Tanzania - Country Procurement Assessment Report (Vol. 1 of 3)

26431 Volume 1 TANZANIA COUNTRY PROCUREMENT ASSESSMENT REPORT (CPAR) VOLUME I MAIN FINDINGS AND RECOMMENDATIONS April 30, 2003 Operational Quality and Knowledge Services Africa Region   Tanzania CPAR- Volume I -2 - April 30, 2003 PREFACE 1. This report, which updates the CPAR of September 1996, presents the findings and recommendations of two World Bank missions: a preliminary mission from July 8-12 and August 5-9, 2002; and a main mission' from November 19 to December 6, 2002. Concurrently with the CPAR exercise, an Independent Procurement Review (IPR) was being carried out by Global Procurement Consultants Limited (GPCL) of India as a sub-consultant to PLS RAMBOLL Management A/S, the main consultants of this CPAR. The IPR has provided direct input to this report. To assist and guide the CPAR, the Government of Tanzania established a Task Force comprising several ministries, local government representatives, parastatals, the private sector, as well as a representative from the Government of Zanzibar. The Task Force is chaired by the Secretary of the Central Tender Board (CTB) Mr. N.S.D. Nkinga. ACKNOWLEDGEMENTS 2. The mission is grateful for the cooperation it received from the Governments of Tanzania and Zanzibar and all organisations visited. In particular, the mission would like to thank members of ihe Task Force for their full and proactive commitment to the CPAR mission, participation in key meetings and, in particular, for their contribution to the discussion on the issues and the development of the recommendations presented in this report. In addition, the mission would like to thank the Danish Government Trust Fund for financing parts of the mission and the AfDB, DFID, JICA, USAID, SDC, DANIDA, SIDA, and the EU for providing valuable contribution at various stages of the CPAR process. ' The mission was led by Mr. Rogati Kayani (Lead Procurement Specialist), and included representatives from the Government of Tanzania, Mr. Pascal Tegwa (Senior Procurement Specialist) from the World Bank Tanzania Country Office as well as a consultant team from PLS RAMBOLL Management A/S of Denmark lead by Mrs. Mette S. Lassesen (Procurement organisation, procurement capacity; and anti-corruption) and consisting of Mr. Soren Staugaard Nielsen (Legal framework, procedures and practices) and Mr. Claus Thomsen (Trade and private sector). In addition a group of local consultants were engaged: Dr. Laurent Shirima (Legal framework, procedures and practices), Mr. Oltesh Thobias (Trade and private sector), and Professor Awadhi Mawenya (Anti-corruption).   Tanzania CPAR- Volume I - 3 - April 30, 2003 CURRENCY EQUIVALENTS (Exchange Rate on April 15, 2003) Currency Unit = Tanzanian Shilling (Tshs) USD I = 1,050.00 Tshs FISCAL YEAR July I - June 30 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank ATIP Accountability, Transparency and Integrity Program BoT Bank of Tanzania CAS Country Assistance Strategy CED Chief Executive Director CFAA Country Financial Accountability Assessment GS Government Stores CSD Civil Service Department CTB Central Tender Board CTBA Central Tender Board Act DI Destination Inspection DIS District Administrative Secretary EOI Expression of Interest EU European Union EUD EU Procurement Directives FY Financial Year GDP Gross Domestic Product GGCU Good Governance Coordination Unit IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICS Integrated Controller System of the World Bank IDA International Development Association IFMAP Integrated Financial Management Accountability Project IMS Information Management System IMWG Inter-Ministeral Working Group IPR Independent Procurement Review JICA Japanese International Cooperation Agency LCC Local Cost Compensation LGFA Local Government Finance Act LGRP Local Government Reform Programme MBA Master of Business Administration MDA Ministries, Departments, and Agencies MSD Medical Stores Department MoF Ministry of Finance  Tanzania CPAR- Volume I -4- April 30, 2003 MSA Medical Stores Department Act NACSAP National Anti-Corruption Strategy and Action Plan NAO National Audit Office NBMM National Board for Materials Management NBMMA National Board for Materials Management Act NCB National Competitive Bidding NCC National Construction Council NGO Non-Governmental Organisation OPP Office for Public Procurement OWl Oversight and Watchdog Institutions PCB Prevention of Corruption PEA Post Entry Audit PER Public Expenditure Review PFMRP Public Financial Management Reform Programme PIF Performance Improvement Fund PMUs Procurement Management Units PPA Public Procurement Act PPAA Public Procurement Appeals Authority PPB Procurement Professionals Body PPTS Public Procurement Training Strategy PQ Pre-Qualification PRS Poverty Reduction Strategy PRSC Poverty Reduction Support Credit PS Permanent Secretary PSI Pre-shipment Inspection PSRP Public Service Reform Programme QCBS Quality and Cost Based Selection RA The Regulatory Authority RAS Regional Administrative Secretary RFQ Request for Quotation SASE Selective Accelerated Salary Enhancement SME Small and Medium Sized Enterprises SBDs Standard Bidding Document TAP Tax Administration Project TB Tender Board TI Transparency International TNA Training Needs Assessment ToT Training of Trainers TRA Tanzania Revenue Authority UML United Nations Model Law for procurement UNCITRAL United Nations Commission for International Trade Law VAT Value Added Tax WB World Bank WBG World Bank Guidelines WTO World Trade Organisation  Tanzania CPAR- Volume I - 5 - April 30, 2003 TABLE OF CONTENTS PREFACE . . 2 ACKNOWLEDGEMENTS . . 2 CURRENCY EQUIVALENTS ................................................3 FISCAL YEAR ..................................................3 ABBREVIATIONS AND ACRONYMS . . 3 TABLE OF CONTENTS ..5 MAIN FINDINGS AND RECOMMENDATIONS ................................................ 6 1. LEGAL AND REGULATORY FRAMEWORK ...............................................6 Existing legal and regulatory framework .................................................6 Legal Framework Issues ..................................................6 Main Recommendations on Legal Framework ................................................. 11 2. PROCEDURES AND PRACTICES ................................................. 12 Main Recommendations on Procedures and Practices ....................................... 14 Monitoring and Contract Management ............................. .................... 15 Main Recommendations on Monitoring and Contract Management .................. 15 3. ORGANISATION AND RESOURCES ..... ............................................ 16 Organisation ................................................. 16 Resources and Capacity ................................................. 19 Public Service Pay and Pay Reform ....................... 20 Capacity Building Measures ....................... 20 Main Recommendations on Organisation and Resources .................................. 21 4. AUDIT AND ANTI-CORRUPTION MEASURES ............................................ 23 Main Recommendations on Audit and Anti-Corruption Measures ........... ......... 26 5. PUBLIC SECTOR MANAGEMENT PERFORMANCE .................................. 27 6. E-PROCUREMENT ................................................. 28 Main Recommendations on E-procurement ................................................. 29 7. PERFORMANCE OF BANK FINANCED PROJECTS ................................... 30 8. GENERAL RISK ASSESSMENT .................. ............................... 31 Prior Review Thresholds for World Bank Financed Projects ............... ............. 32 9. COMMERCIAL PRACTICES AND CUSTOMS ............................................. 33 Main Recommendations on Commercial Practices ........................................... 34 10. ZANZIBAR ................................................. 35 Main Recommendations on Zanzibar ........................ ......................... 