JIGJIGA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

MASTER OF PROJECT PLANNING AND MANAGEMENT
MASTER OF ART IN PROJECT PLANNING & MANAGEMENT (MPPM)

Group Assignment: - Compare and Contrast Ethiopian Procurement System with

World Bank Procurement

Course: - Project Logistics and Contract Administration

Group Assignment

By

1. Bashir Saleman Mahamed GSE/0014/10

2. Abdirahman Mohamed Abdi GSR/0021/10
3. Nasru Serani Dusso GSE/0059/10
4. Mahamed Abdi Mahamoud GSE/0023/10

Assignment Submitted to: Getahun Fenta (PhD) Assistant Professor of

Development Studies, Addis Ababa University

April, 2019

Jigjiga, Ethiopia
Table of Contents Page

1. Introduction………………………………………………………………………
……….3

1.1Hierarchy of Laws in Ethiopia………………………………………………….4

1.2 Procurement Cycle.......................................................................................6
1.3 Procurement Planning......................................................................................7

1.4 Procurement Methods…………………………………………………………..7

1.5 Choice of Procurement Method………………………………………………...7

1.6 National Open Bidding Method ……………………………………………...10

2. World Bank Procurement........................................................................11
2.1 Work Bank Procurement Cycle.....................................................................11
2.2 Methods of Procurement of World Bank ………………………………….11
2.3 Selecting The Right Procurement Method…………………………………12
3. Difference And Similarities Of World Bank Procurement And Ethiopian
Procurement System ………………………………………………………14

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2. INTRODUCTION

Procurement services in the public sector are under considerable pressure to deliver performance
improvements and to achieve financial savings through more efficient and coordinated service
delivery. Increasing the effectiveness, efficiency and transparency of public procurement systems
has become an ongoing concern of governments and of the international development
community.
To track progress and to keep focus on the changing environment, managers and procurement
staff will need to monitor, manage and report on their performance in a consistent,
straightforward and cost-effective way.
One of the central functions of FPPA under Ethiopian Federal Government Procurement and
Property Administration Proclamation No. 649/2009 of provision 15/9 is conduct audit to ensure
that procurement and property administration activities of public bodies are in accordance with
this Proclamation and other documents governing public procurement and property
administration.
As a result, Since EFY 1998 FPPA has been conducting compliance procurement audit of public
bodies whether they are implementing in accordance with this Proclamation, directive and other
documents governing public procurement and taking appropriate corrective measures in
accordance with the instruction given by the Agency.
To further measure the performance of procurement, FPPA has introduced a system to measure
procurement performance of procuring public bodies through procurement Key Performance
Indicators (KPIs) with the objective to regularly monitor and track performance trend. To this
effect it was agreed that a common, core set of National Key Procurement Indicators (KPIs)
manual should be developed. The KPIs manual have been designed to be applicable and useful to
procurement teams in all parts of the public sector in Federal Democratic Republic of Ethiopia.

According to Article Agreement of World Bank IBRD: ART. 3 – SEC. 5 (B):

The bank shall make arrangements to ensure that the proceeds of any loan are used only for the
purposes for which the loan was granted, with due attention to considerations of economy and
efficiency and without regard to political or other non-economic influences or considerations.”
The borrower and the project implementing entity shall use the proceeds of the loan exclusively
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to finance expenditures which, except as otherwise provided in the loan agreement, satisfy the
following requirements (“eligible expenditure”):

1.1 Hierarchy of Laws in Ethiopia

In the Ethiopian legal system, hierarchy of laws according to their precedence is:
1. The Constitution,
2. Proclamations,
3. Regulations, and
4. Directive

The Constitution is the Supreme Law of Ethiopia.

Proclamations are discussed by the Council of Ministers, deliberated upon and issued by the
House of Peoples’ Representatives, an example of which is the Ethiopian Federal Government
Procurement and Property Administration Proclamation No. 649/2009.

Regulations are discussed and issued by the Council of Ministers.

