A REVIEW OF PROCUREMENT PRACTICES  AFFECTING PERFORANCE IN  KAMPALA CAPITAL CITY  AUTHORITY (KCCA)

BY

WILLIAM MWESIGYE BIRAHIRE
12/MPP/1/013

A SEMINAL PAPER SUBMITTED TO THE SCHOOL OF MANAGEMENT SCIENCE IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE MASTERS’ DEGREE IN PUBLIC PROCUREMENT OF THE UGANDA MANAGEMENT INSTITUTE.

JANUARY 2017
LIST OF ABBREVIATIONS
KCC – Kampala City Council
KCCA – Kampala Capital City Authority
PE – Procuring Entity
PPDA – Public Procurement and Disposal of Assets
TOR – Terms of Reference

DECLARATION
I, WILLIAM MWESIGYE BIRAHIRE hereby declare that,this is my original work and has not been presented to any higher institution of learning for any academic award and I have acknowledged all secondary sources of information used in this work.

Signature: ………………………………… Date: ……………………………………

APPROVAL
We certify that WILLIAM MWESIGYE BIRAHIRE carried out this study and wrote this  term paper  under our supervision and has been submitted for the award of a Masters Degree in Public Procurement of Uganda Management Institute (UMI).

SUPERVISORS

SIGNATURE:…………………………………… DATE:……………………………….
PROF. GERALD K. KARYEIJA

SIGNATURE:…………………………………..  DATE:……………………………….
MRS. OLUKA PROSS NAGITTA

DEDICATION
I dedicate this dissertation to my lovely wife Josephine and Children Shanice and Shandon. You have inspired me to work harder and achieve high academic excellence and become a good role model for the family.

ACKNOWLEDGEMENT

My utmost gratitude goes to my supervisors Ass. Prof. Gerald Kagambirwe Karyeija and Mrs. Oluka Pross Nagitta for the invaluable guidance and encouragement throughout this report.
Special thanks go out to the audit team at Public Procurement and Disposal of Public Assets Authority for facilitating me with various audit reports that were helpful during this work.
Above all, I thank the Almighty God for the life and financial resources that have enabled me to obtain this precious academic achievement. 

TABLE OF CONTENTS
LIST OF ABBREVIATIONS
DECLARATION
APPROVAL
DEDICATION
ABSTRACT
1.0.	Introduction
1.2.	Statement of the Problem
2.0.	Literature review
2.1.	Procurement planning
2.2.	Contract management
2.3.	Record management
4.0.	Methodology
5.1.	Findings and discussions
5.2.	Contract management
5.3.	Record keeping performance
5.4.	Conclusions and policy implications
REFERENCES

LIST OF TABLES
Table 1: Summary of performance of Kampala Capital City Authority financial year 2013/14
Table 2: Duration of payment
Table 3: Variation between the planned and actual contract value
Table 4: Contractual Delays

LIST OF FIGURES
Figure 1: Graphical representation of risk rating of contracts

ABSTRACT
The term paper examines the procurement practices affecting in the Central Division of Kampala Capital City Authority in Uganda. Specifically, procurement planning, contract management and records management were the variables of interest.  The methodology used was documentary analysis using audit reports of two financial years. The results obtained indicate that the performance in terms of adherence to procurement plans is still challenge. Contract management and poor records keeping leads to poor performance in the Central Division of Kampala Capital City Authority. The study recommends policy and managerial improvements in procurmenet planning, as well as the addressing contract management and records management deficiencies that are responsible for the prevailing poor performance.
Keywords: Procurement, Practices, Performance, KCCA

