KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY,

KUMASI, GHANA

The Effectiveness of Public Procurement Activities on the Management and Usage Of

Public Funds in The Road Sector.

A Case Study of the Department Under the Roads Ministry

By

JONATHAN PARRY

(BSc. Business Administration)

A Thesis Submitted to the Department of Construction Technology and Management, College of

Art And Built Environment, in partial fulfillment of the requirement for the degree of

MASTER OF SCIENCE

SEPTEMBER, 2018

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DECLARATION

I hereby declare that this research is my own work towards the award of a MSc. and that, to the best

of my knowledge, it contains no materials which have been accepted for the award of any other

degree at this university or elsewhere, except where due acknowledgment has been made in the text.

STUDENT: PARRY JONATHAN (PG 1887117)

Signature: ...........................................................

Date: ..................................................................

Certified by

SUPERVISOR: DR. ENERST KISSI

Signature: ...........................................................

Date: ...................................................................

Certified by

THE HEAD OF DEPARTMENT: PROFESSOR BENARD K. BAIDEN

Signature: ...........................................................

Date: ...................................................................

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ABSTRACT

According to the Ministry of Finance (2003), public procurement accounts for about fifty to

seventy percent of total public spending and accounts for about twenty-four percent of total

imports and fourteen percent of gross domestic product (GDP). Effective public procurement is

therefore very important for the management of the country's economy.

For this reason, governments have always considered procurement as the center of the country's

structural financial reforms. Cost control is also essential in the management of public sector

funds.

The aim of the study was to evaluate the effectiveness of public procurement in the management

and use of public funds in those areas where transparency and accountability exist. It should also

be examined whether procurement activities in the public sector offer good value for money and

control public spending and examine some of the challenges that procurement and related

personnel must face in the implementation of public procurement. The research concentrated on

officials from three departments. The sample size of 50 for the study. Questionnaires were

administered and the answers were analyzed with the help of charts and tables where necessary.

The study found that the public procurement system was transparent and accountable. The study

also found that public institutions have delayed their suppliers of goods and services that have

been delivered, which has influenced future projects or contracts. In terms of cost control and

cost-benefit ratios, the study concluded that, despite the monitoring and control of public

spending, public procurement activities do not offer good value for money.

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TABLE OF CONTENT

DECLARATION........................................................................................................................... ii

ABSTRACT ................................................................................................................................... ii

TABLE OF CONTENT............................................................................................................... iii

LIST OF TABLES ...................................................................................................................... vii

LIST OF FIGURES ................................................................................................................... viii

LIST OF ABBREVIATIONS ..................................................................................................... ix

ACKNOWLEDGMENT ............................................................................................................. ix

DEDICATION............................................................................................................................... x

CHAPTER ONE ........................................................................................................................... 1

INTRODUCTION......................................................................................................................... 1

1.1 CHAPTER OUTLINE .......................................................................................................... 1

1.2 RESEARCH BACKGROUND ............................................................................................. 1

1.3 STATEMENT OF THE PROBLEM .................................................................................... 2

1.4 AIM AND OBJECTIVES OF THE RESEARCH ................................................................ 4

1.5 RESEARCH QUESTIONS ................................................................................................... 4

1.6 RESEARCH METHODOLOGY .......................................................................................... 5

1.7 SIGNIFICANCE AND RELEVANCE OF THE STUDY ................................................... 5

1.8 SCOPE OF THE STUDY ..................................................................................................... 5

1.9 STRUCTURE AND ORGANIZATION OF THESIS ......................................................... 6

CHAPTER TWO .......................................................................................................................... 7

REVIEW OF LITERATURE ...................................................................................................... 7

2.0 INTRODUCTION ................................................................................................................. 7

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 2.1 FINANCE.............................................................................................................................. 7

2.2 PUBLIC FINANCE .............................................................................................................. 8

2.3 PUBLIC FINANCIAL MANAGEMENT ............................................................................ 8

2.4 SOURCES OF FUNDS FOR PUBLIC INSTITUTIONS .................................................. 10

2.4.1Government of Ghana (GOG) ....................................................................................... 10

2.4.2 Grants............................................................................................................................ 11

2.4.3 Internally Generated Funds (IGF) ................................................................................ 11

2.5 Public Expenditure Management..................................................................................... 12

2.6 Bureaucracy ..................................................................................................................... 13

2.7 PROCUREMENT ............................................................................................................... 14

2.8 PUBLIC PROCUREMENT ................................................................................................ 21

2.9 RELATIONSHIP BETWEEN PUBLIC FINANCIAL MANAGEMENT AND PUBLIC

PROCUREMENT ....................................................................................................................... 25

2.10 PUBLIC PROCUREMENT REFORMS IN GHANA ..................................................... 26

2.11 WHY PROCUREMENT IS IMPORTANT ...................................................................... 28

2.12 CONSEQUENCES AND CHALLENGES IN PUBLIC PROCUREMENT ................... 31

2.13 VALUE FOR MONEY ..................................................................................................... 31

2.14 ACCOUNTABILITY........................................................................................................ 33

2.15 TRANSPARENCY ........................................................................................................... 34

2.16 SOLE SOURCING ........................................................................................................... 35

CHAPTER THREE .................................................................................................................... 38

METHODOLOGY ..................................................................................................................... 38

3.0 INTRODUCTION ............................................................................................................... 38

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 3.1 RESEARCH AREA ............................................................................................................ 38

3.2 SOURCES OF DATA......................................................................................................... 38

3.3 POPULATION, SAMPLE SIZE AND SAMPLING TECHNIQUE ................................. 39

3.4 RESEARCH DESIGN AND INSTRUMENT .................................................................... 40

3.5 DATA COLLECTION METHOD...................................................................................... 40

3.6 DATA COLLECTION INSTRUMENT AND PROCEDURE .......................................... 41

3.7 Data Presentation, Analysis and Discussion ....................................................................... 42

3.8 SUMMARY ........................................................................................................................ 42

CHAPTER FOUR ....................................................................................................................... 43

RESULTS AND DISCUSSION ................................................................................................. 43

4.0 INTRODUCTION ............................................................................................................... 43

4.1 DATA ANALYSIS AND PRESENTATION OF DATA .................................................. 43

4.2 BACKGROUND OF RESPONDENTS ............................................................................. 43

4.3 TRANSPARENCY IN PUBLIC PROCUREMENT .......................................................... 44

4.3.1 Information on Public Procurement ............................................................................. 44

4.3.2 Advertisement of procurement opportunities ............................................................... 46

4.3.3 Method of Procurement ................................................................................................ 47

4.3.4 Mode of Tender opening and Period of Tender opening.............................................. 49

4.3.5 Internal mechanisms of control and Audit of Procurement activities .......................... 51

4.4 DELAYS IN PROCUREMENT ......................................................................................... 53

4.4.1 Evaluation of Tenders ................................................................................................... 53

4.4.2 Approval from Tender Review Boards ........................................................................ 54

4.4.3 Delay of contract awards by procurement processes.................................................... 57

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 4.4.4 Levels of Approval for Procurement Activities ............................................................... 58

4.5 SOME CHALLENGES IN PROCUREMENT .................................................................. 59

4.5.1 Record Keeping ............................................................................................................ 60

4.5.2 Payment to suppliers ..................................................................................................... 60

4.5. 3 Market Surveys ............................................................................................................ 62

4.5.4 Expenditure Control ..................................................................................................... 63

4.6 VALUE FOR MONEY ....................................................................................................... 65

4.6.1 Cost Reduction in Procurement........................................................................................ 65

4.6.2 Value for Money in Procurement ................................................................................. 66

4.6.3 Savings in Procurement ................................................................................................ 68

4.6.4 Strengthening and controlling government expenditure .................................................. 69

CHAPTER FIVE ........................................................................................................................ 71

CONCLUSION AND RECOMMENDATION ........................................................................ 71

5.0 INTRODUCTION ............................................................................................................... 71

5.1 SUMMARY OF FINDINGS .............................................................................................. 71

5.2 RECOMMENDATION ...................................................................................................... 73

5.3 CONCLUSION ................................................................................................................... 74

5.4 RECOMMENDATION FOR FURTHER STUDY ............................................................ 74

REFERENCE .............................................................................................................................. 75

APPENDIX .................................................................................................................................. 78

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LIST OF TABLES

Table 4.1: Years of experience of respondents ............................................................................. 44

Table 4.2 - Publication of Information on Public Procurement .................................................... 45

Table 4.3- Advertisement of Procurement Opportunities ............................................................. 46

Table 4.4 - Method of Procurement .............................................................................................. 47

Table 4.5: Method of Tender Opening ......................................................................................... 50

Table 4.6: Control Mechanisms .................................................................................................... 52

Table 4.7: Auditing of Procurement Activities ............................................................................. 52

Table 4.8: Period for Evaluation of Tenders ................................................................................. 53

Table 4.9: Entity Tender Committee Meetings............................................................................. 54

Table 4.10: Approval from Tender Review Boards...................................................................... 57

Table 4.11:Delay of Contract Awards by Procurement Processes ............................................... 58

Table 4.12:Levels of Approval for Procurement Activities.......................................................... 59

Table 4.13:Keeping of Records on Procurement .......................................................................... 60

Table 4.14: Period for Payment to Suppliers ................................................................................ 61

Table 4.15: System for Market Survey ......................................................................................... 62

Table 4.16:Review of Expenditure ............................................................................................... 63

Table 4.17: Record of Procurement Plans Against Budgets ......................................................... 65

Table 4.18:Structured Procurement Reduce Cost ......................................................................... 66

Table 4.19: Procurement ensures Value for Money ..................................................................... 67

Table 4.20: Government’s Money is saved through Procurement ............................................... 68

Table 4.21:Procurement Act on Strengthening and Controlling Expenditure .............................. 70

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LIST OF FIGURES

Figure 2 1-The Procurement Cycle ............................................................................................... 18

Figure 2 2-Diagram of the Management of the Contract .............................................................. 20

Figure 4.1 - Publication of Information on Public Procurement .................................................. 45

Figure 4.2:Method of Procurement ............................................................................................... 48

Figure 4.3: Period of Opening of Tenders .................................................................................... 49

Figure 4.4: Method of Tender Opening ........................................................................................ 50

Figure 4.5:Entity Tender Committee Meetings ............................................................................ 56

Figure 4.6:Period for Payment to Suppliers.................................................................................. 61

Figure 4.7: Procurement ensures Value for Money ...................................................................... 67

Figure 4.8: Government’s Money is Saved through Procurement ............................................... 69

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LIST OF ABBREVIATIONS

DFR Department of Feeder Roads

DUR Department of Urban Roads
EU European Union
GDP Gross Domestic Product
GHA Ghana Highway Authority
GOG Government of Ghana
IGF Internally Generated Funds
ILO International Labour Organization
IMF International Monetary Fund
MDG Millennium Development Goals’
MRH Ministry of Roads and Highways
PEM Public Expenditure Management
PFM Public Financial Management
PPA Public Procurement Authority
PUFMARP Public Financial Management Reform Programme
SPSS Statistical Package for Social Science
VAT Value Added Tax
VFM Value for Money

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ACKNOWLEDGMENT

I want to thank the Almighty God for giving me life and strength to carry out this research.
My sincere gratitude goes to my supervisor, Dr. Ernest Kissi for his guidance, constructive
criticisms, suggestions, and encouragement throughout the research process.

My special thanks go to Mr. Henry Osae Kwansah and Mrs. Jesse Osae Apeadu for their
immense assistance provided in terms of monetary, guidance, suggestions, and encouragements
throughout the course.

I also want to thank Mr. John Acquaye (former Contracts’ Manager, DUR) for his advice via
guidance and time while I worked under his tutelage. It was through his advice I pursued this
course and I am gainfully employed now.

To my friends and colleagues at Department of Urban Road, Head Office and Justmoh
Construction Limited (Justmoh Group) for holding me down when things were rough tough.
Another thanksgiving to my family who were prayerfully supporting while I go through this
course in life. I say thank you for having you around and wish everyone the best in the future.

Lastly, my sincere thanks go to all respondents who in various ways have helped to make my
research work complete.
May the almighty God richly bless you all.

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DEDICATION

This thesis is dedicated to all my loved ones especially in memory of my late colleague Godfred

Fianko. Who could not complete this Masters programme with the procurement class.

