Amd 01 Atch J.3 Atch A Annex 1_ BLI assessment.doc

MCC-08-0111-RFP-42, Amendment 01, Attachment J.3, Attachment A, Annex 1

Annex 1: BLI assessment The matrix below presents the complete assessment of all Baseline Indicators (BLIs) included in the OECD-DAC Methodology for Assessment of National Procurement Systems (version 4, July 17 2006). Each BLI sub-indicator is assessed and scored against the criteria and key to scoring detailed in the Methodology, Section II, Part I. See the Methodology for a detailed listing of the criteria against which each sub-indicator is measured.

Pillar I – Legislative and Regulatory Framework

Indicator 1:

Public procurement legislative and regulatory framework achieves the agreed standards and complies with applicable obligations

b) The PPA and Regulations are available for purchase from the Government Printer in Lilongwe, Zomba and Mzuzu only. The documents cannot be purchased outside these cities. The PPA as well as the Desk Instructions can also be downloaded from the ODPP website, whereas the Regulations are not readily available.

c) The legislative framework covers goods, works and services for all procurement using national budget funds (cf. PPA art. 3)

(a) and (c) met, (b) not met

b) Open tender is the default procurement method as prescribed in the PPA art. 30.

c) The PPA art. 3 (4) prohibit the division of tenders with the intention of avoiding the monetary thresholds.

d) Standards for international competitive tendering are set forth in the PPA, art. 30 (6) (a)-(c) and further described in the Regulations.

(a), (b), (c) and (d) met

b) The Regulations art. 46 outlines the deadlines for submission of bids: 30 days for national competitive bidding, 45 days for international competitive bidding, and 5 days for quotations.

c) According to PPA art. 31, publication of open tenders shall be published in the local press and in the Government Gazette. International tenders shall be published in internationally recognised papers as well as on the internet.

d) Art. 59 of the Regulations lists the requirements to the tender publication providing ample information for potential bidders to determine their interest and ability.

(a), (b), (c) and (d) met

b) The PPA art. 14 requires bidders to be registered with the Registrar of Companies or with the National Construction Industry Council of Malawi (NCIC) or other similar entities. However, the PPA and Regulations also state that the sole absence of registration is not ground for exclusion of a bidder from participation in procurement proceedings (though registration may be a requirement for contract award, cf. Regulations art. 43 (6).

c) PPA art. 18 prohibit corrupt and fraudulent practices in public procurement, and the Regulations, Part X, Division III allows for debarment of bidders for up to 2 years in cases of corruption and fraud. The Regulations also specify that members of Internal Procurement Committees may be expelled in cases of corruption and fraud.

d) The Standard Bidding Documents (SDBs) issued by the ODPP contain rules for participation of government-owned enterprises, e.g. SBDs for Works – National Competitive Bidding, section 3.6, which prescribes that government-owned enterprises in the Republic of Malawi may only participate in public procurement processes if they are legally and financially autonomous, operate under commercial law and are not a dependent agency to the Procuring Entity.

(a) not met, (b), (c) and (d) met

b) The Regulations art. 25 (a) calls for the use of neutral specifications…

c) …unless there is no other sufficiently precise or intelligible way of describing the procurement requirements, and words such as “or equivalent” are included in the specifications.

(a), (b) and (c) met

b) The PPA art 32 (19) prescribes that non-price criteria shall, to the extent possible, be given a relative weight in the evaluation or be expressed in monetary terms wherever possible.

c) Art. 93 of the Regulations provide detailed guidance on the evaluation of consulting services including the relation between quality and cost.

d) The Regulations art. 54 prescribe confidentiality during bid evaluation.

(a), (b), (c) and (d) met

b) The Regulations art. 75 further require that records of the bid opening are kept in the record of the tendering proceedings required by Section 27 of the PPA. Also, according to PPA art. 27 (2) procurement records shall be maintained for a period of minimum five years.

c) The Regulations art. 48 describe the reception and security of bids, and art. 54 of the Regulations prescribe confidentiality in relation to examination, clarification, evaluation and comparison of bids.

d) The Regulations art. 48 provide guidance on reception and security of bids.

(a), (b), (c) and (d) met

b) PPA art. 38 establishes the head of the procuring entity (PE) as the first recourse and the independent Review Committee as the second tier of recourse. According to the PPA art. 38 (8), the Review Committee may order remedies annulling and revising decisions made by PEs.

c) PPA art. 37 through interpretation to the contrary establishes the matters that are subject to review.

d) PPA art. 37 provides timeframes for decision making by both the PEs and the Review Committee.

