Public Procurement I

MAKERERE INSTITUTE FOR SOCIAL DEVELOPMENT
DEPARTMENT OF BUSINESS STUDIES
PROGRAMME: DIPLOMA IN PURCHASING AND SUPPLY CHAIN

MANAGEMENT
YEAR II , SEMESTER I
COURSE UNIT: INTRODUCTION TO PUBLIC PROCUREMENT
COURSE CODE: DPS 2110
BY: HAYENJE REBECCA
Tel: 0712-087664 /0794-741027/0787-440128
Email; rhayenje@gmail.com & rebeccaheyenje@yahoo.com
CHAPTER ONE
INTRODUCTION TO PUBLIC PROCUREMENT
The government initiated reforms in public procurement and disposal sector in 1997 following
the enactment of 1995 constitution and introduction of several reforms and structural adjustment
program (SAP) prior to finance (tender board) regulation under the public act in 1994.
The system was centralized and had been in operation for over 30years. The size of the
government had grown considerably and centralized procurement system under the Central
Tender Board (CTB) was characterized by several short comings which included inability to
cope with government procurement requirements, corruption, lack of accountability and
transparency and insensitivity to urgency. Therefore the reforms were initiated against lack of
accountability and transparency and absence of cultural value for money.
Ms. Hayenje Rebecca Page 1

In the light of the above, in 1995 the government through the ministry of finance, private sector
and donor community led by the World Bank set up a task force to handle procurement. Its
mandate was needed in the procurement system. The task force carried out research and
submitted its report in March 1999.
It’s reported that then procurement system suffered from various forms of malpractice and non-
ethical behavior. It saw the need for a new legal frame work that would decentralize the
procurement responsibility to each procuring and disposing entity while defining the
procurement procedures to be followed giving reference to competitive bidding.
Finally the old central tender board was disbanded or abolished on the 25 th Feb 2001 and it was
replaced by the PPDA act. The law is now in operation and all government owned bodies are
obliged to follow the law. The law emphasizes on the best practices including procurement and
disposal principles, rules, contract administration and disciplinary action against public officers
who commit malpractice.
The new procurement regain in Uganda is reflected in the Public Procurement and Disposal of
public Assets Act 2003. It has led to highly efficient and transparent procurement in local
government by giving the basic procurement process from procurement planning to contract
management.
REGULATION OF PUBLIC PROCUREMENT BEFORE THE PPDA ACT 2003
(a) The Central Tender Board (CTB) was the main overseer of the public procurement
process in Uganda. The CTB derived its authority from the Tender Board Regulations of
1977 established under the Public Finance Act. Cap. 149. The Central Tender Board was
established to regulate and control:
 The purchase or sale of government stores and equipment; and
 The award of government contracts for goods` services or works.
It approved purchases submitted to it by procuring entities. Such procurements were for goods,
works and services above the threshold of Shillings 1 million for goods and Shillings 2 million
for works and services.
(b) The Government Central Purchasing Corporation (GCPC) was set up by Statute No.
3 of 1990. The objectives of the GCPC were to procure government goods and services
at the fairest prices, to ensure government gets value for money and to carry out the
procurement functions expeditiously. It acquired goods, supplied them to government
departments and advised government on procurement policy and practices.
(c) The Swiss Procurement Company (SWIPCO), a private contractor, performed the
following functions under Contract with the Ministry of Finance:
 Advised the CTB to ensure that the professional capacity of the Board is strengthened
and extended;

 Assisted procuring entities in preparing tender documents, performing evaluations,
drafting contracts and supervising contract performance; and
 Provided training on procurement to staff at different levels of government.
(d) Local governments – the district administration also engaged in public procurement
through the District Tender Boards. The local governments Financial and Accounting
Regulations 1998, which derived from the Local Government Act 1997, regulated these.
Goods and services in districts are procured through these Tender Boards.
(e) The Police Tender Board was created by The Police Statute No. 3 of 1994 for procuring
goods works and services for the police force. Procurements conducted through the
Police Tender Board did not have to go through the Central Tender Board.
(f) The Military Tender Board was created by the NRA Statute No. 3 of 1992 to cover
supplies for the Army. Procurements conducted through the Military Tender Board did
not have to go through the Central Tender Board.
Weaknesses:
Despite its implicit strengths, the old system also had a number of weaknesses.
 The Central Tender Board, which oversaw the procurement process in the country, had a
set of disparate, (in the sense that the District Governments were not covered) and
outdated procurement regulations and procedures.
 The responsibility for procurement was inconsistent among various procuring entities
within the system.
 The government system operated through cash budgets that, because of a lack of coherent
management attention to problems caused by this in the procurement area, made it an
unreliable business partner. These problems were compounded by impoverished
management practices in the procurement sub-system both at the central and district
administrations.
 Bureaucratic delays and lack of institutional co-ordination characterized the current

procurement system in the country.
 Malpractice and unethical conduct also saddled the system. There was a high incidence
of vested interests, interference and insider dealings. There were occasional cases of
retroactive approvals of contract awards.
 Procurement knowledge and expertise at policy and operational levels were inadequate.
This implies that the personnel involved were severely handicapped concerning the
requisite procurement skills. Analysis had also revealed that apart from World Bank
documents, the procurement system in the country lacked standard documents for use in
specific contract situations.

 The lack of focus in the existing regulations and guidelines were giving rise to decisions,
which were devoid of objectivity, accountability and transparency and resulted in a high
incidence of corruption and high expenditure.
 . Against this weak background, donors began to exert pressure on the Government to put
in place the appropriate remedies.
In response, the Government created in May 1998 a twelve-man Task Force on Public
Procurement Reforms comprising the private sector represented by Procurement and Logistics
Management Association (PALMA) and the donor community by the World Bank and headed
by Mr. Kalanguka-Kayondho. The Task Force was given comprehensive Terms of Reference
and was meant to report to the Ministry of Finance, Planning and Economic Development within
six months i.e., February 1999.
Recommendations by the task force
The accounting officer should be directly responsible for the procurement function under his or
her department i.e. from the identification of the need to the award of contract to the best
evaluated bidder and also review the decision.
The role of the central tender board (CTB) should remain regulatory thus setting standards,
monitor compliance review procurement decision, audit and investigate complaints by the
contracting department and built capacity in procuring entity.
Procurement and disposal function should be decentralized to each government entity under the
respective accounting officer.
The contracts committee should be setup in all entities to adjudicate and award tenders.
Procurement and disposal unit started for the procurement professional should be established
under each respective Procuring and Disposing Entity (PDE) to manage the procurement and
disposal function.
Government should setup an independent regulatory authority to set standard, advice

government, monitor compliance and regulate public procurement and disposal of public assets
in Uganda.
Importance of public procurement

 Procurement is a high part of the government budget i.e. about 70% of the government
spending in Uganda.
 Government initiative i.e. the old procurement system wasn’t able to deal with the
imaging terms of number of transactions.
 The donors and other stake holders’ pressure i.e. there are various stake holders in the
procurement process who should ensure clients’ compliance with the regulatory regime.
 Poverty alleviation measures
Objectives of public procurement reforms
 To promote economy and efficiency in procurement i.e. creating value for money.
 To ensure that public procurement is conducted in a fair and non- discriminating manner.
 To contribute towards the creation of a sound business climate in Uganda
 To enhance the decentralization policy
 To give entities the power to plan and execute their own programs
 To increase efficacy and effectiveness resulting from the value for money procurement
and disposals
Definitions of purchasing and procurement
Purchasing is obtaining goods and services which are necessary for running and maintaining
goods and services and managing the companies’ primary support activities at the most favorable
conditions. This defines the objectives of purchasing as to buy materials of the right quality in
the right quantity from the right source delivered to the right place at the right time at the right
place.
Procurement on the other hand is a wider term than purchasing which implies the acquisition of
goods and services in return for a monetary or equivalent payment. Procurement however is the
process of obtaining goods or services in any way including borrowing or even force to meet an
identified need.
Public sector and Public sector Procurement
The category in which an organization falls is very significant in designing procurement

approaches. In fact to some people the distinction between public and private sectors creates two

different worlds, which require completely different approaches to purchasing and supply
management.
Private sector organizations are owned by private individuals, whether it is a small family
business, or a medium enterprise or a large multinational company. Public sector organizations
are generally owned by the public, although in recent years increasing parts of public sector
organizations have moved into the private sector (through privatization), they include; central
government ministries, local government, autonomous and semi-autonomous bodies like
Universities/colleges/schools, hospitals and other statutory bodies.
Globally all nations have a combination of both public and private, and non-profit making
organizations. However, the relative size of each sector in a particular country depends on the
nature of its economy.
Differences between Public sector private sector procurement
Area of difference Private sector Public sector
Objectives Usually to increase profit Usually to delivery to provide

services to citizens
Responsibility Buyers are responsible to Buyers are responsible

directors who in turn are ultimately to the general
responsible to shareholders. public.
Legal restrictions Activities are regulated by Most of these equally apply to

company law, product liability public sector but additional
law, etc regulations are present too e.g.
PPDA ACT 2003.
Competition There is usually strong There is usually no

competition among different competition.
firms.
Publicity Confidentiality applies in Confidentiality is limited

dealings between suppliers because of public interest in
and buyers. disclosure.
Information exchange Private sector buyers do not Public sector buyers are
exchange information with willing to exchange notes
other firms because of freely.
confidentiality and
competition.