May his gentle soul rest in peace.

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CHAPTER ONE

INTRODUCTION

1.1 CHAPTER OUTLINE

This chapter gives an outline of the research work and it focus with regard to the background to

the study and the statement of the research problem under review. The methodology adopted, the

relevance of the study, the objectives and area of the research are reviewed as well. All other

vital knowledge and sides of the organization of this study is presented in this research piece.

1.2 RESEARCH BACKGROUND

The Public procurement Authority in a recent interaction with stakeholders said that they have

formed a unit to scrutinize procurement requests made to it by state institutions to ensure

equitable use of resources. It is known as Due Diligence and Value for Money Unit. The unit is

to examine the prices reasonableness of estimated values provided by the agencies for sole

sourcing and restricted tendering. It is in view of building their operating capacity to meet the

desires of the standard of operation and create fair use of the state funds in delivering their

mandate. (Page 25; Daily Graphic September 6, 2018).

The managing of the Public finance focuses on the following three words; Economy, efficiency

and effectiveness. Many problems exist in developing and transition countries that keep local

suppliers from taking advantage of the government marketplace. Utmost blame has always been

rewarded at the threshold of public procurement. It will stay there because they should know

their mandate better. Procurement is a system for procuring goods, labor and services from

suppliers and contractors to meet official needs in order to achieve organizational goals. It is a

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process that begins with the identifying of needs, the solicitation of estimates, the evaluation of

offers, the submission of orders, the receipt, storage, use and maintenance of goods and storage

till it get indisposed and obsolete.

Procurers must apply the essential principles of public procurement at their fingertips. This
involves compliance to the required standard of operations. Similarly, it involves applying the
stands on provision of good value for money (VFM) audit on all projects undertaking. This helps
in reducing wasteful expenditures.

1.3 STATEMENT OF THE PROBLEM

There have been numerous discussions on the topic of public finance and it related activities that

have effect both direct and indirect on the state. The various state institutions cannot function

effectively without procurement activities been properly administered. To some extent it is the

life of the institution. Public procurement plays critical roles in the survival. Managing the

procurement team by marching it with the suppliers or contractors to develop a healthy

relationship. To achieve the purpose of financial management of road transport, much is

dependant on the achievement of the procurement actions; else, the limited monetary resources

are misused at the expense of the masses. A good management of public finances therefore

depends to a large extent on the efficiency of procurement and the maintenance of goods,

services and labor. If adequate measure are not taken it then tend to be abused rendering the

limited resources to be wasted.

Despite the numerous benefits offered by structured public procurement for public finance

management, there appears to be much waste in our procurement system that entails the loss of

huge amounts of public money. Nketia-Asante (2009) noted that public institutions struggling to

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acquire goods and services are leading to inefficiencies, low productivity and potential loss of

money, as well as a negative impact on the government's budget.

The Public Account Committee (PAC) of the parliament of Ghana in their remarks said most

public institutions in general have mismanaged public funds through inefficient procurement

actions that has driven these institutions to spend more than expected to be issued to contractors.

Other results have been that some public bodies have purchased goods and services of inferior

quality, while others have canceled contracts of illegal contracts that have led to the payment of

large sums of money as debt of judgment. The numerous allegations that some state officials are

corrupt and collect bribes due to their biasness to some particular group of firms or individuals.

This in the large extent will trigger issues if the project is awarded any contractor and fails to

complete the work “All other things been equal”. It creates issues for the authorising entity.

Another procurement activity will have to be drawn for this same project which the first

contractor failed to complete.

The purpose of this research is to examine the effectiveness of government procurement actions,

management and use of public finances and to make suitable suggestions to advance these

activities in order to ensure the effective use of resources in the road industry. Consequently,

there is the need to focus more on the design of models and conceptual frameworks which rely

largely on sustainable procurement practice (Johnsen et al., 2016; Sulistio & Rini, 2015).

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1.4 AIM AND OBJECTIVES OF THE RESEARCH

The aim and objectives of the study is to find out the effectiveness of public procurement

activities on management and usage of public funds in the road sector.

This aim will be attained based on the following objectives:

i. To assess the causes of delays in the procuring process and their impact on management
of public funds
ii. To examined how effectively procurement activities are managed in relation to

transparency and accountability.

iii. To evaluate the degree to which value for money is applied in managing the public funds.

1.5 RESEARCH QUESTIONS

The study hopes to give answers to questions as these:

i. Has the Procurement Act developed, strengthened and manage government expenditure

to appreciable level?

ii. Are the levels of approval and processes for procurement too lengthy?

iii. Does the company carry out a systematic assessment of total spend to regulate how

much is spent?

iv. How often are information public procurement published for the public?

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1.6 RESEARCH METHODOLOGY

Questionnaire will be administered to respondents to gather the needed information for the study.

The quantitative approach: descriptive study by the use of constructs generated at the exploratory

survey stage in designing questionnaires, which were distributed to 50 respondents involving

professional experts who are involved in procurement related management practices.

The Statistical Package for the Social Science (SPSS) was used in analyzing the data obtained
from the activity conducted.

1.7 SIGNIFICANCE AND RELEVANCE OF THE STUDY

It is foreseen that the survey would deliver the subsequent benefits.

 The survey provided details on the effectiveness of procurement in the management

and use of public funds

 It delivered to administrators of public organizations means of enhancing on their

procurement dealings

 In this case too, the survey provided opportunities to eliminate or reduce difficulties

in the procurement structure

 The survey was valuable for other scholars intending to do reading on procurement

and public financial management.

1.8 SCOPE OF THE STUDY

There are many problems with management in public institutions. However, this study confines

itself to assessing the potential impact of public procurement on the management and usage of

state finance.

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1.9 STRUCTURE AND ORGANIZATION OF THESIS

It will be prudent to follow a chronological order. The research work is divided into five

chapters. The steps commence with chapter one. Chapter One presents background to the

research including, the problem statement, research questions, aim and objectives, the scope of

the dissertation, research methodology, justification and the research design. Chapter Two

presents a review of literature related to Public financial management, public finance, finance,

public procurement, value for money transparency and accountability. On the other hand,

Chapter Three discusses Methodology, which is the step by step approach which is to be used

in reaching the set target. These helps a reader to follow the work chronologically. This chapter

outlines, methods used and how data gathered can be used to make an informed idea to the going

concern. Chapter Four analyses the data gathered and discusses the results and finally, Chapter

five summarises the findings of the study, the major contributions to knowledge and

opportunities for further research.

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CHAPTER TWO

REVIEW OF LITERATURE

2.0 INTRODUCTION

This stage of the research findings is the literature search and findings about the thesis. It

includes readings around public financial management, finance, public spending and

responsibility, public procurement, sole sourcing, transparency, value for money and

accountability. We shall consider the various definitions from the various books.

The procurement shall consider, inter alia, the definition of public procurement and procurement,

the cost-benefit ratio, the procurement issue, procurement issues, procurement reforms in Ghana

and single procurement. The relationship between procurement and public finance management

is also discussed. This chapter examines the variables associated with the research to provide a

clear understanding of the research findings.

2.1 FINANCE

Finances as defined is the provision of money when required. The finance role is the acquisition

of money and its actual use in the corporate sector (Paramasivan and Subramanian, 2009).

According to Griffin and Ebert (1999), finance is responsible for identifying the long-term

savings of an organization, raising funds for investment, managing the company's day-to-day

financial operations, and managing corporate risk. The funding is designed to ensure that an

organization has sufficient resources to manage the day-to-day operations of the business.

Financial controlling has to do with the verification the actual performance of the expenditure

related to the desired financial plans or results. Finance activities cut across all the key elements

7
of the institution. These roles are very important in the life of every organization. These are

actions that affect the way in which funds are raised, how funds are used and invested to raise

profits.

2.2 PUBLIC FINANCE

Simpson et al, (2011). Plehn (1902) notes that public finances are related to how the state buys

and spends its revenues. It defines public finance as the science that deals with the statesman's

activity of procuring and using the material resources necessary for the fulfillment of the

respective state functions. Efficient liquidity management is very important in the public sector,

as governments and public institutions usually face the challenge of dealing with the few

resources available.

The provision of services and goods can be effective if a prudent public financial system exists.

Effective allocation and monitoring of resources enables better delivery of goods and services.

Unfortunately, there seems to be a waste of scarce resources in the public sector and this requires

sound public financial management. It will be explained below in the next paragraph.

2.3 PUBLIC FINANCIAL MANAGEMENT

Public Financial Management (PFM) can be described as the art of budgeting, spending and

handling public funds. This extraordinary interdisciplinary combination of business areas,

political science, public administration and accounting has seen an invasion of advanced ideas

and improvements to address some of the ongoing challenges of public financial management.

In order to direct decision-making at the level of funding to the results that they can achieve,

many governments have introduced budgeting and performance management initiatives. In order

8
to better understand the actual state of public finances and the underlying risks, some

governments have sought to broaden the scope and depth of accounting and tax accounting and

introduced risk management techniques.

Frank (2006) was of the opinion that, effective public finance administration includes short and

long-term contemplations. In the face of rapidly changing economic conditions, public finance

officials have to balance their budgets in the short term. Effective public finance management

requires short and long-term concerns. In the short term, public finances need to balance their

budgets, often in the context of fast varying financial situations.

The management of public finances therefore extended from the well-defined state budget to all

levels of government and the public sector, including public initiatives and public-private

partnerships.

The main purposes of public finance administration are a maintainable economic position, the

accurate distribution of resources and the effective delivery of public goods and services.

Ayitey (2012) also notes that in 1993, following an in-depth review of its state spending

structure, the government decided to set up an all-inclusive public finance reform program to

strengthen its public finances in order to reduce challenges financial management in the financial

management system of public institutions. The Public Finance Management Reform Program

(PUFMARP), came into operation in 1995. Its objective was to promote effective, efficient,

transparent and accountable public finance management mechanisms.

According to Shand (2005), donor funding agencies and other various partners across the globe

now agree on what constitutes good corporate governance on public finances.

9
To make efficient use of financial resources, the financial resources of the organization must be

carefully planned, organized, monitored and controlled. Public sector finance officers are in a

responsible spot and must for that reason perform well to guarantee accurate management and

accountability to the public.

2.4 SOURCES OF FUNDS FOR PUBLIC INSTITUTIONS

In Ghana, the main means of funding for hospitals, schools, security, welfare, sanitation and

others are the central government and local governments. These public institutions charge for the

services provided. The various institutions have the task of raising funds for the financing of

projects and services for their citizens. Their task is to report to the public on the use made of the

funds raised by them. At the roads ministry, revenue is generated from the monies charged on the

issuance of certificate application and renewal after expiry.

Tax is the largest means by which state finance is accumulated. The state gains from the tax

quota charged which is from both direct taxes such as income tax, petroleum levy, corporate tax,

national health insurance levy, luxury vehicle levies, road tolls, capital gains tax and indirect

taxes such as VAT and excise duties. It is essential for the government to impose taxes on items

that are worth levied in order to raise the needed cash for its programmes. Local governments

raise revenue from taxes charged on local businesses.

2.4.1Government of Ghana (GOG)

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The government of Ghana is also referred as the central government. So, they can be used

interchangeably. They are also mandated to receive revenue from all public and private

institution by way of taxation. Tax is the biggest means by which public moneys are raised. The

then government collects tax revenues from direct taxes such as income tax, health insurance

contributions, corporation tax, capital gains tax and indirect taxes such as VAT and excise taxes.

Local governments increase revenues from taxes levied on local businesses. This is somehow

directed into the government funds. The financial resources are very limited and scarce, so it is

wise to manage and use them for the necessary work. This is also the reason why funds available

to any public institution need to be used wisely and effectively managed.

2.4.2 Grants

Grants come from diverse sources, several of which are related to public organizations. Global

growth collaborators such as the International Monetary Fund (IMF), the World Bank, the

African Development Bank. Governments and some public bodies such as hospitals, schools and

district assemblies must rightly obtain donations for development activities in recipient nations.

Regularly, funding is given if the government or public body is capable to provide its own

financial resources.

2.4.3 Internally Generated Funds (IGF)

Every ministry, department or generally most public institutions have their mode or raising cash.

It will be said that in the road ministry it is only restricted to just some few which has to do with

11
tender purchase, renewal and application of the classification under the ministry. These are very

few ways money is generated by the ministry.