Directive is issued by the concerned Minister. An example is the Public Procurement Directive
issued by the Minister of Finance and Economic Development pursuant to Article 78/2 of the
Ethiopian Federal Government Procurement and Property Administration Proclamation no
649/2009 and Article 19 of the definition of powers and duties of the Executive Organs of the
Federal Government of Ethiopia Proclamation No 471/2005/6 (as amended).
Procurement means the purchasing, hiring, or obtaining by any other contractual means of
goods, works and services. Public procurement is the process of the acquisition, usually by
means of a contractual arrangement after public competition, of goods, services, works and other
supplies by the public entity.
What Is Good or Proficient Public Procurement? What Does It Look Like?
The words good and proficient are used interchangeably. The principal hallmarks of proficient
public procurement are:
1. Value for money (economy, efficiency, and effectiveness);
2. Non discrimination (fairness);
3. Transparency; and
4. Accountability and Ethical Standards.
Economy: Procurement is a broad concept, which goes beyond purchasing activity, whose
purpose is to give the public body best value for money. Value implies right price, right quality,
right time, right place, and right quantity. Moreover, lowest initial price may not equate to lowest
cost over the operating life of the item procured. But the basic point is the same: the ultimate
purpose of sound procurement is to obtain maximum value for money.

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Efficiency: The best public procurement is simple and swift, that meets the public body's need as
planned, producing positive results immediately. In addition, efficiency implies practicality,
especially in terms of compatibility with the administrative resources, organizational capabilities
of the purchasing entity and its procurement personnel with the planned/envisaged type and
volume of procurements.
Effectiveness: Effectiveness means the extent to which the entity is able to procure goods, works
and services of quality, in a timely and most economical manner.
Fairness: Good procurement is non-discriminatory, impartial, consistent, and therefore reliable.
It offers equal opportunity for all interested contractors, suppliers and consultants by providing a
level playing field on which to compete and thereby, directly expands the public body’s options
and opportunities for getting value for money.
Transparency: Good procurement establishes and then maintains rules and procedures that are
accessible, predictable and unambiguous. It should be fair and seen to be fair.
Accountability and Ethical Standards: Good procurement holds its practitioners and other
officers responsible for enforcing and obeying the rules. It makes them subject to challenge and
to sanction, if appropriate, for neglecting or bending those rules. Accountability is a key
inducement to individual and institutional probity, a key deterrent to collusion and corruption,
and a key prerequisite for procurement credibility. All procurement officers and other staff
should adhere to the professional ethical code.

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1.2 Procurement cycle

TABLE 1 RESPONSIBILITY OF PROCUREMENT CYCLE

S/N Activity Responsibility
1 Requisition & Need Identification Beneficiary & Procurement Unit
2 Prepare Annual Procurement Plan Beneficiary, Management & Procurement Unit
3 Prepare Specification/Terms of Technical Expert & Procurement Unit
Reference
4 Prepare Bidding Document and Procurement Unit
Request for Proposal and
Advertisement
5 Advertise Procurement Unit
6 Bid Receiving and Opening Tender committee & Procurement Unit
7 Evaluation of Bids, Proposals and Technical Expert, Tender committee &
Quotations Procurement Unit

8 Award Contract Management & Procurement Unit

9 Sign Contract Management & Procurement Director
10 Implement Contract/Contract Beneficiary & Procurement Unit
management

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1.3 Procurement Planning
A procurement plan spells out intended purchases, proposes the procurement method to be used,
and shows different phases of the procurement process to delivery of the goods, works or
services as necessary. It also provides a guideline for monitoring procurement implementing
over the period.

This plan shall be updated on an annual basis and in a rational manner having regard to expected
flow of funds. The Procurement Plan shall be incorporated into the Project Performance of the
capital project. For procurement under the recurrent budget a public body shall prepare an
Annual Procurement Plan. Preparation of Procurement Plan is mandatory for all public bodies.
Any procurement object irrespective of value and/or methods should be included in the
Procurement Plan. At the beginning of each financial year all public bodies shall prepare
Procurement Plans reflecting both updated annual plan for the capital budget and annual plan for
the recurrent budget. The head of a public body or an officer authorized by him/her shall approve
the Procurement Plan.

1.4 Procurement Methods

The following six methods of procurement shall be used in public procurement:
 Open Bidding
 Request for Proposals
 Two-Stage Bidding
 Restricted Bidding
 Request for Quotations; and
 Direct Procurement
A procurement method is the technique that public body uses to acquire goods, works and
services. The procurement methods described in this chapter are applicable to the procurement of
goods, works and services (consultancy and non-consultancy). The method selected depends on a
number of factors including the type of goods or service being procured, the value of the good or
service being procured, the potential interest of foreign bidders and even the cost of the
procurement process itself. The Proclamation provides as follows:
The following sections explore the choice of procurement methods and the factors considered for
use of one method as opposed to the other.

