Improve the PPDA law to enable  Procurement of Strategic and Complex Projects

 

By Kasingye Kyamugambi

 

KAMPALA - Last week, the Institute of Procurement Professionals in Uganda requested me to present a key note to address the procurement of strategic and complex projects at their 3rd Annual Procurement Summit of 2018. In my presentation, I argued about the need to improve the PPDA law to facilitate easy procurement of strategic and complex projects.

 

 Such projects the Government is implementing include Karuma HPP, Isimba HPP, Oil refinery, Oil Pipelines, Standard Gauge Railway (SGR) among others.  These projects have many features for instance; they are designed to achieve Government long-term strategic objectives-Uganda Vision 2040. Which is aimed at transforming Uganda into an export-oriented economy, raising competitiveness and stimulating Industrialisation.

 

These infrastructure usually have significant Investment costs and high operation and high maintenance costs.

 

Their financing depends on  Government to Government bilateral cooperation, but some involve more than two countries and therefore they have to suit the different countries development strategies.

 

They are technologically sensitive (standards) and the technology sometimes depends on the financier.

 

They have long design periods of over 50-100 years and therefore long impact on the country. They require use of International contractors because of experience and turnover requirements.

 

They usually have long lead time and sometimes they have strategic and security considerations which may not be made public or subject to open competition for strategic purposes.

They require unique and international delivery modes like FIDIC EPC Turnkey contracts. They sometimes involve external Government lobbying for strategic influence on the country for global strategic reasons and require Strong political support.

 

Given the experience from SGR, there are some shortcomings of the PPDA law which I will briefly highlight. Before procurement, the level of services required from the infrastructure are not clearly specified and approved.

 

Most of these infrastructure projects can be built at any cost, operated and maintained at any cost and provide any level of service.

 

It is this level of service that will greatly impact the economy not the investment costs as it were. The ability to pay back will largely depend on the performance of the infrastructure as far as level of service is concerned.

 

Speaking from experience, this level of service should be approved by Cabinet and technically set by the MFPED, NPA and sector ministry.  NPA and MFPED that can easily note the level of services required to transform the economy given their general economic outlook and responsibility of planning and economic development.

 

For example, if the dam is to be built, what will be the cost and quality of power? If it's the railway what will be the performance levels measured by Reliability, availability, Maintainability and safety (RAMS) - quality of services.

 

The evaluation criteria emphasised in PPDA Law is mainly looking at investment costs with little regard of lifecycle costs.

 

The best recommended way of evaluating long term public infrastructure projects should be based on lifecycle costs which incorporates investment costs and operation and maintenance costs.

 

This is because the operation and maintenance costs have big impact on the level of services inhibiting the infrastructure to provide the much anticipated level of services required to transform the economy.

 

It's important that in this globalisation era, it is not just services but the level of services that must be globally competitive to attract investors in the country. The issue of trying to reduce tariff in the electricity sector is a very good lesson of how to incorporate competitiveness in all Government strategic agenda. 

 

When implementing some of these projects, they are some of the requirements to access financing or required due to the trans-boundary perspective that compel you to utilize exemptions within the PPDA law. However once the exemption is applied, you need another well-defined procedure to follow. Some of these financiers do not have procurement guidelines but have some conditions.  

 

Furthermore the issue of technology or standards impacts on the long term strategic partnership between the country where the technology is originating from and Uganda.

 

For example the use of China railway standards will impact on the engineering education in the country for railway related matters. The PPDA sometimes looks at specifying the technology as locking out competition whereas it must be taken for strategic reasons.

 

If you use technology that is not widely used, then operation and maintenance costs increases significantly especially the cost of new equipment, spare parts, and other moving equipment. This will in turn affect the level of services and thus competitiveness of the country.

 

Most of these strategic projects require use of EPC Turnkey contract mode. The financiers prefer the EPC Turnkey commercial contracts because they do not want cost overruns.

 

However, this lump sum fixed cost projects are new in this country and do not have detailed bills of quantities as design-bid and Build type of projects we are largely accustomed to.

 

 They require lengthy negotiations which you cannot do with multiple bidders and the negotiations involve a lot of design considerations.  

 

Therefore we need a mindset change such that we can design and implement infrastructure that meets world class standards and provide globally competitive services.  This mindset change will help us improve our procurement system. I therefore propose the following

 

Level of service to be delivered by infrastructure to be determined by MoFPED, NPA and Sector Ministry. The level of service determines how the infrastructure impacts the economy.

 

Policy should be put in place to give direction and prioritization of these strategic and complex projects.

 

The investment decision should be based on life cycle costs and the general impact of the service to the economy.

 

The law should cater for Investment Projects that require a lot of negotiations and changes of specifications as the process develops.

 

A framework for procurement of projects from development partners who don't impose their procurement guidelines should be made.

 

The law should incorporate technology openness and strategic acquisition of long term technology in view of the long term technology aspects of the country.

The law should as much as possible incorporate private sector business like practices in terms of efficiency, speed and quality.

 

Recognise the professional bodies like ERB, Law council, ARB, SRB. Let professional persons take responsibility for professional work before finalizing procurement

 

Therefore, although the PPDA law has greatly improved the procurement sector in Uganda, amendments are required to cater for strategic and complex projects which will facilitate faster socio-economic transformation of Uganda.