Defined procedures Private sector buyers can cut Public sector buyers are often
red tape (bureaucracy) when constrained to follow
speed of action is necessary. established procedures.
Diversity of purchased items Limited range of items in Wide range of items in public
private sector. sector.
Similarities between Public and Private sector Procurement
 Both have the same objectives i.e. the five rights (quality, quantity, source, time and
price).
 Value for money in the public sector is the same as profit maximization in the private
sector.
 Service delivery in the public sector is the same as customer satisfaction in the private
sector.
INTRODUCTION TO THE PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC

ASSETS AUTHORITY (PPDA)
This body was created in 2003, it reports to parliament through the ministry of finance planning
and economic development. Its policy and advisory body which doesn’t approve procurement or
involve individual tenders expect during administrative review appealing.
Objectives of the PPDA
 To ensure the application of fair, competitive, transparent non- discriminatory and value
for money procurement and disposal standard and practices
 To harmonize the procurement and disposal polices of the central of government and
statutory bodies

 To set standards for public procurement and disposal systems in Uganda.
 To monitor compliance of the procuring and disposing entities and guide lines issued
under the Act. (PPDA Act 2003)
 To build procurement disposal capacity in Uganda.
FUNCTIONS OF THE PPDA
 Advises central government, local government and statutory bodies on all public
procurement and disposal bodies, principles and practices.
 Monitor and report on the performance of the public procurement and disposal systems
and advise on desirable changes.
 Set training standards, compliance levels, certification requirements and professional

development path in consultation in competent Authorities.
 Prepares updates and issue authorized versions of the standardized bidding documents
procedural forms and any other attendant’s document to the PDE’S.
 Ensure that any deviation from the issue of standardized bidding document procedural
forms and any other attendants documents is effected only after prior written approval
form the Authority.
 Issue guidelines and regulations on the procurements and disposal activities.
 Organize and maintains a system for publications of data on public procurement and
disposal opportunities, awards and any to her information of public interests as may be
determined by the authority.
 All determines develop introduce maintain and update related system wide data bases and
technology.
 Maintain a register of providers of works services and supplies.
 Conduct periodic inspections of records, proceedings of the PDE’s to ensure full and
correct application of the Act.
 Institute
 Procurement and disposal audits during the bid preparatory process.
 Contract assessments in the course of the execution of an awarded contract or bid.
 Performance audit after completion of the contract in respect of nay procurement and
disposal as may be required.

POWERS OF THE PPDA.
In the exercise of its regulatory functions, the PPDA shall have powers to;
 Require any information, documents, records, reports etc. in respect of any aspects of a
public procurement and disposal process where the breach has been reported.
 Summon witnesses, call for the production of books, of accounts, plans, documents and
examine witnesses and parties concerned on the Oath.
 Commission or undertake investigations and institute procurement or disposal contract

and performance audits
 Cause to be inspected any procurement or disposal transactions to ensure compliance

with the bid procurement and disposal activity.
 Act up on complaints by PDE’s providers and any other entity in respect on any party to
the procurement and disposal activity.
CHAPTER TWO
THE FUNDAMENTAL PRINCIPLES OF PUBLIC PROCUREMENT

Introduction
Procurement like any other profession has set rules that govern and guide the practitioners. These
set rules are based on internationally recognized basic principles of procurement. It is these basic
principles that have been the basis for the current rules stipulated in the regulations concerning
Public Procurement and Disposal.
According to the Oxford Advanced Learners dictionary of English, a principle is defined as;
 A moral rule or strong belief that influences one’s actions.
 A law, rule or a theory that something is based on.
 A belief that is accepted as a reason for acting or thinking in a particular way.
 A general or scientific law that explains how something works or why something
happens.
In the context of Procurement and Disposal, public Procurement principles could be taken to
mean rules upon which all public Procurement and Disposal laws and regulations are based.
On the other hand, ‘Public Procurement’ may be defined as a means of acquiring by purchase,
rental, lease, hire purchase, or any other contractual means of any type of works, services, or
supplies or any combination using public funds.
What comprises the public sector essentially includes the following;
 Central Government ministries,
 Local Governments,
 Statutory bodies,
 Public institutions e.g. Public universities and other institutions of higher learning,
 Other bodies “mandated to perform public functions”
The basic principles of public Procurement
Public Procurement principles therefore are rules that public entities among which local
governments must fulfill when procuring or disposing their requirements of works, services and
supplies using resources from public sources.
To ensure compliance with the requirements of the PPDA Act and LoG regulations, PDEs must
embrace the principles of Public Procurement and Disposal so as to promote economy and
efficiency, and achieve value for money Procurement.

The basic principles of public Procurement and Disposal include;
i. Non-discrimination and fairness
ii. Transparency
iii. Accountability
iv. Economy and efficiency i.e. achieve value for the money that is spent.
v. Confidentiality
vi. Ethics and integrity
vii. Impartiality
viii. Competition
ix. Public accessibility
(i) Non- discrimination and fairness; PDEs must ensure that all potential bidders whether
from within the country or outside are treated fairly and in a non-discriminatory manner
including protection of commercial confidentiality.
 Bidders therefore must be handled fairly, honestly, and evenly without bias.
PDEs should not exclude any bidder from participating in any public
procurement on the basis of: nationality, race, religion, gender, location, etc.
exception is where it is legally done as in the case of preference schemes for
national interest or reservation schemes for the development of specific target
groups or communities.
 PDEs must give clarifications to all bidders when sought or required, they
should not impose unnecessary burdens or constraints on bidders in the design of
the terms and conditions for bids contained in bid documents.
 Fairness must also be seen in the procurement process where all parties must be
treated fairly.
(ii) Transparency; this principle requires that procurement processes be open to the public,
decisions taken and reasons for them made accessible to the public at the appropriate
time. A process that lacks openness is more prone to corruption and suspicion. To
achieve transparency, the following should be done;

 PDEs should ensure that procurement activities and transactions are carried out
openly to enable public scrutiny.
 PDEs should ensure that all relevant information is made available to all
interested parties consistently, timely at no or minimum cost and through a
readily accessible and widely covered medium (for example making use of the
Procurement Notice Boards).
 PDEs should ensure that there is openness and clarity on Procurement policy,
and that delivers all stakeholders involved in the Procurement process.
 The Procurement and Disposal records must be kept and available to support any
decisions taken in the process.
 A PDE is seen to be transparent by the various stakeholders in its Procurement

and Disposal processes only when;
 Competitive bidding is the most used method of Procurement.
 All available bid opportunities in the PDE are published in a widely circulating
medium and displayed on notice boards for the public to access.
 The time allocated for the Procurement process is adequate to allow maximum
competition.
 All the information required by bidders to make a qualified responsive offer is

made readily available to all bidders whenever there is need.
 Bid openings must be conducted in an open public manner, and in the presence
of bidders or their representatives.
 The evaluation criteria must have been defined and included in the standard bid
documents and adhered to at evaluation.
 Contract awards must be published widely and the unsuccessful bidders

debriefed prior to contract award.
 However, it is important to note that transparency does not mean lack of

confidentiality. Some information considered non-public or public but time
based like evaluation details are treated confidentially. Some information
considered non-public or public but time based like evaluation details are treated
confidentially.
(iii) Confidentiality; Under confidentiality PDEs or persons participating in the

Procurement process should endeavor to attain the following;

 Any information that is not meant for public should be kept confidential, except
when required for example by an order of court.
 Information relating to evaluation should be kept confidential until after the best
evaluated bidder has been notified of the award.
 All parties involved in Procurement should ensure confidentiality and accuracy

of information in the Procurement process.
(iv) Accountability; all persons involved in the Procurement and Disposal process must
account for their decisions and actions taken in the course of their duties. The major
reason is that the PDEs are using public money and must justify to the public the cause
for their actions. In order to ensure accountability, the following should be done;
 A mechanism for auditing the process that is enforced through public complaints
systems should be put in place.
 A written description of something that has happened; the Procurement and

Disposal unit should regularly give reports or statements for the role or
responsibility that has been entrusted to it.
 The reasons or basis for making a decision or doing something must be made
public, (recommendations of the evaluation committee and the contracts
committee recommendations among others).
 There should be adherence to the principle of information sharing among all the
interested parties in the procurement process
(v) Impartiality; all potential qualified bidders must be made aware of, given a fair chance
to compete for contract opportunities to maximize competition and achieve value for
money procurement. Unless there are justified reasons to the contrary, PDEs have to
ensure that all Procurement and Disposal is carried out in a competitive manner. Bidders
should also be treated without bias during evaluation of bids.
(vi) Ethics and integrity; ethics refers to norms and morals expected of public civil servants
and providers. A PDE should ensure that the code of ethical conduct in business is
enforced in the Procurement and Disposal process. It is stipulated that:
 Nobody will use one’s authority or office for personal gain.
 Everyone maintains a faultless standard of integrity in business relationships.
 The highest possible standards of competence should be fostered.
 Resources should be optimally used to ensure prudent accountability.