1.5 Choice of Procurement Method

The Proclamation and Directive and the Manual assumes that the public body is able to exactly
spell out the object of procurement and can specify it in detail in the Bidding Documents and the
technical specifications. Otherwise, procurement proceedings shall not begin until such time as
the public body has been assisted to prepare a satisfactory technical specification against which
bids shall be invited. The following sections describe the choice of procurement methods.

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Open Bidding Method
Under open bidding method, all interested firms bidders are given adequate notification of
contract requirements and all eligible bidders are given an equal opportunity to submit a tender.
The public body must give sufficient public notification of bidding opportunities to potential
bidders to determine their interest and prepare bid documents. The Open Bidding Method is the
preferred method of procurement of goods, works and services (Consultancy and Non
Consultancy), unless the threshold levels or circumstances relating to a specific requirement
make it more appropriate for one of the other procurement methods to be used.
A public body may use a procurement method other than Open Bidding Method only in
accordance with the requirements set out in Proclamation and Directive. These methods cover
Restricted Bidding Method, Direct Procurement Method, Two-Stage Bidding Method and
Request for Quotations Method. The selection of any procurement method other than Open
Bidding should be recorded in the Records of procurement, stating the reasons and justification
for the method selected, in compliance with the conditions specified in the relevant Proclamation
and Directive. The procurement method applicable for a package shall be indicated in the
procurement plan. The head of a public body may request for permission from PPA under
exceptional circumstances, to use a procurement method other than Open Bidding for reasons not
covered by Proclamation and Directive. Such decisions shall be justified on technical and/or
economic grounds. A similar procedure to that set out above shall be followed to record the
decision, except that a specific reason other than those specified in Proclamation and Directive
shall be clearly provided (e.g. technical and/or economic justification) and the decision shall be
approved by the head of a public body.
Directive provides threshold values which govern the use of procurement methods other than
Open Bidding Method. Threshold value refers to the total value of each procurement transaction
or package. If the procurement period is more than one financial year, then necessary budget
provision should be made for each financial year, without splitting the package. Procurement
Plan will show the procurement package and its total value. In case of procurement using
Framework Contract, threshold values shall correspond to the estimated total contract value
under that Framework Contract.

Conditions for use of Restricted Bidding Method

The restricted bidding procedure is a two-stage procedure where bidders express their interest
following publication of a procurement notice, but only those invited by the public body may
submit bids after a screening process. Thus the restricted procedure consists of two distinct
stages - selection of suitable bidders and evaluation of bids. At the first stage, the only criteria
which may be used to select prospective bidders are economic and financial standing or technical
knowledge or capability of carrying out a specific assignment. The restricted procedure works
best where the public body is clear at the start of the process as to what it wants to procure, in
terms of pricing and other award criteria.
A public body may undertake procurement by the Restricted Bidding Method:

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  When goods and related services and works and physical services, because of their
specialized nature, are available only from a limited number of Suppliers or
Contractors. (e.g. aircraft, locomotives, specialized medical equipment,
contraceptives, telecommunications, silos, ports and harbors, etc).
 The cost of procurement does not exceed the threshold specified in respect of
restricted bidding in the Directive.
 Where a repeated advertisement of the invitation to bid fails to attract bidders in
respect of a procurement subject.
 Conditions for use of Restricted Bidding Method shall be considered as being
fulfilled if the estimated value of any contract of goods and related services and
works and physical services to be procured is within the threshold values
specified in the Directive.

Conditions for use of Direct Procurement Method

Direct procurement happens when the public body, for some justified reasons, procures goods,
works or services from only one source. A public body may use Direct Procurement Method for
procuring goods and related services, works and physical services and intellectual and
professional services directly from one single source without going through all the requirements
of a full bidding process. However, this method shall under no circumstances be used as a means
of avoiding competition or for favoring any one particular Bidder/Consultant or for creating any
scope of discrimination among Bidders/Consultants. The conditions for use of direct
procurement may be summarized as: i) small value contract, ii) availability of only one single
source, iii) extension of existing contract; iv) for compatibility reasons; v) and emergency
situations;
The head of a public body shall strictly control the Direct Procurement Method in order to ensure
that there is no abuse and that its use is only where conditions specified in the Proclamation and
Directive is satisfied. A decision to use Direct Procurement Method shall be approved in writing
by the head of a Public body or an officer authorized by him/her.