37 11. Action Plan for Implementing Proposed CPAR Recommendations ................. 37   Tanzania CPAR- Volume I -6 - April 30, 2003 MAIN FINDINGS AND RECOMMENDATIONS 1. LEGAL AND REGULATORY FRAMEWORK Existing legal and regulatory framework 1. The United Republic of Tanzania is a union of two countries, mainland Tanganyika and Zanzibar (consisting of the islands of Zanzibar and Pemba). Tanzania has two governments, the Union Government and the Zanzibar Government. The mainland is wholly governed by the Union Government, while Zanzibar is mainly governed by the Zanzibar Government with the Union Government taking care of some government affairs including security and foreign affairs. Procurement in the mainland is governed by the 2001 Procurement Act and Regulations while Zanzibar is governed by its own Rules and Regulations. The CPAR will review the two systems separately. 2. The Public Finance Act (2001) forms the legal basis for public expenditure. The following main legal instruments govern public procurement in Tanzania: * Public Procurement Act (PPA) and Regulations: The PPA was enacted in 2001 replacing all previous procurement legislation. In July 2001, the Regulations were issued in two parts: 1) Procurement of Goods and Works Regulations, and 2) Public Procurement (Selection and Employment of Consultants). In mid-November 2002, the Central Tender Board (CTB) issued a set of standard documents and guidelines. The PPA covers procurement carried out by both central government and local authorities, though for the latter case, specific Local Government Regulations are to be issued under the Local Government Finances Act. * Anti-Corruption Legislation: The Prevention of Corruption Act (1971) with subsequent changes and amendments serves together with the Organized Crime Control Act (1984) as the basis for the establishment of the Prevention of Corruption Bureau (PCB) in 1990 with authority for monitoring and prosecuting malpractice in public procurement. * Public Service Act: The Public Service Act (2002) with subsequent amendments and the supporting Employment Ordinance and Security of Employment Act establish the Public Service Commission responsible for human resource management in the public sector. Local Government authorities (district, town, municipal, and city councils) are placed outside the line ministries under the control of the Local Government Authority under The President's Office. The line ministries simultaneously maintain their own representation at local level. Legal Framework Issues 3. Application of procurement rules - entities subject to regulation. The PPA aims to cover all procuring entities that use public funds, however, parastatals are covered by the PPA only if mentioned by name in the regulations and if they receive government subsidy. A parastatal organised as a private company, but with the government as a majority shareholder, would thus fall outside this category. This leaves open the possibility of a part of the public administration, or a public utility,  Tanzania CPAR- Volume I - 7 - April 30, 2003 being branched out and thus outside the coverage of the PPA, even though the public, through government ownership of shares, still remains in control of the activity. This is an issue that especially affects a country such as Tanzania, which historically has had a very large public sector, but now is deregulating and developing the private sector as a key player in society. 4. Methods of procurement and their conditions for use. The PPA operates with competitive tendering as the main method for procurement of goods, works and services. Guided by the thresholds published as part of the Regulations, the procuring entity can use International Competitive Bidding (ICB), National Competitive Bidding (NCB), Restricted Tendering, Competitive Quotations, Single Source Procurement, and Minor Value Procurement. The present procurement methods are in line with international standards and the thresholds for their application appear balanced. However, the Regulations Article 80(4) allows for the procuring entity to "select an appropriate alternative method of procurement" in "any case where tendering would not be the most economic and efficient method of procurement..." The alternatives available are single source, direct contracting (goods and works) and force account, all with specific conditions attached. While the approach of offering different procurement methods for different types and sizes of contracts provides for an efficient system, the provision that allows the procuring officer, at his discretion, to apply the alternatives opens an avenue of non-transparency and potential abuse. Such delegation of authority does put increased demand on the quality of the oversight authority. 5. Publicity in procurement - advertisement of tenders and time for bid preparation. The PPA requires a procuring entity to prepare and advertise a tender notice before carrying out any of the open tendering procedures available. However, there is no requirement for publication of notices in the Government Gazette, nor is there a procurement journal or any other consolidated collection of current procurement notices. Bidders are thus forced to seek their information through a number of different sources, including different regional newspapers, notice boards and personal contacts. Contract awards are mandatory to publish in the Gazette, with the name of the successful tenderer, the contract amount and the date on which the contract was awarded. A recommendation concerning the establishment of a procurement journal is contained in the Procedures and Practices section. 6. Pre-qualification and qualitative criteria. The PPA does not have a provision calling for mandatory pre-qualification, but only states that a procuring entity "may engage in pre-qualification proceedings". The Regulations call for the procuring entity to "consider pre-qualifying" and describes the factors to be considered if pre-qualification is carried out. The newly issued "Standard tendering documents on procurement of goods" provide some guidance on eligibility criteria while leaving qualitative selection at the discretion of the procuring officer. Also, the standard bidding documents (SBDs) recently issued by the CTB include a "Standard Pre-qualification Document" for procurement of works through international competitive tendering which does contain examples of eligible qualification criteria. Furthermore, the Standard Pre-qualification Documents contain list of advantages and disadvantages of pre-qualification to assist the procurement officer in making the right decision. The lack of general mandatory qualification criteria does, however, provide opportunity for the application of non-transparent local criteria. 7. Registration Lists. According to the PPA, bidders in works, goods, services and consultant tenders, must all be registered with an "appropriate current professional body". This system of registration lists applies fully to all domestic bidders while international bidders are allowed post- register, pending award of a contract. The mandatory registration lists leads to bidders being evaluated twice by qualitative criteria, first by the board that administers the list and later during the actual tender. Although a system of mandatory registration seeks to ensure the quality and capacity of the bidders, it also creates a barrier to market access for new suppliers and upholds an unnecessary double  Tanzania CPAR- Volume I - 8 - April 30, 2003 qualification procedure. In addition, the registration system may: (i) limit competition; and (ii) be a source of rents. It should however be recognized that procuring entities with low capacity to perform proper pre-qualification are relying on the registration as their main method of assessing the qualifications of potential bidders. However, from discussions with both the public and private sector, it appeared that the different classes of registration, indicating different levels of capacity, tend to be inefficient and inflexible. 