Boapea, (2011) defines IGF as any money or moneys accruing to an organization from a source,

other than government, through the sole efforts of the institution in the performance of its

functions. Although this provides opportunity to public institutions to raise funds and spend on

developmental activities internally, some institutions are accused of using IGF to pay huge

bonuses and honorariums to staff often to the detriment of development (Boapea, 2011).

2.5 Public Expenditure Management

Public expenditure has a central responsibility to play in the acquisition and managing of the

financial resources of each institution. Lack of sufficient resources requires public institutions, in

particular, to plan, manage, control and control their spending patterns very well. Djurović-

Todorović and Djordjević, 2009, report that Public Expenditure Management (PEM) is an

instrument of government policy

According to Malcolm (1987), public spending represents all state budget expenditures,

including those relating to current expenses such as salaries, maintenance, interest and capital

expenditure such as: how, purchases of equipment owned by the school and government. The

management of public spending involves the allocation and efficient use of resources by

government policies.

For example, there is a general belief that it takes an average of six months for various

ministries, departments and agencies to pay off debts owed, even if the standard payment terms

should be one month. It is very likely that suppliers will charge higher commissions than usual to

compensate for the delay in repayment

12
This idea is described by Antill et al. (1989), who said that if the delays are caused by the buyer

or buyer organization, the supplier will receive a reasonable reimbursement in terms of time and

costs. Suppliers take loans from banks and are required to pay back with interest. If payment is

not forthcoming it tends to be a burden on the suppliers which in tend leads to the high charge of

service or supply to the various state institution.

2.6 Bureaucracy

The development of current government is narrowly linked to the advancement of bureaucracy,

and no recent state would be able to function without bureaucracy due to the fact that it controls

the misuse of authority and controls the events and manners of the people in the organization.

However, according to Centre for financial and Management Studies, (2006), indicated that there

has been a number of amendment to the business activities conducted by the public sector. Strict

rules and bureaucratic system of doing business by employees had been changed to more flexible

and efficient system to enhance productivity. Decentralization and delegation of duties to

subordinates and junior staffs to take decision with best practices and available information in

the interest of the institution. These information includes financial information and regulation

made available to them at the local level.

Therefore, the way in which public finances are managed has also changed significantly. In any

case it is not systems and guidelines which cause delay in the financial management set up. It is

perceived rather largely that people put in positions to ensure smooth running of the setup failed

to do so at times and only hide behind the guidelines leading to people having less trust in the

system.

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However, rules which form part of the bureaucratic system may become ends in themselves and

lead to inefficiency. The main concern about any bureaucratic system is delay or a perception of

it. In relation to procurement activities and management of public finance, delays may include

the extra time it takes to complete a procurement process. In several public institutions, aside

religiously following the laid down rules guiding procurement, there is a perception that

processes are intentionally delayed. Delays affect the results of procurement activities. Antill et

al, (1989), notes that if delays are caused by the buyer or purchasing organization, realistic and

just compensation are paid to the suppliers in both cost and time. They proposed a way to do this

compensation that because suppliers mostly borrow from banks to undertake contracts, changes

in interest rates and inflationary indicators must be used as a guide to pay reasonable and fair

compensation. Delays in the bureaucratic process in the management of public finance brings

extra financial obligation to the institution where they would have to pay much more than the

initial fees for goods and service. A good way of reducing the effect of bureaucracy is to ask for

longer validity periods as far as suppliers and contractor’s quotations are concerned and entering

into fixed price contracts which cannot be changed at least within the validity period. Unless

bureaucracies are checked they may not promote effective procurement activities as they lead to

high business cost and have a negative effect on public financial management.

2.7 PROCUREMENT

Procurement deals with identification of a need of the organization, sourcing, accessing and

managing the resources acquired in order to achieve the strategic objectives of the organization.

A good Public financial management requires good public procurement. This is because about

40-70% of the organization’s budget is typically used through procurement activities. Therefore,

14
no good financial management can be achieved in a public institution without first effectively

managing and maintaining a good procurement system.

The OECD (2007) “describes procurement as the purchase of goods and services by public or

private companies”. The bidder with the lowest price undertakes to supply the goods or services

offered. The main objective of an effective procurement policy is to promote efficiency, ie. H.

The choice of the supplier with the lowest price or, more generally, the best quality-price ratio. It

is therefore important that the procurement procedure is not hampered by practices such as

collusion, offers, fraud and corruption

Selection of the supplier with lowest price is not always the prudent way to contract. A more

effective way of selection is what is termed the “lowest evaluated tenderer or supplier”. In this

sense a comprehensive evaluation process is conducted in which the buyer selects the most

suitable supplier based on predetermined criteria such as quality, delivery period, after sales

service, suppliers’ financial capabilities among others. Price becomes the last factor in most

cases and used to select one supplier over another after they have all been determined to be

capable of delivering successfully according to the requirements of the tender.

Dobler and Burt, (1996) identifies eight steps in the procurement process:

 Recognize, define and describe the needs. At this step, the user identifies the need to

satisfy a want. For example, the need for a new computer to replace an old

malfunctioning one. The need is described by spelling out the detailed technical and

functional specifications

 Transmit the need. Transmission is done when the user requests the procurement

department to take steps to procure the need for them. In order words requisition is made

in the form, mostly of a request letter to the Procurement Unit or department.

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  Investigate, qualify and select the supplier. The supplier selection starts from examination

of proposals submitted by suppliers through to visiting of supplier’s premises where

necessary, especially for the procurement of capital goods. After the detailed evaluation,

the best supplier is selected among the lot.

 Prepare and issue the purchase order. At this stage, the purchaser places the order with

the supplier by preparing and issuing a purchase order or a contract award letter to the

supplier.

 Follow up the order. This includes telephone calls, supplier visits, and email

correspondences among others. Discussions on status of orders are undertaken at this

step.

 Receive and inspect the material. At this step, the supplier delivers the item or goods

requested for and checks to see whether they conform to the order specifications. The

order is also checked to detect any defaults. After this they are stored at the warehouse.

 Audit the invoice. The invoice is checked against the order to confirm quantity and price

and also to check the accuracy of calculations.

 Close the order. The order closing step is the step at which the order has been accepted

and used and after sales service carried out. Normally the order is closed after the

warranty period has expired and any sales level agreement carried out.

In addition to Dobler and Burt’s eight steps, other steps may be; inviting quotations or proposals,

evaluating the proposals, seeking appropriate approvals before placing the order. The process of

procurement normally ends with not just closing the order but disposing off the goods so

acquired.

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Srinivasan, (1999) defines procurement as the function of purchasing goods, works and services,

from an outside body. According to Kidd (2005), “procurement is an administration discipline

and career that pursues to reconcile supply management events with organizational goals that go

past cost circulation, efficiency and effectiveness”. “Procurement is also an important

development discipline, with the result that it expands its knowledge and realizes that it can

contribute much more to the organizational results than formerly thought”. Procurement manages

and control many external resources. Procurement is the commercial management procedure that

has to do with the management of these external resources, which are inserted into an

organization to fund their activities.

It guarantees that the external resources that an institution requires or possibly will require to run

into its calculated goals are identified, referenced, accessed, and controlled. The mission is to

discover prospects in the supply market and to device policies to provide the best likely result of

supply management to the organization, its stakeholders and clienteles.

Procurement is the acquisition of goods, services or works at the best possible cost, in the right

quantity, at the right time, in the right place for the direct benefit or use of governments,

corporations or individuals generally by means of a contract (KPMG, 2014).

Procurement can be simplified by using the procurement cycle in explaining the process. It is

shown in the diagram below.

The Procurement Cycle

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Figure 2 1-The Procurement Cycle

The cycle of procurement is a general sequence the processes of procurement goes through.

First is the planning, which starts with the initiation, annual procurement planning requirements

and planning individual procurement requirements. It is the start of the cycle where needs are

sought and a plan is developed in order to fulfill that particular need. The planning should

include contract packaging, source of funding, average packaged cost, the methods of

procurement applied, the time and steps of processing used.

Sourcing, which talks about methods of procurement and the supply sources. Methods of

procurement that we have are competitive, restricted, 2 – stage tendering, international, and

national, request for quotation or single sourced and sole sourcing. The supply sources include

registered suppliers, traded sources or websites and pre-qualification. There is also evaluation

and award which forms as a criterion for evaluation and negotiation.

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The third step is the contracting. The contracting reviews the notification of award and the

contract document. After a successful firm has been nominated as the best responsive and

notified as the winner will go up to sign the contract document to make legally binding for all.

The fourth is the contract management. It is done by selecting a contract manager to superintend

the project. He is also to allocate responsibilities and perform benchmarks to guide progress.

There need to be an established communication channel to help in the transmission of

information. Should there be any case, it becomes a job for the contract management head to

resolve an issue to enable the project to continue without hitch. Under this step there are three

types of contract modification i.e. amendment, variation and termination. Another extended

explanation via a diagram has been cited for read. This shows the management of the contract

which has to do with managing relationships, risk management. Contract review and financial

and budget management.

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 A diagram of the management of the contract.

The Management of the Contract

Managing Relationships
The contract relationship over
time
Performance monitoring
Problem resolution

Financial & Budget Risk Management

Management
Contract Risk over time
The budget headings
Management Contingency planning
Financial controls & targets
Researching alternatives
Payment schedules
Financial risks
Audit trail

Contract review
Reviews over time
Correcting non compliance
Continuous improvement
Business targets

Figure 2 2-Diagram of the Management of the Contract

The fifth step is the storing. It involves in the inventory control and management and storage

requirement.

The sixth step is the distribution. It considers the distribution to end users in various locations,

use of regional stores and consider transport requirement and available infrastructure.

The seventh step is disposal. Disposal is doing away with things that are obsolete. Method of

disposal are transfer of other public entities, sale by public tender to the highest bidder, sale by

public auction and destruction, dumping or burying.

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The eight step is evaluation. It is the review of the performance of the procurement function.

Again, it is to access the compliance, efficiency, and effectiveness. It may include procurement

audits.

2.8 PUBLIC PROCUREMENT

The Public Procurement Act, 2003 (Act 663) amended 2015 of Ghana, indicated that “the

acquisition of goods, works and services at the best possible total cost of ownership, in the right

quantity and quality, at the right time, in the right place for the direct benefit or use of

governments, corporations, or individuals, generally via a contract” (PPA, 2015).

Arrowsmith et al, (2010), defines “Public procurement refers to government’s activity of

purchasing the goods and services which it needs to carry out its functions”. It is a phrase that

has been used in relation to activity in the English language in the European Union as it has be

usual phrase used in the regulation of European Union.

The process of public procurement are indicated in three different phases:

i) Phase one talks about the services or goods that are supposed to be purchased and the time it

be must be purchase.

ii) The second phase of the procurement process deals with the contract placement for the

acquisition of the goods and services. This stage involves particularly the choosing of contract

partner and the contract terms on which the goods and services would be provided.

iii) The third phase of the procurement process is where the contract is administered for effective

contract performance.

The public procurement concept can be referred to all the three different phases of the

procurement processes. The second phase of the procurement process focuses generally on the

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regulatory rules public procurement as it is this stage that legal and regulatory issues becomes

very significant and important. Nevertheless all the three phases needed to be integrated looked

at as a different stages of one cohesive cycle.

Moreover, Iloranta, (2008) stated that Public procurement activities can be categorized into three

groups. These are the strategic, tactic and operative categories. He considers the strategic

activities as planning and controlling operational activities as well as human resources. Tactical

procurement involves activities related to supplier relationship management whereas operative

aspects concern activities such as placing orders for goods and services and arranging

transportation. In typical Ghanaian procurement however, it is difficult to distinguish between

these categories by simply observing roles played by individuals in procurement. The categories

are often overlapping with single individuals involved in strategic, tactic as well as operational

activities.

According to Hunja (2001), many developing nations does not see the strategic impact of

managing public resources. They mostly see the management of public resources as a mere

process oriented. As a result, little focus and attention is been paid to ensure institutional

framework as well as policies and rules regulating the procurement system are adhered to in a

way that ensures the funds are use efficiently and economically that would ensure the general

public gets value for the money spent. This in recent time has change as a result of limited

budgetary allocation and the desire to fighting corruption in the public sector. Also, many

governments sees that it is possible to save huge sum of money through well organize system of

procurement. Again, it has be noticed by many leaders in developing nations that a well-

organized system of procurement contributes largely to accountable and good governance as it

would increase confidence in how public money are used. As a result of these significance most

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developing nations had instituted reforms that would help make procurement system very

efficient and transparent.

