STAKEHOLDER MANAGEMENT IN PROCUREMENT OF INFRASTRUCTURE PROJECTS (A CASE OF UGANDA NATIONAL ROADS AUTHORITY)

1. STAKEHOLDER MANAGEMENT IN PROCUREMENT OF INFRASTRUCTURE PROJECTS(A CASE OF UGANDA NATIONAL ROADS AUTHORITY) By Eng. Ayalew K. Belew B.SC, C.Eng.,M.Sc Con. Mgmt,MECA Ag. Director of Procurement and Procurement Consultant Uganda National Roads Authority 22 February 2014

2. CONTENT • INTRODUCTION • ROLES AND RESPONSIBILITIES • INNOVATIVE WAYS TO EXPEDITE PROCUREMENTS • COLLABORATIVE STARTEGIES & FUNCTIONAL TEAMS • MANAGING CONFLICTS AND SOLUTIONS

3. INTRODUCTION Definition- INFRASTRUCTURE • The basic physical systems of a business or nation. Transportation, communication, sewage, water and electric systems are all examples of infrastructure. These systems tend to be high-cost investments, however, they are vital to a country's economic development and prosperity. Infrastructure projects may be funded publicly, privately or through public-private partnerships. http://www.investopedia.com

4. Definition - Stakeholder “Person or organization (e.g., customer, sponsor, performing organization, or the public) that is actively involved in the procurement, or whose interests may be positively or negatively affected by execution or completion of the project. A stakeholder may also exert influence over the project and its deliverables.”

5. Uganda national Roads Authority Establishment of UNRA • UNRA was established by an Act of Parliament; The UNRA Act, No.15 of 2006. • UNRA became operational on 1st July 2008. • UNRA’s Mandate is to: • Develop and maintain the national roads network of about 20,000km, managing ferries linking the national roads network and controlling axle overloading. • To render advisory services to Government and for related matters concerning National Roads Network, among others. 

6. Procurement organization UNRA’s Procurement Organization • In July 2008, PDU was a Department under Directorate of Finance and Administration headed by a manager with three procurement officers. • As of March 2011, PDU has bcome a Directorate headed by a Director who reports to the Executive Director. • The Directorate has two Departments; Engineering Procurement Department (Works and Services) and Goods and Supplies Department. • Each Department is headed by its own Manager • The Engineering Procurement Department is staffed with Engineers and the Goods and Supplies with logistics and procurement professionals.

7. Diversity of infrastructure Stakeholders External stake holders: • Solicitor General • PPDA • Road Fund • MoFPED • Development Partners/Funders • Contractors/consultants/Providers • PAC (Parliament) • Auditor General • IGG • State House • OPM • MoWT • CID • Civil Societies/Anti Corruption Activists • General public, Media Internal stakeholders: • User Departments • Contracts committee • Accounting officer • Procurement Department • Evaluation team • Board • Negotiation Team

8. Peculiarity of infrastructure procurement • The Technical and complex of the Civil works sector. • Urgent as it is an input to poverty reduction and rapid development. • A project setting(time, cost, quality bound) • Multi-stakeholder • Multi-year (spanning over a number of financial years) • Involves a number of multilateral and bilateral Donors-Various procurement procedures and guidelines • It requires high level of professionalism and dedication.

9. Peculiarity of infrastructure procurement • Variations and changes are the rule than exception due to ground and environmental variability. • Capital and risk intensive which requires specific and innovative best practice procurement and contracting strategies and approaches.

