The Need for a Comprehensive Public Procurement Strategy aimed at Developing Sierra Leone's Private Sector

Abdul R Thomas

Editor – The Sierra Leone Telegraph

19 July 2010

When news of allegations of corruption, impropriety and maladministration broke, regarding the outsourcing of a contract for the printing of Goods and Services Tax receipt books to a Ghanaian company valued at $9 Million, Sierra Leoneans were horrified.

But this is just one such episode in a long running scandal involving the improper awarding of contracts to foreign companies at the expense of local businesses that are equally as capable of discharging those contracts. This is very bad for the country’s economy.

A few weeks ago, the Standard Times described the process of awarding contracts for the construction of new roads and highways in the country as unscrupulous. There is lack of transparency and probity. There is very poor supervision of such contracts by those in authority.

Many in Sierra Leone would support the allegation of impropriety as regards the awarding of those contracts, as Hundreds of Millions of Dollars have been outsourced to foreign owned construction companies, again at the expense of local businesses, with very little transparency - if at all. This cannot be good for the country’s economy either.

The Bo – Masiaka Road is costing the taxpayer Euros 40 Million; the Freetown City Road will cost $9 Million; the Rogbere – Pamelap Road is estimated to cost $35 Million; while the Lumley – Tokeh Road construction contract is valued at more than $35 Million. There are many such costly road construction contracts, which have been awarded to foreign companies.

On a similar note, indigenous businesses have lost out on dozens of other government procurement contracts, which have been awarded to foreign companies, simply because they have taken advantage of a corrupt system and the absence of a legally enforceable Public Procurement Strategy that puts the need to develop the country’s private sector well above other factors.

Local businesses need those large public procurement contracts to be able to grow from small enterprises to large corporations. Local entrepreneurs need those large contracts to create large scale sustainable employment opportunities for the nation’s youths that are currently languishing in poverty and destitution.

The government has to do more than merely acknowledging that the country’s private sector is the vehicle through which sustained economic growth can be achieved, but whose engine has been switched off through systemic marginalisation.

The current public procurement policy driven by the National Public Procurement Commission is unfit for purpose as several cases of abuse of public procurement procedures have shown. The National Public Procurement Commission was established in furtherance of the 2004 Anti-Corruption Act.

The fight against corruption and graft in public procurement is an entirely different national campaign, which must be implemented in concert with a co-ordinated Public Procurement Strategy aimed at developing the country’s weak economy.

The country’s fledgling private sector is desperate to find its feet in an ever increasing trend towards greater global economic competitiveness. Access to vast spending disbursed by the government  annually, through public procurement, could turn the fortunes of the private sector around.

What is needed is a guarantee that in the first instance, local indigenous businesses are given the opportunity to tender for large public contracts prior to the bidding process being opened up to foreign firms.

President Koroma spoke in March 2009 of the importance of developing the nation’s private sector as a precursor for economic growth. During the launch of the government’s Private Sector Development Strategy, he spoke of the importance of tackling poverty by stimulating economic growth and achieving higher GDP through private sector business development.

But those words have not been matched with action. The private sector continues to be marginalised, as foreign businesses strengthen their upper hand in the award of public procurement contracts worth almost $500 Million.

With the country’s GDP not expected to exceed growth of 4.8% in 2010, critics are questioning the government’s rationale in out-sourcing so much of the country’s productive capacity to foreign owned companies, when the people of Sierra Leone are being asked to put up with financial austerity measures that are seriously affecting their standards of living.

In October 2008, President Koroma announced that his “government is committed to reducing the country’s dependence on foreign aid by increasing internally generated revenue.” But tax receipts from the private sector have declined in the last two years. Also, as unemployment rises so has government revenue fallen. A new National Public Procurement Strategy could avert this trend.

Speaking at the opening of Parliament in 2009, the President said that ‘Procurement plans and competitive bidding have been established in 43 Ministries, Departments and Agencies, in conformity with the National Procurement Act of 2004’ as part of his government’s drive to pursue sound public financial management reforms that will ensure transparency and accountability.

No one is questioning the spirit and intention of the National Procurement Act of 2004. But the fight against graft, impropriety, corruption and the abuse of the public procurement procedures continue unabated, posing significant threat to the country’s economic recovery.

The 2004 Procurement Act does not in any way promote, nor ensure the development of the country’s private sector for sustained economic growth. Government’s over-reliance on donor funds is simply due to the fact that taxation receipts in 2010 will decline as the profitability of local private businesses fall.

The expectation therefore, is that quarterly public sector borrowing will remain at Hundreds of Billions of Leones throughout 2010, if government is to meet its current account spending plans. But this is unsustainable.

What is equally unsustainable is the policy of marginalisation and the systemic deprivation of local businesses, of the opportunity to develop the capacity and ability to win large-scale public procurement contracts, such as road network construction and the printing and supply of government stationery – tax receipt books.

There is no questioning the need for government to ensure that decisions relating to the awarding of all public contracts are based on lowest cost, quality and delivery. But the principles underpinning the achievement of ‘Best Value’, goes far beyond the simple contact performance criteria of cost, quality and delivery.

Whilst justifying every $1 spent by government, to ensure that the chosen option is the most economical, most efficient, and is likely to yield the most effective result, due regard must be given to other factors or cross-cutting themes, such as; use of local contractors, use of local labour, economic sustainability – contribution to GDP, and environmental impacts.

A National Procurement Strategy will not only guarantee that local businesses and contractors are given priority in tendering for contracts, but will ensure that those cross-cutting themes are embedded in every contract that goes out to tender from all 43 ministries and departments.

In situations where individual local contractors or businesses lack the capacity to tender for large contracts, they should be encouraged to form consortiums, bringing together a number of companies possessing different but complementary expertise and resources, to act collectively in bidding for such contracts.

Where necessary, the country’s professional bodies, trade associations and chamber of commerce should pump-prime the formation of those consortiums.

Local consortiums should also find it much easier to access private finance, in order to discharge the complex specifications of those large contracts and be able to better manage short-term cashflow pressures.

A National Public Procurement Strategy should also make provision for local companies or consortiums to enter into joint-ventures with foreign owned contractors where necessary, especially with respect to leveraging specialist skills and expertise that are unavailable locally.

It could be estimated that with this new strategy, Sierra Leone can reduce its reliance on international donor funds by up to 30%. Youth unemployment may be reduced by more than 50%; and GDP could grow by at least two percentage points.

The United States government has for many years excluded foreign companies from participating in tendering for several categories of public procurement contracts in order to safeguard local employment, promote American industrial innovation, research and development. The British government also has a national Public Procurement Strategy that is aimed at promoting the global competitiveness of British firms.

Learning from the best and delivering what is good for one’s country is what makes the difference between the haves and the have-nots. Sierra Leone can do a lot more for itself by growing its economy through the private sector. But this will require a change in mind-set of those in power.

What would it take to have a new National Procurement Strategy that delivers that change?



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