In Ghana it was realized that procurement plays a critical role in the advancement of the nation

and therefore the Public Procurement Act, Act 663(2003) and subsequently amended in 2015 to

regulate the processes of public procurement. Since 2003, almost all public institutions have

incorporated formal public procurement systems in their strategic plan to ensure that the best is

derived from procurement activities for these institutions.

Public procurement “is the procedure by which an institution obtain goods and services from

public resources”. These comprise forecasting, lobbying quotes, awarding contracts and

managing contracts. In order for procurement goals to be achieve the principle of value for

money and professionalism must be followed.

Professionalism here is described as a field in which trained, experienced and responsible

purchasing officials make informed purchasing decisions. The role of procurement experts is

crucial to Ghana's economic development. It is in recognition of this fact that includes the object

of the procurement committee; “the professional development, promotion and support for

individuals engaged in public procurement and ensure adherence by the trained persons to ethical

standard”. Srinivasan, (1999) defines Public Procurement as the acquisition by public bodies,

such as government departments and municipalities of various goods, works and services that

they need for their activities, by making a contact with another entity be public or private. Given

the variety of functions of Governments, Public Procurement covers a wide range of

transactions, varying from the purchase of stationary, office furniture, vehicles, insurance

services, technical services, consulting services, through to the acquisition of complex satellites

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and missiles, and the construction of hospitals, schools, roads, rails, power stations, airports and

the like. The procuring body must therefore have the legal powers to undertake the transaction,

obtain any relevant approval within the government hierarchy, and arrange the necessary

funding. This requires the enactment of Public Procurement Laws, to provide the legal

framework for public procurement.

Funding is very important in public procurement. It is important to have enough financial

resources available and allocated to a particular project or procurement before an order is placed.

The more time it takes to pay suppliers for the goods delivered or services offered, the less

confident existing and potential suppliers have in the buyer.

Odiambo and Kamau, (2003), defined public procurement as the purchasing, hiring or obtaining

by any other contractual means of goods, construction works and services by the public sector.

Public procurement is alternatively defined as “the purchase of goods and contracting of

construction works and services with resources from state budgets, local authority budgets, state

foundation funds, domestic loans or foreign loans guaranteed by the state, foreign aid as well as

revenue received from the economic activity of state”. Their definition emphasizes the source of

funds that make procurement a public one. Public procurement is distinguished from

procurement in the private sector which although, in Ghana, most private businesses use the

Procurement as a guide to their activities, are not obliged to use compulsorily. According to

Roux De La Harpe, (2009) “Public procurement concerns at least three interest groups: firstly,

those who fund the activity, being government; secondly, those who benefit from and indirectly,

through the payment of taxes, fund the goods and services procured, namely the general public;

and lastly, those that supply the goods and services, namely private enterprise. The public’s

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interest in public procurement is twofold, namely the expenditure of its (the public’s) money, and

being the recipient of the benefits of the public procurement”. KPMG, (2014) states that public

procurement is the process by which goods, works and services financed in whole or in part from

public funds are procured; as well as the disposal of public assets.

Public procurement therefore can be seen to be the process of using public funds to acquire

goods and services for public institutions using formal public procurement guidelines to guide

the processes which usually start from requisition through to contract management and disposal

of goods so purchased so as to enable an efficient use of scarce public resources.

2.9 RELATIONSHIP BETWEEN PUBLIC FINANCIAL MANAGEMENT AND PUBLIC

PROCUREMENT

Procurement in most cases forms the central part of the management of public expenditure.

Pretarious and Pretarious, (2009), stated “that a well-organised, efficient and transparent public

procurement system is a vital component of any sound PFM system and it transcends the budget

process from procurement planning to audit”. Public procurement activities have a direct effect

on how public fund is used because budgets are implemented mostly through the procurement of

goods, works and technical services for the benefit of the entire public. Pretorious and

Pretorious, (2009) further stated that public procurement had principles which include

transparency, competition, accountability, efficiency, regulated systems and economy. These

principles contribute to improving the financial system’s integrity. Syquia, (2007) however said

the major obstacle is how to adopt these philosophies to the general conditions pertaining to

governance in a particular nation. This can be due to lack of will politically, lack of required

knowledge and the fact that the public institutions involved have complex issues. Sulaiman,

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(2010), concluded by saying that PFM includes collection of funds from numerous involves both

collection of funds from various sources and its distribution through spending in the most

effective, efficient and economic manner, which is also known as Public Expenditure

Management (PEM). The management of public fund must include the cycle of the overall

budget process that consists of both “up-stream” (preparation and programming) and “down-

stream” (execution, accounting control, reporting, monitoring and evaluation).

Agbesi, (2009) points out that procurement planning enables the identification of major

investment expenditures, which in turn facilitates budgetary decision-making. In addition, the

effective provision of public services often requires the coordinated delivery of materials and the

like, which the state purchasing apparatus must accomplish. It is difficult to imagine how a state

can deliver substantial improvements in the wellbeing for its citizens without a public

expenditure system that includes effective public procurement policies. This recognition

accounts in part for the growing interest in public procurement laws and practices and in the

feasibility and likely consequences of their reform. Agbesi continues that public procurement

should be an integral part of the overall financial management and public sector governance

system in a country. A well-structured system of procurement will provide data for the

formulation of budgets. Execution of budgets also needs procurement and financial management

as funds are needed to ensure timely allocations and payment to contractors and suppliers for

goods and services offered. Where there is no relationship between procurement activities and

budgeting, payments cannot be made on time leading to high cost of business and poor

management and use of public funds.

2.10 PUBLIC PROCUREMENT REFORMS IN GHANA

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Prior to the coming effect of the public procurement Act of Ghana in 2003, several public

institutions operated several procurement systems. It was largely believed that due to the lack of

structured procurement system, there was a lot of waste in the public sector as far as the

management and use of public funds are concerned. According to Suleiman, (2010), prior to the

reform programme for Public Financial Management in Ghana, many different rules were used

to guide procurement activities. Government and public officials struggled to identify which of

the rules to follow, due to lack of existing policy framework for public procurement, lack of

existing institutional arrangement, and the absence of a Central Body for Procurement. There

was also no structured legal framework to regulate public procurement. Complaints from

suppliers and contractors were mostly unresolved due lack of an independent appeals system.

The government of Ghana formed an oversight committee, therefore, to make proper design and

also coordinate the reform programme. In 2003, the public procurement act was enacted to end

the use of many different procurement guidelines used by various public institutions. Ten years

after its implementation alongside the financial Administration Act, the public still believes the

waste is still there if not worse than it used to be. Procurement reforms in Ghana were part of a

larger reform programme aimed at a tremendous transformation of the financial management

process of public institutions in Ghana. The purpose of the public procurement reform is to

promote national development through enhancement of harmonious relationship with other local

and international laws and regulations. Ministry of Finance, (2001), Anvuur et al, (2006), also

states that the procurement reform is to foster competition in public procurement processes;

transparency and accountability in procurement functions; facilitating the ease of procurement

administration; and ensuring that value for money is achieved.

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The public procurement reforms were instituted mainly to make public sector procurement in

Ghana more transparent and ensure fairness among other things. It was expected that the

tendering process will be more open to the public and more information on procurement

activities will be provided to all interested parties. These activities include; advertising contracts

falling into appropriate thresholds, organizing public tender openings, posting of contract awards

and notifying tenderers on the outcome of tenders. Competition is very key in procurement and

the reforms also touch on completion so as to promote quality procurement and save resources

for development. The reform is also expected to build the capacity of local suppliers and

contractors as their confidence is boosted to bid for projects. Bribery and corruption, although

cannot be eliminated completely, the reform has an objective to reduce the likelihood of bribery

and corruption.

2.11 WHY PROCUREMENT IS IMPORTANT

In order for effective public procurement to be practiced, public services and upright corporate

governance must be ensured. The public procurement industry of various countries spends a lot

the acquisition on the goods and services necessary to deliver public services. Government must

apply the highest professional standards when it spends this money on behalf of taxpayers, to

ensure it gets a good deal and to provide appropriate and necessary goods and services to the

quality required to meet user needs. The procurement process spans a life cycle from

identification of the need, through the selection of suppliers, to post-contract award management,

including disposal. There is a duty on procurers in central government to apply the key principles

of public procurement. These require the delivery of value for money (VFM), appropriate quality

and service to meet business needs, and appropriate governance (i.e. adherence to HM Treasury

rules concerning the use of public money in procurement).

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Procurement in the public sector is subject to UK regulations transposing the EU public

procurement directives. These apply to the majority of purchases with a total value above a

certain threshold. Procurement below the threshold is not covered by the UK, but subject to the

principles of the EU Treaty. The contracting authorities must take on a strong human and

organizational commercial management, and in most cases the procurement activities must be

carried out by professionally trained personnel. The procurement approach and process must be

relevant and appropriate for what is being purchased, and the market must be able to provide it at

an affordable price. Contracting authorities must promote sustainable development objectives by

awarding contracts in line with value for money and the legal framework for public procurement.

They must contribute in particular to achieving the objectives and commitments. The sustainable

governance of the government and the government's Sustainable Procurement Action Plan.

Public authorities should also include social issues in procurement if they are relevant and

proportionate to the subject matter of the contract OECD, (2007), states that Public procurement

is a key economic activity of governments, accounting for a large proportion of Gross Domestic

Product worldwide. Effective procurement avoids mismanagement and waste of public funds.

Public procurement is the purchase of goods or services by the public sector and it generally

accounts for a large share of public expenditure in a domestic economy. Existing statistics

suggest that public procurement accounts, on average, for 15% of Gross Domestic Product

(GDP) worldwide, and is even higher in OECD countries where that figure is estimated at

approximately 20% of GDP. Through its public procurement policy, the public sector can affect

the structure of the market and the incentives of firms to compete more or less fiercely in the

long run. Procurement policy therefore may be used to shape the longer-term effects on

competition in an industry sector.

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The primary objective of an effective procurement policy is the promotion of efficiency, i.e. the

selection of the supplier with the lowest price or, more generally, the achievement of the best

value for money. It is therefore important that the procurement process is not affected by

practices such as collusion, bid rigging, fraud and corruption. Anti-competitive conduct affecting

the outcome of the procurement process is a particularly pernicious infringement of competition

rules. Through bid-rigging practices, the price paid by public administration for goods or

services is artificially raised, forcing the public sector to pay supra-competitive prices. These

practices have a direct and immediate impact on public expenditures and therefore on tax payers’

resources. The successful delivery of public services and government projects, sound public

financial management by achieving value for money in government expenditure, budgetary

savings, and reducing corruption, reducing debt levels, competition and private sector

encouragement are directly affected by public procurement activities. PPA, (2007)

According to Sarfo, (2011), social impacts of public procurement include enhanced respect for

rule of law, improved social sector services, improved prospects of achieving other government

objectives, increased access by local market to government contracts, and enhanced reputation

for government institutions. Procurement has multi-dimensional importance which cuts across

all spheres of lives.

Ayitey (2012) found that public procurement actions have increasingly gained access to

worldwide markets, increased contributor confidence in public systems, and improved donor

funding, grants and loans, and overseas direct investment in Ghana. Hunja, 2003, notes that the

effective, efficient and expert application of public procurement regulations can contribute to a

sound administration of public spending. Effective planning and execution of public procurement

activities can lead to a lot significant savings in the use of public funds. This is because it will

30
lead to buy the right quality at the right price at the right time and getting them delivered to the

right place.

Agbesi, (2009) also stated that public procurement has a direct impact on the following; the

successful delivery of projects and public services; sound public financial management by

achieving value for money in government expenditure; reducing corruption; and encouraging

private sector growth and investment.

2.12 CONSEQUENCES AND CHALLENGES IN PUBLIC PROCUREMENT

Public sector institutions need good public procurement to enhance their development. A poor

procurement system however, results in, to a large extent, poor public sector development.