10. Roles & responsibilities of stakeholders in the procurement management 1. 1. BOARD/MINISTRY OF FINANCE • Boards /Councils and MoFPED are responsible for the approval of the procurement plan and budget. • Challenges Underfunding • The underfunding results in the cancellation of procurements at advanced stage • Delays in the finalization of procurements waiting for funding. • By this time prices escalate and Government pays extra charges. •  Delays in service delivery to the public

11. 2. accounting officer • Accounting Officer- Accounting Officer" means the Accounting Officer of a procuring and disposing entity so appointed by the Secretary to the Treasury, and for the avoidance of doubt includes the Accounting Officer of a Local Government or a statutory body. • PPDA Act 26, states that, The Accounting Officer of a procuring and disposing entity shall have overall responsibility for the execution of the procurement and disposal process in the procuring and disposing entity, and in particular, shall be responsible for- • (a) establishing a Contracts Committee • (b) appointing the members of a Contracts Committee • (c) causing to be established a Procurement and Disposal Unit staffed at an appropriate level • (d) advertising bid opportunities

12. Roles & responsibilities of accounting officer COMNT’D • (e) communicating award decisions • (f) certifying the availability of funds to support the procurement or disposal activities; • (g) signing contracts • (h) investigating complaints by providers • (i) submitting a copy of any complaints and reports of the findings to the Authority • (j) ensuring that the implementation of the awarded contract is in accordance with the terms and conditions of the award. CHALLENGES • Less empowered to impact the procurement process. • Ambiguous role such as is responsible for the overall procurement process the activities specifically defined to do are small

13. 3. user department • PPDA Act 35 stipulates the functions of the User Department and these includes; • (a) initiate procurement and disposal requirements; • (b) recommend Statements of Requirements to the Procurement and Disposal Unit;(c) undertake conformity assessments; • (d) propose technical specifications to the Procurement and Disposal Unit when necessary; • (e) input with technical evaluation of Bids received as required by the Procurement and Disposal Unit; • (f) issue change orders in accordance with the terms and conditions of the contract; and • (g) certify invoices for payments to providers. • Challenges; • Late initiation of procurement • Poor specifications/inaccurate specifications- Variations/extension of time • Lack of interest in the procurement process • Reliance on extension of contracts • Tendency of conflict of interest

14. 4. evaluation committee • Evaluation Committee (Adhoc) is responsible for evaluation of bids. According to PPDA Act 37, all evaluations shall be conducted by an Evaluation Committee, which shall report to the Procurement and Disposal Unit and the number of the members of the Evaluation Committee shall depend on the value and complexity of the procurement requirement, but shall in all cases be a minimum of three members. • CHALLENGES. i. Distorted Evaluation System • The two pillars of public procurement are ensuring value for money to Government and fairness/transparency to bidders • A 100% perfect bid is what may guarantee both value for money and fairness at the same time. • However, a 100% perfect bid is practically impossible. • This suggests that we have to reject every bid with a deviation so that we can be fair to other bidders. • However, if we reject every bidder for any deviation, we are losing competition and value for money to Government

15. Challenges Cont’d Hence, we are not meeting one of the two cardinal objectives of public procurement, i.e., value for money. • If we accept every deviation by rectifying the deviation, then we are affecting the competitive position of other bidders; hence, not meeting the other cardinal objective, fairness. • Therefore, we should always optimize/strike a balance between the two cardinal objectives, i.e., value for money and fairness. • That is why best practice and public procurement laws stipulate that non-material deviations should be accepted. • And they also stipulate the three fundamental parameters to determine non-material deviation.

16. Challenges Cont’d • A non-material deviation is one that does not in any substantial way (i) Affects the right of the employer (ii) Quality of the product (iii) Competitive position of other bidders. • There is no mathematical formula for materiality • It is the professional who determines materiality • Does every deviation affect the competitive position of other bidders? NO. Deviation shall be Quantified to see if it affects the financial comparison of bidders.

