EXPERIENCE OF THE PUBLIC SECTOR WITH REGARD TO PERFORMANCE OF SUPPLIERS

1. EXPERIENCE OF THE PUBLIC SECTOR WITH REGARD TO PERFORMANCE OF SUPPLIERS PRESENTATION TO 4th EAST AFRICAN PUBLIC PROCUREMENT FORUM – KIGALI 16th NOVEMBER 2011 GODFREY LUTIMBA MATOVUMANAGER PROCUREMENT UGANDA CIVIL AVIATION AUTHORITY

2. STRUCTURE OF PRESENTATION • Brief on Civil Aviation Authority • Public Sector Procurement • Public Sector Expectations • Public Sector Supplier Performance • Challenges faced with Providers • Recommendations • Comments/Questions

3. Brief on Uganda Civil Aviation Authority • Civil Aviation Authority (CAA) is a government statutory entity responsible for the promotion of the safe, secure and efficient development of Civil Aviation inside and outside Uganda. • Civil Aviation Authority (CAA) was established under the CAA statute No 3 of 1994. • The Civil Aviation Authority operates Entebbe International Airport and 13 domestic airports, five of which are designated as entry and exit points to boost tourism and regional trade across the borders.

4. DEFINITION OF PUBLIC SECTOR (PPDA ACT 2003) • DEPARTMENT OF THE CENTRAL GOVERNMENT • LOCAL GOVERNMENT • STATUTORY BODIES • ANY OTHER BODY OR UNIT ESTABLISHED AND MANDATED BY GOU TO CARRY OUT PUBLIC FUNCTIONS

5. In Uganda, public sector procurement by law must follow the procedures laid down in the PPDA Act & Regulations and guidelines. Aimed at: • Transparency and Accountability - to fight waste and corruption • Fairness/ Equal opportunity for all in the bidding process • Maximising competition to satisfy customer needs and ensure value for money • There has been persistent claims that this law (PPDA) causes delays in the public sector procurement, however the law is being amended to improve on performance of entities.

6. Public Sector Expectations The public expectation is only one: Delivery of Works, Goods and Services on: • Time • Good Quality • Within reasonable cost • Transparency This is a big challenge in Uganda. The perception about public sector suppliers and providers is the opposite.

7. Public Sector Performance Ask yourself these questions • How well does your supplier satisfy your needs? • Does the performance align with the organisation’s strategy, goal and direction? • Do you have problems due supplier performance? The answers above are largely negative for public sector suppliers & Contractors in Uganda.

8. Headline News In Uganda about Suppliers & Contractors • Blame game as Govt looses billions to ghost Indian firm in Bike Deal - Thursday, 22 September 2011 • Army Buys Undersize Uniforms-Yet Again! - 5 May 2002. • Tonnes of Expired Drugs Litter Mbale – 23 October 2011. • Auditor Names 50 Most Expensive But Poor Quality Road Works - 10 October 2010

9. PERFORMANCE OF SUPPLIERS • Price - We do not get the best price. Suppliers & Contractors tend to charge more than they do the private sector and rarely offer bulk discounts or other favourable terms. In Uganda, constructing a Km of road costs US$800,000 which is far too high.

10. Delivery - suppliers are not punctual. Supplies do not arrive on time. Delivery of poor quality goods and works is also widespread. Fake Goods Invade Local Markets 8 May 20010 • Lack Capacity – There is no enough capacity resulting in most tenders going to foreign based suppliers. • Innovation - suppliers rarely inform us of new products and services that might help improve our business processes. Lack of long term relationships is failing the development of innovations and consistency and the therefore Value for money Generally, the public sector does not get the best deal resulting in public outcry.

11. Environment and Safety: Very little consideration is made by suppliers resulting in some dangerous goods being delivered. • Corruption: Supplier induced bribes are a major determinant of public procurement corruption in Uganda. • Difficult Providers: Some contractors persistently perform poor works and deliver poor quality goods. In Uganda these are many and most have high level contacts making terminating their contracts extremely difficult.

12. Challenges Faced by Providers They include; • High cost of doing business • Late or Delayed payments • Low capacity of the private sector • Corruption • Other related challenges.

13. High Cost of doing business • The credit worthiness of most suppliers is not guaranteed. Banks to issue letters of credit, bid bonds and other guarantees for compliance with tenders, suppliers must deposit money in cash. • Fixed price Contracts. However the price fluctuations in the economy due to the uncertain dollar rate is hindering effective delivery of products and services in Public Procurement. • High interest rates (e.g. 18% – 30%) appear to be a hindrance for national suppliers to access credit.

14. Late or delayed payments • Government entities take long to pay for goods and works delivered. With constant price fluctuations some providers end up making loses and being impoverished.

15. Low Capacity of the private sector • Most Providers can hardly understand bid documents and consequently they are non responsive. • Suppliers who would like to participate in public procurement find the procurement procedures irrational and cumbersome. • They are sometimes excluded when the procurement is too big and they are apprehensive of unfamiliar procedures. They are not well informed of how the procurement process functions.

16. Corruption • Corruption is part and parcel of the community we live in, it is estimated that corruption accounts for 25% of Africa’s GDP and results in higher prices. If we do not control prices the service level will drop

17. There is evidence of malpractice by providers; Sometimes invoices, receipts and other documents are faked. • In other instances procurement documents are “chased” by suppliers pushing them through the process in person. The assumption is that “chasing” will not be successful without bribes, commonly known as the “kitu kidogo”. • Over invoicing in imports and local procurement is a common practice by providers.

18. Other Challenges • Open bidding is not favourable to the private sector especially companies that are powerful. • The presence of counterfeit products on the market demoralises the abilities of companies that can supply authentic products, since companies with counterfeit products quote very low prices and hence become competitive. • Long time lags and delays on the part of government to pay suppliers are some of the causes for over-invoicing.

19. Success StoriesNew VVIP Terminal at Entebbe

21. New ATC Radar at Entebbe

22. RECOMMENDATIONS • The need to build capacity for the private sector coupled with enforcement of rules. • All gov’t contracts should have compensation clause for delayed payments. • Private sector and public Sector should work together as partners and establish long term relationships for mutual benefit and achieving value for money. • Enabling Public procurement legislation should be put in place to achieve the above.

23. If the private and public sector doesn't work together, we will sink together.

24. THANK YOU VERY MUCH QUESTIONS AND COMMENTS