8. Tender Documents - SBDs. The PPA requires the procuring entities to use the "appropriate standard model in tender documents". A set of SBDs was only issued in mid- November 2002 by the CTB. The SBDs issued by the CTB comprise of: * Procurement of Goods through international competitive bidding * Procurement of Health Sector Goods * Standard Requests for Proposals (Consultants) * Standard Pre-qualification Document for Procurement of Works * Procurement of Works through National Competitive Bidding * Procurement of Works - Smaller Contracts. 9. Since the SBDs issued by the CTB are mandatory they will replace all previously issued documents issued by the National Construction Council and will prohibit the use of donor documents on government-funded projects. A review of the newly issued SBDs reveals their close similarity with Donor SBDs on which they are in part based. The internationally recognized essential features of SBDs are all there. The primary concern is whether the procuring entities have the capacity to utilize these quite comprehensive documents. 10. Filing system. According to the PPA, a procurement protocol for each tender must be kept for a 5-year period by both the procuring entity and the approving tender board. The Regulations contains a comprehensive list of information and documents that must be included in the protocol. The mandatory information to be recorded includes names of bidders, qualifications and evaluations of bidders and bids and any exceptions to the general provisions that have been applied. The procurement protocol in its present form is a powerful prerequisite for proper enforcement of the rules, provided that maintaining of the protocol itself is enforced. 11. Bid submission and opening. The existing rules on bid submission and opening are largely in accordance with international standards. Hence, the PPA and Regulations list a number of specific mandatory demands for the bid submission and opening process. The most important are: * A locked tender box must be used for storing tenders until opening * Tenders received late must be rejected * Tenders must be opened immediately after the deadline for submission * Tenders must be opened in public * Tenderers' names and prices shall be announced at the opening session * Attempts of wrongful influence must result in rejection. 12. Time limits. The given time for preparing bids is described in the PPA and the Regulations as "sufficient time", yet the Regulations call for a minimum tender period of 45 calendar days increasing to 90 calendar days for complex works tenders. A period of 45 days for preparation of a shopping bid seems to defy one of the main purposes of using this method, which is speed. The time limits, however, appear only as guidelines for procurement planning without foundation in the PPA itself. Lack of mandatory time limits, such as a limit on the period between bid submission and award of contract, before re-tendering is called for, opens opportunity for collusion and corruption. A limit on award of contract of, say, 60 days from submission, before specific approval for extension must be sought from the CTB, would target the issue of drawn out award processes that the mission identified  Tanzania CPAR- Volume I - 9 - April 30, 2003 as a general problem. Otherwise the limits contained in the Regulations appear balanced and should be made mandatory. 13. Contract award procedure and criteria. The PPA specifies that the procuring entity must ensure equal treatment of bidders in processing bids and awarding the contract. The PPA does not specify eligible award criteria other than "evaluated cost" for goods and works procurement. On consultant procurement the procuring entity can choose between criteria based on cost, technical quality or a combination. Adequate guidance on use of the evaluated cost criteria and rules of calculation can be found in the Regulations and in the SBDs issued by the CTB. Bracketing, by banning bids with a value below or above a certain amount is not permitted. The terms of contract must be approved by the Attomey General before the procuring entity is authorized to enter into such contract. The available award criteria are adequate and in line with international practices, and are supported with guidelines on their application. 14. Domestic and other Preferences. The PPA allows the procuring entity to apply a margin of preference in awarding contract to Tanzanian bidders. This domestic preference can be maximum 10% for ICB of works and requires a number of conditions to be met, mainly to ensure that foreigners do not misuse this rule through ownership or joint ventures with local companies. For goods and services ICB, the maximum margin of preference is 15% for locally manufactured goods and related services. For consultancy services contracts, the PPA permits that the shortlist comprise entirely Tanzanian consultants if the value is below a certain threshold, there is sufficient local competition and foreign participation is "prima facie" not justified. For procurement of goods, works and services that are exclusively funded by the govemment and under a threshold, the PPA furthermore demands that bidding is reserved for "local persons or firms". The Regulations give a wide access for the procuring entity to change and adapt the procurement procedures and give preference to local communities, if this is "in the interest of project sustainability, or to achieve certain specific social objectives". There are no specified thresholds for access to this discretionary preference system. While domestic preference arguably supports capacity buildling at the local levels, a more efficient method of building capacity is through the design of tender packages so that they appeal to local suppliers. Such packages would for instance have bid securities which are affordable to the local contractors and the minimum qualifying criteria such as annual gross tumover could be set to a level at which local bidders are able to participate. 15. Negotiations: pre- and post contract negotiations. Negotiations between bid submission and contract award are allowed as long as they do not "substantially alter the original terms of reference or the terms of the contract". A total ban on negotiations forms one of the cornerstones in the principle of equal treatment of bidders. In the light of this, conditional access to negotiations in the PPA hinders effective enforcement of the bari, and creates confusion as to the limits of the ban on negotiations. Negotiations after contract award leading to alterations and amendments are banned according to PPA, unless the alteration is to the benefit of the Government or the alteration has been endorsed by the approving authority. The PPA in this respect fails to recognize the issue of equal treatment of bidders. A substantial alteration in an already signed contract is in its substance comparable to pre-contract negotiations. If collusion between staff of the procuring entity and bidder takes place, it is very difficult to discern whether a post-contract alteration is in fact a result of illegal pre-contract negotiations. 16. Complaints and administrative review. Access to a complaints review mechanism is available to bidders and other parties in the procurement process, but not to the general public. The  Tanzania CPAR- Volume I - 10 - April 30, 2003 PPA establishes a three-tier system of administrative review for aggrieved bidders with the Public Procurement Appeals Authority (PPAA) as the final tier. The PPAA was, at the time of writing (April 2003) not yet established in practice. Once a contract has entered into force, the procuring entity is barred from entertaining complaints regarding the tender that led to that contract. Remedies available to the PPAA range from a declaration of the applicable rules to suspension of proceedings, annulment of any decisions, and termination of proceedings. A very significant exemption to this rule is the fact that a contract that has entered into force cannot be annulled. This leaves the entire complaints procedure without its most potent remedy, namely that of annulment and forced re-tendering. A whistleblower facility entrenched in the Regulations, would allow the public to initiate investigations into procurement cases and should enable both bidders and the general public to initiate such Investigations anonymously. To prevent misuse however, the filing of complaints should incur a modest fee and be limited to entities or persons with a substantiated legal interest in the case. This subject is covered in more detail in paragraphs 29 and 30. 