JIGJIGA UNIVERSITY

SCHOOL OF GRADUATE

ASSIGNMENT OF: PROCUREMENT POLICE IN ETHIOPIA

AND WORLD BANK PROCUREMENT POLICE

COLLEGE OF: - BUSNISS AND ECONOMIC

DEPARTMENT OF: - PROJECT PLANNING AND MANAGEMENT

STUDENT NAM: ID

1.Mahamed Abdi Aden 0140

2.Ibrahim Abdulahi Mahamed 0241/10
3.Mahamed Hussen 0147/10
4.Niman Haji 0243/10
THE ETHIOPIAN PROCUREMENT SYSTEM

Why public procurement is Important

Expenditure on public procurement take the lion share from the annual Government
budget;
  64% of the Annual budget,
 14% of the GDP
 Support the country’s economic development by ensuring economy, efficiency and
effectiveness in the execution of public procurement,
 It serves as a Government Policy Instrument in terms of encouraging local producers and
small and micro-enterprises.

In Addition,it helps:

 To enhance the capacity of Local producers,suppliers, contractors and consultants.

 To attract Foreign Direct Investment.
 To Enhance Good governance.
 To build Trust between Government andDonors and increase the flow of Official
Development Assistance (ODA) throughBilateral and Multilateral Channels.
 To Create a conducive environment for variouspartnership arrangements between the
Governmentand the private Sector.
 To Reduce Trade and non-Trade Barriers within theframework of enhancing the
competition policy.
 As one of the Government Policy instruments toprotect the environment by encouraging
the purchaseof environment friendly goods only.

GENERAL FEATURES OF PUBLIC PROCUREMENT LEGAL FRAMEWORK

The Legal Framework

 Public Procurement and Property AdministrationProclamation No 649/2009 issued in
Sept.2009.
 Public Procurement Directive issued in June 2010.
They have been prepared in line with UNCITRALModel Law, The World Bank
Guideline andCOMESA Regulation and Directive.
 Various Standard Bidding Documents includingSBD for Framework Agreement and
PublicProcurement Manual have already been preparedand disseminated to Procuring
Entities
  The Public Procurement and PropertyAdministration Regulatory functions are now
administered by Public Procurement and PropertyAdministration Agency.
 It is clearly stated on the Proclamation and Directivethat Open Bidding is a default
method in publicProcurement.
 Advertising the bid opportunities in widely circulatedNational News paper at least once is
a mandatoryrequirement by law.
 Procuring Entities can also advertise more than onceand by using(Television, Radio,
Websites)

Floating Period of Goods

Procure complexi ICB NCB Restricted Restricted
ment ty Bidding Bidding
type Internatio National
nal Bidder Bidder
WORKS Complex 45 days 35 30days 45 days 35 30days
Non Co. days 21days days 21days
GOODS Complex 45 days 35 30days 45 days 35 30days
Non Co. days 15days days 21days
OTHER Complex 45 days 35 30days 45 days 35 30days
SERVICES Non Co. days 15days days 21days
CONSULTANCY Complex 14days 10 10days --- -- 30days
SERVICE- CALL Non Co. days 45 7days 35 days 15days
FOR PROPOSAL days 35 30days 21days
days 15days

APPROVED METHOD OF PROCUREMENT

The following six methods ofprocurement are approved.

 Open bidding
 Two-stage bidding
 Request for proposals
 Restricted bidding
 Request for quotations; and
 Direct Procurement

INTERNATIONAL COMPETETIVE BIDDING

Procurement may be made by means of ICB ifthe value of the contract exceeds the threshold
indicated below in respect of each type ofprocurement: -
 a) For Works above birr……….50,000,000.00
 b) For goods above birr ……….10,000,000.00
 c) For consultancy service ……..2,500,000.00
 d) For services above birr………7,000,000.00

 Conditions for the use of Other Methods ofProcurement have also been stipulated in
thelaw

 Procurement personnel, including higherOfficials of Procuring Entities should abide by

the rules of Ethics in Public Procurementstipulated in Article 32 of the proclamation and
Article 34 of the Directive in discharging theirduties and responsibilities.