An active system of public procurement is vital for respectable governance. A bad procurement

scheme leads to greater costs for the government and the public. It interrupts the implementation

of the project, which increases costs more, leads to poor project implementation and interrupts

the provision of services to the recipients. Procurement difficulties also escalates the range for

corruption, create more grievances and increase worries about the truthfulness of the

procurement procedure. Poor procurement dismays good (national and foreign) firms from

tendering and robs the country of improved prices and goods, works and services (World Bank,

2000).

2.13 VALUE FOR MONEY

Value for money in public procurement cannot be over emphasized. Public institutions are

expected to obtain value for money in their purchases. “Value for Money in this case means this

is to secure a judicious, economic and efficient use of state resources at a reasonable cost”.

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According to Ayitey, (2012), the idea of value for money not only affects the purchase price /

cost, but also considers the proficiency and usefulness of a procurement procedure. Procurement

experts must constantly advance their services and innovations, which are necessary to deliver a

higher value to the procuring entity. For this reason, public procurement workers need specific

skills and knowledge to make the procurement process efficient and effective, while public

institutions strive to motivate procurement workers in terms of pay and better working

conditions.

“The purpose of public procurement is to obtain the best value for money (BVFM) and to do this

it is important to consider the optimum combination of whole life cost (i.e. acquisition cost, cost

of maintenance and running costs, disposal cost) of a purchase and its fitness for purpose (i.e.

quality and ability to meet the contracting authority’s requirements)”. This description helps the

authorities to put together the procurement specification including economic, social and

environmental policy goals and objectives in the process of procurement. “Whole life cost

includes both quantifiable and non-quantifiable or intangible costs and benefits”. For the process

of procurement to attain the deserve value for money, the following ten guiding principles must

be adhered and satisfied:

1. There must be integrity, objectivity and honesty in the procurement process.

2. The procurement authorities must encourage competition among the suppliers.

3. There should be fairness in the procurement lifecycle. The procurement authorities must

avoid discrimination in the process.

4. There should be efficiency and effectiveness in the procurement process to ensure there is

value for money for the public.

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 5. There should accountability in the responsibilities of the officials as well as proper record

keeping.

6. There should be confidentiality and information accuracy as well as the protection of the

intellectual property during and after the procurement process.

7. There must also be higher level of professionalism in the implementation of the

regulatory framework

8. There must also conform laws and requirement in the process.

9. Transparency must be ensure in the process where all parties are equal information with

regards to all conditions and accessibility of all economic operators.

10. There should be green purchasing.

2.14 ACCOUNTABILITY

Transparency leads to greater accountability. Mechanisms of accountability do not work if

access to critical information needed is very minimal. A hall mark of public procurement and its

ability to ensure effective financial management is transparency and accountability. The Public

Procurement Authority seeks to make sure that these two principles are reinforced in public

sector procurement.

World Development Report, (2004), defines accountability as a relationship with five features.

The five features are finance, delegation, performance, information about performance and

enforceability. To ensure that these five features work well in the relationship, more than just

legal and accounting systems are needed.

To a large extent, accountability plays a key role in effective use of financial resources in the

public sector. The government is the owner whilst the workers play a stewardship role. The need

to render accounts on the stewardship relationship may be a motivating factor for the public

33
institutions to manage these resources effectively. Accountability may be defined as a process of

provision of information by individuals, groups or institutions who have been delegated to act on

behalf of another in order for the other to have a fair knowledge of the state of affairs.

Accountability to a large extent reduces corruption and rather increases transparency and in the

process of procurement in the public sector.

2.15 TRANSPARENCY

Watermeyer, (2004), defined transparency in procurement as a procurement process in which all

parameters and decision-making criteria are disclosed publicly. Decisions on the processes and

contract awards are made available to the public giving appropriate reasons for the decisions

made. He continues by saying that a procurement management system is considered transparent

if;

 terms upon which the procurement process are to be conducted and the criteria upon

which any decisions are to be made are properly documented and made widely available;

 the eventual procurement award decision, and where appropriate, any intermediate

decisions, are made publicly available as are the reasons given for these decisions; and

 It is possible to verify that the documented procedures and criteria were indeed applied.

Transparency exists where the rules for procurement are clearly documented and there is also a

clear means of certifying that the rules have been complied with. Transparency in procurement

can be improved through the capturing of key information in an electronic data base and the use

of web-based information technology to publish information on procurement opportunities and

awards of contracts; the harmonising of procurement processes, procedures and methods within a

34
country; standardisation of procurement documentation; and the introduction of challenge

procedures in the form of adjudication where procurement processes, procedures and methods

Are comprehensively documented. The Public Procurement Authority of Ghana requires all

public entities to publish their procurement plans, tender opportunities and invitations and

contract awards on the authority’s website as a way of making public procurement as transparent

as possible. Transparency, however can be subjective and may be determined by the

circumstances. It may not mean that every minute detail must be given to all prospective

tenderers. Abuse of discretion therefore may hinder the efforts of the tender process at achieving

transparency. Transparency must be incorporated into all stages of the procurement process

beginning with need identification and ending with contract execution and supervision.

Bolton as sited by De La Harpe, (2009) describes this as a requirement of openness. Information

should be generally accessible and available, rules and practices should be published, contracts

should be advertised, the criteria to be applied should be disclosed, and an opportunity should be

provided to determine whether or not the principles of the Act had been complied with. Public

confidence is greatly enhanced when the public perceive that transparency actually exists. The

more transparent the processes become, the more the public and especially potential suppliers

participate in the competition.

2.16 SOLE SOURCING

The Public Procurement Act, Act 663, states that a procurement entity may engage in single-

source procurement under section 41 with the approval of the Board, based on the following:

35
(a) Where goods, works or services are only available from a particular supplier or contractor, or

if a particular supplier or contractor has exclusive rights in respect of the goods, works or

services, and no reasonable alternative or substitute exists;

(b) Where there is an urgent need for the goods, works or services and engaging in tender

proceedings or any other method of procurement is impractical due to unforeseeable

circumstances giving rise to the urgency which is not the result of dilatory conduct on the part of

the procurement entity;

(c) where owing to a catastrophic event, there is an urgent need for the goods, works or technical

services, making it impractical to use other methods of procurement because of the time involved

in using those methods;

(d) where a procurement entity which has procured goods, equipment, technology or services

from a supplier or contractor, determines that (i) additional supplies need to be procured from

that supplier or contractor because of standardisation; (ii) there is a need for compatibility with

existing goods, equipment, technology or services, taking into account the effectiveness of the

original procurement in meeting the needs of the procurement entity; (iii) the limited size of the

proposed procurement in relation to the original procurement provides justification;

(e) where the procurement entity seeks to enter into a contract with the supplier or contractor for

research, experiment, study or development, except where the contract includes the production of

goods in quantities to establish commercial viability or recover research and development costs;

or

(f) Where the procurement entity applies this Act for procurement that concerns national

security, and determines that single-source procurement is the most appropriate method of

procurement.

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(2) A procurement entity may engage in single-source procurement with the approval of the

Board after public notice and time for comment where procurement from a particular supplier or

contractor is necessary in order to promote a policy specified in section 59(4)(c), (d) or

69(2)(c)(i), and procurement from another supplier or contractor cannot promote that policy.

There seems to be abuse of this provision of the law with most public organizations preferring to

sole source rather than entering into competitive tendering procedures. It is in the light of this

that the office of the president of the Republic of Ghana has directed that with effect from March

1, 2014 all public institutions must obtain clearance from cabinet before forwarding their

requests to the PPA to obtain approval to use sole sourcing procurement method.

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CHAPTER THREE

METHODOLOGY

3.0 INTRODUCTION

This chapter deals with the source of data, the area of research, research population, population

sample and procedures for sampling, collection of data and procedure and analysis of data

collected.

3.1 RESEARCH AREA

The public sector of Ghana contributes significantly to the growth of the country. The public

sector is given the responsibility of using scarce public resources efficiently for the benefit of all

citizens of the country. The research was conducted in Accra. Accra has a significant number of

public institutions particularly the Ministries. The research is biased to the roads sector where I

formally worked and could easily reach out and acquire the needed information. The study area

consisted of some public procurement stakeholders in the road sector. The institutions involved

are the Department of Urban Roads, Department of feeder roads and Ghana Highway Authority

which are under the Ministry of roads and highways (MRH).

3.2 SOURCES OF DATA

The study used both primary and secondary sources of data. According to Obuobi, (2013)

Primary source of data includes interviews, questionnaires, surveys and observations as the

researcher collects the information directly. It is a firsthand evidence of an event. Secondary

source of data on the other hand is one that the researcher is not a direct witness to but the data is

obtained from an existing data. This data has been already collected and made available from

38
other sources. Through the administration of questionnaire, respondents provided the primary

information. The data from the primary source provided a more accurate and reliable original

information which was relevant to the study on how effective procurement activities are to the

management and use of public funds.

Secondary source of data unlike the primary source was obtained from already collected and

documented data. Sources included the internet, library, newspapers, articles and journals and

reports of other research. The secondary data was gathered in addition to the primary source

because they provided a guide to the researcher and also provided a good basis for comparison

purposes.

3.3 POPULATION, SAMPLE SIZE AND SAMPLING TECHNIQUE

Zikmund, (1997) defines target population as the complete group of specific population elements

relevant to the study. Ayitey, (2012) also defines population as the totality of a well-defined

collection of individuals or objects that have a common, binding characteristics or traits. The

research targeted four public institutions in Accra Metropolitan Area. They are Department of

Urban Roads, Department of Feeder roads, Ghana Highways Authority and Ministry of Roads

and Highways. The study time was very limited and therefore was very impractical to undertake

the study on all members of the population. The study therefore targeted some people who are

involved in procurement and financial management in these public institutions. They included

procurement officers, store keepers, some divisional heads, quantity surveyors and entity tender

committee members. Altogether, the research looked at fifty people as respondents a further

study can increase the numbers to see whether the outcome matches the results of this study.

39
3.4 RESEARCH DESIGN AND INSTRUMENT

De Vaus, (2001) stated that a research design goes beyond being a simple work plan. It serves as

a tool that enables the researcher to make sure that the research questions are answered

unambiguously as possible using the evidence gathered. The study used explanatory research

design. Gay, (1990) states that explanatory research involves data collection so as to test

hypothesis and answer questions which concern the current status of the subject under study.

According to Yin, (1993), explanatory research provides an explanation for the causal

relationship concerning the cause and effect of a occurrence and explains the causal relationship

between the variables. Explanatory research is widely used by researchers across various

disciplines. It is particularly useful for social sciences researches. The researcher carried out an

explanatory research among procurement practitioners, accountants, development officers,

auditors among others. Two factors were considered in designing the research. The type of

research question and the researcher’s knowledge on contemporary events in public procurement

and financial management were taking into consideration. To help the researcher in

understanding the effect procurement activities have on management of funds in public

institutions, explanatory research was used to examine various variables.

3.5 DATA COLLECTION METHOD

The research primarily used questionnaire as its method of collecting data. Looking at the status

of the carefully selected respondents, questionnaire was considered the most appropriate means

of collecting data as the respondents were very busy officers and could also read and understand

a set of printed questions. By providing them with questionnaire it was expected that they could

use their own free time to complete the questionnaire without recourse to any guidance to be

40
provided by the researcher. Using questionnaire enabled the collection of data to be easier. Also,

it removed the inconvenience caused by conducting interviews with these set of respondents who

are considered to be very busy during the peak period of working time. Saunders, (2007) states

that survey is used for descriptive research and this enables the survey to scrutinize and deliver

explanation about relationship between variables; cause and effect relationship variables in

particular. Fifty (50) questionnaires were circulated to particular respondents in connection to the

study. 41 was retrieved. This gives an approximate percentage of 82 %. The questionnaires were

personally administered on the respondents by the researcher. They comprised both open ended

and closed ended questions

3.6 DATA COLLECTION INSTRUMENT AND PROCEDURE

The researcher visited the various institution that was considered under the research as vital for

they study. The aim of the visit was to distribute the questionnaire to procurement officers, estate

officers, accountants and some key players necessary for the study. In order to encourage the

various officers to help the researcher in filling the questionnaire, they were provided assurance

that the responses obtained will be used purely for academic purposes. They were also assured of

confidentiality so that they may give their responses with no reservation. The respondents were

given one week to fill the questionnaire and afterwards a day was used to collect the responses.