17. 5. PROCUREMENT $DISPOSAL UNIT • The core activity of PDU is to manage the procurement process for all the procurements. The PPDA Act (Sections 31& 32), the functions and powers of the PDU are summarized below: • Plan and manage all the procurement and disposal activities of the PDE • Implement the decisions of the CC • Support the functioning of the Contracts Committee • and liaise directly with the Authority on matters within in jurisdiction and ensure compliance with the PPDA Act

18. Challenges i.Understaffing • The national roads network has doubled in size from the time UNRA became operational (10,000 km to 21,000 km). • The human resources level has remained the same because of the fixed wage bill cap. • This is affecting the management and supervision capacity of UNRA necessary to ensure that the projects are delivered within time, quality and budget. • The understaffing has resulted in delays in the procurement process particularly in bid evaluations.

19. Challenges CONNT’D ii. Procurement Workload • UNRA Plans 300-400 procurements a year containing all categories of procurement of Supplies, Services and Works. • The estimated value of the planned procurement is UGX 1.2 trillion per year. • The average value of contracts signed was UGX 515.6 billion per year in the past four years • Majority of the procurements are technical and complex in nature. • The currently 14 staff of PDU are highly overloaded. • On average a procurement officer handles over 25 procurements and contract amendments.

20. 6. Contracts committee • As per PPDA Act 29. A Contracts Committee is responsible for the authorize following; • the choice of a procurement and disposal procedure • solicitation documents before issue • technical, financial or combined evaluation reports; • contract documentation in line with the authorized Evaluation Report; and • any amendment to an awarded contract; • recommend for the delegation of a procurement or disposal function by the Accounting Officer whenever the necessity arises; and • award contracts in accordance with applicable procurement or disposal procedures as the case may be.

21. CHALLENGE • CHALLENGES • Unbalanced Power Distribution among the procurement parties-Power Concentration on the Contracts Committee. • The powers of the Contracts committee should be reduced and be rationally distributed to the other parties like User Department, Accounting Officer and Procurement and Disposal Unit • The Power to make decisions should be reallocated to each party with the corresponding accountability. • This reduces delay and increases efficiency and accountability at all levels.

22. 7. DEVELOPMENT PARTNERS • Development Partners aim at promoting cheap, efficient and reliable road transport services with the specific objectives of: • Providing a national road network capable of meeting the present and future traffic demands while harmoniously integrating road safety and environmental protection requirements; • Establishing and developing a strong road administration for effective and efficient management of the national road network and; • Enhancing and developing the local construction industry.

23. challenges i. Need to comply to both PPDA and Donor Rules (Stakeholders); • For projects that are funded by the donors their respective financing agreements with the Government require that their procurement guidelines should be used. • Article 4 of the PPDA Act (2003) requires that the PPDA procedures are also applicable unless there is a conflict between the PPDA and Donor’s procedures. • This duplicates the procurement effort as almost all the steps in the two procedures should be used at a time. • This has created a lot of delay and confusion in the procurement process especially when the procedures contradict each other. • The donor gives its approval declaring that it is in line with its rules. PPDA rejects it saying that it does not meet the PPDA rules. • Whose decision shall be implemented. The Donor or PPDA? Or the work should be abandoned? ii. Delays at getting No-objection from Development partners.

24. 8. SOLICITOR GENERAL • It is a statutory requirement that solicitor general clears contracts above 50 million Uganda shillings. CHALLENGES • Delays of approvals of deviations and Clearnces • There are no statutory timelines forcing SG to respond within a certain specified time. • Taking UNRA’s submissions for clearance in 2012/13, the minimum, maximum and average clearance durations in days are 3, 333 and 24 respectively. • The comments and requirements are not consistent and they vary from person to person. • Unclear role-SG questioning procurement need, Value for money, evaluation process which should have been the mandates and powers of the PDES

25. 9. PPDA • It is also a requirement that PPDA grants deviations to procurement methods/procurement process ,amendments and variations to the existing contracts. • Taking the submissions made to PPDA in 2012/13, the minimum, maximum and average approval durations in days are 3, 183 and 33 respectively. • CHALLENGES i. Procurement Delays • Currently open bidding for works and services may take up to 9-15 months including Government and Donor approvals. • Open bidding through Expression of Interest/Prequalification for works and services may take up to 15-24 months including Government and Donor approvals • This time is unacceptable in any best practice

