Use Of Tendering And Competitive Bidding In Public Sector Procurement

Project and Seminar Material for Purchasing and Supply PS

Use Of Tendering And Competitive Bidding In Public Sector Procurement


Abstract


The subject matter of this study is the use of tendering and competitive bidding in the public sector procurement. A case study of ministry of works, Imo State, Owerri. Among the objectives is stated in chapter one of the study.
In other to attain to the objectives a research questions was constricted to enable the researcher collect relevant information in the subject matter.

The researcher reviewer related iterative and some facts drawn from the work in chapter two. Chapter three welcomes the research methodology; the population and size etc. chapter four contains the researcher’s presentation and analysis of data.

Finally chapter five is about conclusion, summary and recommendations.


Chapter One


1.0 Introduction

1.1 Background of the Study

The dictionary of purchasing and supply management defines tendering and competitive bidding as offers from tenderness without callous, usually in scaled enveloped delivered by a time and date specified in the invitation to tendering for supply of goods and services.

Uzor (2004:440) in (Lysons 1996:42) defined tendering as a purchase procedure whereby potential suppliers are invited to make a firm and unequivocal offer of the price and terms which on acceptance shall be the basic of the subsequent contract.

Frank Harris and Ronald Mc Caffer defined competitive bidding as an invitation by an organization (i.e the client) to supplier to submit its quotation for a job or services required by the client organization the whose main objective is to determine the performance abilities of the supplier.

Tendering and competitive biding is usually required when an organization or a firm needed supply of certain goods such as furniture, generating set, caterpillars, vehicles, drugs, medical equipment, and computers e.t.c

Tendering is widely used in the public sector to ensure observance of the principles of public accountability. It many also be used by private sector organization more especially in respect of construction and services contracts to obtain prices and terms of the contract. According to Compton and Jessap (1989) such tenders are opened only at the time and data specified by the tender panel of qualified persons who records the necessary details the essence of this research therefore is to examine the use of effective bidding in improving public sector procurement.


1.2 Statement of Problems

The problems of tending and competitive bidding and its implications on public sector procurement has been identified by many as not only enormous but complex now that there is serious needs on the part of our various government to provide more services with little funds and issue of corruption in our “public life” some of the problems are

  1. A great numbers of problems have bedeviled sector tendering which has great affection in the quality of contract entered by the public sector organization. The entire contract system has gone sour as a result of mis management, corruption mis application of rules and regulation set to be adhered to in contracting for goods and services.
  2. The negligent on the part of the various authorities to ensure a uniform codes standard of practice and professional ethics of conduct all have made a complete miss of our public sector tendering.
  3. The out data nature of our financial regulation which guide the operations public procurement as well as public sector tendering in the greatest problem of our public sector tendering and therefore has serious implications on the efficiency and effectiveness of public sector contract management and administration.
  4. Competitive bidding in public sector procurement usually ends with the lowest price bidder getting the award of the purchasing firm gains a population for negotiation with the towerst bidder after bids are opened. This will make future bidders not to offer their best price initially, believing that they do better in any subsequent negotiation.

They will adopt a system of submitting a bid low enough to allow them to be included in any negotiations. But their initial bid will not be as low as when it is anticipated that the award be made to be the lowest bidder without further negotiation. Competitive bidding tends to put great pressure on suppliers to reduce their cost to be able to bed low but profitable prices. This cost pressure may result sacrifice in product quality development efforts and other vital services.


1.3 Objectives of the Study

In most public establishment there is a wide misunderstanding of tendering and competitive bidding as a tool for public sector procurement.

  1. To examine the use of tendering in improving the efficiency and effectiveness of public sector procurement.
  2. To find out the reason why there is misunderstanding of competitive bidding.
  3. Determine whether or not there is need for an independent unit to be created with trained and qualified professional to handle public sector procurement.
  4. To examine the procedures and processes of tendering and contract awards and the skills of officers involved in public tendering and contract management.