On the day of collection, respondents who needed clarification on just one or two questions were

aided to complete the questionnaire. Prior to administering the questionnaire, a pre-test exercise

was carried out. The aim of the pre-test was to test the viability or otherwise of the data

collection method. In the process some few mistakes were detected and corrective actions

accordingly taken to put the questionnaires in good shape. Sarantakos, (1998) agrees to this

41
process when he explained that it helps the researcher to come to terms with the research

environment and delivers a chance to practice research in the actual condition before the main

survey.

3.7 Data Presentation, Analysis and Discussion

This segment dealt with presentation of data, data examination and discussion of the analysis.

The results obtained were presented with the aid of graphs and tables. The research used both

qualitative and quantitative methods of analysis. Statistical Packages for Social Sciences (SPSS)

and Microsoft excel were the main computer data analysis packages used in analyzing the data

collected. Both excel and SPSS are easy to use for word processing. They also aid in making

pictorial presentations more accurate. The results obtained from the research were expressed in

percentage terms and a presentation was made with the aid of tables, pie charts and bar charts.

This typically related to closed ended question results. The results of open ended questions were

analyzed by making a complete list of all salient responses obtained and a consideration given

them according to their level of importance to the study. This provided general ideas to the

researcher with regards to the effects public procurement activities have on the management and

use of public funds

3.8 SUMMARY

In sum, this chapter detailed the needed elements for the suitable research methodology used to

address all research problems. The research philosophical positions that guided the research

instrumentation, data collection, and analysis were explained including the sampling size, frame

and techniques adopted for the study were explained. The outcome of the research result is

presented in the next chapter.

42
CHAPTER FOUR

RESULTS AND DISCUSSION

4.0 INTRODUCTION

Presentation of research results, analysis and discussion of the data gathered through the

administration of questionnaires is the focus of this chapter. The study results are grouped under

transparency in procurement, some challenges in procurement, value for money and expenditure

control and delays in procurement. The responses obtained from Procurement personnel and

officers, accountants, entity tender committee members among others are presented and

discussed in this chapter. Where necessary, tables, percentages, pie charts and bar charts are used

to aid the analysis.

4.1 DATA ANALYSIS AND PRESENTATION OF DATA

Four organizations were used in this analysis. These were the Ministry of Roads and Highways,

Department of Urban Roads, Department of Feeder Roads and Ghana Highway Authority.

Looking at the size of these institutions, the Department of Urban Roads and Ghana Highway

had the majority of respondents.

4.2 BACKGROUND OF RESPONDENTS

In all, the researcher distributed a total number of fifty questionnaires to respondents carefully

selected from the four institutions. Out of the fifty, forty-one responded and provided valid

responses for the analysis. The table below shows the experience levels of the respondents as far

as the number of years of service is concerned.

43
Table 4.1: Years of experience of respondents

Frequency Percent Valid Percent Cumulative Percent

Valid 1 - 10 32 78.0 78.0 78.0

11 - 20 95.1
7 17.1 17.1
21 - 30 100.0
2 4.9 4.9
Total 41 100.0 100.0
Field Survey - August, 2018

The table above shows that out of Forty-one respondents, 32 representing 78 percent responded

that they had 1-10 years of experience whereas seven and two representing 17.1 and 4.9 percent

responded they had 11-20 years and 21-30 years’ experience respectively. It is obvious from the

above that the respondents have appreciable number of years’ experience and therefore

knowledgeable to provide independent responses to the questionnaires.

4.3 TRANSPARENCY IN PUBLIC PROCUREMENT

The research asked respondents about their views on publication of procurement information,

advertisement of procurement opportunities, methods of procurement frequently used, tender

opening and control mechanism and auditing in order to assess the extent to which transparency

exists.

4.3.1 Information on Public Procurement

The rate at which information on public procurement is made available to the public through

publication is a very important indicator of transparency in the procurement process. The study

sought to find out the frequency with which public institutions publish information on

44
procurement such as information on award of contract, procurement opportunities among others.

Figure 1 below details out the results obtained.

Table 4.2 - Publication of Information on Public Procurement

Frequency Percent Valid Percent Cumulative Percent

Valid Quaterly
16 39.0 47.1 47.1
Every Six Month
4 9.8 11.8 58.8
Yearly
13 31.7 38.2 97.1
Every Two Years
1 2.4 2.9 100.0
Total
34 82.9 100.0
Missing Did not answer
7 17.1
Total 41 100.0
Field Survey - August, 2018

PUBLICATION OF PROCUREMENT
INFOMATION
50.0 47.1

38.2
40.0

30.0

20.0
11.8
10.0
2.9
0.0
Quaterly Every Six Month Yearly Every Two Years

Figure 4.1 - Publication of Information on Public Procurement

Field Survey - August, 2018

From figure 1, sixteen respondents representing 47.1 percent indicated that their institution

publishes procurement information quarterly. 11.8 percent stated that information is published

semi-annually whereas 38.2 percent and 2.9 percent respectively responded that their institution
45
publishes information on public procurement yearly and bi-annually. Although the majority

responded that publication is made once in every quarter of the year, it is difficult to conclude

that transparency exists on this premise since this response constitutes less than 50 percent of the

responses obtained.

4.3.2 Advertisement of procurement opportunities

Advertisement of procurement opportunities falling within the thresholds of National

Competitive Tendering and International Competitive Tendering is very important for increasing

the intensity of competition and transparency in public procurement. The researcher sought to

find out the most frequently used medium used for the publication. The results are presented in

table 3 below.

Table 4.3- Advertisement of Procurement Opportunities

Cumulative
Frequency Percent Valid Percent Percent
Valid National news papers 82.1
32 78.0 82.1
Local radio stations 89.7
3 7.3 7.7
All the above 92.3
1 2.4 2.6
National newspapers
and Internet 2 4.9 5.1 97.4

National newspaper
and Local radio 1 2.4 2.6 100.0
stations

Total 39 95.1 100.0

Missing Did not answer

2 4.9

Total 41 100.0
Field Survey - August, 2018

46
As seen from the table above, 82.1% stated that procurement opportunities are advertised in the

national newspapers. 7.7% revealed that local radio stations were used for advertising

procurement opportunities where as 5.1% stated that both national newspapers and internet were

used. 2.6% each went for national newspaper and local radio stations and all of the above. The

results of this question show that procurement opportunities are were publicized thus improving

transparency. This confirms the importance of transparency which increases competition in the

procurement processes.

4.3.3 Method of Procurement

One of the most important indicators of transparency is the use of the required method for

procurement activities. The researcher sought to find out the frequently used method for procurement.

The result s is presented below in table 4.

Table 4.4 - Method of Procurement

Cumulative
Frequency Percent Valid Percent Percent
Valid National
competitive
21 51.2 51.2 51.2
tendering

Sole source 58.5

3 7.3 7.3
Selective
Tendering 1 2.4 2.4 61.0

Price Quotation
16 39.0 39.0 100.0
Total 41 100.0 100.0
Field Survey - August, 2018

47
 METHOD OF PROCUREMENT
Method of Procurement

60
51.2
50
39
40

30

20

10 7.3
2.4
0
National Competitive Sole Source Selective Tendering Price Quotation
Tendering

Figure 4.2: Method of Procurement

Field Survey - August, 2018

The results above indicate that the entities used national competitive tendering most frequently.

This is a god sign that transparency exists since national competitive tendering ensures that the

competition is opened to the general public or all interested and qualified suppliers. In all 51.2

percent reported that their institution used the national competitive tendering where as 39 percent

reported of using price quotation most often. Only 7.3 percent and 2.4 percent reported of mostly

using sole sourcing and restrictive tendering which are designed to relatively limit competition to

one or a few suppliers. Tas, (2008) stated that efficiency in procurement is improved in a

competitive environment and also promotes cost saving in public procurement thus helping the

management of public finance.

48
4.3.4 Mode of Tender opening and Period of Tender opening

Another significant factor of transparency in public procurement is the way and manner tenders

are opened. The Public Procurement Act stipulates that tenders are opened immediately after

deadline for tender submission. It also states that they should be opened in the presence of

tenderers representatives who choose to attend. The researcher sought to find out if this provision

of the Act was adhered to. This is because adherence to the provision will promote transparency

and fairness in the competition. The results of this are presented in the tables 5 and 6 below.

Period for Opening of Tenders

1, 3%
3, 8%

Immediately after deadline

Two weeks after receipt
One month after receipt

33, 89%

Figure 4.3: Period of Opening of Tenders

Field Survey - August, 2018

49
Table 4.5: Method of Tender Opening
Cumulative
Frequency Percent Valid Percent Percent
Valid In the the presence
of tenderers or their
30 73.2 78.9 78.9
representatives

During Entity
Tender Committee
7 17.1 18.4 97.4
meetings

Privately by the
procurement Unit 1 2.4 2.6 100.0

Total 38 92.7 100.0

Missing Did not answer 3 7.3

Total 41 100.0

Field Survey - August, 2018

METHOD FOR TENDER OPENING

Method for Tender Opening

90
78.9
80
70
60
50
40
30
18.4
20
10 2.6
0
In the presence of tenderers or their During Entity Tender Committee Privately by the Procurement Unit
representatives meeting

Figure 4.4: Method of Tender Opening

Field Survey - August, 2018

50
Out of the 38 respondents for this question on the period for tender opening, 33 representing 82.9

percent responded that tenders were opened immediately after deadline whereas 8.1 and 2.7

percent respectively responded that tenders were opened two weeks and one month after receipt

respectively. This can be seen from figure 2 above. On the mode of opening of tenders, 78.9

percent responded that tenders were opened in the presence of tenderers or their representatives.

18.4 responded that they are opened at entity tender committee meetings where as 2.6 percent

also responded that they are privately opened by the procurement Unit. It is clear from the above

results that majority of tenders are opened instantly when it’s the submission deadline and in the

attendance of bidders or agents of tenderers. This enhances the transparency concept in public

procurement.

4.3.5 Internal mechanisms of control and Audit of Procurement activities

Control mechanisms and auditing of procurement activities are very key in public procurement.

Shand, (2005) put forward that internal regulation and assessing ensures that right utilization of

resources, value for money, avoidance of impropriety and deception minimization which are

required for effective financial management in public institutions. The results on control

mechanisms and auditing are presented in the tables below that is table 7 and 8.

51
Table 4.6: Control Mechanisms

Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly Agree
16 39.0 40.0 40.0
Agree
20 48.8 50.0 90.0
Strongly Disagree
2 4.9 5.0 95.0
Disagree
2 4.9 5.0 100.0
Total
40 97.6 100.0
Missing Did not answer
1 2.4
Total 41 100.0
Field Survey - August, 2018

Table 4.7: Auditing of Procurement Activities

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree
21 51.2 52.5 52.5
Agree
16 39.0 40.0 92.5
Disagree
2 4.9 5.0 97.5
Uncertain
1 2.4 2.5 100.0
Total 40 97.6 100.0
Missing Did not answer 1 2.4
Total 41 100.0
Field Survey - August, 2018

The table above indicates that 40 percent and 50 percent of the respondents strongly agreed and

agreed respectively that there are enough internal mechanisms of control whereas 5 percent each

strongly disagreed and disagreed that there are enough internal mechanisms of control. On the

52
point of regularly auditing procurement activities, 52.5 percent and 39 percent strongly agreed

and agreed respectively that procurement activities are regularly audited. 5 percent however

disagreed whereas the remaining 2.5 percent were uncertain. From the above it can be seen that

there are enough internal control mechanisms coupled with regular auditing of procurement

activities.

4.4 DELAYS IN PROCUREMENT

Periods for evaluation of tenders, approval levels for contract awards and general procurement

activities were examined to assess whether they cause delays in the procurement process.

4.4.1 Evaluation of Tenders

Evaluation of tenders is one of the critical stages of the procurement process. It is the stage that

examines tenders or proposals from suppliers and make recommendations for possible contract

awards. The researcher wanted to find out how long the entities take to evaluate tenders from

tenderers. The periods of tender evaluation are presented in table 9 below.

