About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic

Monday, September 8, 2014

Missing the ball and kicking the leg (Part2)

How adherence to public procurement is inflicting high costs and creating a disaster for the country

When David Jamwa was appointed Managing Director of the National Social Security Fund (NSSF), he found the Fund in the final stages of procuring a contractor to build a 29-floor Pension Towers on Lumumba Avenue. Roko Construction won the tender of Shs $21m. The structure did not optimally utilize the land and its value as its rate of return was estimated at 18%.  Jamwa asked the architects to design a new structure to maximize returns from the plot.

The NSSF architect did a new design of 52 floors. It was given to a quantity surveyor who returned a sum of $55m as its likely cost, which would have increased the rate of return to 18%. Meanwhile, Roko were already on the site excavating the ground. Jamwa asked them to excavate according to the new design to create six underground parking floors instead of two as previously planned. They were willing to build the new design at the sum given by the NSSF quantity surveyor. Jamwa wrote to PPDA to give a waiver so that instead of re-tendering (which would last another two years), NSSF keeps Roko by single sourcing.

It was clear that Jamwa had violated many procurement rules. He had changed the design of a building whose tender had been awarded. He had instructed Roko to excavate for the new design without retendering. But his decision was right from both a business point of view and from the view of rationality. I was in the office of Chris Kasami (then Finance Permanent Secretary/Secretary to Treasury) with his deputy, Keith Muhakanizi, when a debate on this issue came up. Muhakanizi argued that regardless of Jamwa’s violations, retendering would be costly. You either had to hire Roko to build the new design or compensate them for the contract they had won and which was going to be cancelled.

But in complete disregard of rationality (by adhering strictly to procedures and the law), the IGG ordered that the entire process be stopped as she investigated. When her report came out a year later, she found all these procedural violations by Jamwa and ordered a retendering. Meanwhile, Roko had stopped their work and their equipment was lying idle. Under the contract, this allowed them to claim compensation for time lost that was due to delays caused by NSSF. Roko had workers and equipment on site all of which were costing it money.

Worse still, in 2008, the dollar was worth Shs 1,600, a bag of cement Shs 13,000 and a litre of Petrol Shs 1,800. NSSF went without a board or substantive MD for almost two years. When Richard Byarugaba was appointed in 2010, the dollar had risen to Shs 2,300, a bag of cement to Shs 28,000 and a litre of petrol to Shs 3,700. He immediately initiated a retendering process, which lasted two years. When it was finally awarded in late 2012, Roko lost to a Chinese company, CCECC; and the new contract sum was $95m.

Meanwhile after excavating the ground to prepare for six underground floors, a risk developed. Nakasero Road and Lumumba Avenue were about to collapse, endangering the lives of motorists. NSSF asked PPDA for a waiver to get Roko to build the six underground floors to hold both roads. Under such emergency conditions, Roko bargained hard. Compensation for delays and these works came to $16m making the entire project cost $110m – double the initial sum. That is the cost of trying to correct Jamwa’s procedural mistake. Is that desirable?

This situation has played out in the tender for the National ID Project (where work delayed for seven years and project costs tripled) and Bujagali Power Dam (where works delayed for ten years and the project sum doubled). And it is happening now for Mukono-Katosi Road. The company that won the tender to build the 74km road, Eutaw Construction Company Inc of Florida, is a briefcase company with no capacity to do the work. But it did what UNRA failed to do – it has subcontracted a competent Chinese company, CCECC, which built the Fort Portal-Bundibugyo road. CCECC is on the ground with equipment and doing the work.

However, according to the contract, Eutaw is only allowed to subcontract only 30% of the works. The challenge for Uganda is whether to actually allow UNRA do a direct procurement of CCECC and therefore finish the road within the budget and on time or to cancel it and order a retendering. However, retendering – in the best-case scenario and assuming no one complains about the procedures – lasts 18 months. With prices of things like cement, dollars, bitumen, fuel etc. going up, it is possible that the contract sum can go up. That means that the road may delay for another four years and be done at double the cost.

This is where my disagreement with the IGG begins. In her defense against my criticism, she correctly cites the Constitution, the act establishing her office and its mandate and the procurement laws of Uganda. All that is fine. However, the law is not a substitute for common sense. If a strict, adherence to the law delays major government projects and multiplies the costs by a factor of two or three, then common sense must set in. As Jesus advised overzealous Pharisees implementing Jewish law, the Sabbath was made for man; man was not made for the Sabbath. Equally, the law is made for Ugandan citizens; Ugandans are not made for the law.

Decisions about violation of procedures should never miss sight of the goal that is sought – getting a good quality service at the best price available in the shortest time possible. Adhering to every rule can be costly as the NSSF’s Pension Towers on Lumumba Avenue example demonstrates. In such cases, it is important to exercise rational judgment and bend some rules where necessary. I am not saying we remove procedures entirely. They are very, very important. But where they undermine realization of the main objective, pragmatism must be employed.

Many countries, beginning with Singapore, have since discovered that procurement and other government rules and procedures can be cumbersome and counterproductive. Nations like Australia, Canada and New Zealand reformed their procurement systems. Rather than emphasize adherence to procedures, they hold public officials accountable for results. Did you deliver the right service at the right price, within the right time frame at the required standard? Thus where strict adherence to procedures undermines the main aim, a public official is allowed to sidestep them.


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