26. CHALLENGES CONT’D ii. Rejection of approvals for retrospective grounds • PPDA and SG do not consider the issue of retrospective approval on a case by case basis. • There are instances where retrospective approvals may be needed due to the nature of the business. • Donor guidelines acknowledge retrospective decisions on a case by case basis. •  Rejection of submissions for retrospective grounds before evaluating the circumstances in which the delay has occurred is not appropriate. • E.g. A contract is due to expire this evening at 24:00. A heavy rain has occurred at 23:59 and damaged part of the constructed road. • If the contractor didn't sleep by that time, he will start to assess the level of the damage and make a claim/addendum request to the Engineer. • The Engineer assesses the validity of the claim/addendum and sends it to the Contract Management.

27. CHALLENGES CONT’D • The Contract Manager reviews it and makes a submission to PDU. • PDU reviews it and makes a submission to Contracts Committee. • The Contracts committee approves it and sends it sent to PPDA/SG. • All these should have been done by the remaining one minute before the contract expired at 24:00. • As this is humanly impossible, the contract has already expired when the claim/addendum reached PPDA/SG. • PPDA/SG will declare that it was retrospective and reject the addendum. A fact of life.

28. CHALLENGES CONT’D iii. Prescriptive nature of the PPDA Act and Regulations • The PPDA Act and Regulation provides no room for the procurement professional to think outside the box. • A lot of details and guidance notes which should have been included in manuals and guidelines are included in the Act and Regulations • This gives little room for flexibility and adaptations as the Act and Regulations are issued by parliament. • The law should only give a framework. • Other details and guidance notes should be included in a procurement manual which does have less legal priority and can be modified or adapted easily.

29. 10. Special interest group-auditors/overseeing bodies. • Procurement of works/goods and services by infrastructure public entities is considered to be a very high risk area because huge or substantial amounts of money –Sometimes over 80% of the entity budget. • Procurement audit, enables management to assess the extent to which goals and objectives of the procurement department are balanced with its resources. CHALLENGES • UNRA is faced with Multiple and Over lapping Audits/Investigations. Major statutory, administrative and overseeing bodies investigate,

30. This include; • Auditor General(AG) • Criminal Investigation Department (CID) • Inspector General of Government(IGG) • Public Procurement and Disposal of Public Assets Authority (PPDA) • State House • Parliament (PAC, Infrastructure Committee) • Road Fund • MoFPED • Development Partners’ Integrity Departments • Anti corruption Forums & Initiatives • Media • General Public

31. Challenges • The audits are usually concurrent and a number of audits on one thing. • Up to five auditing institutions at a time. • Sometimes procurement files are dismantled due to repetitive handling. • Roads are dug repeatedly. • These concurrent audits, coupled with the understaffing of UNRA, are consuming a lot of professional time and inputs • The professional inputs should have been saved to manage and supervise other procurement and contract management activities. • One does not rely on the other’s findings. Duplicating effort. For instance, PPDA is a specialist in procurement compliance auditing, OG is specialized in Value for Money Audits. Why do we duplicate effort? • The audits are based on procedures than impact

32. 11. providers/contractors • Consultants/contractors have a big stake in the procurement management of infrastructure projects. Well Qualified with experience and financial capability is a major influence in the performance and execution of infrastructure projects. • Consultants participate in preliminary designs, feasibility studies, detailed designs, institutional reforms and capacity building. • During construction, the role of consultant is to administer the contract as described in the “Contract Documents” with no temporal or other restrictions on the provision of its services. • Involving the consultant at an early stage of the construction project is often beneficial for the employer. • A contractor is assigned to a construction project once the design has been completed or in progress or at the beginning of the project if it is a design and build contract.