Conditions for Use of Two-Stage Bidding Method

A two-stage bidding method is used when the procurement process is split into two phases. The
first phase identifies suitable candidates, who are then invited in the second phase to submit their
firm bids. A public body may use the Two-Stage Bidding Method in accordance with the
requirements set out in Proclamation Article, 57 and 58 and Article 19 of the Directive in the
case of large or complex contracts of goods and related services and/or works and physical
services, such as turnkey contracts for manufacturing process plants, e.g. the design,
construction, installation of equipment and commissioning of a new factory, industrial plants or
the procurement of major computer and communications systems or construction and
commissioning of a public institution. Under this method, the bidding have to follow two-stages,
First-Stage and Second- Stage.

Conditions for Use of Request for Quotations Method

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Sometimes referred to as shopping, request for quotations method is used to buy items of low
value. A public body may undertake procurement by means of a Request for Quotations (RFQ)
in accordance with the requirements set out in Proclamation and Directive for the purchase of
readily available, standard off the shelf goods or for procurement of works or services for which
there is an established market, so long as the estimated value of such procurement shall not
exceed the prescribed threshold value as given in Article 24.2 of the Directive and Appendix 1.
The head of a public body shall strictly control the use of RFQ as a method of procurement in
order to ensure that there is no abuse and that its use by public bodies is restricted to the items
specified in the Proclamation and Directive. A decision to use the Request for Quotation Method
shall be approved in writing by the head of a public body, or an officer authorized by him/her. In
deciding and/or justifying the use of the RFQ method in public procurement, the following shall
be considered:
RFQ is a method that should not require complex documentation or all the formalities of a full
Bidding process. It is, therefore, an appropriate method only for procuring readily available, off-
the-shelf goods or standard specification commodities which are small in value and/or routine
low value related services, physical services or stand alone services, e.g., catering services,
courier services, security services, transportation services, printing services, etc. When the nature
of the specifications is complex or the type of procurement requires an elaborate, detailed
evaluation system (e.g., efficiencies, delivery times, etc.), that needs substantial documentation,
open Bidding shall be used and not the RFQ method.

1.6 National Open Bidding Method

National open bidding method refers to the procurement procedure where Invitation to Bid is
restricted to the Federal Democratic Republic of Ethiopia.

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 2. World Bank Procurement
2.1 Work Bank Procurement Cycle

Table 2 Responsibilities in Project Cycle

Phase Borrower Bank

Identification √ Assists
Preparation √ Assists
Appraisal √
Negotiations √ √
Implementation √ Supervises
Evaluation √

2.2 Methods of Procurement

National Competitive Bidding

Although NCB is the preferred method for procurement involving community participation,
communities unless commercially sophisticated almost always need assistance to participate

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either as suppliers or procurement agents. The Bank allows the process of bidding to be
simplified or streamlined without affecting its competitive nature thus; smaller local
organizations have a greater opportunity to participate.
Local Shopping
In other instances the Bank has established direct contracting between the project implementing
agency and community groups. Such projects include those that finance small civil works in
remote and scattered locations. In most cases work is carried out directly by the communes,
which hire local technicians to supervise the works. The communes also hire local workers to
construct the works under contracts entered into for the specific project. An example of such
projects is:
The Burundi Social Action Project which involves the community in the planning, designing and
implementation processes. In rural areas, for instance rehabilitation and construction of local
social infrastructure (schools, health centers, and water supplies) is carried out by communities
using their own labor. The work is supported by skilled masons and the communities are used
carry out the work and provide various services based upon: The Bank permits some variations
of local shopping in projects involving community participation. There should be more than one
contractor invited to provide the goods, works or services. It is normal practice to obtain three
quotes. For example, under the Ghana Primary School Development project, small scale
contractors were selected through local shopping, obtaining three quotations, whenever possible
on the basis of disclosed cost estimates. Works were paid for at actual costs not exceeding this
estimate by the project on receipt of reports from independent technical editors certifying full
completion in accordance with standard drawings and specifications.
Direct Contracting
In some projects, direct contracting can be used as the method of procurement to facilitate
community participation. Direct contracting is used especially where sub – projects are scattered
or remote, making it less attractive for contractors, and eliminating the need for extensive
supervision and reviews by the Bank. In such projects, the TTL/PS/PAS perform quarterly
reviews and the procurement schedule is regularly audited and updated as necessary.
 the technical complexity of the work to be undertaken;
 local practice of using community labour;
 The availability of small contractors in the area.
2.3 Selecting the Right Procurement Method