17. Local Government Procurement. With the enactment of the PPA, the sections in the former Financial Memorandum issued under the Local Government Finance Act (LGFA) governing procurement in the local government, was revoked. While the PPA calls for specific local government procurement regulations to be issued under the LGFA, such regulations have just been gazetted (March 12, 2003). The PPA is therefore presently directly applicable to local government procurement. The local government regulations are supported by a draft Procurement Manual for Local Government Authorities. The regulations are in two volumes: (i) The Local Government (Procurement of goods and works) regulations, and (ii) The Local Government (Selection and employment of consultants) regulations. The main procurement methods and processes in the Regulations are very similar to those in the regulations governing central administration and parastatals. Until the new regulations were issued the composition of the local authority tender boards was in accordance with the now void Financial Memorandum, according to which the politically elected councillors were members of the tender board. However, the new regulations have entirely removed the councillors from the procurement process. 18. National Board for Materials Management Act vs. Public Procurement Act. With the enactment of the PPA the procurement function has now gained a legal framework of its own and this has raised questions as to the relationship between the National Board for Materials Management Act (NBMMA) and the PPA. It has been the view of the National Board of Materials Management (NBMM), that the NBMMA on certain issues, such as procurement being exclusively reserved for supplies professionals, would supersede the PPA. It is however clear from the PPA Article 76 that it renders void all previous rules on procurement that are in contradiction to the PPA. As a consequence, the procurement professionals mentioned in the PPA are not by law required to be supplies officers, but as recommended in this report should be replaced with certified procurement professionals. 19. Defence and security Procurement. The PPA contains a special exception for "military equipment and supplies for the Defence Forces" and "equipment and supplies of arms and ammunition" for the intelligence and security services, the police and prison authorities. The exception of sensitive procurements from the general procurement rules is a common feature of most procurement regimes, and is accepted under the UNCITRAL Model Law. Even though the PPA could be more precise on its description of the differences between the two types of procurements, this weakness could be corrected by simple guidance by the CTB. The Ministry of Defence have established two tender boards, in principle dealing with respectively sensitive and non-sensitive procurement. The sensitive procurement is carried out by a tender board under the Defence and Security Committee and the non-sensitive procurement is carried out by the Military Tender Board. Even though the Military Tender Board is by virtue of its non-sensitive operations covered by the PPA, it has not been included in the schedule to the Regulations listing all entities with tender boards.  Tanzania CPAR- Volume I - 11 - April 30, 2003 Thus a state of confusion exists as to the status of the Military Tender Board and to some degree also regarding the correct splitting of procurement between sensitive and non-sensitive articles. Main Recommendations on Legal Framework Short term * The rules regarding application of the PPA on parastatals should be clarified by amending the PPA to cover all parastatals * Disseminate the new Local Government Authority Regulations * Support the distribution and enforcement of the newly developed Standard Documents issued by the CTB. * Establish the Public Procurement Appeals Authority. * Introduce necessary amendments to the PPA to establish a Regulatory Authority (from the Organisation and Resources section) Long term . Introduce a whistleblower facility in the law * Subject non-sensitive defence procurement to the PPA. * Ensure adequate remedies for misprocurement. * Establish mandatory time limits for the main steps in the procurement process and review existing time limits * Introduce an effective ban on both pre- and post-contract negotiations  Tanzania CPAR- Volume I - 12 - April 30, 2003 2. PROCEDURES AND PRACTICES 20. Procurement Planning. Procurement planning is essential for public procurement to achieve one of its major goals of providing value for money. Without proper planning, tenders fail to meet the real requirements of the public, timeframes are missed, costs increase and opportunities for economy of scale are missed. The Regulations contain a detailed list of mandatory requirements for procurement planning before tenders are floated. The Local Government Procurement Manual contains a similar requirement for procurement planning. The general practice witnessed by the mission was that besides minimal budgeting exercises, no actual procurement planning is taking place for government funded projects. However, the quarterly release2 of funds that is common makes it very difficult for the procuring entities to plan beyond the next quarter, in practice crippling all attempts of effective procurement planning3. 21. Procurement Methods. Some of the major procurers, notably the Ministry of Works (including TANROADS) and the Ministry of Education, are well aware of the PPA and its principle of selection of procurement method based in part on the value of the contract. This certainly also applies to the tenders being brought before the CTB which is seen as a strong enforcer of the PPA. It is however still a widespread practice to base the choice of procurement method on whichever seems appropriate, on the discretion of the accounting officer. This practice often leads to use of the competitive quotation or single source methods, even for procurements with a value above the set thresholds. The local government administration still uses the procurement rules in the void Financial Memorandum. Based on these now defunct rules the district tender boards often apply the "request for quotations" method with open tendering being almost exclusively used on donor funded projects where this is a donor requirement. The splitting of tenders to avoid having to seek the approval of the CTB, which is regarded as a cumbersome and time-consuming process, is common, despite the outright ban on this practice in the PPA. To a certain degree the splitting of tenders is also a result of the present budgetary process and the uneven disbursement of funds. 22. When using the competitive quotation (shopping) method, procuring entities often pick the three minimum bidders from an internally maintained list of potential bidders or directly from the lists maintained by the registration boards. None of the procurement units visited by the mission was able to provide any explanation as to how the three invited bidders are chosen from amongst all the potential bidders on the list. This practice is contrary to the Regulations on use of restricted tendering and provides ample opportunity for abuse. Nevertheless this practice is widespread. 