1.0.	Introduction 
Procurement constitutes the biggest part of an organisation’s expenses (Dlamini & Ambe, 2013; Emiliani, 2010; Oyuke & Shale, 2014). It is seen as a crucial activity to any organisation from households to firms, organisations and the government (Hornby, 2005; Choi, 2010; Makabira & Waiganjo, 2014). The private sector views it as a means of costs saving and the public sector sees it as a means for meeting the public’s needs efficiently, since it is funded with the public’s tax money.  It is for this reason that the procurement function, should be properly regulated to procure in the most economic, transparent and competitive manner. According to Bailey, Cloete and Pillay (2011), governments’ are the biggest spenders, spending taxpayers’ money, and thus should be regulated and procurement officers should be responsible with such funds. Mahmood (2010) observes that government expenditure constitutes 18.42% of the world’s gross domestic product (GDP). According to Akafia (2007), public procurement amounts to approximately 50% - 70% of government expenditure in Africa. However, this function is marred by corruption, though not limited to the huge amounts of money involved, the presence of unsupervised discretion; budgets that may not be tied to specified goals and payments that are not related to performance (Bolton, 2006). Thus leading to an increased number of countries and/or organisations giving this function a strategic status, to eliminate the mismanagement of funds and corruption within an organisation (Ambe & Badenhorst-Weiss, 2012). 

  Procurement has evolved from a transactional-oriented function to a strategic contributor   (Tate, 2015). Despite the business customer service model based on the New Public Management (NPM) approach, performance of public procurement has had observable impacts on the local governments which at times slows down government programmes (Kyohairwe & Karyeija, 2014). The main challenge for the proper regulation of this function is that it operates in an environment of increasingly intense scrutiny and is driven by technological developments and high social and political expectations (Eyaa & Oluka, 2011). 
Public procurement is the term used to refer to the way in which government funded entities,   contract for civil works and the procuring of goods and other services (Akafia, 2007). These goods and services include standard to large expenditures like stationery to the construction of roads, and key services like education (Dzuke & Naude, 2015). According to Eyaa and Qluka (2011), public procurement is the function of procuring goods and services by the government in order to fulfil public welfare. In addition to fulfilling the welfare of the public, procurement has also proven to be a successful management tool of public resources (Ambe & Badenhorst-Weiss, 2012). It has also been used by governments to achieve socio-economic objectives like improving the economy, protection against foreign competition, stimulating competition within industries and many other economic benefits (Le Roux de La Harpe, 2009).
Since the reform in 1990s, public procurement has been implemented by organizations with diverse results and a variety of problems have been encountered (Hakiza & Basheka, 2012; Sabitti, Muhumuza & Basheka 2011). A number of factors combine to determine the success of failure of procurement management (Oluka, 2012). This calls for an urgent need for a workable and efficient management modus operandi for improved implementation. Procurement practices such as planning, supplier selection and contract management among others in Uganda public sector are guided by the Public Procurement and Disposal of Public Assets Act (2003) amended 2014.  Each government entity is driven by its own unique to its operations. 
Kampala Capital City Authority [KCCA], formerly known as Kampala City Council, is one of the local governments that have faced procurement related challenges over the last decade. KCCA operates through five decentralised lower local governments known locally as ‘Municipalities’. Each of the five municipalities is a semi-autonomous entity with a fully-fledged political and technical structure similar to the one at the City or District level. There has been a long-standing power struggle between the political leadership of the Divisions and  at the District with regard to the question of whether to decentralise the procurement function from the District to each of the five Divisions or not. The purpose of this study was to find out the procurement practices (procurement planning, contract management and records management) that affect performance of KCCA. 

1.2.	Statement of the Problem 
Notwithstanding the enactment of the Public Procurement and Disposal Act, 2003, regulations and guidelines, to improve performance of the procurement function, public procurement in Kampala City Council Authority (KCCA) cases of incomplete contracts and scandals of no value for money is on the increase amounting to billions of shillings. Reports of terminated contracts arising out of unsatisfactory works or unexplained delays with moreover with exaggerated costs (Daily Monitor, July 2014). Therefore, ased on the foregoing background, the paper set out to assess the procurement management practices within KCCA that lead delayed delivery of services. The next section contextualizes the problem, presents the reviewed literature followed by methodology and discussion of findings. Finally the management and policy implications are discussed. 