REGISTRATION OF SUPPLIERS

Conditions to be fulfilled by Suppliers for registration in thesuppliers list are the following:
  Valid trade license indicating the stream of business in which
the supplier is engaged,
 A certificate of professional qualification from the appropriate
body, if a supplier is a consultant,
 A contractors’ certificate issued by the Ministry of Works and
urban Development indicating the level of such contractor.
 A certificate issued by the Federal Transport Authority
indicating the level of the garage, if a supplier is engaged in the
maintenance or repair of motor vehicles.
 A certificate issued by the Drug Administration and control
Authority, if the supplier is engaged in the provision of drugs
and medical equipments.
SECIRITY
Bid Security/Bond

 The amount of bid security a Public Body may requireshall be in the range of 0.5% to 2%
of the totalestimated contract price, which the Public Body has tofix and indicate in the
invitation to bid and the biddingdocument. However, the bid security to be fixed by
thePublic Body shall not exceed 500,000.00 (five hundred
thousand) birr.
 Local contractors engaged in construction service mayprovide bid security in the form of
conditionalinsurance bond.

PERFORMANCE SECURITY

 The successful bidder shall furnish aperformance security in an amount equal to

10% of the price.
 A conditional insurance bond shall be acceptedas performance security in respect of
construction contracts or in respect of contractsfor supply of drugs with local contractors
ormanufacturers of pharmaceutical products
  A Public Body may require a consultant to furnish professionalindemnity insurance in
respect of consultancy service suchconsultant renders to that Public Body under a
contract, where thePublic Body finds it appropriate to make provision for any damageit
may sustain as a result of possible default on the part of theconsultant.
 Small and micro enterprises shall be required to submit a letter ofguarantee from the body
organizing and overseeing them in lieuof performance.
 Enterprises engaged in insurance business and entered into acontract with a Public Body
may use their reserve with theNational Bank of Ethiopia as performance security, it
beingnecessary for such enterprises to produce a certificate from thebank that the reserve
they have with the bank is sufficient to coverthe required performance security.

ADVANCE PAYMENT

 In any Public Procurement advance paymentshall not exceed 30% of the contract value.
Thesupplier should provide advance paymentGuarantee in an amount equal to Advance
payment.

PREFERENCE

 According to the Article 16.20 of the Directivepreference shall be granted in any

procurementto locally produced goods, to small and microenterprises established under
the relevantproclamation and to local construction andconsultancy companies. The
margin ofpreference shall be as follows:
 For procurement of locally producedgoods and other products 15%;
 Preference shall be given to small & microenterprises by a margin of 3% when such
enterprises compete with local suppliers innational competitive bidding.

o For construction and consultancy services

7.5%;
 o For procurement of drugs or pharmaceutical
products or medical equipment’s 25%;
 The above preference is applicable: -
 The procurement to be granted to drugs, medical equipment’s orother products as per
article 16/20/2(a) and (b) shall be effectivewhere it is certified by a competent auditor
that no less than 35%of the total value of such products is added in Ethiopia.

PROCUREMENT COMPLIANT MECHANISM

BIDDERS PROTEST MECHANISM

First Step The Aggrieved Supplier can lodge his complaintto the Head of the Procuring Entity
Second Step, He can Lodge his Complaint to the
Complaint Review Board:

The Board Members Comprised of:

Private Sector
 Public Enterprises
 High Spending Procuring Entities
 FPPA
MoFED takes the Chairmanship Role of the Board andFPPA serve as a Secretariat for the Board
 If they are not satisfied by the decision of the Board they
can take the case to the court.

USE OF COUNTRY SYTEM

  The World Bank has allowed the use ofCountry System for procurements to be
conducted by NCB with certain conditions
 New progress is expected in the area of use ofCountry System because of the ongoing
reform both at the World Bank and theAgency.

CHALLENGES OF PROCUREMENT POLICIES

Suppliers lack knowledge of procurementprocedures particularly in relation tocomplaints review.

 Lack of information from suppliers’ side toprocess complaints.
 Poor contract performance by some suppliers,they became deficient in meeting
theircontractual agreement.