23. Publicity and transparency in procurement - advertisement of tenders and awards. Open tender procedures are advertised as stipulated, except in local government procurement where for cost reasons advertising in newspapers is often not practical. Instead notices are posted on the tender notice board maintained by each tender board. Though the Regulations require that international community is notified through their respective embassies and trade commissions, tender advertisements are often restricted to local newspapers and East African papers, which might explain why the same set of contractors (including foreign) have been participating in most of the works contracts. 2 A Budget Ceiling Committee, chaired by the Permanent Secretary of MoF, comprising the Divisional Commissioners, Accountant General, the TRA and Bank of Tanzania (BoT), determines the release of funds. 3According to the CFAA (2001) "Improvements in resource programming have meant that variance between budget allocations and outturns has been reduced across government, and releases to priority sectors are now broadly consistent with the expenditure programme. However, non-priority sectors continue to experience shortfalls in releases, particularly at the beginning of the fiscal year."  Tanzania CPAR- Volume I - 13 - April 30, 2003 24. As there is no central media for advertisement of tender or award notices the practices are scattered and the requirement for advertisement difficult to enforce. By introducing a Procurement Journal, the bidders would gain access to a central source of information and the costs of advertisement could be brought down. Contract award notices are very seldom published, even though this is a requirement in the PPA. The procuring entities cite lack of knowledge of the rules and excessive cost for advertising as reasons for this practice. 25. Pre-qualification and qualitative criteria. Pre-qualification is not mandatory, but its use relies on the professional judgment of the procurement officer. Because of low capacity to utilize the rather complex rules, this often leads to pre-qualification not being carried out, even in complex works tenders where the importance of its application is paramount. In many cases, specifically in works procurement, the procuring entity relies solely on the bidders' registration status with one of the registration boards for its assessment of the bidders qualifications. In such cases the bidders are not qualified according to their specific qualifications for the project tendered, but only on more vague general qualifications. 26. Tender Documents - Standard Bidding Documents (SBDs). The SBDs in use can roughly be divided into two groups: (i) those based on donor SBDs, especially World Bank; and (ii) those issued by the NCC for works procurement. Bidding documents are often very poorly prepared and fail to reflect the actual needs of the procuring entity. The main reason for this is the low capacity in the procurement units and lack of knowledge of the new legal instruments. This again leads to poor quality of technical specifications and the need for negotiations, which again opens an opportunity for collusion and breach of the principle of equal treatment of bidders. 27. Bid submission and opening. The rules and procedures for submission and bid opening are generally adhered to. However, the mission was informed of several instances of breaches of confidentiality and collusion between the procuring entity and bidders, leading to competitors' bids being revealed before the official opening and bidders being allowed to replace their own bids based on that information. These practices are all in blatant conflict with existing rules, and underlines the urgent need for an authority to effectively enforce the rules. 28. Contract award procedure and criteria. Evaluation reports are generally of poor quality. In many cases award criteria other than those listed in the bidding documents are applied. 29. Complaints and administrative review. It is the impression that bidders very rarely complain over discrepancies in the procurement process. Given the gap that presently exists between the legal framework and the actual practices, the reason for the lack of complaints is certainly not that procurement is carried out by the book, but rather that the bidders find it unfruitful to complain. This is true for complaints directed against the procuring entity itself, but also for complaints directed at the CTB, of which there are very few. Based on information from the private sector the major reasons for this situation are: * Unclear procedures of complaint: Even though the PPA is quite clear as to the process of complaint the act is not widely known, and the consensus seerns to be that personal relations with people tend to create more results. * Lack of enforcement: Despite huge discrepancies between the law and actual practices, a relaxed attitude towards the enforcement of existing rules prevails. Monitoring and review of procurement process is only done upon receipt of a complaint, which again very rarely happens. The lack of enforcement cannot help but give the bidders the impression that complaining has no real consequence or impact, regardless of the formal outcome of the complaint.  Tanzania CPAR- Volume I - 14 - April 30, 2003 * Lack of adequate remedies: As the law does not provide the option of annulment of the procurement contract once it is in force, the aggrieved bidder is left to seek economic damages. 30. The PPA requires all bidders determined to have been involved in corrupt practices to be registered by the CTB and banned from participating in public tenders for a period of ten years. The CTB does currently not have such a list. Official blacklists are not in use, but several of the procuring entities interviewed, especially amongst local government, expressed clearly that contract award in part was based on their previous experience with the bidders, without this being indicated in the tender documents. Main Recommendations on Procedures and Practices Short term Enforce the requirement for advertisement of tenders in generally available media with an aim to increase market access and transparency until the procurement journal is operational. * Enforce existing rules on application of pre-qualification to ensure that accounting officers realistically consider the advantages that pre-qualification provides. * Enforce the integrity of the bid opening process in accordance with existing rules by stepping up the number of audits targeted at the physical and organisational measures that the procuring entities have taken to ensure proper handling of the bid-opening process. Enforce correct use of award criteria through audits and strengthening of the quality of evaluation reports. Introduce credible complaints mechanism, by strengthening the complaints handling ability of the CTB (and then RA) and establishing the PPAA to provide a functioning avenue of complaints for bidders. Medium term * Strengthen the general quality of procurement planning through monitoring and capacity building, with the aim to bring procurement plans up to the standards required by existing rules. Issue Guidelines for selection of bidders for- quotations to strengthen enforcement of the existing rules of equal treatment of bidders. Establish a government-funded, monthly-issued, procurement journal. The journal should be paper-based but also available through the Internet. Long term * Consider mandatory pre-qualification for certain tenders to enforce the proper use of pre-qualification.  