(a), (b), (c) and (d) met

Indicator 2:

Existence of Implementing Regulations and Documentation

b) The Regulations art. 3 (2) requires the ODPP to periodically issue an updated compilation of the main legal texts governing public procurement, including the Regulations. As the Regulations were only issued in September 2004, no updates have yet been made.

c) It is noted that the ODPP has as part of its mandate the responsibility to propose improvements in public procurement procedures (PPA art. 4 (2)(i)), which will typically be done through amendments to the Regulations.

(a), (b) and (c) met

b) The SBDs do include clauses and templates, e.g. the SDBs for procurement of Goods under National Competitive Bidding. Also, according to the PPA art. 5 (2)(c), the PPOA shall issue standardised and unified procurement regulations, instructions and bidding documents, which shall be binding on all Government Ministries, departments and parastatals. Thus, the SBDs, including their clauses and templates are indeed mandatory.

c) Art. 12 of the Regulations requires the ODPP to develop and maintain SBDs and demands that PEs use the SBDs.

(a), (b) and (c) met

b) The PPA art. 13 and the Regulations (Part IV) are not clearly stipulating a pass/fail principle. However, the Desk Instructions, section 35 clearly states that those conducting pre-qualification must “assess each application against the criteria defined in the pre-qualification document and determine whether each bidder is qualified or not qualified.”

c) The Regulations Part IV, Division II provide guidance on the use and applicability of pre-qualification procedures.

(a) met, (b) not met, (c) met.

b) The Regulations art. 97 provides guidance on the evaluation of quality in an easy accessible manner.

(a) and (b) met

b) The ODPP has a clearly stipulated mandate for maintaining and updating the desk instructions and do so on a continued basis.

c) See above.

(a), (b) and (c) met

b) The content of the GCCs is generally consistent with internationally accepted practice, e.g. FIDIC rules.

(a) and (b) met

Pillar II – Institutional framework and management capacity

Indicator 3:

The public procurement system is mainstreamed and well integrated into the public sector governance system

(a), (b) and (c) met

Indicator 4:

The country has a functional normative/regulatory body

According to the PPA art. 41 (1), the ODPP shall report on its activities to the “Minister” after each financial year. The PPA, however, does not specify which Minister the ODPP shall refer to. It is generally understood that the ODPP shall report to the Minister responsible for procurement affairs at any given time. At the moment, the Minister responsible for procurement issues is the President himself, which means that the ODPP will be reporting to the Office of the President and Cabinet (OPC), who shall lay the report before the National Assembly.

Neither the PPA nor the Regulations specify how adequate funding for the ODPP is secured, hence leaving the issue of financing to administrative decisions which can easily be changed.

In addition to these roles, ODPP has also taken on a third procurement management role, namely that of carrying out prior reviews and issuing ‘no objections’ to award decisions made by PEs. Although no provision of this is made in the PPA, Regulations or Desk Instructions, in practice the ODPP requires all procuring entities to present award decisions (for procurements above the established threshold) to the ODPP for prior review and ‘no objection’ before the official award notice may be issued by the PE.

The prior review arrangement goes back to the passing of the Public Procurement Act which took place in a vacuum. In this situation, the prior review function was a means to correct misinterpretations and malpractices at procuring entity level on an ongoing basis, hereby ensuring continuous compliance improvements. At the time of writing, the ODPP has step by step begun to increase the prior review threshold, hereby expecting to slowly phase out prior reviews in the coming years.

Nevertheless, the ODPP’s involvement in procurement management functions, and in particular its ‘no objection’ function, constitutes a major weakness to the ODPP as an oversight body by jeopardising the separation between oversight and operational functions, hereby potentially causing conflict of interest in the review and audit process, which also falls under the ODPP’s mandate. In addition, for reasons of procurement efficiency, ODPP involvement in direct procurement operations through ‘no objection’ is unadvisable, as it adds an extra element to the procurement chain, thus postponing the tender award decision and generating bottlenecks in the process.

Indicator 5:

Existence of institutional development capacity

Previously, the Government Gazette has been the main media for collection and dissemination of tender information. However, due to lack of funds and low frequency of publication, the Gazette is now no longer used to disseminate tender and award notices.

In September 2006, the ODPP officially launched a website developed to provide bidders and all other interested parties access to procurement information at the click of a button. The intention of the website is to provide complete information about all open and closed tenders and contract awards published by all public institutions.