2.0.	Literature review
2.1.	Procurement planning 
The process of planning in Local Government systems of Uganda requires identifying needs in a participatory bottom-up planning approach to ensure that the priorities of communities are addressed, and for these communities to own and sustain the plans, budgets, and investments (Katono, 2007; Kukkiriza, 2007). Developing countries public entities, Uganda inclusive are faced with challenges of developing effective procurement planning system and sticking to them (Oluka, 2013). This observation is amidst provision of training by Public Procurement and Disposal Authority (PPDA), which plays a central role in providing training, technical guidance and ensuring compliance to all set rules (Muhwezi, 2010). When the planning goes wrong, then service delivery is delayed. Therefore, planning is one area that needs careful attention from all stakeholders in public entities because it has a huge budget and if this budget can be managed in an accountable manner, then there will be improved service delivery and this is one way of accounting to the tax payers (Sabiti, Basheka & Muhumuza 2011; Ocharo, 2013; (Manthosi & Thawala, 2012). On the other hand, Pilcher (2012) notes that planning involves drawing up a shortlist of contractors deemed to have the appropriate qualifications to carry out the proposed work satisfactorily. These activities must be done to promote transparency, economy and efficiency, and limit favoritism (Basheka, 2008). The needs of an organisation can be of any type in the categories of works, services or supplies or any combination, which can be acquired by purchase, rental, lease, hire purchase, license, tenancy, franchise, or any other contractual means. Procurement planning was defined by four sub-variables namely: 1 needs identification; 2 scheduling of requirements; 3 determination of procurement methods; 4 solicitation planning (Hakiza & Bashka, 2012).
2.2.	Contract management 
Contract management is the active monitoring and control of all aspects of the relationship between the service provider/contractor and the client. For the purpose of this paper, contract management was operationalized in accordance with United Nations [UN] Procurement Practitioner’s Handbook (November 2006, p. 3) as   “the process that ensures that all parties to a legally binding agreement (contract) meet their respective obligations as efficiently and effectively as possible, delivering the business and operational outputs required and providing value for money”.
The above definition implies that a contract between an entity (principal or government entity) and a contractor (agent) reflects a principal-agent relationship as advanced by (Eisenhardt, 1989). In this case, the entity (principal) wants to achieve value for money while the contractor (agent) has business oriented objectives. This creates a difference in terms of objectives and sharing of information. According to agency theory, the divergence of interests between principal and agent can be mitigated by instituting proper contract management procedures (Mutua, Waiganjo & Oteyo, 2014) and by monitoring activities to limit opportunistic actions which are aspects of inter-functional coordination. Unfortunately, existing literature alludes to several challenges in contract management either because the contracts are in most cases incomplete or no one takes interest in managing the contract (United Nations [UN] Report, 2014). Contracts are developed in an increasingly complex environment, including the rising use of contracted supplies and services throughout government and industry, hence a solid understanding and assessment of the contracting management practices is critical (National Audit Office [NAO], 2014).  The aim of contract management is to ensure the delivery of a cost effective and reliable service at an agreed price and standard. It must be consistent with legal requirements and financial propriety (Schooner & Swan; 2011). Both parties should understand, from the outset, their respective obligations and that they fulfill these efficiently and effectively to provide best value for money (United Nations Report [UN], 2014; Oluka & Basheka, 2014, Pillai & Adavi, 2013). The process starts from the identification of the requirement for goods and services and runs through to the completion of the contract (Oluka & Basheka, 2014).
The inability to complete projects on time and within budget continues to be a chronic problem worldwide and is worsening due to poor contract management. According to Ahmed et al. (2002), overruns on construction projects are a universal phenomenon. Azhar (2008) states that the trend of cost overruns is common worldwide though more severe in developing countries. The Organization of Economic Cooperation and Development  (OECD (2011) asserts that contract management encompasses the life cycle of a contract and involves many stakeholders including, but not limited to the contracting officer, the client department and the supplier. It stretches from the stage of planning, bidding and contract award, contract administration and finally, contract close out; and consists of delivery management, relationship management and contract administration. 