1.4 Research Questions

Based on the project topic and objective of the research, the following question were developed by the researcher:-

  1. Does tendering have a role to play in improving the efficiency and effectiveness of public sector procurement?
  2. What qualifies a bidder to be invited to bid?
  3. Has there been instances where the lowest bidders are not offered the job?
  4. Can the current tendering process or procedures as used by the public sector organization eliminate corruption and build accountability and transparently in the public sector?
  5. Are the officers handling tendering in the public sector qualify?

1.5 Statement of Hypothesis

Based on the research question formulated the following hypothesis are formulated.

Hypothesis One
  • Ho: tendering is an effective tool in public sector procurement
  • H1: tendering is an effective tool in public sector procurement.
Hypothesis Two
  • Ho: there is no effective method the ministry adopt other than competitive bidding
  • H1: there is another effective method the ministry adopt other than competitive bidding

1.6 Significance of the Study

The significance of this research work is to help the research or showers to know the significance of this. Study to discover whether there will need for effective and efficient use of tendering and competitive in the ministry. At the end of this work the ministry will be able and capable of ensuring that. There is effective and efficient use of tendering and competitive bidding in ministry.

  1. This research work be beneficial to the ministry of works the researcher himself and also to the public and private organization under study.
  2. It creates opportunity for unknown contactor or supplier to become known especially when it is successful.
  3. It makes public accountability possible
  4. The research work allows keen competition which may produce cheaper tender figure.
  5. It is an opportunity to get genuine tenderers who are actually interested in the project.

1.7 Scope of the Study

This study has been limited to the public sector organizations.

Tendering and competitive bidding has play many role in the management and administration of public sector contract, this study would have covered all the ministries departments, Agencies, Boards even the local government areas in this country but the researcher after due considerations of various variables and implications decide to concentrate on the study of the implications of effectiveness and efficient tendering in the administration and management of contract in the ministry of works and housing, Owerri Imo State. In doing this the researcher concentrated on most of the department and units that have one or other things to do with the subject matter of this study.

These departments or units include administration, engineering, planning, finance of these areas well give a great insight as what takes place in other ministries departments, Board, Agencies etc.


1.8 Limitation of the Study

In the process of conducting this study the researcher has confronted with the various problems among them are:

  1. It was not easy for the researcher who had to combine attending lectures in school and other activities in school with the various visits to the ministry during this research work. This in no small way limit the level of investigation, the research intended to carry out.
  2. Yet another limitation faced by the researcher was financial constraints. This made it impossible for the researcher to make all the necessary visits in order to obtain the right quality and quality of information the research of this nature requires.
  3. Lastly many officials changes with the management and administration of tendering and competitive bidding and public sector contracts were not keen to give out much needed information by way of documents and forms which were classified as “ strictly confidential” by the government.

1.9 Definition of Terms

(1) Bid:

A quotation for a price or other conditions for contracts whether for payment or acceptance.

(2) Lead Time:

This is the interval between when a need is perceived and the fulfillment or satisfaction of that need.

(3) Tender:

It is the procedure through potential suppler are invited through newspaper and other selected media advertising to make a firm and unequivocal offer of the price and terms which on acceptance, shall be the basis of the subsequent contract in competition with others.

(4) Competitive Bidding:

This is one of the methods by which the right price can be obtained.

(5) Quotation:

A formal statement prepared by a contactor/ supplier to his customer that includes cost estimates specification and other key information about an agreement between the two parties.

(6) Government:

An institution with power to govern and direct the affairs of a state.

(7) Evaluation:

The process of finding out and deciding the amount and value of something.

(8) Negotiation:

Seeking agreement between the purchaser and the contractor/ supplier on mutually acceptance terms and conditions prior to conclude a contract.

(9) Analysis:

The process of breaking components into separate parts or units in order to examine each unit and constitute critically.

(10) Certificate:

Act of licensing by a document formally testing the fulfillment of conditions.

(11) Procedure:

A May, system or pattern of performing a work, service, suppliers etc.

(12) Performance Bonds:

This is an undertaking or security to perform a contract as required and failure to perform as required the client will be compensated by the supplier or contractor.

