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How review of tendering process can save billions

By Otieno Odhiambo | February 19th 2019

There is an urgent need to review the entire tendering process in the public sector. 

The tendering rules and regulations should be tied to whether the services or goods sought serve an economic purpose or not.

Maybe we need to get rid of existing processes.

The emerging cases of scandals in the tendering process within the public sector should be of real concern to any government that is cost conscious.

In a nutshell, we need a new model to address government expenditure triggered via a tendering process.

My guess is that the Government might save lots of money by eliminating the present tendering process.

It appears the laws that regulate tendering are inadequate because they fail to address the principle of value for money that was to enable the Government to acquire services economically and efficiently.

The major reason why the tendering process came about was to ensure suppliers compete.

This leads to value for money to the taxpayers.

However, the way the whole process is handled currently is pathetic.

Those awarded the tenders in most cases do a sub-standard job to maximise their profit margins.

The case in Bungoma County where seven county officials were found guilty of inflating the price of wheelbarrows is a perfect example of how the tendering process is being abused.

Price manipulation

The 10 wheelbarrows were bought at a staggering Sh100,000 each while the market price is about Sh10,000 each, meaning if the right procedures were followed, it could have saved the county Sh900,000 that could have been channelled to other activities.

It is just one of the many examples of price manipulation that have been witnessed in public contracts.

Another shortcoming with the country’s tendering process is that the best suppliers sometimes do not even participate in the bidding process.

This opens the door for suppliers of inferior goods or services.

Leading firms do not bid in most cases since the outcome is usually predetermined and the tendering is a mere formality.

A report by Price Waterhouse Coopers (PWC) indicated that 36 per cent of CEOs of tendering firms have been asked to pay bribes so that they can be awarded tenders, meaning that those in the procurement departments are making a kill from abusing the tendering process.

Consider a scenario where a potential supplier pays the bribe and they are unable to recover the money from the tender. How will this be achieved?

The problem with these tenders is that variations are allowed.

The supplier may consider the usage of cheap labour and materials of poor quality. With this, he will end up increasing his profit margins at the expense of doing a quality job.

Product complexity

The solution to the tendering process may vary depending on which industry, government department, product complexity, nature of the relationship, whether it is short-term or long-term. 

Before making any procurement decision, the department should consider paying the supplier a decent profit margin so that the quality is not sacrificed at the expense of profit.

Others are developing a strong relationship with reputable suppliers and conduct thorough research on the purchasing requirements.

One major hitch of abolishing the competitive tendering process in government organisations is that those who benefit most are politicians.

Companies owned by politicians are the ones more often than not awarded State tenders.

The politicians will argue that the tendering process is thorough and transparent though they are the ones who influence the whole process.

The solution would be to keep the politicians away from tendering; let them concentrate on oversight duties. 

The competitive tendering process should be abolished and long-term relationships encouraged between suppliers and purchasers that are mutually beneficial.

The departments in charge of sourcing should come up with a shortlist of suppliers who can do a commendable job.

 -The writer teaches at the University of Nairobi

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