On their part, Stefanie Phillip, Kim and Helmut (2010); Ntayi, Byabashaija, Eyaa, Ngoma, and Muliira (2010) argue that contracts can provide the support for the economic growth, as long as the relationship is clear in terms of what is to be provided and spelling out of the rights and obligations of each party to the contract thus minimizing the potential for opportunistic behavior (Oluka & Basheka, 2014). This calls for setting key Performance Indicators (KPIs) and then measuring, report and monitor on a regular basis (Thomson & Jackson, 2007). However, the UN Report (2014) observes that in many organisations, contract management is given very minimal attention, with hardly any systematic approach. The problem possibly arises due to the fact that the activity is often an extremely controversial subject matter especially in developing countries (Trepte, 2011; Patrick, 2005; Arrows, 2010).

According to Mbalangu (2013) and Kansiime (2014), monitoring of formalized contractor-client relationship allows an organization a degree of control over the deliverables and performance requirements. However Hinton (2003) argues that entities must enhance the capacity of employees; measure performance and hold post-award meetings. While these are crucial practices, not all contracts are monitored using the same components, hence the variations. Rendon (2010) in his study outlines the critical success factors for contract management as being qualified workforce, clear processes, relationships, resources, leadership and policies. All these have a direct impact on an organization’s contract management processes as well as resulting outcomes (Hui et al, 2011). 

2.3.	Record management 
Records are crucial in the business of government and their absence would lead to inefficiencies or failure in operational procedures (Kansas State Historical Society, 2007). Without records, no assessment can be made of whether individuals, private and public organizations have actually carried out the actions and transactions that they had to execute, or whether they ensured that these actions and transactions met the criteria of efficiency, legitimacy or the principles of good governance, and whether they had done things which they were not supposed to do (Thomassen, 2001). In Uganda, Public Procurement and Disposal of Public Assets Authority [PPDA] Annual Performance Report (2014); Ntayi, Ngoboka, Ndahiro & Eyaa (2013), observe that government entities lack reports regarding the procurement management, review meetings between the entities and contractors. The scholars further observe that the situation makes it difficult for audit trails and correction of errors hence causing unnecessary variations. At worst some payments may be made without supporting documentation. The situation points at inherent weaknesses in contract management that might need to be addressed. Relatedly, the PPDA Performance Report (2015) showed that during the financial year 2013/2014, 27% of the contracts in the Ugandan public procurement system were rated as high risk, while only 16% of the contracts were rated as low risk. The ratings are attributed to majorly lack of records. 

Kemoni and Ngulube (2008) contends that that proper records management critical in government departments for accountability towards management of state resources, and among others. In supports Thurston (2005) underscore that reliable, timely and accessible records   should   make   available   information   about   administrative   actions,   such   as resources   received,   committed,   spent   and   enables accountability. According  to  Mullon  (2004), records  management  helps to “reduce  operational  costs,  save space,  eliminate  data  duplication  and  clutter  by  ensuring  that  only  needed  information  is stored”. Marutha and Ngulube (2010) underscore that centralisation of records management activities and preservation ensures that government bodies comply with the principle of value for money by avoiding duplication of efforts. This is because it saves a lot of time and energy for different organisational offices to do similar things at the same time. Time is money in any organisation. Centralised records management and preservation also assists government bodies to prevent fraud and corruption by the records creators.  In order to ensure timely and quicker retrieval of records in response to records requests in the public health sector, proper records management must be exercised. This will assist in avoiding records management barriers like misfiling and missing files. Proper records keeping will result in a proper file tracking system in an organisation (Marutha & Ngulube 2010).
Davila, Gupta and Palmer (2003) assert that increasingly, electronic records are becoming the primary mode of record of transactions. Hence the many hard copy records are digitized so that they may be managed in digital form. Further, the ease with which such records may be searched, accessed, and edited allows large entities to manage information in a much more efficient way than in the past. However, the ability to preserve electronic records has not matched the ability to create such records. They can be fragile, easily lost, destroyed, or altered, and run the risk of obsolescence as software and hardware age and are replaced Aberdeen Group (2001).
4.0.	Methodology  
The article is exploratory in nature and involves analyzing secondary data on procurement practices in KCCA context. Specifically, Audit reports for two financial years 2013-2015, were analysed. However, the single case study approach inherently limits generalizability of findings to this research (Cooper & Schindler, 2011). By design, one type of data, i.e. historical or retrospective data was used. These together included the following sources of evidence; websites and archival records (e.g. press releases and PPDA Audit reports for financial years 2013/2014 and 2014 /2015).
5.0. Findings and discussions
Findings presented in this section show the procurement management practices that had been adopted by KCCA, in view of assessing their effectiveness. 
5.1.	Findings and discussions
Procurement planning and performance in KCCA
PPDA Section 26 of the PPDA Act 2003 gives the Accounting Officer the overall responsibility for the successful execution of procurement, disposal and contract management in the Procuring and Disposing Entity.
Table 1: Summary of performance of Kampala Capital City Authority financial year 2013/14
Risk Category	No	% No	%Value	
				