The website currently only hosts a few open and closed tenders and no contract awards. However, the ODPP has recently initiated training activities and provided extra computers at the PE level to correct this situation.

· Quarterly Procurement Reports: The ODPP has developed a template through which all procuring entities must submit Quarterly Procurement Reports on all procurement activities.

· Monitoring Reports: In addition to the Quarterly Procurement Reports, the ODPP has initiated monitoring visits to procuring entities based on which a monitoring report is prepared.

b) Through the Quarterly Procurement Reports, procuring entities submit descriptions of all goods, works and services procured, procurement method used, number of units, unit price, total contract value, IPC minutes date, contract award, and current contract status. Similarly, the monitoring sheets enable the ODPP to collect information from the PEs about their level of compliance with the PPA and Regulations in areas such as procurement method, tender evaluation and awards, use of SBDs, etc. At the time of writing, all procuring entities in practice submit quarterly reports to the ODPP, while the ODPP has drafted monitoring reports for more than 60 PEs.

c) The Quarterly Procurement Reports submitted by the procuring entities at the current stage do not undergo verification by the ODPP or auditors, thus constraining the reliability of the information.

d) As both the Quarterly Procurement Reports and the Monitoring Reports are relatively new tools to the ODPP, neither of them yet form basis for aggregated statistics or systematic analysis of procurement trends.

(a) and (b) met, (c) and (d) not met

b) The training policy does not allow for evaluation and periodic adjustment based on feedback and needs, although adjustments in practice have been made.

c) The training policy does not provide for advisory services or a help desk.

(a) met, (b) and (c) not met

b) The DHRMD has initiated a performance appraisal mechanism according to which all government officials on performance contracts are subject to evaluation based on outcomes and professional behaviours. Since all ODPP staff is employed on performance contracts, they are covered by this performance appraisal mechanism. The performance appraisal mechanism in place, however, does not provide for performance evaluation of procurement officers at procuring entity level.

c) N/A (see above)

(a), (b) and (c) not met

Pillar III – Procurement Operations and Market Practices

Indicator 6:

The country’s procurement operations and practices are efficient

(b) The PPA art. 11 provides for a systematic matching of skills against requirements in the recruitment of specialised procurement staff. In practice, this does not happen, partly due to the fact that the procedures for recruitment of specialised procurement staff give rise to a number of uncertainties across the recruitment system. While the Department of Human Resources Management and Development (DHRMD) is responsible for approving (to be legalised by a warrant of establishment issued by the Treasury) new procurement units and their positions upon request from the procuring entities, a system for selection and appointment of procurement officers – either at the decentralised level or in the form of a common service for the procurement cadre – is not yet in place, in practice leading to lack of new appointments in the procurement entities. The seemingly slow progress in this area appears to be partly due to poor collaboration and an unclear division of responsibilities between the DHRMD and the ODPP, in practice freezing the development of a career path and recruitments in the procurement field.

(c) Both procurement officers and staff required to undertake procurement activities on an ad hoc basis in procuring entities suffer from an immense lack of the knowledge needed to undertake procurements. The lack of procurement competence covers a wide range of areas from a basic understanding of the legal framework in place and a core understanding of what is considered good procurement practice to a detailed technical understanding of how to use SBDs and GCCs, how to develop technical specifications, how to apply evaluation criteria, etc. While this trend is more pronounced among smaller procuring entities and at local authority level, even major central government procurers still suffer from a serious lack of procurement officers with the right set of skills, knowledge and competence.

(a) met, (b) and (c) not met

(b) Information and training programmes on public procurement for the private sector exist, although at present in very limited scale. At the time of writing, a total of three short-term workshops targeting private sector participants have been held, while training courses and workshops provided by other institutions to target the private sector are virtually non-existent.

(c) The public procurement training market is characterised by the paradoxical combination of a very extensive training need and a relatively low demand. As a result, the main providers of procurement training of Malawi report that there is no waiting time to be enrolled on a course, and some courses even face the challenge of achieving sufficient applications. The gap between training need and training demand seem to be partly attributable to the lack of funds available among individuals and line ministries to cover the fees associated with the available procurement training. Proof of this is found in the significant waiting time to become accepted to an ODPP sponsored place as well as the numerous applications so far received for the government-subsidised degree programme in procurement starting up in 2008.

