR 2003 were also incorporated in what came to be the second national consolidation Act, the Public Procurement Act No. 21 of 2004, which repealed and replaced the 2001 Act. As likewise noted above, in 2011, after further review of Tanzania’s public procurement system following shortcomings therein, the current Public Procurement Act No. 7 of 2011 (hereinafter, “the 2011 Act”) was passed and signed into law, thereby repealing and replacing the 2004 Act.

From 2001 to 2011, what a decade-long journey it’s been through the Tanzanian public procurement system! The achievements of the system, designed and operated in today’s heavily globalized economy that requires countries, individuals and firms to compete, have included far-reaching reforms, some of which are discussed hereinbelow.  

All government procurements (apart from some defined exceptions) must now strictly adhere to the 2011 Act, which, following extensive consultations and debate, has made better provisions for the regulation of procurements of public bodies in Tanzania. This 2011 Act recognized the existence of the Public Procurement Policy Division (PPPD) under the Ministry of Finance and Economic Affairs. Pursuant to the 2011 Act, the PPPD is charged with developing a National Procurement Policy; reviewing procurement policies, regulations, circulars and other related directives; monitoring the implementation of public procurement policies; advising the Central Government, local government authorities, and statutory bodies on matters related to procurement policies; and grooming a cadre of procurement professionals in Tanzania.

Besides that, the 2011 Act empowers the Public Procurement Regulatory Authority (PPRA), the statutory body constituted to regulate the public procurements in Tanzania, to ensure the application of fair, competitive, transparent, non-discriminatory, and VFM procurement standards and practices. The 2011 Act also gives the PPAA original jurisdiction to hear and determine complaints by contractors, suppliers and service providers against a procuring entity.

Compliance with the 2011 Act and, as much as possible, with the standard documentation, guidelines, circulars and directives that the PPRA issues from time to time is required when bidding for government contracts and procurement of public works, goods and services. Therefore, consulting local lawyers who have a deeper understanding and appreciation of the Tanzanian public procurement system to run investors through the nitty-gritty issues is very critical.

But perhaps a key innovation under the 2011 Act is the provision enabling interested local and international firms to submit unsolicited Public Private Partnership (PPP) proposals to procuring entities, which would, in consultation with the PPRA, acknowledge and recognize the intellectual property rights over the PPP project idea. This is a welcome development, as it is expected to build investors’ trust in the Tanzanian investment environment. It should, however, be noted that such proposals would be subjected to a formal competitive tendering process.

While international firms may participate in public tenders for Tanzania government contracts, Section 54(2) of the 2011 Act requires procuring entities to grant a margin of preference for works by Tanzanian contractors or services provided by Tanzanian consultants on condition that this is plainly stated in the tender documents and is done in accordance with the set conditions.

The Government, under Section 5(4) of the 2011 Act, encourages and incentivizes the involvement of international firms in consortia (joint ventures) or subcontracting arrangements with Tanzanian tenderers, in all procurements of an international and national competitive bidding nature. However, where financial resources are entirely provided by a Tanzanian public body, Tanzanian nationals or companies are given exclusivity to tender for works, goods or services of a specified threshold value.

Evidently, this is in compliance with the Government policy on encouraging Tanzanians to buy Tanzanian goods, and helps Tanzanian contractors, suppliers and service providers to access advanced technology and management experiences; and ultimately, improve their competitiveness in the global marketplace  

Some industry experts expected that Tanzania would have acceded to the WTO Agreement on Government Procurement (GPA). Up till now, this has not yet happened, and so, this Agreement does not bind Tanzania. Under Article V of the revised GPA, it is interesting to note that special and preferential treatment for developing countries in the form of transitional measures can be negotiated in the accession process. Why the GPA has not been acceded to by Tanzania is not exactly clear, but its rationale is to open government purchases to international competition and is intended to make public procurement systems more transparent, so that foreign competitors can be assured of fair treatment and equal access to international markets.

All the same, as a signatory to the United Nations Convention against Corruption since 2003, Tanzania has, internationally, pledged its commitment to the zero tolerance of corruption. Complaints of corrupt practices are investigated by the Prevention and Combating of Corruption Bureau, a statutory body set up as a result of the enactment of the Prevention and Combating of Corruption Bureau (PPCB) Act 2007. According to press reports, in October last year, the Finance Minister, during a meeting of the PPRA Workers’ Council, observed that “without the PPRA, the country would suffer a lot in terms of dubious deals that are rampant in public procurement.” The Finance Minister’s observation emphasised that the Government recognizes the negative impact that corrupt practices have on the economy. However, until the potential cost of engaging in corrupt practices is greater than the benefit attained from the engagement, mitigation of bribery and corruption risk in public procurement will remain an arduous struggle.

Recently, in May this year, the PPRA celebrated a decade of existence (2005-2015). Now, as Tanzania evaluates the implementation of its public procurement system within the past ten years, the following issues are very crucial and worthy of being given thought to: Is adherence to the system (and its constituent elements) achieving VFM benefits? What should be done to further improve the system? An honest, open dialogue between stakeholders on these issues is needed, given that it’s improbable that the 2011 Act represents the last bit of the legal and regulatory framework for public procurement in Tanzania. It’s good for the legal and regulatory framework to be stable, but not static: it should regularly adjust as Tanzanian and global circumstances themselves undergo change. 

Be that as it may, ten years on; the fruits of the reforms can be seen from the several foreign trade missions and business delegations that have visited Tanzania in the recent past; and international companies, such as, Symbion Power LLC from the U.S.; Strabag International from Germany; BAM International from The Netherlands; and VINCI/SOGEA SATOM from France; Oryx Energies/TIPER from Switzerland; and China Railway Group that are presently doing business with the Tanzanian Government and undertaking public projects. Moreover, as Tanzania continues to modernise its public procurement system the number of international firms tracking developments closely and keen to participate in tender opportunities and ink government contracts will increase.

Overall, public procurement has become a major part of the Tanzanian economy and public spending. The technical and financial assistance efforts of the World Bank, the United Nations Development Programme, the African Development Bank, the Delegation of the European Union, the UK’s Department for International Development, the Belgian Development Agency, and other development partners; as well as, the enthusiasm of the Government of Tanzania to reform the country’s public procurement system are laudable.

Through the power of its public procurement budget, Tanzania could develop more attractive incentives to draw on the creative and innovative capabilities of local and international firms, which significantly contribute to economic growth and job creation in Tanzania. Public procurement is an important source of demand for these firms across the range of industry sectors, that's why continuously appraising the efficiency and effectiveness of Tanzania’s public procurement system and improving it by removing barriers should be a key priority for current and future government leaders.

Paul Kibuuka is the Managing Partner of Isidora & Company Advocates. Email: paul.kibuuka@isidoralaw.co.tz Twitter: @isidoralaw

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