To ensure ethics and integrity in all procurement activities, staff and bidders should be
able to;
 Declare their conflict of interest that could influence their decision.
 Adhere to confidentiality and accuracy of information, and ensuring that such

information is true, fair and not meant to mislead.
 Uphold and uses competition as the default procurement method.
 Avoid or refuse business gifts and hospitality.
 Adhere to the restrictiveness phenomenon.
Note
(a) Corruption – The practice of offering giving receiving, or soliciting anything

of value to influence the action of a public official in the Procurement process or
in contract execution.
(b) Fraud – is a misrepresentation of facts in order to influence a Procurement

process or the execution of a contract to the detriment of the PDE. It also
includes collusive practices among bidders prior to or after bid submission
design to establish bid prices at artificial, non-competitive levels, depriving the
PDE the benefits of free and open competition.
(vii) Economy and efficiency; when analyzing bids there is need to move away from the
lowest priced bid to the best evaluated, which is a combination of technical, financial
and any other preliminary requirements. It is the duty of PDEs to control and manage
procurement to add value for better service delivery among others. The value for money
is the optimum combination of whole life costs and total quality appropriate to meet the
requirements of the PDE’s.
(viii) Competition; PDEs are encouraged to ensure that there is competition among bidders
under the same terms and conditions to ensure value for money. PDEs should take it
upon themselves that competition is the most preferred method, unless otherwise with
reasons. The relevant competitive methods are: open bidding, restricted bidding, request
for quotation and proposals.
(ix) Public accessibility; PDEs should give access to information related to business
opportunities and bidding process to bidders free of charge and where there is need to
charge a fee say for bidding documents, the cost should be a recovery fee (printing,
photocopying and binding costs). These include;
 Bid/bid opportunities

 Specification
 Evaluation criteria
 Award decisions
 Pre-qualification lists
 Providers lists
The Public Procurement and Disposal of Public Assets Authority should also avail copies of the
PPDA Act Regulations, Guidelines, standard bidding documents and relevant decisions made by
the Authority.
CHAPTER THREE
THE PROCUREMENT PROCESS
Procurement Planning
Overview
There is no doubt that the success of any undertaking depends on how well that undertaking is
planned. It is even in the traditional administrative theorists and management writers who assert
that planning is the primary management function. A plan has therefore been defined by some as
a document of the wise. Planning is the primary management function and it is the bridge
between the present and the future.
Procurement planning –its meaning and nature
Procurement planning if handled well can have numerous benefits to the procurement exercise.
Procurement planning provides the initial tools for the procurement process. Procurement
planning as the first stage of the procurement process is concerned with determining what
products or services are best acquired from outside the procuring organization.
Procurement planning is the responsibility of the user department. However, the user dept. has to
work closely with both Finance department and procurement unit. Procurement planning’s
processes revolves around providing accurate answers to five key questions.

The questions include the following:-
1. What to procure? This involves identifying a list of all goods and services that are to be
procured in a particular period. It should capture items for all the departments within a
particular organization and make them available before the beginning of the new
financial year and this has to be reflected in the budget
2. When to procure? This relates to the time factor when the identified list of goods and
services are to be procured. In any organization there are those goods and services which
are so vital that they have to be procured at the earlier time possible without affecting the
normal operations of the organization.
3. Where to procure from? This relates to the sources. The choice of the place where to
procure such goods and services is important because it has an implication on the
envelope of the organization concerned. In Uganda’s situation, the desire for allowances
(travel and perdiems) cannot miss on the list of such factors. Other factors may include
price/cost, quantity /quality of the goods or services.
4. How much to procure? This relates to the amount of goods to be procured and this
varies from organization to organization. It will also depend on the urgency of the goods
and services as well as the resources available.
5. How to procure? This relates to the method of Procurement. This also varies from
organization to organization and whether goods are simple or complex.
Contents of a Procurement plan
 A detailed breakdown of activities of works, services, or supplies to be procured.
 A statement of the required resources supported by a schedule of projected funding.
 A plan for likely methods of procurement.
 Lead time.
 Estimated price and quantity.
Types of Procurement Plans
1. Multi- annual / rolling work plan: - this is based on the approved budget which
is submitted to the PDU. the purpose is to facilitate orderly execution of the
annual procurement activities and this plan usually covers three – five years. The
user department has to send the plan at the beginning of the financial year to
allow the PDU to consolidate with other plans and communicate with the finance
departments.

2. Combined work plan: - this is used by the PUD to plan, organize forecast and
schedule for the entire PDEs activities for the financial year. The user department
has to keep in mind the basic principles of procurement i.e. Transparence,
competition fairness, non-discrimination, economy, efficiency and best value for
money,
Therefore the user department must take into account the consideration below:-
(a) Aggregation of the requirements to achieve lower unit cost; this can be done by
aggregating all requirements from the different departments of the PDE and to aggregate
for the whole financial year or longer for a chosen item. However, before taking the
decision of whether to aggregate or not will depend on the questions like interest on the
tied up capital, financial floor, storage facilities and costs, shelf life and time spent on
aggregating the requirements.
(b) Splitting of requirements; sometimes it is tempting to split the requirement into smaller
amounts to be ordered more times with the intention of avoiding a particular method of
procurement. As a main rule, this is not permitted. Splitting of procurement or disposal
requirements which are broadly similar or related shall only be permitted when the split
offers clear and calculated economic or technical advantages
(c) Division into Lots; sometimes it can be expected that the best value for money can be
obtained by dividing the order into different lots and this can be due to the fact that some
producers specialize in a certain size, color, shape etc. of similar products. In this case it
is possible to divide the order into separate lots. If this is done and results into separate
contracts, then the procurement will be determined by the estimated value of each of the
individual lots.
Benefits of effective Procurement Planning
(i) Effective procurement planning results into best value for money
(ii) Encourages transparency
(iii) Improves procurement outcomes
(iv) Leads to achievement of the organization objectives within time cost and quality standards
(v) Avoids risk and dangers of poor planning (Minimizes emergencies)
(vi) Leads to proper distribution of resources.
Reasons for ineffective implementation of procurement plans
 Inability to learn from experiences and past mistakes.

 Poor and inadequate Procurement planning education and training.
 Ethical issues.
 Poor monitoring, evaluation and control mechanisms.
 Political interferences and general external pressure
Steps involved in the procurement process
The procurement process involves several steps and each component in the process is concerned
with a particular aspect and one stage definitely leads to another.
Step 1. Identification of the need;
Here the user departments identify their needs and this has to be done before the budget process
is concluded because the entity’s budget has to incorporate the identified needs
Step 2. Formulation of procurement plan;
The PDU formulates the entire corporate needs, plans and schedules for the acquisition of the
goods, services and works as the identification of need stage revealed.
Step 3.Advertisement for pre-qualification;
After presentation and approval of the procurement plan; implementation follows. In the
prequalification advert, the interested applicants for provision of works, services and supply of
goods are required to submit information to the PDU in relation to what is expected of them by
the PDE.
Step 4. Preparation of bid documents
Bid documents are the same as solicitation documents as per the PPDA Act of 2003.
These are documents used to request for irrevocable offers from the providers of the identified
requirements. They set out the rules of the procedures to be followed in the bidding and the
conditions of any resulting contract. The PPDA has standard bidding documents as models for
drafting all solicitation documents for public procurement.
Step 5. Advertisement for bids
Following the established procurement plan and after thorough preparation of bid documents,
which provide the following information;
 Instructions to bidders, Terms of Reference (T.O.R),

 Eligibility requirements,
 Plans & Technical specifications ,i.e. Product/service requirements
 Bidding procedures
 Response format
 Evaluation criteria
Step 6. Receipt of bids; Correct management of the receipt of bids is essential to transparent
procurement as it ensures that no late bids are accepted. There are two methods of receiving bids
and the choice of the method is a decision of the PDE.
(a) Bids can be received in person by the staff of the PDE with the staff issuing the receipts
for bids marked with the date and time of receipts.
(b) Bids can be received in a bid box which may look like a suggestion box and the staff see
the box at the time and date of closing. Bids must be kept in a secure place until the time
for opening.
Step7. Public bid opening;
All methods of procurement with the exceptional of micro procurement and request for
quotation, must have a public bid opening and the PDE must inform all bidders of the date, time
and location of the opening to enable them attend.
At least a member of the contracts committee (CC) is required to witness the Public bid opening.
Step8. Evaluation by the technical committee
Evaluation is the process by which the best bid is selected for award of the contract from among
all the bids received. Evaluation consists of three stages;
(a) Preliminary evaluation; this is a brief assessment to establish whether each bidder is
eligible as per the requirements of the solicitation documents.
This is used to eliminate unsuitable bidders such as those who are not registered companies,
those who have not complied with legal requirements such as payment of taxes, etc.
(b) Detailed evaluation; this determines bids that have substantial responses to the commercial
and technical requirements of the solicitation documents. These include looking at whether each
bid conforms to the terms and conditions of the solicitation documents and assessing technical
quality by either comparison to the specifications in the solicitation document or by awarding
merit points.
(c) Financial evaluation; this determines the evaluated price for each bid following corrections
of any error or conclusion of adjustments and determines the best evaluated bid.
Step9. Post qualification