THE WORLD BANK’S PROCUREMENT POLICIES AND

PROCEDURES

INTRODUCTION
As the World Bank adapts to its changing role in a changing world, and aligns its policies
and processes with its modernization agenda and commitments to enhance development
Effectiveness, the Bank will continue to exercise its leadership in procurement for development
and remain in the forefront of public procurement as a setter of international standards. Major
Underpinnings of the review are to incorporate worldwide best practices, support the Bank’s
Borrowers in strengthening their own procurement systems, simplify whenever possible, and
enhance flexibility

2. Open and competitive procurement has been the mainstay of the Bank’s policies on the
Procurement of goods, works, and services under Bank-financed operations since the Bank’s
Founding. These policies reflect four main considerations: the need for economy and efficiency,
the interest in ensuring that all eligible bidders have equal opportunity to compete, the desire to
Encourage the development of domestic industries, and the importance of having a transparent
procurement process

3. The Bank’s procurement policies and procedures were originally shaped by the nascent
practices for large-scale, stand-alone infrastructure investments.

4. As a consequence, the Bank has periodically updated its policies and procedures, as laid
out in the “Procurement and Consultant Guidelines” (the Guidelines) applicable to the Bank’s
borrowers (the “red” book ―“Procurement Guidelines”―governing the procurement of goods,
works, and non-consulting services, and the “green” book―“Consultant Guidelines”―governing
the selection and employment of consultants), as well as OP/BP11.00 - Procurement. Such
periodic updates over the years embody significant cumulative changes that represent the
evolution of a policy that has served the Bank and its borrowers well. Much progress has been
achieved, in particular with regard to transparency of the bidding processes, enhanced business

RATIONALE

There are a number of reasons, summarized below and expanded in the accompanying
Initiating Discussion Paper, for undertaking a review of the Bank’s procurement policies and
how they are now applied. First and foremost, the Bank’s business has changed dramatically
since its founding, when the original procurement policies were adopted. The Bank’s
procurement policies, designed for infrastructure investments, have become less well-tuned to
the Bank’s evolving portfolio in all sectors and to new lending instruments and ways of doing
business—from innovations by which the public and private sectors interact under Public-Private
Partnership (PPP) financing to the ever-increasing number of smaller, dispersed contracts,
sector-wide approaches, and performance-based and community-based activities, which now
make up a significant share of the Bank’s operations.

The Guidelines have also accommodated new concepts and ways of carrying out public
procurement. Innovative methods and procedures have been incorporated in the most recent
versions, and concepts such as output-based procurement and life-cycle evaluation are already
incorporated. Further, the Bank’s procurement policy played a catalytic role in enhancing
transparency, efficiency, and fairness in procurement, and became a bulwark in the fight against
fraud and corruption. At the same time, procedures that are prescriptive (in particular with regard
to ICB), while effective in a ring-fenced project environment, may have limited impact on the
overall effectiveness of country systems. Countries can lack capacity to apply the Guidelines
and the Bank itself faces challenges and resource constraints in exercising its procurement
oversight. Borrowers and staff often find the procedural provisions too prescriptive, complex,
and time-consuming.

The Bank now has new financing instruments, such as Development Policy Loans and
Guarantees. It increasingly uses new delivery mechanisms, such as community-driven
development, and operates across a wide range of sectors and countries. It has a new focus on
results—for example, through the recently approved Program-for-Results (PforR) instrument. It
also seeks to respond to borrower requests and international commitments to increase the use of
country systems and to strengthen national capacity. Fraud and corruption has further emerged
as a high priority as part of the Bank’s focus on governance and anticorruption.