High	11	18.3	27.4	
Medium	20	33.3	47.1	
Low Risk	12	20	7.10	
Satisfactory 	17	28.3	18.2	
Total	60	100%	100%	

According to the PPDA (2014), the overall performance of KCCA during the 2013/2014 financial year was rated at 18% (highly satisfactory), 28.3% (satisfactory); 33.3% (moderately satisfactory), low risk was 20%). In terms of value the majority of the risk was under the medium category with 47.1%. While the high value risk rating was 27.4%. Works procurement contracts have high values than the supplies and services contracts and account for a significant portion of the national budget. Reports indicate that the works related contracts generally in most entities are the poorest performing contracts (PPDA, 2014). During the 2013/2015 financial year.

Source: PPDA Audit reports financial year 2013/2014
Figure 1: Graphical representation of risk rating of contracts
Overall the entity did not performance well during the financial years due to the following underlying reasons; Procurements outside the procurement plan; variation between planned and actual contract value; weaknesses at planning stage by the user department that led to delays, cancellations and variations in the procurement process; 
The findings do not differ with some scholars observations that planning should be emphasized by all stakeholders in public entities if budgets are to be adhered to and thus improved service delivery (Sabiti, Basheka & Muhumuza 2011; Ocharo, 2013; Manthosi & Thawala, 2012). These activities must be done to promote transparency, economy and efficiency, and limit favoritism (Basheka, 2008). 
5.2.	Contract management
The compliance level for 2014/2015 financial year with regards to contract management was assessed to be 83%, a rating which is highly satisfactory compared to that of 2013/2014. However, the audit report for financial year 2014/15 revealed that in the following eight (8) procurements worth UGX 877,991,598, the Entity delayed to pay its providers contrary to the provisions under the contract: 
Table 2: Duration of payment
No. 	Subject 	Value (UGX)	Status	Duration taken to pay 	
1.		Supply of mobile storage facilities	87,999,975	Delivered 	38 working days	
2.		procurement of survey equipment	301,614,079	Delivered	77 working days	
3.		Procurement of Street Lights Bulbs and Chokes	59,861,400	Delivered	123 working days	
4.		Supply of computers and peripherals	85,432,000	Delivered	100 working days	
5.		Procurement of working tools and protective wear	170,911,200	Delivered	87 working days	
6.		Consultancy services for value for money audit of road works	97,256,765	Delivered 	60% payment for approved draft report paid after 36 days, the balance of 20% has not yet been paid yet the report was submitted on 23rd November 2015	
7.		Procurement of street lighting materials for Binaisa road	63,765,179	Installed	No record of payment to provider 	
8.		Procurement of general stationery	11,151,000	Completed	No record of payment to provider	
Total	877,991,598		
Entities commit to pay suppliers 30 days after delivery although the facts are different. The implications of delayed payments affect bidders’ cash flow and could discourage them from participating in Government procurements. This also slows down the implementation of projects.
Table 3: Variation between the planned and actual contract value
S/No	Procurement	Estimated UGX	Contracted UGX	Variance UGX	
1.		Construction of a double storied six classroom block at Kamwokya Primary School	502,088,895	599,433,304	97,344,409 
(16%)	
2.		Provider for the mini media campaign	10,000,000	60,000,000	50,000,000
83%	
3.		Supply of uniforms for Law Enforcement Staff	72,000,000	123,225,000	51,225,000
42%	
	TOTAL	584,088,895	782,658,304	198,569,409 (25%)	