(a) met, (b) and (c) not met

(b) According to the PPA art. 27 (3), the records must include a description of the object of the procurement; a list of the participating bidders and their qualifications; bid prices; a summary of the evaluation of bids; summary of any review proceedings and decisions thereon; requests for clarification and responses thereto; a statements of grounds for cancellation of procurement proceedings; a statement of grounds for choice of a procurement method other than tendering or request for proposal for services; a statement of ground for reduction of bid-preparation periods; and information concerning rejection of bids. The requirements are further detailed in the Regulations art. 168 and 172, which also require the records to include final signed contract documents, claims and dispute resolutions, final payments and disbursement data.

(c) The PPA art. 27 (2) establishes that documentation included in the procurement records shall be maintained for a period of five years from the date of a decision to terminate or cancel the procurement action, the date of contract award, or the date of contract completion, whichever comes later. Neither the Corrupt Practices Act nor the Public Audit Act include provisions on document retention for the purpose of conducting audits or investigating and prosecuting cases of fraud and corruption.

(d) Neither the PPA nor the Regulations or the Desk Instructions establish security protocols to physically or electronically protect records.

(a), (b) and (c) met, (d) not met

b) The PPA, part III regulates delegation of decision making authority to the lowest competent levels by prescribing Internal Procurement Committees and Specialised Procurement Units to be established in all Ministries, departments and parastatal organisations, and other entities and authorities of public administration in Malawi.

c) Accountability for decisions is defined by the PPA, art. 8 (2), and further detailed in the Regulations, art. 20-22, and Desk Instructions, p. 11-13.

(a), (b) and (c) met

Indicator 7:

Functionality of the public procurement market

b) The responsibility of developing procurement capacity among private companies, including SMEs, e.g. through training and other facilitation of access to the procurement marketplace, lies with the ODPP. The ODPP has recently initiated trainings for the private sector and expects to upscale these activities in the future. At present, three workshops on the use of the PPA, Regulations and SBDs have been held, and more are being planned. Except for these workshops, no SME capacity building initiatives are currently on the ground. At the time of writing, though, a consultative process has been initiated by the ODPP with the aim of promoting SME access to the procurement market in accordance with the Regulations art. 164.

c) The Government is generally reported to encourage public-private partnerships (PPPs), and some forms of PPPs, e.g. concessions, have been in existence for some time. Examples of such concessions are the Malawi Railways, Malawi Lake Services and the RAIPLY Viphya Forest. At present, however, no legal framework exists to support PPP arrangements.

(a), (b) and (c) not met

Competition for public contracts in most fields is considered to be keen, with procuring entities generally receiving a large number of bids in response to tenders. However, competition for large government contract is limited to a relatively small group of companies. E.g. less than 7% (34) of the Building Contractors and 3% (12) of Civil Contractors on the National Construction and Industry Council’s List of Registered Contractors for 2005-2006 are listed in the unlimited category, thus allowing them to compete for the large scale building contracts.

Furthermore, the private sector – and particularly SMEs – at the same time suffers from a number of capacity constraints limiting its access to the procurement market:

· Many private sector participants lack basic knowledge of the legal framework surrounding procurement, including the provisions of the PPA, Regulations and SBDs. Proof of this can be found in the number of non-responsive bids received by procuring entities. Depending on the type of contract in question, the procuring entities thus indicate that roughly 50% to 70% of the bids received are on average deemed non-responsive.

· This trend is closely linked to a second constraint, namely that many bidders – particularly SMEs – often do not have the technical and legal capacity necessary to comprehend the terms and language used in the SBDs. In result, many SMEs fail to provide the required tender documents, leading to their exclusion from competition.

· Lack of advanced technical and managerial skills is a challenge facing the vast majority of SMEs in the procurement market. To compensate for this lack, some companies choose to dump their prices when participating in tenders, hereby creating a situation where the contract award is made to a firm that is not able to provide the required deliverables.

· The business culture of private sector participants also in some cases presents a constraint to the development of a strong private sector. For example, many SMEs display a fear of growing, which may ultimately result in inability to professionalise their business model and hence their competitiveness.

· Access to tender information and tender documents is a major constraint for private sector participants located outside the main cities of Malawi, cf. indicator 5(a).

· In the tendering process, the issue of collateral is prevalent among SMEs, which are often not able to provide bid securities. For small contracts, the required bid securities are in some cases oppressive to upcoming private sector providers.

· A third major systemic constraint to SME participation on the procurement market is the lack of access to credit needed to implement an awarded contract. SMEs often crucially depend on these credits, as they do not have the liquidity required to initiate implementation without bank support. However, banks are generally reluctant to provide credit to SMEs, or require high interest rates in return for their services, thus making bank credit arrangements unaffordable for many SMEs.