The best evaluated bidder may be subjected to post qualification to check whether they have the
capacity and resources to effectively carry out the contract.
Post qualification may only use the criteria given in the solicitation document and it will
typically look at the past performance, equipment or other facilities and the financial resources.
Where post qualification is conducted, bidders may be rejected if they fail the post qualification
assessment
Step10. Negotiation
Negotiations are not encouraged where comprehensive procurement process has been conducted,
but they may be necessary to make minor adjustments to the proposed contract on mobilization
arrangement. Under competitive methods, negotiation on price is not permitted
Step11. Award decision
Any recommendation to award a contract in exception of micro procurement, must be submitted

to the contracts committee (CC) for approval. The contracts committee will review the
recommendations made including evaluation reports and results on any post qualifications or
negotiations, a decision by the CC to approve communication for contract award does not
constitute a binding contract.
Step12. Best evaluated bidder notice; Following any award notice decision, the PDE must
display a notice of the best evaluated bidder for a certain period of time before placing a
contract. A notice must also be sent to all bidders who participated in the bidding process.
Step13. Award of the contract; following disposal of the notice of the best evaluated bidder, a
contract may be awarded. Contract award is the point at which a legally binding agreement is
formed.
Step14. Contract management & performance evaluation; Once the contract has been placed,
it must be managed to ensure that the provider performs in accordance to terms and conditions of
the contract and thus the PDE needs all its communications under the contract.
The stage involves as key activities monitoring contract performance against established
standards and this is done by the user department, any other interested party for the successful
realization of value for money procurement, supervision and evaluation by the technical staff of
the PDE.
Step 15. Payments; It is a contractual obligation for the providers of works, services, and
supplies to receive payments for the work done. The payment should be done after the
“inspection and auditing” of the work done. In the case of works, when a certificate has been
issued by the engineer.

After payments have been made, transactions have to be recorded for use by the relevant organs
and external stakeholders.
Summary of the Procurement cycle/ main stages in the Procurement cycle
1. The pre-award stage; this involves all the preparatory stages before a contract is awarded and
includes;
a. Procurement planning
b. Solicitation planning i.e. preparation of bid documents and determination of

selection criteria and
c. Solicitation itself i.e. advertisement for bids.
2. The award stage; this involves source selection and actual award of a contract and includes;
a. Receiving of bids and
b. Evaluation of bids
c. Award of a contract.
3. Post-award stage; this stage involves;
a. Contract administration and
b. Contract close out or termination as applicable
Evaluation methodologies
(i) Quality and cost based selection method; this is a method that considers both the
technical quality and cost of the bid, with the relative weighing of technical and cost
elements decided in advance. There is a minimum technical qualifying mark below
which a bid shall be rejected. The relative weights are allocated to technical and
financial components. The weight for financial score is usually between 10-30 points
whereas for technical 70-90. The best evaluated bid is the one with the highest
combined technical and financial score.
(ii) Quality based selection method; this focuses on quality as the primary factor in the
process under which a technical bid is evaluated. The bid document shall state the
technical evaluation criteria and their maximum score. The highest technical score
shall be best evaluated bid and shall be recommended for award subject to negotiation
of the financial bid. Quality based selection method is appropriate for the following
types of assignments;

 Complex or highly specialized assignments which the client expects the
consultants to demonstrate innovation in their proposals.
 Assignments which have downstream impact and in which the objective is to
have the best experts. For example structural and engineering design of large
dams.
 Assignments that can be carried out in substantially different ways such that
proposals will not be comparable. The best quality bid is the best evaluated
bid regardless of the price.
(iii) Fixed budget selection method; this is an evaluation methodology that recommends
the bidder with the best technical bid which is within the budget. A bid whose
financial /cost proposal exceeds the budget is rejected. The budget therefore is used as
the key evaluation factor and bidders are informed of the budget in the bid document.
Merits are used to determine the best quality technical bid and the best evaluated bid
is the one which scores the most points and remains within the budget. This method is
appropriate when the assignment is simple and can be precisely defined and when the
budget is fixed.
(iv) Technical compliance selection method; this recommends the lowest priced bid
which is substantially responsive to the commercial and technical requirements of the
entity. A bidder who has submitted the lowest priced bid which is qualified,
compliant and responsive should be recommended for award of a contract subject to
any post-qualification or negotiations that may be required.
(v) Least cost selection method; this recommends the lowest priced bid, which is
qualified and meets the minimum qualifying technical mark. Merit points are used to
determine bids which meet the minimum technical requirements and the best
evaluated bid is one which is the lowest priced and meets this minimum technical
standard.
This method is more appropriate to selection of consultants for assignments of a
standard nature where well established practices and standards exist like auditing.
Challenges in the Procurement process
(i) Bid trading; practices of revealing the vendor’s bid prices to another vendor to induce
the second vendor reduce the price even lower than the first vendor’s price.
(ii) Acceptance of gratuities; the practice of accepting gifts from vendors which benefit the
individual recipient and this can greatly compromise the contract award process.

(iii) Restrictive specifications; practices of writing overly restrictive specifications which are
not necessary to obtain the necessary requirement .This is intended to unfairly bar
competitors from supplying goods or services which meet requirements.
(iv) Vendor collusion; vendors or suppliers collude among themselves in order to win
tenders in shifts.
(v) Representing contractors; making or recommending official decisions in which one has
a financial interest or defrauding the organization/government after conspiring with
vendors.
Sourcing/Procurement methods
The procurement Act spells out a number of methods that may be employed in securing
goods or the provision of services. The choice of a particular method is normally guided
under part (iv) of the procurement Act. However, the guiding factor is usually the need to
obtain value for money.
Every method chosen by an entity must first be approved by the contracts committee to see
whether it provides value for money. The Act outlines the following methods;
(i) Open domestic bidding; under section 80 of the PPDA Act, a PDE may employ open
domestic bidding. It is a procurement and disposal method which is open to participation on
equal terms by all providers through advertisement of the procurement or disposal opportunities.
The media of advertisement is national. However, this means that nothing prevents a foreign or
international bidder from participating in open domestic bidding process.
(ii) Restricted domestic bidding; this is guided by regulation (225).This is a procurement or

disposal method where bids are obtained by direct invitation without open advertisement for the
whole public to participate.
It is used where circumstances do not permit open bidding. For example where
supplies/services/works are available from a limited number of providers within the country. The
PDE uses information available in the authority’s register for providers or in the entity’s own list
of pre-qualified providers.
(iii) Open international bidding; this is guided by regulation 114.This is a procuring or

disposal method which is open to participation on equal terms by all providers through
advertisement of the procurement or disposal opportunity in a publication of wide international
circulation and specifically seeks to attract foreign providers. This method is used to obtain
maximum possible competition and value for money where national providers may not
necessarily make this achievable.
However, this method does not prevent domestic providers from participating in the bidding
process.

(iv) Restricted international bidding; Under section 83 of the Act, This is a procurement or
disposal procedure where bids are obtained by direct invitation without open advertisement and
the invited bidders include foreign providers.
It is used where circumstances do not justify or permit an open bidding method and the short
listed bidders mainly include foreign providers.
The PDE uses information available in the authority’s register for providers or in the entity’s
own list of pre-qualified providers.
(v) Quotation and Proposals; under section 84 of the Act, these are simplified procurement and
disposal methods which compare price quotations obtained from a number of providers.
This method is used to obtain competition and value for money where the value or
circumstances do not justify or permit open or restricted bidding procedures. At least three bids
must be obtained when using these methods.
Quotations are used when procuring works and supplies while proposals apply to procurement
of services.
(vi) Direct procurement; This is the purchase without competition and is used when an existing
contract for goods (procured by other methods) is extended to obtain additional similar
goods/services/works.
Direct contracting can be used when the required goods available from only one source. It may
also be used when need for fast delivery of goods/services/works exists such as when an
emergency occurs.
In case of security reasons direct procurement is also preferable.
(vii) Micro procurement; This is a simple procurement method which is used for very low
value procurement requirements.
It is used to achieve efficient and timely procurement where value does not justify a competitive
procedure i.e. if the estimated value does not exceed Ug. Shs.5,000,000
Factors that may influence choice of a public procurement method to be used
(i) The amount of money to be spent; e.g. where a procurement exceeds sh.
500,000,000, open competitive bidding should be used and in case a procurement
does not exceed sh. 5,000,000, micro procurement should be used.
(ii) The number suppliers e.g. where there is a sufficient number, then competitive
methods would be used and if there is a limited number, then quotations and
proposals would be used.

(iii) The nature of the items/works or services to be procured; for instance if they are
simple, then micro procurement would be used whereas if in case of complex and
non-standard items/services, direct sourcing would the appropriate.
(iv) Circumstances under which the procurement is to be undertaken e.g. in case of
emergency then direct sourcing would be appropriate compared to other procurement
methods.
(v) Availability of time; in case of open competitive bidding methods, there is need for
sufficient time. This is because these methods take a relatively long time. So where
there is limited time, other methods like quotations, proposals and direct sourcing
should be used.