Table 4.8: Period for Evaluation of Tenders

Cumulative
Frequency Percent Valid Percent Percent
Valid Between one and three
weeks 27 65.9 71.1 71.1

Between One and Three

Months 9 22.0 23.7 94.7

Three months and above

2 4.9 5.3 100.0
Total
38 92.7 100.0
Missing Did not answer
3 7.3
Total 41 100.0

53
Field Survey - August, 2018

From the above table, it can be seen that 71.1 percent responded that it takes the entity one to

three weeks to evaluate tenders. As compared to this, only 23.7 percent and 5.3 percent

responded that it takes one to three months and three months and above to conduct evaluations.

This result indicates that evaluation is not really a delay factor as it takes mostly three weeks to

complete evaluations.

4.4.2 Approval from Tender Review Boards

The Public Procurement Act stipulates that entities shall obtain approval from relevant

committees and boards when the items to procure are estimated to cost more than GH¢5,000.00

for goods and GH¢10,000.00 for works. These include Entity Tender Committees, District

Tender Committees, Ministerial Tender Review Boards, and the Central Tender Review Boards.

This indicator sought out to find out how often the relevant bodies meet to approve evaluation

reports and recommendations for award of contracts and how often the institutions are able to

obtain approval from them.

Table 4.9: Entity Tender Committee Meetings

Frequency Percent Valid Percent Cumulative Percent

Valid Once in a month
9 22.0 24.3 24.3
Once every quarter
24 58.5 64.9 89.2
Once every six
3 7.3 8.1 97.3
months
Once yearly
1 2.4 2.7 100.0
Total
37 90.2 100.0
Missing Did not answer 4 9.8

54
 Total 41 100.0
Field Survey - August, 2018

55
 ENTITY TENDER COMMITTEE MEETINGS
Entity Tender Committee Meetings

70 64.9

60

50

40

30 24.3
20
8.1
10
2.7
0
Once in a month Once every quarter Once every six month Once yearly

Figure 4.5: Entity Tender Committee Meetings

Field Survey - August, 2018

It is evident from the above table and figure that most Entity Tender Committees (ETC) meet

once in three months. Whilst the Act requires ETCs to meet once every quarter, this delays the

procurement process as it can take three months for an institution to get approval from its ETC

before awarding a contract or forwarding to the relevant Review Board. The table below

indicates how long it takes to seek approval from the appropriate Tender review Boards.

56
Table 4.10: Approval from Tender Review Boards

Frequency Percent Valid Percent Cumulative Percent

Valid Less than a month
14 34.1 37.8 37.8
One month to four
months 22 53.7 59.5 97.3

Six months
1 2.4 2.7 100.0
Total
37 90.2 100.0
Missing Did not answer
4 9.8
Total 41 100.0
Field Survey - August, 2018

59.5 percent responded that it takes them one to four months to obtain approval from the relevant

approval authority where as 34.1 percent indicated that it takes them less than a month to obtain

approval. 2.7 percent however said it takes them six months to obtain approval. This clearly

shows that there is a delay in getting approvals for contract awards.

4.4.3 Delay of contract awards by procurement processes

The researcher sought to find out whether procurement processes generally delay contract

awards. There is a perception that procurement processes delay contract awards.

57
Table 4.11:Delay of Contract Awards by Procurement Processes
Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly Agree
12 29.3 29.3 29.3
Agree
10 24.4 24.4 53.7
Strongly Disagree
4 9.8 9.8 63.4
Disagree
14 34.1 34.1 97.6
Uncertain
1 2.4 2.4 100.0
Total 41 100.0 100.0
Field Survey - August, 2018

From the table 4.12 it can be seen that 29.3 percent and 24.4 percent of the respondents strongly

agreed and disagreed respectively that procurement processes delay contract awards whereas 9.8

percent and 34.1 percent strongly disagreed and disagreed respectively that procurement

processes delay contract awards. 2.4 percent however were uncertain. The above results indicate

that procurement processes generally delay contract awards.

4.4.4 Levels of Approval for Procurement Activities

The researcher sought to find out if the levels of approval are too lengthy. The lengthier they are

the more the processes for procurement are likely to delay.

58
Table 4.12: Levels of Approval for Procurement Activities

Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly Agree
9 22.0 22.5 22.5
Agree
24 58.5 60.0 82.5
Strongly Disagree
1 2.4 2.5 85.0
Disagree
6 14.6 15.0 100.0
Total
40 97.6 100.0
Missing Did not answer
1 2.4
Total 41 100.0
Field Survey - August, 2018

Whereas 22.5 percent strongly agreed that the levels of approval delay procurement activities, 60

percent answered that they agreed to the assertion that the levels are too lengthy. On the other

hand, 1 respondent representing 2.5 percent strongly disagreed that the approval levels are too

lengthy. 15 percent also disagreed that there are too lengthy levels of approval. From the above it

can be concluded that the levels of approval are too lengthy and this obviously causes delays in

the procurement process.

4.5 SOME CHALLENGES IN PROCUREMENT

The researcher also wanted to find out some of the challenges faced in carrying out procurement

activities. The indicators used were record keeping, period for payment to suppliers, market

surveys and expenditure control.

59
4.5.1 Record Keeping

The researcher posed this question to find out if records on public procurement activities are well
kept.

Table 4.13: Keeping of Records on Procurement

Cumulative
Frequency Percent Valid Percent Percent
Valid Yes
40 97.6 97.6 97.6
No
1 2.4 2.4 100.0
Total 41 100.0 100.0
Field Survey - August, 2018

From the table above, it can be seen that 4 respondents out of 41 representing 97.6 percent

agreed that records on public procurement activities are well kept. Only one respondent

answered in the negative representing 2.4 percent. This reveals that record keeping is not a major

challenge as records are well kept by these institutions. Keeping records enhances auditing,

accountability and promotes transparency. It therefore implies that if public institutions keep

their procurement records well accountability and transparency will be promoted and ultimately

lead to proper management of financial resources.

4.5.2 Payment to suppliers

Payment to suppliers after contract execution was picked as one of the major challenges in public

procurement which have a telling effect on the management of financial resources in the public

institutions. The researcher sought to find out the period it takes these public institutions to

process and pay their suppliers their due after they have delivered their part of the contract. The

responses about the payment period are presented in the table below.

60
Table 4.14: Period for Payment to Suppliers
Cumulative
Frequency Percent Valid Percent Percent
Valid Up to one month
4 9.75 41.5 41.5
Two to four
Months 34 82.93 46.3 87.8

Six months
2 4.88 7.3 95.1
A year and above
1 2.44 4.9 100.0
Total 41 100.0 100.0
Field Survey - August, 2018

PERIOD FOR PAYMENT TO

50 46.3
41.5 SUPPLIERS
40
Period for payment to suppliers

30

20

10 7.3
4.9

0
Up to one Two to four Six months A year and
month months above

Figure 4.6: Period for Payment to Suppliers

Field Survey - August, 2018

From the table above, 4 people representing 9.75 percent indicated that their suppliers are paid

within a month. 82.93 percent, that is 34 respondents, however, responded that their suppliers are

paid in a period of two to four months. Only two respondents and 1 respondent indicated that

their suppliers are paid in six months and one year and above respectively. The result is an

61
indication that it takes the institutions longer time to pay suppliers. Standard tender documents

indicate a payment period of thirty days but the institutions go beyond the thirty days.

4.5. 3 Market Surveys

One requirement for good procurement system and effective financial management is regular

market surveys. The study sought to find out if there were systems in place for the institutions to

conduct regular market surveys. The responses are indicated in the table below.

Table 4.15: System for Market Survey

Cumulative
Frequency Percent Valid Percent Percent
Valid Yes
19 46.3 54.3 45.7
No
16 39.0 45.7 100.0
Total
35 85.4 100.0
Missing Did not answer
6 14.6
Total 41 100.0

Field Survey - August, 2018

Of the 35 who answered this question, as indicated in table 14 above, 45.7 percent responded

that there were no systems in place for regular market surveys. 54.3 rather responded that there

were systems in place to conduct regular market surveys. The 54.3 percent who responded in the

affirmative went on to indicate in the follow up question what the market survey does for the

institution. The overriding benefit of the regular market survey was that it helps in determining

the appropriateness of prices quoted by the institutions’ suppliers. It is however clear from the

results that the institutions have structured systems in place for regular market surveys and does

help in financial management in the public institutions.

62
4.5.4 Expenditure Control

Rose and Lawton, (1994) put forward that control of budget involves the monitoring of actual

expenditure and income and comparing with planned expenditure and income regularly and

identifying and investigating variances to ensure balance budgets. Excessive spending or over

expenditure is a challenge in financial management and procurement of goods and services in

public institutions. The research sought to find out whether the institutions conduct regular

review on total expenditure to determine how much is spent on procurement of goods and

services.

Table 4.16: Review of Expenditure

Frequency Percent Valid Percent Cumulative Percent

Valid Yes
33 80.5 82.5 82.5
No
7 17.1 17.5 100.0
Total
40 97.6 100.0
Missing Did not
1 2.4
answer
Total 41 100.0

Field Survey - August, 2018

As presented in the table above thirty-three respondents which represents 82.5 percent indicated

that the institutions conduct regular reviews on total expenditure in order to monitor and control

public expenditure. The remaining 17.5 percent out of the forty who answered this question

answered in the negative. This indicates that the institutions review and monitor their

expenditure in order to improve the management and use of public funds. The researcher also

asked if procurement plans are recorded against budget to identify any anomalies in recorded

expenditure. The results are presented in the table below.

63
64
Table 4.17: Record of Procurement Plans against Budgets

Frequency Percent Valid Percent Cumulative Percent

Valid Yes
29 70.7 78.4 78.4
No
8 19.5 21.6 100.0
Total
37 90.2 100.0
Missing Did not
answer 4 9.8

Total 41 100.0
Field Survey - August, 2018

The results from the table above indicates that whereas 78.4 percent responded in the affirmative

that procurement plans are recorded against budgets to identify anomalies, 21.6 percent indicated

that procurement plans are not recorded against budgets. This result goes to support the

majorities’ earlier view that expenditures are monitored and controlled in the institutions.

4.6 VALUE FOR MONEY

4.6.1 Cost Reduction in Procurement

The researcher sought to find out whether structured public procurement activities reduce cost of

purchases undertaken by the entity. The table below provides the responses.

65
Table 4.18: Structured Procurement Reduce Cost

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree
11 26.8 26.8 43.9
Agree
1 2.4 2.4 46.3
Strongly Disagree
8 19.5 19.5 65.9
Disagree
18 43.9 43.9 92.7
Uncertain
3 7.3 7.3 100.0
Total 41 100.0 100.0

Field Survey - August, 2018

From the table above, it can be seen that 26.8 percent and 2.4 percent strongly agreed and agreed

that structured procurement activities reduce cost of purchases. Respectively, however, 19.5

percent and 43.9 percent strongly disagreed and disagreed that the structured procurement

activities reduce cost of purchases. 3 people representing 7.3 percent, however, were uncertain.

This shows that structured procurement activities in these public institutions do not necessarily

lead to reduction in the cost of purchases undertaken by the entity.

4.6.2 Value for Money in Procurement

Value for money is a very important factor in determining the effects public procurement

activities have on public financial management. The research sought to find out from the

respondents whether they agreed or disagreed to the fact that procurement activities ensure value

for money. The responses are tabled below.

66
Table 4.19: Procurement ensures Value for Money

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree
14 34.1 34.1 34.1
Agree
2 4.9 4.9 39.0
Strongly
disagree 15 36.6 36.6 75.6

Disagree
8 19.5 19.5 95.1
Uncertain
2 4.9 4.9 100.0
Total 41 100.0 100.0
Field Survey - August, 2018

Procurement ensures value for money

5%

19%
34%
Strongly Agree
Agree
Strongly Disagree
Disagree
Uncertain

5%
37%

Figure 4.7: Procurement ensures Value for Money

Field Survey - August, 2018

67
The responses revealed that 34.1percent and 4.9 percent strongly agreed and disagreed

respectively to the fact that procurement activities ensure value for money. However, 36.6

percent and 19.5 percent strongly disagreed and disagreed to this fact. Two respondents

representing 4.9 percent stated they were not certain about this. From the above, it is clear that

majority do not believe that public procurement activities ensure value for money.

4.6.3 Savings in Procurement

Financial resources are very scarce in most public institutions so it is important to save a lot of

government money and since the financial resources are mostly spent through procurement, the

researcher sought to find out if procurement activities in the public sector contribute to saving

government’s money.