Tanzania CPAR- Volume I - 15 - April 30, 2003 Monitoring and Contract Management 31. Record-keeping. Even though the PPA clearly stipulates a demand for proper and comprehensive record keeping, files are generally missing and incomplete. This does not seem to be an issue confined to the procurement files, but is rather the result of generally poor filing systems in the public sector. The enforcement of the already existing rules on proper record keeping is lax, and it seems without any real consequence to the accounting officer that a file, or parts of it, can go missing. In the local government, the problem seems to be partly caused by lack of resources leading to necessary copies for the file not being made. 32. Variations and post-contract negotiations. Generally variations are not a frequent occurrence, with the exception being local government procurement where variations are often negotiated, resulting in material differences from the original specifications, without this leading to re- tendering. The procurement units themselves cite poor planning, poor specifications and the time/cost consuming tender process as the main reason for this situation. The Auditor-General reported some cases of variations, especially in large roads projects, leading to substantially larger payments than budgeted. These cases were allegedly not caused by lack of knowledge of the rules, but were clear cases of corruption, which were allowed to flourish due to lack of monitoring by the responsible authority. 33. Enforcement and monitoring compliance. On all major steps of the procurement process, the mission witnessed a gap between the existing legal framework and the practices followed. The reasons for this are multiple, but it is a common feature of all procurement entities visited, that monitoring and enforcement of existing rules is almost non-existent. This is the case for procurement on both central and local level, as well as in the parastatals. Main Recommendations on Monitoring and Contract Management Short term * Enforce existing rules on proper record keeping * Increase quality in specifications to reduce need for variations * Establish deterrence by enforcing existing rules on punishment for misprocurement * Establish awareness of legal framework.. Medium term * Execute a general program of monitoring, audit and enforcement, with specific annual goals  Tanzania CPAR- Volume I - 16 - April 30, 2003 3. ORGANISATION AND RESOURCES Organisation 34. Public procurement decisions in Tanzania are currently made by the CTB; ministerial tender boards; regional administration tender boards; district tender boards; local government tender boards; and parastatal tender boards. In addition to these institutions, there are other relevant organisations such as: the Attorney General, who is responsible for prosecuting breaches of the Procurement Act; the Auditor General who responsible for auditing all procurement transactions; and the Prevention of Corruption Bureau (PCB), which investigates corruption related offences. Also relevant are the Government Stores (GS), responsible for procurement of a variety of goods for all central government entities; and the Central Medical Department (CMD), which is responsible for the procurement and distribution of medical supplies. 35. Role of the Central Tender Board. The most critical issue is the dual role of the CTB currently maintaining both executive and regulatory powers. According to the Procurement Act, the CTB has the following functions: * Regulatory: (i) oversee and monitor the conduct of procurement by the various entities; (ii) advise the Government on procurement policy; and (iii) in cooperation with local and international organisations, supervise the management and training of a cadre of procurement specialist staff within the civil service. * Executing: (i) approve the issue of tenders or the use of alternative methods; (ii) execute tenders; and (iii) review and approve tenders. 36. This mix of powers and functions contributes to an unstable situation, whereby the CTB on one hand participates in the procurement procedure by issuing, executing and approving tenders and on the other hand monitors the same procedures. This leads to a situation where the CTB in reality monitors its own deeds, which is contradictory to all established principles of separation between executive and regulatory powers. It ultimately leads to the CTB losing authority and credibility as a regulatory body. The executive role of the CTB further results in lack of accountability and responsibility at the level of the ministerial tender boards and the ministerial Accounting Officers. Under the current system, the Accounting Officer is fully accountable for the budget but not for procurement with a value above the threshold for CTB approval under that budget. 37. Decentralisation. The thresholds laid upon lower-level tender boards are generally perceived as too low. Rather than increasing the thresholds across the board, it is suggested that the procurement be completely decentralised to the ministerial level, leavin, ie CTB as a purely regulatory and monitoring body. Advantages of full decentralisation: * Greater accountability at the Ministry level and for the Accounting Officers, who would not only be responsible for the budget but also for all procurement under that budget * More efficient procurement, as the CTB would no longer serve as a bottleneck in the procurement process. 38. The potential risks, which have to be proactively addressed, are: (i) potential decentralisation of corruption; and (ii) lack of oversight and coordination. However, these risks may be mitigated by combining decentralisation with the establishment of a well-resourced regulatory body that monitors  Tanzania CPAR- Volume I - 17 - April 30, 2003 compliance and with powers to sanction violators of the laid down procedures. A prerequisite for this is to secure the information flow from the ministerial tender boards to the CTB and thereby ensure that proactive rather than reactive monitoring can be conducted. Also, decentralisation of the entire procurement portfolio to the ministerial level must be followed with substantial capacity building of the ministerial tender boards. 39. The Regulatory Authority. The Regulatory Authority (RA) should be a policy and regulatory body. It should also be vested with strong monitoring powers, allowing it to monitor all stages of the procurement process, from procurement planning to contract management, i.e. the entire procurement cycle. The RA should have the following tasks: (i) Monitoring the public administration and the procurement environment in order to implement proactive and/or corrective measures when necessary. (ii) Forging policies for the future of procurement. The RA will be the foremost advisor to the Government on matters of public procurement. (iii) Administrative review the RA will be the second level of complaint for a bidder, consultant or contractor complaining of a violation in procurement pro,ceedings. (iv) Rezulatorv body the RA will be responsible for issuing and updating of regulations. (v) Capacity building. The RA shall oversee and coordinate activities aimed at enhancing procurement capacity at all levels of Government. This includes coordination and cooperation with independent training institutions tasked with the implementation of tailored training activities. (vi) Information dissemination. The RA shall be responsible for coordinating all information efforts aimed at enhancing the knowledge of the procurement system in general and of procurement decisions in particular. 40. The location of the RA. It is suggested that the RA be established as an autonomous body reporting directly to the Minister of Finance and not as present to the Permanent Secretary (PS) of the MoF. By maintaining the RA under the auspices of the Minister of Finance, the RA will benefit from the strength and political influence of the MoF vis a vis other ministries. In addition, the MoF is the coordinator of the major reform efforts and will also be a key player in procurement reform. Thus, by maintaining links between the RA and the MoF, the necessary momentum for procurement reform is best ensured 41. Establishment and Strengthening of PMUs. In line with the decentralisation and the establishment of a professional procurement cadre, as described in detail below, the already existing supplies units should be transformed into regular Procurement Management Units (PMUs). The PMUs will provide support and secretariat services to the decentralized tender boards, and will be responsible for the process aspects of procurement. 