33. Challenges i. Lack of Capacity of the domestic construction industry • The local contractors do not have sufficient personnel, equipment, technical and managerial capability • The participation of domestic contractors on road upgrading rehabilitation and reconstruction works remained limited. • Even in the road maintenance operations, where the domestic contractors participate fully, the performance of the domestic contractors remained unsatisfactory due to limited technical, managerial, financial and skilled manpower capacity. • The awarded contracts are delayed and many times abandoned before completion. • This has made the Government to rely on foreign contractors • It has also resulted in losses of additional money due to inflation from delayed completions.

34. challenges ii. Unmanaged relationship between PDEs and Providers • There is no partnership and symbiotic relationship between providers and the PDES. • The relationships are mainly tense and adversarial. •  Providers work to discredit and dismantle PDES. • Because of this, work is not flowing out from PDES regularly. • Due to this, the providers are dying out there for lack of continued business. • Government programs are delayed • Both PDEs and Providers are the losers.

35. challenges iii. Get that Contract or Kill it Attitude • Those bidders who are not Best Evaluated, first pledge complaints and administrative review applications • Even after appropriate responses were given, they go ahead to maliciously allege the process for irregularities and fraud • They allege the Best Evaluated Bidder for incompetence • The intention is to frustrate the process, stop the tender and get it cancelled. • By this, they kill the tender so that it does not become any one’s as it was not theirs.

36. challenges iv. Anonymous Allegation • Losing Bidders they first try to reinstate themselves through Complaints and Administrative Reviews • If not they go anonymous and whistle blow to overseeing bodies and the media. • Although ultimately the allegation might be found baseless and rejected, those who made the false allegation and sabotaged Government Programs remain unpunished. • This is also tarnishing the image and trust on the PDEs.

37. challenges v. Lack of Confidentaility • The providers through unethical staffs of PDEs obtain information that is premature for public consumption or a confidential business matter. • After getting the confidential information, the providers and their collaborators, pledge untimely complaints and allegations • They intervene/frustrate the decision making process of the PDE. • There are no strong procedures to prevent the internal staff from leaking confidential information and discipline them when they are found culprits. • There is confusion between the obligation to maintain confidentiality in the procurement process and the right to whistle blow.

38. challenges vi. Poor performing providers • Consultants produce incomplete designs which increase variations and changes during implementation • Providers do not finish the contracts within the agreed times. • This exposes projects for additional inflations • It results in loss of economic benefits which should have been obtained if the projects were completed in time. • Termination of these contracts is also costly in that it requires time for re-tendering. • Settlement of disputes and litigations to wind up terminated contracts also takes its own time and cost.

39. challenges vii. Unethical practices by providers • Providers forge bid/performance/advance securities • They inflate experience and financial figures in a bid to win contracts. • These unethical practices are limiting the participation of the providers • The practice is consuming procurement times in order to verify and scrutiny the authenticity of the submissions.

40. INNOVATIVE WAYS TO EXPEDITE PROCUREMENTS 1.INDEPENDENT PARALLEL BID EVALUATION (IPBE) • UNRA’s procurement process was marred by compaints and administrative reviews. • UNRA established an off-shore bid evaluation system • The objective is to increase public and stakeholder confidence on UNRA’s bid evaluation process and ensure value for money. • The IPBE evaluates bids in paralel to the in-house evaluation comittee • The IPBE is an advisor to the contracts committee • The Contracts Committee uses the IPBE bid evaluation report as a reference to adjudicate the in-house evaluation. • Over 95% of the time the in-house and IPBE evaluations are in agreement • Independent Parallel Bid Evaluation system is a good innovation to expedite the procurements .This provides confidence on the quality of UNRA’s bid evaluation.