CHAPTER FOUR
STAKEHOLDERS IN PUBLIC PROCUREMENT
The major players in Public Procurement and Disposal of Public assets include the following;
(i) The PPDA (Authority)

(ii)The Procurement and Disposal Entity (PDE)
(iii)
Providers i.e. persons or firms that offer works, services and suppliers to the
PDEs.
(iv) Public i.e. all citizens of the country such as tax payers who need to the update of
information from all procurement and disposals and also act as whistle blowers in
case of mishandling of any procurement or disposal by certain PDEs.
(v) The police; arrest those involved in procurement fraud so they can face the law.
(vi) The Auditor general advises the government on various procurements etc.
(a) The Authority (PPDA);
The body was created in 2003 by an Act of parliament. It reports to parliament through the
ministry of finance, planning and economic development. It is a policy and advisory body
which does not approve procurement or involve individual tenderers except during
administrative review-appealing.
Objectives of the PPDA
 To ensure the application of fair, competitive, transparent, non-discriminatory and value

for money procurement and disposal standards and practices.
 To harmonize the procurement and disposal policies of the central government, local
government and statutory bodies.
 To set standards for public procurement and disposal systems in Uganda.
 To monitor compliance of the PDEs and guidelines issued under the Act (PPDA Act
2003)
 To build Procurement and Disposal capacity in Uganda.
Functions of the PPDA
(i) Advises central, local government and statutory bodies on all Public Procurement and
disposal bodies’ principles and practices.
(ii) Monitor and report on the performance of the Public Procurement and Disposal
systems and advise on desirable changes.
(iii) Set training standards, competence levels, certification requirements and professional
development path in consultation with competent Authorities.
(iv) Prepare, update and issue authorized versions of the standardized bidding documents,
procedural forms or any other attendant documents to PDEs.

(v) Ensure that any deviation from the issue of standardized bidding documents,
procedural forms or any other attendant documents is effected only after prior written
approval from the authority.
(vi) Issue guidelines and regulations on the procurement and disposal activities.
(vii) Organize and maintain a system for publication of data on Public Procurement and
Disposal opportunities, awards and any other information of public interest as may be
determined by the authority.
(viii) Undertake procurement and disposal research and surveys nationally and
internationally.
(ix) Determine, develop, introduce, maintain and update related system wide databases
and technology.
(x) Maintain a register of providers of works, services and supplies.
(xi) Conduct periodic inspections of records, proceedings of the PDEs to ensure full and
correct application of the Act.
(xii) Institute procurement and disposal audits during the bid preparatory process.
(xiii) Conduct contract assessments in the course of execution of an awarded contract or
bid.
(xiv) Performance audit after completion of the contract in respect of any procurement and
disposal as may be required.
Powers of the PPDA
In the exercise of its regulatory functions, the PPDA shall have powers to;
 Require any information, documents records, reports, etc in respect of a Public

Procurement and disposal process where the breach has been reported.
 Sermon witnesses, call for the production of books of accounts, plans, documents and
examine witnesses and parties concerned on oath.
 Commission or undertake investigations and institute procurement or disposal
contract and performance audits.
 Cause to be inspected any procurement or disposal transactions to ensure compliance
with the bid award by the PDE.
 Act upon complaints by PDEs, providers and other entities in respect of any party to
the procurement and disposal activity.
(b) The Procuring and Disposing Entities (PDEs)

Composition of the PDEs
The PDE shall be composed of
(i) The Accounting officer (A.O)

(ii) Contracts Committee (Tender board)
(iii) Procurement and Disposal Unit (PDU)

(iv) A User department
(v) An Evaluation Committee (E.C)
(i) The Accounting Officer
Responsibilities of the Accounting officer
 Establishing a contracts committee in accordance with the PPDA Act.

 Appointing the members of a contracts committee.
 Causing to be established a PDU staffed at appropriate level
 Advertising bid opportunities.
 Communicating award decisions.
 Certifying the availability of funds to support the procurement or disposal activities.
 Signing procurement contracts after approval by the contracts committee except where
due to an emergency situation, the contracts committee can not meet to approve the
procurement. Where the accounting officer signs a contract for a procurement to be made
for emergency purposes, he/she shall;
o Inform the contracts committee of the contract within seven working days of
signing the contract.
o Within ten working days, after signing the contract, he/she shall submit in respect
of the contract a report to the Authority.
 Prior to commencement of a procurement process, an accounting officer shall undertake

an assessment of the market price of the supplies services or of the unit costs of the
works in respect of which the procurement is to be made by a PDE.
 Accounting officer shall not sign a contract where the price quoted by the bidder who is
evaluated as the best evaluated bidder is higher than the market price established by the
Accounting Officer.
(ii) The contracts committee/Tender board
A contracts committee shall be composed of the following members;
 The chairperson
 Secretary
 A maximum of three (3) other members appointed by the Accounting officer one
of whom shall be a lawyer.
Members of the CC shall be appointed with regard to their technical competence and skills
required for discharge of the functions of the C.C.
The tenure of the members of the contracts committee shall be three years and a member may be
re-appointed for only one further term.

Functions of the contracts committee
 Adjudication of recommendation from the PDU and award of contract

 Approving bidding and contract documents
 Approving procurement and disposal procedures.
 Ensuring compliance of the PPDA Act
However, the following officers of the PDE are not eligible for nomination to the contracts
committee of that PDE in which they are employed
 The head of the PDU

 The head of finance department but not the head of accounts department where
positions are headed by different officers.
 The staff of the department of internal audit.
Powers of the contracts committee
A contracts committee shall;
(a) Authorize;
 The choice of procurement and disposal procedure

 Solicitation documents before use
 Contract documentation in line with the authorized evaluation report
 Technical or financial evaluation reports.
 Any amendments to an awarded contract.
(b)Recommend for delegation of procurement and disposal functions by the accounting officer
whenever the necessity arises.
(c) Award contract in accordance with applicable procurement and disposal procedures as the
case may be.
(iii) Procurement and Disposal Unit (PDU)
Functions of the PDU
 Manage all Procurement or disposal activities of the Procuring and disposal entity except
adjudication and award of contracts.
 Support the functioning of the contracts committee.
 Implement the decision of the contracts committee.
 Liaise directly with the Authority on matters within its jurisdiction.
 Act as a secretariat to the contracts committee
 Plan the Procurement and disposal activities of the PDE
 Recommend procurement and disposal procedures.

 Prepare bid documents and advertise bid opportunities etc.
Powers of the PDU
The PDU shall have powers to;
 Recommend the composition of the evaluation committee for approval by a contracts

committee.
 Contract independent advice as may be necessary in the discharge of its functions.
 Ensure compliance with the Act (PPDA) regulations and guidelines made under the
PPDA Act.
 Manage bid proposals and pre-qualifications, submissions and make recommendations on
them to the contracts committee.
 Provide bid clarifications.
 Receive bids
(iv) The User Department
Functions of the User department
 Prepare a procurement plan based on approved budget which shall be submitted to the
PDU for implementation when required.
 Initiate procurement and disposal requirements and forward them to the PDU
 Propose technical inputs to statements of requirements for procurement requirements to
the PDU.
 Propose technical specifications to the PDU when necessary.
 Input with technical evaluation of bids received as required by the PDU.
 Arrange for payments to providers.
 Report any departure from the terms and conditions of an awarded contract to the PDU.
 Forward details of any required contract amendments to the PDU for action.
Powers of the User department
 Initiate procurement and disposal requirements.

 Recommend statements of requirements to the PDU
 Undertake conformity assessments
 Issue change orders in accordance to the terms and conditions of the contract.
 Certify invoices for payments to providers.
(v) The Evaluation Committee (EC)
All evaluations shall be conducted by an evaluation committee which shall report to the PDU
Membership of the evaluation committee

 The membership of the evaluation committee shall be recommended by the PDU and
approved by the contracts committee according to the regulations under the PPDA Act.
 The number of members of the EC shall depend on the value and complexity of the
procurement requirement but shall in all cases be a minimum of three members.
 The members shall be of an appropriate level of seniority and experience, depending on
the value and complexity of the procurement requirement.
 Members of the EC may be external to the PDE where the skills or experience are not
available within the PDE or where members are reluctant or have a conflict of interest.
 All members of the EC shall sign the code of ethics provided under the regulation made
under the PPDA Act declaring that they do not have a conflict of interest in the
procurement requirement.
CHAPTER FIVE
CONTRACT MANAGEMENT
Contract management is a process that enables both parties to a contract to meet their obligations
in order to deliver the objectives required from the contract. It also involves building a good
working relationship between the buyer and the provider.
A contract is a legally binding agreement between a procuring and disposing entity and the
provider.
Elements of a valid contract
The essential elements of a valid contract include the following;
(i) Offer and acceptance; There must be a lawful offer and a lawful acceptance of the offer thus
resulting in an agreement between a procuring and disposing entity and the provider.
(ii) Intension to create a legal relationship; There must be an intension between parties that the
agreement should be attached by legal consequences and create legal obligations.
(iii) Lawful consideration (price); A contract is legally enforceable only when each of the
parties to it gives something and gets something.

(iv) Capability of parties; The parties to an agreement must be competent to contract; otherwise
it can not be enforced by a court of law. These parties must be of the age of majority and of
sound mind.
(v) Lawful object; For the formation of a valid contract, a PDE and the provider must agree for
a lawful object. The object for which the agreement has been entered into must not be fraudulent.
(vi) Possibility of formation; A valid contract mist be capable of performance. If an act is

impossible in itself, physically or legally, the contract can not be enforced by law.
Objectives of contract management
 To monitor the performance of a contract.
 To report to the procurement and disposal unit any departure and alternations from the
terms and conditions of the contract. This is done by the user department.
 To ensure that the provider meets all the performance or delivery obligations in
accordance with the terms and conditions of the contract.
 To ensure that all contract management records are kept and achieved as required.
 To cater for variations or change orders in accordance with the terms and conditions of
the contract.
 To manage handover or acceptance procedures.
Types of procurement contracts
There are different types of procurement contracts used in Uganda and these include:
(i) Lump sum contracts; These contracts are used where the content, duration, and
outputs of the procurement are not well defined. A lump sum contract may include
either fixed prices or price adjustment in accordance with regulation 245. It may
include interim or stage payments in accordance with regulation 250. Payment for a
lump sum contract shall be linked to clearly specified outputs. For example deliveries
of supplies, evidenced by the appropriate delivery documentation, payment schedules,
activity schedule, etc.
The advantages associated with lump sum contracts
 Cost is known at the outset.

