Public Procurement Methods To Enhance Private Investment

There is a need for enhancing investments in infrastructure given their contribution to economic growth and development. One of the ways is to leverage all available financial and technical resources: much has been written about the need to engage the private sector in the modalities of infrastructure service delivery. Much less has been written on the most suitable public tendering processes for identifying and selecting investments and partners. There is an implicit assumption that competitive procurement is the ideal, but there are many cases where the conditions for competition are not suitable or projects are complex or urgent and alternative methods must be explored.

The conceptual model for selecting alternative methods under the less than ideal conditions prevailing in many developing countries (Uganda being one of them) is linked with the choice of the project procurement procedure to select infrastructure projects in public works where private sector participation extends beyond being a mere contractor, where the private sector has a stake in the success of the project, puts it resources at risk.

Traditionally it is thought that there are only two choices in the procurement of projects: through some form of competition, either direct or staged, or through unsolicited offers. There are advantages and disadvantages of these two broad methods of selection, mostly in relation to economic efficiency, including the avoidance of corruption.

For these methods to be the most efficient, conditions in the surrounding institutional and legal environment must be suitable. In Uganda as a whole, and even at the local level of government in, these conditions are less than ideal and the authorities may have to go for a “second best” procurement method. Sometimes, the government does not even have the capacity to know what it is needed, much less is able to structure and define a project to be tendered for competitive procurement. In other cases, the government may be capable but radically new project concepts are needed; competition for the minimum cost would be unable to select the most valuable solution, which is unknown beforehand. Here is a brief analysis of these methods and their variations looking at the most suitable options under less than ideal conditions. Most of the literature on project procurement deals with issues related to the enhancement of the efficiency, effectiveness and transparency of the process, with getting the most value for money. The procurement guidelines of the World Bank, paraphrasing its Articles of Agreement state that proceeds of the loans must be used “with due considerations of economy and efficiency and without regard to political or other non-economic influences or considerations”; and “Open competition is the basis for public procurement.” (World Bank 2006 and UNCITRAL 2004, 2001). While some exceptions are allowed to open competition, the emphasis is on efficiency and transparency. This applies mostly to the procurement of goods and services of its projects, yet it has been extended to the selection of projects themselves, financed by the public sector, with or without multilateral loans and of projects with private sector participation. In practice that has produced a bias against non-competitive methods of procurement. The incentives of public sector bureaucrats tend to be avoiding problems by going by the book. Because of this conservatism, many worthwhile projects fail to be carried out.

To consider are non-competitive methods and identify supplemental actions needed to overcome the lack of full competition. We aim to put it all in context, in a relatively simplified and understandable manner, to guide the thought process of public sector officials and the private

This perspective is a sequel to our reasoning on the selection of delivery modalities and financial structuring in projects suited to the local conditions prevailing in the location of the project by our procurement system.