41. 2. Preparation of an accredited Procurement Procedures for the national road sector • There were repeated complaints from Government and the public that the road sector did not ensure value for money for Government. • It was realized that the national road sector needed an accredited alternative procurement procedure/system which addresses organizational and sector specific issues. • This is to assist the sector to ensure Value for Money for Government and Fairness and Transparency to the Bidders. • The accredited alternative procurement procedure/system will take into account international best practices. • The alternative procurement procedure/system will be implemented after accreditation by PPDA in accordance with Regulation 342 of the PPDA Regulations (2003).

42. Preparation of an accredited Procurement Procedures for the national road sector CONT’D • A consultant has been engaged to “Review UNRA’s Procurement Procedures for Works and Services” which commenced on 1 March 2012 and will run for 3 years. •  The consultant is currently finalizing the alternative Procurement Procedures/System for UNRA, and will assist UNRA in applying for accreditation of the alternative procurement procedures/system by PPDA. • The project also includes comprehensive training program for UNRA staff in procurement best practices, and in the application of the accredited alternative Procurement Procedures/System. • The system being established includes a real-time performance measurement for bid evaluation. The system includes a contractor classification system.

43. 3. E-procurement; • E-Procurement system has been procured and the Service commenced on 4th February 2013. • The system is a web-based system • It will automate the procurement process. • The system focuses on helping UNRA to provide cost savings, better responsiveness, increased efficiency, compliance tracking and flexible cost control solution. • The service is at system design stage. • It is expected that the E-procurement system will be finalized in June 2014.

44. 4. Construction Sector Transparency (COST) Initiative • COST is a governance initiative that employs a multi-stakeholder approach to improve transparency in the construction sector. • It involves government procuring entities and oversight agencies, private sector consultants and contractors, and civil society groups working together. • It encourages, demand and pressure for transparency by bringing together interested stakeholders from the public, private, and civil society sectors. • The ultimate result is a new governance and accountability mechanism that builds on existing government institutions, regulations. • COST uses the disclosure of key non-sensitive information to improve transparency and complement other oversight bodies. • The relevance and local importance of the infrastructure is to generate public demand for better management and delivery. •  COST was successfully piloted in eight countries between 2008 and 2011 with funding from the UK Department for International Development and support from the World Bank. • The COST programme is currently being scaled up and UNRA has applied for participation.

45. 5.Integrated Online Contracts Management System • Information management is a crucial function in UNRA • It supports timely decision making, planning and reporting as well as monitoring and evaluation. • UNRA was unable to effectively utilize all the data and information collected relating projects/contracts • This was due to the lack of Management Information System that collate this useful data into actionable information. • The establishment of an Integrated Contract Management Information System is intended to achieve the following major goals: - • Effective Project/Contract Document Management • Easy Program Monitoring • Easy Project life cycle Monitoring/Tracking • Systems Integration • Performance Accountability

46. 6. Procurement planning and Weekly Procurement progress follow-up • Integration of the budgeting and procurement planning tools helps to avoid including a procurement item in the plan when there is no budget. • Each procurement officer reports the status of each procurement weekly. The follow-up sheet includes the procurement plan for live update of the procurement plan .

47. 7. Innovative procurement delivery strategies • Design and Build • Design-Build-Operate • Design-Build-Operate-Maintain

48. 8. Build capacity of local professionals and contractors • Junior experts are employed to work under senior professionals(Junior Bridge, Materials, Highways Engineers to be employed under their respective seniors) • Encouraging Joint ventures between foreign and local contractors

49. COLLABORATIVE STARTEGIES & FUNCTIONAL TEAMS • Collaborative strategies involves staff working together. • All the stakeholders shall collaborate for a common goal •  Establish PDE Provider-forum- where formative issues are shared for continuous improvement between the entity and the contractors/providers.

50. FUNCTIONAL TEAMS • Establish feedback mechanisms from the procurement process to future specifications, bidding documents • Out source Evaluations. • One-to-one coaching to fine-tune skills. • Collaborative meetings in PDU to share challenges and way forward • Open communication system • Engaging the procurement team into out door activities.