 Risk is transferred to the contractor.
 The contractor is motivated to complete on time.
 Contractors tend to employ good quality staff.
Challenges associated with lump sum contracts
 Requires full information which may not be available.
 Assumes stable market conditions which may not be realistic.
(ii) Time-based contracts; A time-based contract is used where the scope and duration of the
procurement requirement is difficult to define. Payment for a time-based contract shall be based
on agreed hourly, daily, weekly or monthly fees for either nominated personnel or a certain type
or grade of personnel and reimbursable items using either actual expenses or agreed unit prices.
The payment rate for personnel may include salary, social costs, overheads, fees and special
allowances. The contract supervisor closely monitors the progress of the contract and payments
claimed by the provider and ensures they are in accordance with the contract terms.
Advantages of a time based contract
 It is ideal where the scope is uncertain.
 Value for money is easier to achieve.
 Cost control is achievable
Challenges associated with time based contracts
 Not possible where record keeping is poor.
 Requires openness from both parties especially the bidder which is very difficult to attain.
(iii) Admeasurements contracts; An admeasurements contract means a re-measurement, unit

rate or bill of quantities and is used for works which are not well defined and are likely to change
in quantity or specification or where difficult or unforeseen site conditions such as hidden
foundation problems are likely to occur.
The works are split into various items and quantities of each item needed to complete the
assignment are estimated and indicated in a bid document. A provider prices each work item by
indicating a unit rate for each item in the bill of quantities. The initial total contract price is
calculated by multiplying the unit rate with the estimated quantity to give a total for each item.
The actual work done is then measured during the performance of the contract and reconciled

upon completion of the contract. Payments are then made for the final contract price, which is
the total of the actual quantity of work performed.
Advantages of admeasurement contracts
 They are good for long term contracts that are difficult to estimate actual costs.
 Best for works contracts that require bills of quantities.
Challenges associated with admeasurement contracts
 They are risky for Procuring entities as costs ate difficult to control.
 Inefficiency of the provider may be passed to the PDE.
(iv) Frame work contract; It is an indefinite delivery contract used where a requirement may
be needed “on call” and quantity and timing cannot be known in advance. It is used to reduce
Procurement costs or lead times for requirements needed continuously over a period of time by
having them on a “call off” basis. The bidder indicates the unit rate for each item, but the entity
indicates the estimated quantity or value where it is possible or necessary to obtain competitive
bids, but does not make a commitment to purchase the full quantity or value.
It is required for supplies which are needed repeatedly or continuously over a period of time,
including stationary, office supplies, food stuffs and spare parts. The payments are made on the
basis of the works, services or supplies actually delivered or performed.
(v) Percentage-based contracts; This may be used where it is appropriate to relate the fee paid
directly to the estimated or actual cost of the subject of the contract. A percentage-based contract
is used for architectural, third party procurement, auctions or inspection services.
A percentage-based contract should clearly specify the total cost from which the percentage is to
be calculated. A bidder is required to indicate his or her fee rate as a percentage of the total cost
of the requirement.
A percentage contract may include;
 A fixed target cost.
 Minimum or maximum fees.
 Incentive fees, related to any savings made through economic design, discounts obtained,
cost reductions or similar fees.
(vi) Cost-reimbursable contracts
It is used for;

Emergency works, where there is insufficient time to calculate the costs involved.
High risk works, where it is more economical for the procuring and disposing entity to bear the
risk of price variations than to pay a provider to accept the risk or where the provider will not
accept the risk. A PDE then pays a provider for the actual cost of the works, as evidenced by
receipts and other appropriate documentation and fee or profit to be agreed upon and specified in
the contract.
Advantages of cost reimbursable contracts
 The client has strong influence.
 Earlier commencement is possible.
 Change control normally easy.
 Better financial control by client.
Challenges associated cost reimbursable contracts
 Costs are unknown and can spiral
 Poses the highest risk to clients.
 Does not give any incentive to the contractor
 It is not appropriate if the contractor is not reliable and well organized.
 It is only appropriate for technically competent contractors.
(vii) Target price contracts; A target price contract may be used instead of a cost reimbursable
contract where a target price will be agreed and cost savings may be achieved by offering an
incentive payment to the provider for any cost savings below the target price.
In this case, a procuring and disposing entity pays the provider for the actual cost of the works,
as evidenced by receipts, and other appropriate documentation and a fee, profit or agreed
percentage of any cost savings below the target price.
Advantages of target price contracts
 Costs are easily controlled
 Lead times are reduced as already the contract price is agreed upon.

Challenges associated with target price contracts
 It does not provide incentives to the provider
 It stifles innovation of a provider.
(viii) Retainer contracts; A retainer contract is used to retain a provider to provide services over
a prescribed period of time, without defining the level and actual amount of services required. ;
Payment for this type of contract may include a flat fee; which represents the total payment due,
irrespective of the level and amount of services provided during the prescribed period; or retainer
for the prescribed period plus a pre-agreed unit rate for services provided.
Advantages of retainer contracts
 It is ideal for works or new technology.
 Leads to better service delivery as the provider is aware that is around for some time.
Challenges of a retainer contract
It is difficult to terminate a provider who has performed even in the initial stages of the project.
(ii) Contingency or service fee contracts; A contingency or success fee contract is used to
link a provider’s fee to an achieved objective to provide an incentive to the successful
completion of a particular task, event or action. Payment for a contingency or success
fee may be:
 A pre-agreed amount linked to the successful completion of a target or event.
 A percentage of a pre-determined amount or proceeds.
 A basic flat rate, which is not linked to the successful completion of a particular
task, event or action.
A contingency or success fee contract describes the nature of the success to which a success fee
is applicable and the timescale in which the task, event or action shall be achieved.
Advantages of a contingency contract
 It motivates towards better service delivery
Challenges of a contingency contract

 A pre-determined amount at times could be based on wrong assumptions which could
prove difficult for the provider to perform their obligations.
Termination/ discharge of a contract
A contract can be terminated in any of the following ways:
a. Discharge by performance; When a contact is duly performed, by both parties, it comes to a

happy ending and nothing more remains.
b. Discharge by agreement; Where each of the parties is yet to perform his contract obligation,
the parties may mutually agree to release each other from contractual obligation.
c. Discharge by frustration; A contract is said to be frustrated if an event occurs which brings

its further fulfillment to an abrupt end. Frustration events include:
• Destruction of the subject matter
• Death etc
d. Discharge by breach; Breach brings to an end the obligation created by a contract on the part
of each of the parties. An aggrieved party can sue for damages.
A breach may take place when;
• A party fails to perform his/her obligation
• A party disables him/herself from performing his promise
e. Discharge by operation of law; In cases such as lapse of time, death, bankruptcy, a contract
can be discharged by operation of law.
Roles of a contract manager
(i) To issue any required variations, or change orders in accordance with the terms and
conditions of the contract
(ii) To provide full details of the required contract amendment to the PDU and obtain a
CC’s approval prior to issue of any amendment.
(iii) To manage hand over and acceptance procedures.
(iv) To provide full details of any proposed termination of a contract to a PDU and obtain
approval of the CC prior to termination.

(v) To submit reports on the progress or completion of a contract as required by a PDU or
AO.
(vi) To ensure that;
 A provider meets all performance or delivery obligations in accordance with the terms
and conditions of the contract
 A provider submits all required documentation In accordance with the terms and
conditions of the contract
 A procuring and disposing entity meets all payments and other obligations in accordance
with the terms and conditions of the contract
 There is adequate cost, quality and time control where appropriate
 There is compliance with the provisions of the PPDA-Act, regulations, guidelines and
best practices
 All contract obligations are complete primo to closure of the contract file
 All contract management records are kept and achieved as required
Challenges faced during contract management
 Determining the applicable law
 Cultural conflicts
 Dominance i.e. the responsibility of the provider versus the responsibility of the
buyer
 Lack of specificity
 Change circumstances may affect the implementation
 Change of ownership or management
 Currency fluctuations
 Lack of adequate skills to manage contracts
CHAPTER SIX
PURCHASING CONSORTIA