42. Monitoring - Securing information flow to the RA. To ensure comprehensive monitoring of the procurement process by the RA, the reform will need to establish sound and efficient information mechanisms and procedures between the RA and all the procuring entities. T his focus on the information flow should ensure that the RA can carry out its monitoring role in a pro-active manner and not only react to already implemented procurement decisions. It is therefore advised that an information sharing model be developed ensuring early and continued flows of information from the procuring entities to the RA. Ideally such a model should entail an early warning mechanism allowing the RA to carry out reviews of planned and ongoing procurement and not merely finalised procurement processes. The information sharing and early warning should be integrated in an Information Management System (IMS) tailored specifically for the Tanzanian setting. To facilitate efficient monitoring by the RA, the IMS should include the following features:  Tanzania CPAR- Volume I - 18- April 30, 2003 * Intelligence gathering, i.e. systematised reporting to the RA by procuring entities providing information at various stages of the procurement process * Information matching, allowing the RA to match information and identify high risk procurement jobs * Targeting - where the RTCB based on the risk assessment, conduct targeted early review of certain high risk procurement jobs Information sharing, ensuring that information is shared among all relevant parties and thereby enhancing transparency and accountability. 43. The risk assessment part of the IMS could focus on obtaining and matching information regarding certain procurement jobs, for example procurement jobs: (i) of large value; (ii) within specifically corruption prone sectors, such as construction; and (iii) within procuring entities with weak capacity. 44. The monitoring role of the RA vis-a-vis local government. As part of an overall focus on strengthening monitoring of public procurement, there will be an increased need for strengthening the institutions, which will carry out the monitoring functions. Rather than building up extensive monitoring capacity at both the RA and within the President's Office/Regional and Local Government, it is suggested that the RA be empowered to directly monitor local government procurement, and that RA be C -"ered to intervene at all stages of procurement carried out by local government authorities. This funr. falls into line with the recommendation above in the legal framework chapter suggesting that one uniform legal framework for procurement be introduced for both central and local government. 45. The Public Procurement Appeals Authority. In consequence of the establishment of the RA as an autonomous body, the PPAA should also be detached from the MoF. The RA could maintain the secretary function of the PPAA. The PPAA should have members appointed by the MoF, by the Procurement Professionals' Body (PPB), and by the private sector. The latter measure is important to ensure that private sector complainants, i.e. the bidders, maintain the impression that the PPAA is a fair and credible review authority. 46. Local government procurement. The presence of councilors on the local government tender boards has been an issue of extensive discussion within the local government reform process. All the local government tender boards visited were constituted of elected members of the Council. Since procurement is an executive function, it should be carried out without political interference. Politicians are responsible for approving the budget and supervising its implementation, but should not be involved in the executive role of dispersing the funds. Thus, the oversight role of the councilors is compromised, when they, as in the present situation, are also involved in the execution of the budget provisions through procurement. The mission is pleased to know that the new Local Government Procurement Regulations excludes councilors.from the tender boards. 47. Another issue calling for immediate attention is the complete lack of monitoring and audit of local government procurement. None of the districts visited had had their procurement processes audited, despite the many indications that irregularities are frequent. As an aspect of the monitoring element, the mission identified no examples of local community involvement in the monitoring of local public procurement. There is need to build monitoring capacity at the community level. 48. However, other issues of equal importance must be addressed, and one of these is the general lack of capacity for conducting sound procurement at the local government level. A major task persists in introducing the new legal framework to all relevant parties involved in the procurement process, including the local communities and local civil society.  Tanzania CPAR- Volume I -19 - April 30, 2003 49. Utilising the advantage of scale - Government Stores and Medical Stores Department. At present the Govemment uses the advantage of scale when procuring through the Government Stores (GS) and Medical Stores Department (MSD). Both the GS and the MSD are perceived as ineffective and not meeting demands from the public entities. The GS are obliged to supply all levels of government, but have neither the funds, nor the organisational capacity to do so. As a result, most government entities have stopped relying on the GS and have introduced their own procurement measures for items that should be procured by the GS. The only item, which the GS is still able to procure and provide at competitive prices, is fuel. Overall, however, it is obvious that the present set- up of centralised procurement and storage pose a barrier to a cost effective and value for money oriented procurement system, and the mission suggests that an effective "zero storage system" be introduced. 50. The scope of the MSD is regulated in the Medical Stores Department Act (MSA) of 1993, which establishes the MSD as an autonomous department within the Ministry of Health (MoH). The MSD procures drugs, medical supplies, equipment, vaccines, medical kits and special products. About 90% of MSD orders are procured through ICB, and this has helped considerably to reduce the prices of pharmaceuticals and related products. In light of the extensive resources invested in the current MSD procurement system, and the previous negative experiences with (extensively) decentralised medical procurement, the mission agrees that this set-up should be kept for the medium term. It is, however, recommended that the long-term objective should be to decentralise the medical procurement along the same lines as for the GS. 51. Information dissemination regarding the RA and the PPAA. A general lack of knowledge about the PPA prevails, especially at the local govermment level. Apparently the lack of complaints and appeals lodged is closely connected to the lack of information about the appeals option, as well as a general lack of trust in appeals leading to remedial action. After reforming the CTB and setting up the PPAA, a first step should therefore be to design and initiate a nation wide information campaign targeting central and local govemment, parastatals as well as the international and national business community and informing all these about the new institutional set-up, its implications, and paying particular attention to the appeals system. Resources and Capacity 52. Lack of capacity is the single most important issue in the sector, and all of the interlocutors with whom the mission met, cited lack of capacity and skilled personnel as a great impediment to conducting sound procurement. Also the lack of capacity on the supply side, i.e. within the private sector was cited as an obstacle. With decentralisation and the creation of properly staffed procurement units in each procuring entity the demand for skilled procurement staff will undoubtedly rise. The procurement capacity of the various procuring entities varies greatly. Some ministries like the Ministry of Works and large parastatals like TANROADS have quite extensive experience with procurement through many years of procuring under donor funded projects, whereas capacity at local government level is diminutive. Here there is a great need for a quick yet carefully planned intervention. 