· Other constraints facing many SMEs include late payments, performance bonds, high tender document fees, bundling of tenders, and regulatory costs.

Indicator 8:

Existence of contract administration and dispute resolution provisions

b) The SBDs generally include clauses on inspection and contract amendments, see for example the SBDs on Goods – International Competitive Bidding, sections 26 and 33. These clauses comply with international standards.

c) The Regulations art. 141 contains general provisions for procuring entities to take such steps as are deemed necessary to ascertain or verify that goods, services or work items procured conform to the technical requirements set forth in the procurement contract. It is further prescribed that in performing that duty, the procuring entity may establish inspection and testing facilities, employ inspection personnel, enter into arrangements for the joint or cooperative use of laboratories and inspection and testing facilities, and contract with others for inspection or testing work as needed.

d) Supervision of civil works is carried out by qualified supervisors from either the Buildings Department or the National Roads Authority of the Ministry of Transport, Public Works and Housing.

e) Although the situation of final payments has significantly improved in recent years, some procuring entities reportedly still face issues of late final payments.

(a), (b), (c) and (d) met, (e) not met

b) The law is consistent with accepted practices for neutrality of arbitrators, due process, expediency and enforceability.

c) The country accepts as a matter of course international arbitration for international competitive tendering.

d) The GCC generally include provisions for dispute resolution, e.g. the GCC within the SBD for Goods – national competitive bidding. However, none of the documents refer specifically to alternative dispute solution mechanisms.

e) N/A, cf. item d).

(a), (b) and (c) met, (d) and (e) not met

b) The country has procedures to enable the winner in a dispute to seek enforcement of the outcome by going to the courts. The procedures are detailed in the Rules of Supreme Court White Paper of 1999.

c) The Institution Compliance Assessments carried out by the ODPP include questions on contract administration. However, the country does not have a process in place to monitor the level of enforcement of the outcome of the dispute resolution process specifically, or addressing performance issues in this respect.

(b) met, (a) and (c) not met

Pillar IV – Integrity and Transparency of the Public Procurement System

Indicator 9:

The country has effective control and audit systems

The Auditor General’s office derives its mandate from the Constitution section 184, whereas the mandate and operations of the NAO are detailed in the Public Audit Act (PAA). NAO audits are carried out in all public entities (including parastatals) and reports go directly to the Parliament (Public Accounts Committee). The NAO primarily conduct financial audit and consider procurement a part of this. The NAO is currently developing audit manuals for financial audit and performance audit respectively. Though, neither of these manuals have yet been issued.

Neither the NAO not the IAU currently have in place frameworks or procedures for risk assessment.

(a) and (b) met, (c) and (d) not met

Enforcement of internal and external audit recommendations remains weak. The NAO is in two years in arrears, currently finalising the draft audit report for the FY 2005/2006. The arrears are partly caused by the NAO’s persistent difficulty in obtaining final accounts from the Treasury. Thus, the final accounts for the FY 2004/2005 were only received in March 2007. It is observed, and both the IAU and the NAO conceded to this, that controlling officers are generally not held accountable and no cases of disciplinary actions due to misappropriation of funds or other violations of the PFMA could be identified. This despite the fact that the PFMA does include punitive measures.

b) They include standards for conveying matters to the management through regular periodic reporting. The Ministry of Finance has issued a circular prescribing the establishment of IACs in public entities. These IACs are in place in some ministries but not in all.

c) Based on information from the NAO, which will often assess the work, strength and independence of the internal audit function, it is observed that the periodicity and written standards prescribed by the IAU are not always complied with.

(a) and (b) met, (c) not met.

Indicator 10:

Efficiency of appeals mechanism

b) The Review Committee of the ODPP serves as a second tier complaint level, the PEs being the first instance. Decisions by the Review Committee can be appealed to the High Court (only judicial review), and to the Supreme Court of Appeal.

c) Both the Act and Regulations provide timeframes for review.

(a), (b) and (c) met

Indicator 11:

Degree of access to information

In addition to being available through the respective communication channels, key information on procurement-related issues is furthermore consolidated into the website of ODPP, which includes a large documents archive, including relevant background information on ODPP and various aspects of the procurement system, newspaper articles, previous issues of The Public Procurer, as well as most legal documents.

The information provided by the PR Office is generally relevant and easy to understand. Furthermore, the information is relatively comprehensive, although not complete.