Table 4.20: Government’s Money is saved through Procurement

Cumulative
Frequency Percent Valid Percent Percent
Valid Yes
9 22.0 25.7 74.3
No
26 63.4 74.3 100.0
Total
35 85.4 100.0
Missing Did not
answer 6 14.6

Total 41 100.0
Field Survey - August, 2018

68
 Government's money is saved through
procurement

26%

Yes
No
74%

Figure 4.8: Government’s Money is saved through Procurement

Field Survey - August, 2018

From the table above, out of the thirty-five who responded, nine respondents representing 25.7

percent responded in the affirmative whereas twenty-six respondents representing 74.3 percent

responded in the negative. This indicates that a lot of government money has not been saved

through procurement activities.

4.6.4 Strengthening and controlling government expenditure

The research also sought to find out if the Public Procurement Act, Act 663, has strengthened

and controlled government expenditure. The responses are indicated in the table below.

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Table 4.21: Procurement Act on Strengthening and Controlling Expenditure

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree
14 34.1 35.0 35.0
Agree
16 39.0 40.0 75.0
Disagree
9 22.0 22.5 97.5
Uncertain
1 2.4 2.5 100.0
Total 40 97.6 100.0
Missing Did not answer
1 2.4
Total 41 100.0

Field Survey - August, 2018

As can be seen from the above table, 35 percent of the forty people who responded strongly

agreed to the fact that the public procurement Act has strengthened and controlled government

expenditure whereas 40 percent agreed to this fact. However, 22.5 percent disagreed with one

person responding uncertainty. It is therefore obvious that the majority believe the public

procurement act has really controlled and strengthened government expenditure.

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CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.0 INTRODUCTION

The chapter five deals with the summary of the study, conclusions drawn from the study and

recommendations offered to improve public financial management through improved public

procurement.

5.1 SUMMARY OF FINDINGS

The study set out to find the effects public procurement has on the management and use of public

funds in the road sector. The research was carried out not only to satisfy the requirements for the

award of a master’s degree but also to provide important information on public procurement and

public financial management to policy makers. After a careful analysis of the data obtained from

the field work the researcher made the following findings:

1. The study showed that the institutions mostly used National Newspapers as the medium

through which advertisement about procurement opportunities were published. This is a

good revelation as public institutions are required by the Public Procurement Act to

advertise their invitations for tenders in nationally circulated newspapers.

2. The study also revealed that the institutions used National Competitive Tendering more

often than the other procurement methods. This improves the level of competition

relatively and enhances transparency in the procurement processes.

3. Another revelation from the study is that most of the institutions had internal mechanisms

for control of procurement activities and also systems for auditing of procurement

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 activities. Auditing and control are very important in procurement and they help in

ensuring accountability in the system.

4. On evaluation of tenders, the study revealed that most of the institutions spent between

one to three weeks to conduct evaluation and therefore it cannot be said that evaluation of

tenders delays the procurement process.

5. One significant delay in the procurement process was found to be seeking approval from

tender review boards. It takes the institutions a considerable number of weeks before the

appropriate tender review boards consider their recommendations for contract awards.

Entity Tender Committees meet once in every quarter and this means approval seeking

process may take three months.

6. It was again shown from the study that the institutions had well-kept records on their

procurement activities although it was also found out that summaries from these records

such as information on contract awards are not regularly published. Accountability,

auditing and transparency are improved through proper record keeping and making the

records available to interested stakeholders.

7. Another significant revelation from the study was the payment to suppliers after

execution of contract. Mostly, contractors and suppliers are not paid on time although one

would expect that the institutions would maintain a standard period of one month to do

payment. This can affect future contracts negatively.

8. The study also showed that most of the institutions’ procurement activities did not lead to

reduction in the cost of purchases and did not ensure value for money. Procurement

activities in these public institutions have therefore affected the management and use of

public funds negatively as they have not promoted cost efficiency and effectiveness.

72
5.2 RECOMMENDATION

In order for public procurement to achieve its ultimate aim and have a positive effect on the

management and use of financial resources in public institutions, the following recommendations

were made:

i. The first recommendation is that the public institutions pay their suppliers promptly

after they have completed the execution of a job or after they have supplied the goods

or services. This will improve the suppliers or contractor’s ability to provide financial

resources to execute further assignments. It is essential for the institutions to make

sure funds are available for a particular project or purchase before placing orders.

Also, officers in the payment process must be encouraged to follow up on payments

so that suppliers are paid in time.

ii. To fall stall the delays in obtaining approval from the various tender review boards, it

is recommended that the Tender Review Boards and Entity Tender Committees meet

once a month provided that there are requests before them for consideration. The

thresholds for procurement approval levels must also be reviewed to current values as

soon as possible to reduce the number of transactions that would require concurrent

approval from Tender Review boards before contract awards.

iii. For procurement activities to lead to value for money and cost savings, the public

institutions must carry out extensive research on pricing and quality issues. Contracts

must not be awarded on initial price quoted by suppliers alone but the whole life cost

must be considered such as the cost of maintenance and after sales service provisions.

iv. Procurement officers and other officers related to the procurement process must be

given training on how to increase the level of efficiency in the procurement processes

73
 in order to maintain a healthy financial management system. The speed with which

orders are processed is very critical and therefore must be encouraged throughout the

process through regular monitoring and control.

5.3 CONCLUSION

Government recognizes the importance of an effective procurement system to the management

and use of funds in public institutions. The ministry that oversees the actions of its department

institutions researched in this study are just but a very few. For this reason, the Public

Procurement Act was introduced in 2003 and subsequently amended in 2015 to regulate

procurement activities in the public sector of the economy to ensure transparency, promote value

for money and regulate public expenditure. The researcher therefore carried on the research to

find out about some of the challenges in public procurement activities, the extent to which

transparency exists in public procurement, whether procurement ensures value for money and to

examine the causes of delays in the procurement process. Based on the findings of the research it

can be concluded that:

1. There is transparency in the procurement activities in the public institutions and this is

good for effective management and use of public funds. Value for money however, has

not been achieved on the expected level and this affects management and use of public

funds negatively.

2. Concerning public expenditure, procurement activities ensure that they are monitored and

streamlined and reviewed regularly.

5.4 RECOMMENDATION FOR FURTHER STUDY

Considerations can be made for further research in the following topics.

74
 i. Assessment of the ten years implementation of the Public Procurement plan 2003-

2013

ii. The relationship between public financial management and good governance

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APPENDIX

KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY, KUMASI

COLLEGE OF ART AND BUILT

DEPARTMENT OF BUILDING TECHNOLOGY

(MSc. Procurement Management)

RESEARCH TOPIC:

THE EFFECTIVENESS OF PUBLIC PROCUREMENT ACTIVITIES ON THE

MANAGEMENT AND USAGE OF PUBLIC FUNDS IN THE ROAD SECTOR.
A CASE OF THE DEPARTMENTS UNDER THE ROADS MINISTRY

BY
PARRY JONATHAN (BSc.)

SUPERVISOR:
DR. ERNEST KISSI

78
Preamble
My name is Parry Jonathan, Msc student from Department of Building Technology at Kwame

Nkrumah University of Science and Technology, Kumasi. This research is being conducted as

part of a Master’s degree dissertation. It is expected that this research will provide additional

knowledge on the effect procurement activities have on the management and use of public funds.

Anonymity is assured and responses will be treated with the utmost confidentiality they deserve.

Please provide the correct information by ticking in the appropriate box accompanying the

questions and/or by filling in the blank spaces where applicable.

The implication of the findings is for the future development of the procurement and

construction management professions in Ghana and any information provided will be treated

with the highest confidentiality. I would like to convey my appreciation for your cooperation in

completing these questions. If you have any questions and contributions about this research,

please mail at qwables@gmail.com or call on 0266686442.

Thank you in advance for your participation and assistance with this study.

Parry Jonathan

79
SECTION A: PERSONAL DATA

1. Name of Institution where you work ……………………………………………………………

2. Position or designation ………………………………………………………………

3. Years of experience …………………………………………

SECTION B: TRANSPARENCY IN PROCUREMENT

1. Records on procurement are well kept. Yes No

2. How often are summaries of information about public procurement published?

a. quarterly b. every six-month c. yearly d. every two years

3. Through what medium are procurements falling within the threshold of National Competitive

Tendering advertised publicly?

a. National newspapers b. Internet c. Local radio stations

d. Journals e. all of the above

4. On the average, how long are suppliers and contractors given to prepare and submit their bid

documents?

a. Two weeks c. Four weeks d. Six weeks

5. Which Procurement method is often used for procurements with regard to the Act?

a. National Competitive Tendering b. Sole source c. Selective Tendering

d. Price Quotation e. international competitive tendering

6. Do suppliers make appeal on procurement issues to the institution? Yes No

7. If you answered yes to 6 above, about how many appeals are received per year?

a. 1-5 appeals b. 6-10 appeals c. above 10 appeals

80
8. What kind of appeals is usually received? ……………………………………………………

………………………………………………………………………………………………………

9. How are appeals and complaints handled?

a. Mostly unresolved b. Mostly resolved

10. When are tenders normally opened?

a. Immediately after deadline b. Two weeks after receipt

c. One month after receipt d. above one month

11. Where and how are tenders normally opened?

a. In the presence of tenderers’ or their representatives

b. during Entity Tender Committee meetings c. Privately by the procurement Unit

12. There are enough internal mechanisms of control? a. Strongly agree b. Agree

c. Strongly Disagree d. disagree e. Uncertain

13. Procurement activities are regularly audited? a. Strongly agree b. Agree

c. Strongly Disagree d. disagree e. Uncertain

SECTION C: DELAYS IN PROCUREMENT

14. Does the institution prepare annual procurement plans? Yes No

15. How long does it take your outfit to prepare a procurement plan?

a. One-week b. Between one and two months c. Between three and four months

d. Five months and above

16. How long does it take your entity to advertise a contract?

a. One-week b. Two weeks c. Three weeks d. One month

81
17. On the average, how long does your entity take to evaluate bids submitted by bidders?

a. Between one and three weeks b. Between One and three Months

c. Three months and above

18. How often does the entity tender committee meet?

a. once in a month b. once every quarter c. once every six months

d. once yearly

19. How long does it take your entity to obtain approval from the appropriate tender review

boards?

a. Less than a month b. one month to four months c. Six months

d. more than 6 months

20. How long does it usually take the entity to pay suppliers?

a. up to one-month b. two to four months c. Six months d. a year and

above

21. Do you agree that Procurement processes delay contract awards?

a. Strongly agree b. Agree c. Strongly Disagree d. disagree e. e.

e. Uncertain

22. If you agreed to 21 above what are some of the causes of the delay in procurement?

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

23. The levels of approvals and processes for procurement are too lengthy?

a. Strongly agree b. Agree c. Strongly Disagree d. disagree

e. Uncertain

82
SECTION D: CONTROL OF EXPENDITURE

24. Are procurement activities audited on regular basis? Yes No

If you answered yes to 24 above, how often is this done?

a. Monthly b. quarterly c. half yearly c. Yearly

25. Is there a system in place for the procurement unit to undertake regular market surveys?

Yes No

If yes, how have these surveys helped the entity?

..................................................................................………………………………………………

……………………...........................................................................................................................

26. Structured Public Procurement Activities reduce cost of purchases undertaken by the entity.

a. Strongly agree b. Strongly Disagree c. Agree d. disagree

e. Uncertain

27. Procurement activities ensure value for money for the entity. a. Strongly agree

b. Strongly Disagree c. Agree d. disagree e. Uncertain

28. Through procurement the entity is able to monitor expenditure against the budget. a. Strongly

agree b. Strongly Disagree c. Agree d. disagree e. Uncertain

29. Through procurement a lot of government’s money has been saved? Yes No

30. Procurement Act has strengthened and controlled government expenditure. a. Strongly agree

b. Strongly Disagree c. Agree d. disagree e. Uncertain

31. Does the entity conduct regular review on total expenditure to determine how much is spent?

Yes No

32. Are procurement plans recorded against budgets to identify anomalies in recorded

expenditure? Yes No

83
33. Please share with us any suggestions or comments you may have.

…………………………………………………………………………......................…………….

………………………………………………………………………………………………………

……….……………………………………………………………………………………………...

Thank you for your time.

84