Not only has the Bank’s business changed, but there have also been major
transformations of the global economy over the past twenty years that have had a marked impact
on the world in which the Bank operates. For example:
 The market for items financed by the Bank has been transformed, the result of
globalization and integration. Merchandise exports from developing countries have
multiplied many times over and new giants have appeared among the world’s top
companies. Multinational corporations produce where their markets are and sell
through local affiliates. PPP financing and outsourcing also provide new ways for the
public and private sectors to collaborate. Meanwhile, exports from Part I countries
have become more specialized, emphasizing high-value and technologically-driven
goods. As a result, supplying countries for Bank-financed operations are increasingly
Part II countries, with national companies playing a dominant role in winning ICB
contracts in their home countries.
 New international instruments and agreements, notably the WTO’s Government
Procurement Agreement (GPA), as well as many regional and bilateral agreements,
such as the EU’s Directives on Public Procurement, have created new demands for
open and transparent public procurement. Moreover, UNCITRAL’s Model Law on
Public Procurement has played an important role in setting international standards for
public procurement laws. The adoption of these instruments and signing of
agreements have accompanied a growing recognition of the size and importance of
the markets offered by public procurement around the world. Public procurement is
big business.
 Along with these new international instruments and agreements, new concepts and
practices of what makes for good public procurement have emerged. The use of
technology, including electronic tools and platforms, has vastly changed the way
public procurement is executed. The benefits of e-procurement are much more than
improved efficiency through computerization of processes: e-procurement represents
a powerful information and management tool that underpins the strengthening of
public procurement systems and that can transform the provision of public services.
Modern public procurement systems are further driven by the desire of governments,
whether in developing or developed countries, to get better value for money and to

make their procurement systems faster and cheaper. These reforms reflect an
important change in perception: from viewing public procurement as a set of
bureaucratic rules, an increasing number of governments now see procurement as a
strategic function at the core of delivering quality public services and giving good
value to taxpayers. The mantra now followed by the leading public procurement
agencies in an increasing number of countries is how to get value for money and
pursue best-fit-for-purpose objectives, with new ways for contracting agencies to
interact with supplying companies. Generally, these changes introduce new
flexibility in public procurement policies and entail rebalancing these policies
between compliance and performance and between rules and principles.
 Increasingly, issues of governance and probity have become embedded in these new
approaches to public procurement, with the expectation of high ethical standards on
the part of both private firms and public sector counterparts. Public procurement is
thus the nexus of governance, anticorruption, and competition, offering opportunities
to build on the common values of openness, transparency, fairness, competition,
value for money, and accountability. There are synergies to be more fully exploited
that go well beyond compliance with specific procurement procedures.
 The Bank’s borrowing members have not been left out of these transformations.
Improved procurement capacity among the Bank’s borrowing members, especially
high and upper middle-income countries, has driven up client expectations of the
support they receive from the Bank to reform their procurement policies and to build
the corresponding institutions. Many countries are advanced in adopting new legal
structures and putting in place institutions to handle public procurement, and some
are at the vanguard of using e-procurement systems to simplify and automate
procurement transactions, especially to handle low-value, high-volume procurements.
These new systems are producing high returns. At the same time, the Bank’s work
with small countries and with fragile and conflict-affected states and post-conflict
countries frequently calls for a differentiated strategy geared toward simplification
and adaption to their respective capacities and circumstances. All of this is
accompanied by the Bank’s shift in investment lending policies and processes
towards differentiating by risk and managing those risks.
 The Bank is now party to international commitments on harmonization and
convergence. Since the early 2000s, the international community has come together
to endorse commitments to enhance the effectiveness of development programs, as
articulated in the Paris Declaration, with specific actions to be taken to strengthen
procurement capacities under the Johannesburg Declaration. These have further
evolved to culminate in the Cuzco Declaration and inputs to the Busan Fourth High
Level Forum on Aid Effectiveness. This requires the Bank, along with other donorsAnd
Multilateral Development Banks (MDBs), to reassess how it uses country
Systems, encourages dialogue on harmonization, and builds local procurement
Capacities.
 Finally, the efficiency and effectiveness of the Bank’s internal review and clearance
Processes and its procurement supervision and oversight model have to be taken into
Consideration. The number of contracts subject to drives the Bank’s own costs
prior review—processes designed for when the Bank dealt with few clients in a few
Sectors entailing a few contracts managed by external consultants. Procedures
Mandate that the Bank’s specialized procurement staff now have to deal with both a
Small number of very large contracts—the top 100 contracts account for about 1
percent of the number of contracts and half of the value of the contracts subject to
Prior review by the Bank in FY11—and a large number of small and diverse
Contracts. Thus, extensive prior review requirements compete with capacity building
And system-wide improvements for staff time and attention. As the accompanying
Discussion Paper shows, the internal resources devoted to procurement are relatively
Small and the workload for these specialists has grown over time. There may be
ways to increase the value-added of the Bank’s work to have a multiplier effect on the
entire range of borrower public procurement with considerable potential for
Generating savings for borrowers and private bidders.