Five methods of procurement are traditionally acceptable by the Bank for the procurement of
textbooks. The Bank typically encourages bulk packaging and estimated package values are used
to determine the appropriate procurement method, as they are a good gauge to measure potential
interest by foreign bidders. Suitable procurement methods include:
(a) International Competitive Bidding (ICB)
Where there is an identifiable, competitive, local educational publishing industry experienced in,
and capable of producing quality textbooks in that language. The Bank’s policy is that ICB

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should be used for all Bank-financed textbook contracts where foreign bidders are likely to
participate. This includes contracts with a value of more than US$ 200,000, except where:
 the language of the publication is not a widely used one; and
 Where there is an identifiable, competitive, local educational publishing
industry experienced in, and capable of producing quality textbooks in that
language.
Even where these conditions exist, however, the Bank encourages the Borrower to considered
using ICB if foreign bidders are thought to be interested in bidding. Domestic preference
margins may be applied in procurement of textbooks using ICB.
(b) Limited International Bidding (LIB)
LIB may be used to procure off-the-shelf textbooks when a limited number of titles are available
for selection and to procure publishing services where specific local/regional experience is
essential. LIB may also be used where sophisticated multimedia publishing services are needed,
particularly those involving video and computer assisted learning techniques. This is usually
because the number of qualified and experienced publishers is limited.
(c) National Competitive Bidding (NCB)
(i) The Bank allows Borrowers to use NCB as the method of procurement of textbooks where
there is a strong local publishing industry and foreign bidders are not interested in bidding. NCB
is normally used for contracts of under US$ 200,000 in value. The TTL/PS/PAS in collaboration
with the Borrower should ensure that nationalistic pressures do not result in the awarding of
contracts to local organizations without the necessary professional, technical or financial
qualifications. NCB should not be used in countries with weak or non-existent publishing
industries irrespective of the estimated value of the contract or language to be used.

(ii) In countries where the existence of good local primary textbook publishing capacity is
established, but the secondary and tertiary markets are too small to encourage local publishing
for those educational levels, the use of ICB for off-the-shelf textbooks or adaptations is often
more economic and appropriate.
(d) International and Local Shopping
This method of procurement may be used to procure small quantities of off-the-shelf titles with
an estimated value of less than US$ 50,000. It may also be acceptable for publishing services
contracts where a there is a limited number of qualified publishers that are proficient in the
required local language.
(e) Direct Contracting
This method of procurement is acceptable when particular titles have been pre-selected from
existing titles by the Borrower with Bank approval. Since after selection no competition is
possible, it is essential that an objective procedure be followed in the pre-selection process so
that price can play a role in the selection.

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3. DIFFERENCE AND SIMILARITIES OF WORLD BANK PROCUREMENT AND
ETHIOPIAN PROCUREMENT SYSTEM
Table 3 SIMILARITIES

SIMILARITIES
s/n World Bank Procurement Ethiopian Procurement System
1 Basic Principles of Bank Procurement The Principles of Procurement
 Economy & Efficiency  Value for Money
 Fairness Economy, efficiency and
 Encourage development of domestic effectiveness
contracting & manufacturing industries in  Non-discrimination
the borrowing country  Transparency & Fairness
 Transparency  Accountability

2
Procurement Methods Procurement Methods
 National Competitive Bidding  Open Bidding
 Local Shopping  Request for Proposals
 Direct Contracting
 Limited International Bidding (LIB)  Two-Stage Bidding
But Five methods of procurement are traditionally  Restricted Bidding
acceptable by the Bank for the procurement of  Request for Quotations; and
textbooks.
 Direct Procurement
3 Domestic preference in the Borrowing Country
Domestic preference in local
manufacturing

Table 4 DIFFERENCES

DIFFERENCES
s/n World Bank Procurement Ethiopian Procurement System
1 Bid documents is prepared English, French or Bid documents is prepared English
Spanish, language and national language
2
Threshold is US dollar Threshold limit is below World
Bank
3
Bank uses no objection
4
Procurement Cycle Responsibility; Procurement Cycle Responsibility;
Borrower and bank

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 Technical Expert, Public
Procurement Unit and
Beneficiary
5 Documentation to be kept with the Borrower up to 5
years after closing date but to be provided to the 10 years should be kept public
Bank upon Request. procurement records

“THE END”

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