In the following three (3) procurements worth UGX 782,658,304, there was a variance of 198,569,409 (25%) between the estimated and actual contract value. This implied that Entity’s failure to generate realistic estimates during planning could have affected other planned activities in order to cater for the variations. The ffailure to generate realistic estimates during the planning phase and at initiation affects other planned activities.
The Audit revealed delays during contract execution. These delays were observed in the following ten (10) procurements:
Table 4: Contractual Delays
No.	Subject of Procurement	Contractual completion date	Actual completion date	
1.		Supply of computers and peripherals	19th June 2015	6th July 2015	
2.		Construction of and demolition of a party wall	14th September  2015	12th October 2015	
3.		Procurement of street lights bulbs and Chokes	20th February 2015	24th April 2015	
4.		Procurement of survey equipment	16th July 2015	7th September 2015	
5.	 	Renovation of staff quarters at St. Mbuga Tuzinde P/s Kiwatule Nakawa Divison	15th October 2015	9th November 2015	
6.		Supply of mobile storage facilities	29th November 2014	18th December 2014	
7.		Procurement of hydroponic fodder machines	4th March 2015	11th June 2015	
8.		Procurement of uniforms and heavy boots	4th January 2015	29th May 2015	
9.		Renovation of city hall 2nd floor wing A & B	31st December 2015	contract extended to 31st March 2016	
10.		Completion of Kabalagala One Stop Youth Centre (Phase III)	2nd February 2016	The contract was extended twice.	

The above findings contradict the aim of contract management which is to ensure the delivery of a cost effective and reliable service at an agreed price and standard, which should be consistent with legal requirements and financial propriety (Schooner & Swan, 2011). The inability to complete projects on time and within budget continues to be a chronic problem worldwide and is worsening due to poor contract management. 
Efficient contract management should ensure the delivery of a cost effective and reliable service at an agreed price and standard (Oluka, 2012; United Nations Report, 2014; Oluka & Basheka, 2014, Pillai & Adavi, 2013). Therefore KCCA’s inadequacy in the contract management has the potential to frustrate contract performance as was the case with many contracts in KCCA. 
5.3.	Record keeping performance
The audit reports for financial year 2013/2014 and 2014/2015 shows that KCCA provided no documents after the exit meeting. For example in 2014 /15, there was no record of any waivers in the evaluation report. The implication is that the entity’s record keeping is still insufficient and therefore makes it impossible for audit trails. This finding is supported by Ngoepe (2008) who assert that better service delivery always begins with better records management practices. This is because government departments can only take appropriate action and make correct decisions if they have sufficient information at their fingertips. Hence, proper records management supports efficiency and effectiveness in service delivery in a variety of ways. These could include, among others, documentation of policies and procedure that inform service delivery such as; the type of services provided; who are to be responsible for carrying out the work; and what costs involved.

Kemoni, Ngulube and Stilwell (2007) have also affirmed that proper records management is significant to governments‟ realisation and achievement of their goals such as the rule of law, accountability, management of state resources, and protection of entitlements of its citizens as well as enhancing foreign relations. The trio further argument and observes that “effective information and records management provides the foundation for accountability, protection of human rights and increases citizens‟ awareness to their rights”. Thus it is imperative for government to continue improving their records management programmes in order to achieve greater service delivery, bearing in mind that the customers’ socio-political and economical needs are diverse. The underlining point therefore is that proper records management facilitates planning, informed decision making, supports continuity, consistency and effectiveness of public service delivery.
5.4.	Conclusions and policy implications
The contemporary procurement systems employed in KCCA fail short of procurement policies, and thus necessitating vigilance from all stakeholders. The implication is that delays at contract execution affect service delivery to the intended beneficiaries of the requirements. Failure to properly manage the procurement process and systems can lead to wasted effort and poor development results consequently increased poverty and deprivation of social and economic rights of the citizenry. In addition, there is need to address the problem to avert the entity from grappling with failed contract if not loss of public funding and lack of trust in public sector procurement and hence shoddy works. Hence the need for management of KCCA to monitor and evaluate procurement activities and hold responsible person accountable for all contracts. 
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