Definition and Terminology
A purchasing consortium can be defined as two or more independent organizations that join
together, either formally or informally, or through an independent third party, for the purpose of
combining their individual requirements for purchased materials, services, and capital goods to
leverage more value-added pricing, service, and technology from their external suppliers than
could be obtained if each firm purchased goods and services alone.
Purchasing consortium go by many names, including purchasing groups, group purchasing

organizations, federal organizations of purchasing, and international purchasing organizations.
However, they all have the same goals, and their differences are mainly in their structure, vertical
focus, and modus operandi. In the next section we will discuss some methods of classification.
Member Benefits/Advantages of purchasing consortia
Lower Prices / Pooled Negotiating Power
By increasing the volume of the intended award, the consortium is generally able to negotiate
(much) lower prices for the good or service being awarded than any single member company in
the collective.
Lower Transaction Costs
By joining together in consortia, organizations can (effectively) streamline procurement

processes. This not only reduces unit cost, but also reduces the overall transaction costs since
only one contract needs to be negotiated and implemented.
Reduced Workload
Since the consortium handles a number of buys on behalf of the organization, the organization
has a (significantly) reduced workload, especially on the tactical side, and the buyers are freed up
to focus on more strategic categories.
Better Practices
Individual members units are able to improve their results by sharing best practice in certain
business processes, leveraging expertise in functional areas, and pooling knowledge about how
to succeed in specific regions with the consortium and with each other.
Higher Quality
A consortium will have access to all of the knowledge of its members which it can tap to identify
the best potential suppliers with the best potential products and services to meet the members
needs. Furthermore, it can tap this knowledge base to identify new processes and emerging best

practices on a regular basis to make sure it is always using the best information and processes to
make its decisions.
Lower Supply Risks
A consortium, able to tap into the collective expertise of all of its members, will have a much
better chance of identifying and qualifying low risk suppliers.
Member Drawbacks/Challenges of Group Purchasing
Purchasing consortia are set up to pool demand from many different companies and serve the
needs of the majority. This implies that it must serve the good of the many and not the few, or
the one. As such, there could be some (minor) drawbacks to participating in a consortium,
especially with respect to certain categories. This section discusses some of those (potential)
drawbacks.
Set-up Costs
Before a process can be effectively outsourced, it has to be well understood, well documented,
and well managed. Outsourcing an ineffective process will not be a success, nor will outsourcing
a poorly understood one, as success depends on good change management. Thus, in addition to
the initial costs of identifying a consortium, negotiating a contract, and setting up the
relationship, there could also be costs associated with cleaning up processes, documenting them,
and effecting the change. It’s important to understand the costs up front and to only enter into an
agreement if the benefits are expected to exceed the costs.
Longer lead times
Since the needs of the many outweigh the needs of the few, or the one, in a consortium, it is
possible that the suppliers selected might have longer lead times. Make sure the items outsourced
are those that are not required for just in time delivery, or that the consortium is capable of
negotiating contracts that can be adapted to the need of each member.
Better Communication and Monitoring
As with any business process, one cannot just outsource purchasing operations and expect
results. One has to clearly communicate requirements and goals and consistently monitor the
process to ensure consistent results. Otherwise, the value of the organizational investment might
erode over time.
Reduced Flexibility

In order for a consortium to be effective, members have to agree to use whichever supplier is
selected to receive the contract when the project begins. The member will be locked into the
contract, and will not have full control over the terms and conditions eventually agreed upon.
Furthermore, the member may not be able to break or renegotiate the contract, should the need
arise, since the contract is between the supplier and the third party consortium.
Internal Resistance
There can be resistance within the organization to using a third party. This can take a variety of
forms and be for a variety of reasons. There might be an internal belief that an external party
could not know the company's business well enough to make the right decision, there might be a
fear of intellectual property and / or confidential information loss, there might be a fear of
"working with the enemy", and there might be a belief that the organization's volume is already
so large and so well leveraged that a consortium will not be able to bring any additional value.
Supplier Resistance
Sometimes suppliers might not want to deal with a consortium. This is especially true if they are
currently extracting high margins from a customer base of small, disparate customers. A
consortium would force them to be (much) more competitive and efficient, and in the eyes of the
salesman, significantly cut his commission. Of course, this is not necessarily true, since a
consortium can represent a much bigger sales opportunity, and even at a smaller margin, could
still mean a higher commission for the salesman who successfully negotiates the larger contract.
Loss of Supplier Relationships
Since the contract is between a third party and the supplier, there is a good chance that a new
supplier will be selected, which would mean the loss of the current supplier relationships.
Furthermore, even if the organization's current supplier is selected, the relationship could still be
weakened with the new arrangement.
Common Fears
When attempting to select a consortium, chances are good that there will be some resistance.
This is often do to innate fears held by the dissenters. They will not always be rational fears, but
it is important to understand, rational or not, what the fears are so that arguments can be devised
that will both combat the fears while educating the dissenters as to the benefits a consortium
could bring.
Anti-Trust Regulations
Those opposed to pooling purchases will often say that purchasing consortiums are a
concentration of market power that reduces competition, stifles innovation and creates barriers to

market entry. Some will go even further and suggest that such consortiums violate anti-trust
regulations.
While exclusive dealing, sole-source contracting, quantity or market share discounts and similar
practices are occasionally anticompetitive, the conditions for competitive harm necessary under
the law are rarely satisfied.
Consortium is too small
If the consortium is new, and membership is small, dissenters will explain that there are not
enough members to bring enough additional buying power to the table to make enough of a
difference to make it worthwhile.
Consortium is too large
If the consortium is well established, and has a lot of members, detractors may say that the
consortium is too large, that the needs of the organization will not be met because they will be
lost in the collective, or that the size of the consortium will make the purchasing process
burdensome and inefficiently slow.
Consortium is too diverse
If the consortium is open-enrollment, it could bring together buyers with widely diverse needs
and philosophies. Detractors will insist that this will only result in untenable complexity and
dysfunction.
Consortium benefits the competition
The largest and most obvious point of a consortium purchasing model is the collaboration and
partnership involved, often with rival companies, the competition, or the so-called enemy.
Dissenters will insist that it will help the competition while hurting the organization.
Loss of Competency
It is quite possible that some of the competencies that are possibly less obvious in normal
procurement activities be lost when purchasing work is effectively outsourced. Dissenters will
insist that critical competency and the benefits it offers will be the first to go.
Consortium Success Factors
Whereas most of the report discussed purchasing consortiums from a potential member's
perspective, this section outlines some of the factors that are required for the consortium to
succeed.

The Right Members
There are many requirements for a successful consortium, but one of the most important
requirements is to have the right members. The members should share common values and
interests, similar external challenges, geographical proximity and a desire for group success. This
will help to ensure that the members get the benefits they are looking for, which is one of the
fundamental keys to continued success of the consortium.
Careful selection of suppliers and service providers
Consortiums need to identify those suppliers and service providers that are capable of meeting
the demand at the required level of quality and service. They also need to insure that the
suppliers and service providers are financially stable, not on restricted party lists, and low risk to
their member organizations.
Defined Goals and Performance Measures
The consortium should have general goals for each of its members and specific goals for each of
its projects. These goals should be based on measurable metrics and performance measures
should be taken on a regular basis.
In addition, it should also have the goal of being a good customer. In order for a consortium to
ultimately succeed, it's suppliers must benefit as well. If the best suppliers refuse to work with
the consortium, it will not be able to provide the best values to its members, and they will likely
leave. This means that the extracted margin reductions should come with an increased volume in
the award. The supplier should still be able to make a fair profit at the end of the day. The
consortium should take steps to alleviate suppliers' concern by reducing the supplier's cost of
sale, committing to award volumes significant enough to make the contract attractive, and
signing up for reasonable length contract terms, especially on commodity categories that don't
usually fluctuate very much.
Process and Contract Management
As eluded to in the section on selection criteria, a consortium needs a good, well thought-out,
process for each project that spans the project from inception through the post-mortem analysis
and really good contract creation and management procedures. For most categories of moderate
complexity, each of the buyers might have slightly different needs. In this situation, the
consortium needs to be able to execute a master contract that can be tailored, through
addendums, to the individual needs of each member. It also needs the ability to track fulfillment
against each individual member need to insure that members are receiving the service they
bargained for.
Supplier Involvement

Suppliers can provide market information, track order cycles and consumption rates, provide
supply cost data and recommend affordable alternatives. In some industries, suppliers are the
best source of expertise and can often offer up suggestions on how to improve the purchase and
use the process to help users reduce waste. A good consortium will take advantage of the
knowledge and capabilities of its suppliers.
In the consortium lies the potential to create a new dimension of partnership-based strategic
alliance that can go beyond a simple collaboration between a buyer and a seller. Through
supplier involvement, the consortium can enable many-to-many collaborations between multiple
buyers and sellers that can identify and promote supply market expertise and best practices
beyond what any organization will be able to develop on its own.
The Right Contracts
The purchasing consortium selects the right contract for the category, whether it is a definite
quantity and delivery, indefinite quantity and delivery, or piggyback contract. In a definite
quantity and delivery contract, the consortium identifies all members, their respective
requirements, and fixed demands. In an indefinite quantity and delivery contract, the consortium
again identifies all members and their respective requirement, but demands are not defined.
Matching Philosophies
It's important that each member in the consortium have similar philosophies. Each actor in a
consortium will have a discrete set of motives, values and needs influencing not only their
actions, but their perceptions of other members. If the members have substantially different
philosophies about the role of the consortium, such diversity will give rise to a complex and
potentially conflicting value set within the group that will limit the effectiveness of the
consortium.
Trust and Cooperation
In order for a consortium to be successful, full commitment to the consortium from each member
is required along with an innate trust that the decision made by the consortium is the right one for
the consortium and for each member. Each member must be willing to accept the final outcome
when the project begins and cooperate with the designated project members in the selection
process as required.