53. Establishing a procurement cadre. A first step should be the introduction of a cadre of qualified procurement officials. At the moment procurement is mainly carried out by certified supplies officers without adequate procurement training. On the whole, procurement is not viewed as an established profession and does not present an attractive career path, and from this follows the overall lack of incentive schemes for procurement professionals. This situation stands in the way of establishing the necessary capacity for proper procurement in compliance with existing rules. The introduction of a specialised procurement cadre should be vested within the ongoing Public Service  Tanzania CPAR- Volume I -20 - April 30, 2003 Reform Programme (PSRP). The mission discussed this matter with the leadership of the Civil Service Department (CSD) of the President's Office, which was agreeable to the introduction of a specialised procurement cadre within the civil service career system. 54. Upgrading and certification of procurement professionals. There are currently 901 supplies officers employed within the public service. The challenge will be to organise the transition from mere materials management to full-fledged procurement. Ideally the CSD supplies staff category should be replaced with a category of procurement officers, and this category should be recognised within the public service meritocracy on the same level as other professionals, such as administrators, accountants, etc. Recognising that materials management is merely a limited aspect within the larger public procurement framework, it is suggested that a new procurement professional body (PPB) be established. This body should be tasked with the promotion of the new procurement cadte and should replace the NBMM as the certifying body for professionals working with procurement. The PPB should also be responsible for procurement training in close cooperation with the RA. The establishment of the PPB might be carried out by way of transforming the current NBMM, however, in choosing this path it is important to ensure that a truly new organisation and vocation is created. Public Service Pay and Pay Reform 55. From the on-set the reform of public service pay was a core component of the Civil Service Reform Project (CSRP). The CSRP was launched with two basic objectives for the pay reform: (i) to rationalise the compensation structure by making it more transparent, equitable and efficient; and (ii) to enhance public servants salaries to levels consistent with satisfactory performance motivation and productivity. Considerable progress has been made towards attainment of the first objective, and compensation structures have been simplified through the elimination of some allowances and benefits and consolidation of a simplified salary structure. However, public service pay levels remain low in both absolute and comparative terms, especially compared with salaries offered in the private sector. Capacity Building Measures 56. Currently the training offered to civil servants in public procurement is at best very sporadic and for the most non-existent. The implementation of the proposed procurement reforms is expected to generate an extensive demand for procurement training over and above the already limited availability, and the Government needs to address this issue by employing both short, medium and long term measures. Training for the reform of public procurement will not only cover the rules and regulations, it will also involve changes in ethical and cultural ways of doing procurement. Future procurement training should also include anti-corruption measures as further deliberated below. In order to create real impact the training must also address the supply side, i.e. the private sector, enabling the local companies to compete in both national and international bidding. On the short term, two immediate actions are suggested: First, a training needs assessment (TNA) must assess and specify the current capacity and the needs for capacity building within each institution, and will be crucial in the design and further development of a sound training programme Secondly, a survey of potential training institutions must be carried out in order to ensure the involvement of the most capable institutions. 57. Nature of the training. It is suggested that the public servants in need of training be divided into three main categories: (i) Procurement specialists: These are the persons, who will be involved in and in charge of procurement matters on a day-to-day basis, including the staff of the CTB  Tanzania CPAR- Volume I -21 - April 30, 2003 and all central and local government officials who will eventually be certified as procurement specialists (ii) Specialists in need of targetedprocurement training: This group will comprise individuals from the specialised bodies, which do not deal exclusively with procurement, but for which it is important to maintain a high degree of knowledge and experience with procurement related matters, i.e. employees of the PCB, Auditor General and Attorney General's Office. (iii) Public servants or others periodically involved in the procurement process: This group includes the members of the tender boards at both central and local government level and the various external and internal experts charged with developing technical specifications, etc. 58. In order to meet the training demands it is important that the training devised be targeted, well-planned and executed in a cost-efficient and value for money oriented manner. It is suggested that a Public Procurement Training Strategy (PPTS) be developed. The PPTS should be designed to deliver differentiated training for the above three groups. The PPTS should determine the content and the form of the training. The Public Procurement Training Strategy should be coordinated with the overall training strategy for the public service, and should also address how training will be funded (the choice is whether funds should be held centrally, and earmarked for procurement training, or be deemed part of the general training votes held by departments). Over the longer term, the training function might be coordinated or discharged by the newly created PPB in coordination with RA. Main Recommendations on Organisation and Resources Short term * Establish the Regulatory Authority (RA) as an autonomous regulatory body reporting directly to the Minister of Finance * Decentralise procurement to ministerial level * Change legal framework to include private sector representatives and representatives from the Procurement Professionals' Body (PPB) in the Public Procurement Appeals Authority (PPAA) * Appoint members of PPAA and ensure that it becomes operational . Provide RA full monitoring and supervisory powers vis-a-vis local government procurement * Transform supplies units into procurement management units * Conduct training needs assessment * Conduct survey of potential training institutions * Develop Public Procurement Training Strategy. Medium term * Establish Information Management System linking RA with procuring entities * Establish a new cadre of procurement specialists while phasing out supplies officer cadre. * Conduct certification of procurement specialists * Conduct information campaign on the new institutional set-up within procurement * Develop initiatives for civil society involvement in procurement monitoring  Tanzania CPAR- Volume I -22 - April 30, 2003 * Replace National Board of Materials Management with PPB * Introduce Selective Accelerated Salary Enhancement (SASE) scheme for key procurement staff * Coordinate and ensure quality of procurement training