(13) Specification:

This is the description of any objective materials or process in sufficient detail requirement of a job/ suppliers or contract which the contractor or the supplier must compile with. It is what the supplier must supply to the buyer as describable by the buyer.

(14) Sourcing:

This is a process and procedure used by the buyers to survey, evaluate and determine which supplier that can meet with the best requirement of their organization.

(15) Sourcing Policy:

These are policies developed to guide the purchasing functions in respect of who may be the major sources of the organizational suppliers.

(16) Quality:

Quality is the fatality of futures and characteristic of a product or a serves that bears in the ability to satisfy a sated or implied needs.

(17) Price:

This the amount of money for which a thing is offered sold or brought

(18) Price Analysis:

This is the examination of the sellers price without examination elements of the cost and profit element that make up the price.

(19) Fair Price:

A fair price is the lowest price that make it possible for a continuous supply of the right quality materials by the supplier where and when needed.

(20) Selective Tender:

There a method where only competent suppliers on the approved list of supplies are invited by the buying firm to tender.

(21) Forward Buying:

This is a buying practice which embraces the buying of materials in quantity more that it current requirements.

(22) Standardization:

It is an agreement on definite sizes, design, quality and the like.

(23) Contract:

It can be defined as an agreement between two or more persons which is intended by them to have legal consequences.

(24) Pricing:

This is the process of determine the price

(25) Order:

This is an instruction to a manufacturer or trader to supply something


1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the use of tendering and competitive bidding in public sector procurement.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of tender and competitive bidding inpublic sector procurement process.


5.2 Summary

The study found out that, majority of the officers are not reasonably remunerated considering their level of education despite handling tenders worth millions of shillings and that majority of officer’s levels of education is not adequate to handle such tenders. The study also found out that, tendering processes were well managed and duration significantly influence the effectiveness of tendering process in Central region. Favoritism, tribalism, politics prevalence were low, but were present in tendering process. ethical practices in tendering do not significantly influence the effectiveness of tendering in the agency.


5.3 Conclusion

Most of the time, public procurement is carried out through competitive bidding or tendering process with the intention of achieving maximum economic efficiency through competitive process. Any anticompetitive practices in a procurement process, such as collusion, bid-rigging, fraud and corruption, could lead to artificially raised prices, or compromise on the parameters and consequently impact public expenditure and the precious national resources. Ensuring effective functioning of public procurement market is also parts of good governance and necessitates two distinct, but inter-related challenges. (i) Ensuring integrity in the procurement process, that is, preventing corruption on the part of public officials and (ii) Promoting effective competition among suppliers, including preventing collusion among potential bidders. Certificates Independent Bid Determination (CIBD), which require bidders to certify that they have arrived at their tender price absolutely independent of other bidder (CIBD) operate as both a reminder of the relevant legislation and as a commitment by the bidders that these rules have been complied with there is need to either have qualified staff handling procurement or to provide adequate professional training to convert the procurement officials into procurement managers


5.4 Recommendations

Haven completed the study, the researcher recommends that the present and successive governments should do all things possible, through sincere political will, not only to sustain it, but to re-invigorate it by putting ‘bitting razor teeth and a “hot iron knots” to cracks or leakages, through which the policy is being abused or mocked. The Nigerian government should also ensure that relevant organs promptly approve and release funds to avoid undue stress on procurement processes, regular stock taking, adequate, effective and efficient projects, programmes and monitoring and evaluation. There should be proper database for proper record keeping and documentation in the BPP and in allthe Government MDAs in the country. Enforcement agencies should also seek to establish a collaborative relationship with front line public procurement officials to the possibility and warning signs of collusion, as well as warning of the consequences for officials, who themselves engage in corrupt practices. Redesign of the procurement process, maximizing transparency without allowing sharing of commercially-sensitive information. Generally, sealed bid tenders are less prone to collusion than dynamic or open tender mechanisms; whereas individuals’ negotiation has greater potential for corruption or favouritism than competitive bidding, although in certain circumstances, it may be the most efficient procurement tool


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