CHAPTER SEVEN
PUBLIC PRIVATE PARTNERSHIPS (PPPs)
Definition
Public private partnership is a contractual agreement formed between public and private sector
with clear agreement in shared objectives for the delivery of an asset or service that would have
been provided through the traditional public sector procurement. It is basically just a different
method of procuring public services and infrastructures by combing the best of the private and
public sector with an emphasis on value for money and delivery of quality public services.
In general, however, public –private partnerships refer to forms of cooperation between public
authorities and the private sector which aim at ensuring the financial, construction, renovation,
management, operation and or maintenance of an infrastructure and or the provision of a service.
All Public-Private –Partnerships involve some form of risk-sharing between the public and
private sector in the provision of an infrastructure or service. The allocation of risk to the private
partner is the key determinant in distinguishing between PPP and the more traditional, public
sector model of public service delivery.
Note:
Rather than transferring the public asset to the private sector, as with privatization, the
government and private sector business work together to provide services e.g. use of PPPs to
finance the building of schools, hospitals, for defense contracts, etc.
Public sector is represented by the government at a local, state or national level while private can
be privately owned business, public corporation or consortium of business with a specific area of
expertise.
These agreements are useful for large projects that require highly skilled workers and a
significant cash outlay to get started. PPPs are also useful in countries that require the state to
legally own any infrastructure that serves the public.
Nature of PPPs
PPPs are formed and operate differently than more traditional contracting relationships. Some of
the prominent features of PPPs include;
 A recognition that the goal or end outcome of the procurement cannot be solved by
traditional means.
 A high degree of uncertainty about how to best achieve the goals or end outcomes of the
procurement and the partnerships.

 A high degree of risk.
 A significant change in partnership’s roles, including a sharing of responsibilities.
 All partners must consider each other as equal.
Types of PPP models
There are various types of PPP models but the following are some of them;
(i) Design-Build (DB) ; under this type, the private sector partner designs and builds the
infrastructure to meet the public sector’s specifications often for a fixed price. The
private sector assumes all risks.
(ii) Operation and Maintenance (O&P) ; under this type, the private sector partner,
under contract operates a publicly owned asset for a specific period of time. The
public sector partner retains ownership of the asset after a specified period agreed
upon.
(iii) Design –Build- Finance – Operate (DBFO); under this type, the private sector
partner designs, finances and constructs a new infrastructure component and operates
or maintains it under a long term lease. The private sectors partner transfers the
infrastructure component to the public sector when the lease is over.
(iv) Build- Own-Operate; (BOO); under this type, the private sector partner finances,
builds, owns and operates the infrastructure perpetually. The public sector’s limits are
stated in the original contract and through on-going regulatory authority.
(v) Buy – Build-Operate (BBO); under this type, the publicly owned asset is legally
transferred to a private partner for a designated period of time.
(vi) Build-Lease-Operate-Transfer (BLOT); under this type, the private sector partner
designs, finances and builds a facility on leased public land. The private sector
partner operates the facility for the duration of the land lease. When the lease expires,
assets are transferred to the public sector partner.
(vii) Finance only (FO); under this type, the private partner usually a financial company
funds the infrastructure component and charges the public sector partner interest for
the use of the funds.

Advantages of PPPs
 It is unlikely that public-private – partnerships will ever entirely replace the

traditional public sector model of public service delivery. PPPs are just a tool
amongst the many available to governments and public authorities for the
development of infrastructure and services. That being said, however, PPPs
have shown their potential for addressing infrastructure shortages and
achieving good value for money. Some of the benefits of PPPs include;
 Value for money for tax payers’ money through optimal risk transfer and
risk management.
 Effective utilization of state assets to the benefit of all users of public

services.
 Faster implementation of infrastructure projects; due to the fact that

payments is tied to infrastructure and service delivery, PPPs have a solid track
record of completing construction on time or ahead of schedule.
 Optimal risk sharing; PPPs shift specific life cycle risks to the private
partner, thereby creating incentives for better and more cost effective service
delivery. For instance by shifting construction, operation and maintenance risk
to the private partner, powerful incentives are created for delivering a high
quality facility which are ideally suited for operations and not prone to break
downs.
 Customer service orientation; given the use of performance based

incentives, PPPs have a proven track record of improving quality and service
levels. Specific private service providers offer expertise, while private sector
innovation facilitates the provision of quality services.
 Improved efficiency and cost savings; private sector efficiency coupled with
a optimal risk allocation, can create significant cost savings in the delivery of
a public infrastructure and services. Cost savings from PPPs typically
materialize in the form of lower construction costs, reduced life cycle costs,
improved efficiency, lower costs of associated risks.
 Generation of additional revenues; innovation and the private sector profit

motive can create incentives for the private partner to develop new and
creative source of revenue from public infrastructure. These new sources of
income can be shared with the public, creating additional sources of revenue
for other social priorities.

 Private sector development/investment opportunities; since the private
sector is constantly searching for new investment opportunities, PPP provide
stable, long term investment possibilities for the private sector, as well as the
opportunity to enter into service sectors previously monopolized by public
authorities.
 PPP allow the public sector to focus on strategic functions and outcomes;
by liberating the public sector from the direct provision of non-strategic
services, governments can focus their scarce resources on their core mission.
 Budget leveraging / additional capital; by shifting financing responsibilities

to the private party, public – private – partnerships result in an infusion of
private capital into public infrastructure and services. This mobilization of
additional capital allows governments to governments to increase the overall
level of investment in infrastructure development.
Disadvantages /challenges associated with PPPs
 They are complex and relatively inflexible structures
 PPP procurement and implementation can be lengthy and costly, making it

unsuitable for some projects.
 PPPs place additional responsibility on the public sector which must be

prepared to act as a competent counterpart and regulator. This may require a
different set of government proficiencies i.e. managers skills in negotiation,
contract management and risk analysis.
 PPP may lead to higher user charges once implicit or explicit subsidies are
removed. This is not necessarily a direct consequence of PPP, but the public
may perceive the increased rates and charges as a consequence of the private
partner ‘s required return on investment.
 PPP do not achieve absolute risk transfer. The public sector will retain some
risks.
 Not all projects are suited for PPP.
Conclusion;
Indeed although PPP hold significant benefits as an infrastructure delivery tool when
done incorrectly, PPP can generate considerable problems. For this reason,
governments and public authorities should look to experts to ensure that PPP
programs and projects achieve their intended objectives, while maximizing value for
money.


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MAKERERE INSTITUTE FOR SOCIAL DEVELOPMENT

DEPARTMENT OF BUSINESS STUDIES

PROGRAMME: DIPLOMA IN PURCHASING AND SUPPLY CHAIN

COURSE UNIT: INTRODUCTION TO PUBLIC PROCUREMENT

COURSE CODE: DPS 2110

BY: HAYENJE REBECCA

Tel: 0712-087664 /0794-741027/0787-440128

Email; rhayenje@gmail.com & rebeccaheyenje@yahoo.com

INTRODUCTION TO PUBLIC PROCUREMENT

Ms. Hayenje Rebecca Page 1

REGULATION OF PUBLIC PROCUREMENT BEFORE THE PPDA ACT 2003

Ms. Hayenje Rebecca Page 2

 Bureaucratic delays and lack of institutional co-ordination characterized the current

Ms. Hayenje Rebecca Page 3

Recommendations by the task force

Government should setup an independent regulatory authority to set standard, advice

Importance of public procurement

Ms. Hayenje Rebecca Page 4

 Poverty alleviation measures

Objectives of public procurement reforms

 To contribute towards the creation of a sound business climate in Uganda

 To enhance the decentralization policy

Definitions of purchasing and procurement

Public sector and Public sector Procurement

The category in which an organization falls is very significant in designing procurement

Ms. Hayenje Rebecca Page 5

Differences between Public sector private sector procurement

Area of difference Private sector Public sector

Objectives Usually to increase profit Usually to delivery to provide

Responsibility Buyers are responsible to Buyers are responsible

Legal restrictions Activities are regulated by Most of these equally apply to

Competition There is usually strong There is usually no

Publicity Confidentiality applies in Confidentiality is limited

Ms. Hayenje Rebecca Page 6

Similarities between Public and Private sector Procurement

INTRODUCTION TO THE PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC

Objectives of the PPDA

Ms. Hayenje Rebecca Page 7

 To build procurement disposal capacity in Uganda.

FUNCTIONS OF THE PPDA

 Set training standards, compliance levels, certification requirements and professional

 Issue guidelines and regulations on the procurements and disposal activities.

 Maintain a register of providers of works services and supplies.

 Procurement and disposal audits during the bid preparatory process.

 Contract assessments in the course of the execution of an awarded contract or bid.

Ms. Hayenje Rebecca Page 8

 Commission or undertake investigations and institute procurement or disposal contract

 Cause to be inspected any procurement or disposal transactions to ensure compliance

THE FUNDAMENTAL PRINCIPLES OF PUBLIC PROCUREMENT

Ms. Hayenje Rebecca Page 9

 A moral rule or strong belief that influences one’s actions.

 A law, rule or a theory that something is based on.

 A belief that is accepted as a reason for acting or thinking in a particular way.

What comprises the public sector essentially includes the following;

 Central Government ministries,

 Other bodies “mandated to perform public functions”

The basic principles of public Procurement

Ms. Hayenje Rebecca Page 10

i. Non-discrimination and fairness