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Promoting a Competitive Local Business Community in Ghana: The Role of the Legal Framework for Public Procurement
Published online by Cambridge University Press: 03 July 2014
Abstract
Ghana's Public Procurement Act 2003 was enacted to bring about the judicious, economic and efficient use of state resources, transparency, fairness, and non-discrimination in procurement. The primary objective of the act is best value for money. This article assesses how, beyond being used to achieve its primary objective, the law should be applied to propel the capacity and competitiveness of local businesses in Ghana. It argues that effective implementation of the act can indirectly promote competition and industrial competiveness in Ghana. Therefore, procurement entities must follow the requirements for procurement, both to achieve best value for money and to build and improve upon the capacity of domestic industries. Competition, transparency and restrictions on the application of single-source procurement and restricted tendering can promote and encourage the participation of Ghanaian firms in procurement. This can enhance their capacity and competitiveness in both procurement and other economic activities in Ghana.
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- Copyright © SOAS, University of London 2014
References
1 The Public Procurement Act 2003 (Act 663), sec 3(t).
2 See generally Arrowsmith, SThe Law of Public and Utilities Procurement (2nd ed, 2005, Sweet & Maxwell)Google Scholar at 1; Arrowsmith, S, Linarelli, J and Wallace, DRegulating Public Procurement: National and International Perspectives (2000, Kluwer Law International)Google Scholar at 1–2.
3 Quinot, G and Arrowsmith, S “Introduction” in Quinot, G and Arrowsmith, S (eds) Public Procurement Regulation in Africa (2013, Cambridge University Press)Google Scholar at 1.
4 RD Anderson “International procurement: Developments in 2008 and the road ahead” in West Government Contracts Year in Review Conference (2009) 1–1.
5 In the United Kingdom, it is said that local government “spends more than £40 billion each year undertaking capital projects and buying in goods and services”: Councillor Paul Bettison, chairman of the Local Government Association Environment Board in “Local government sustainable procurement strategy”, available at: <http://www.idea.gov.uk/idk/aio/7643299> (last accessed 28 April 2014). The Federal Government of the United States spends approximately $530 billion annually on a wide range of goods and services to meet mission needs. See Office of Federal Procurement Policy at: <http://www.whitehouse.gov/omb/procurement_default/> (last accessed 18 June 2012). Anderson in “International procurement”, above at note 4 at 1-1, has also observed: “Public procurement accounts for a substantial proportion of gross domestic product – 15–20 percent on average in developed economies … In developing and transition economies with thinly-developed private sectors, the proportion of gross domestic product accounted for by public procurement can be substantially greater in the range of 30–40 percent by some estimates.”
6 Dagbanja, DNThe Law of Public Procurement in Ghana: Law, Policy and Practice (2011, Lambert Academic Publishing)Google Scholar at 45.
7 Anderson “International procurement”, above at note 4.
8 Arrowsmith The Law of Public and Utilities Procurement, above at note 2 at 2–3.
9 Under sec 92 of the Public Procurement Act 2003, contravention of any provision of that act is an offence attracting penalties including a fine not exceeding 1,000 penalty units, a term of imprisonment not exceeding five years or both.
10 The importance of a system for public procurement has been appropriately stressed thus: “Government procurement is of considerable economic significance at both the domestic and international levels, accounting for a significant proportion of national GDP. At the domestic level, the procurement of goods and services by government agencies provides needed inputs that enable governments to deliver public services and fulfill other tasks. It has a significant impact on the efficiency of public expenditure management and good governance. The attainment of value for money, public access to information on government contracts, and fair opportunities for suppliers to compete for government contracts are all essential requirements of an efficient procurement system, in particular as they impact on public finances and the delivery of public services. A well regulated government procurement system, embodying the principles of transparency and fair and effective competition, is thus essential to attaining the goals of government procurement, and is often the object of domestic reforms”: World Trade Organization “General overview of WTO work on government procurement”, available at: <http://www.wto.org/english/tratop_E/gproc_e/overview_e.htm> (last accessed 18 June 2012).
11 For a full view of the history of the public procurement system in Ghana, the objectives of the procurement system and the meaning of the concept of best value for money, see Dagbanja The Law of Public Procurement in Ghana, above at note 6 at 42–48 and 22–30. Also see id “The regulatory framework for public procurement in Ghana” in Quinot and Arrowsmith Procurement Regulation in Africa, above at note 3, 77, which sets out a full interpretation of the objectives of the PPA.
12 Davies, AThe Public Law of Government Contracts (2008, University Press)CrossRefGoogle Scholar at 260.
13 Ibid. Prof Peter Trepte classifies the uses of government procurement into three categories. The first category is “strategic” policies where procurement is used to boost the national economy. The second category is “protective” policies where procurement is used as a tool to protect local business entities. The third category is “proactive” policies where procurement is used to protect government objectives which have no immediate relation to the objective for embarking on a particular procurement, including human rights, labour and employment rights and environmental protection: Trepte, PRegulating Procurement: Understanding the Ends and Means of Public Procurement Regulation (2004, University Press)CrossRefGoogle Scholar, chap 3 generally. It should be noted that whether procurement regulation is actually used to achieve any of these policies depends on the particular jurisdiction and its law, since local peculiarities might not allow a neat application or operationalization of these policies as outlined by Trepte.
14 Id at 261.
15 Ibid.
16 Id at 260–62.
17 see Dagbanja The Law of Public Procurement in Ghana, above at note 6 at 31–42.
18 There is a useful chapter on collateral policies in procurement in Cibinic, J Jr and Nash, R JrFormation of Government Contracts (3rd ed, 1998, Kluwer Law)Google Scholar, chap 11.
19 Williams, S and Quinot, G “Public procurement and corruption: The South African response” (2007) 124(2) South African Law JournalGoogle Scholar 339 at 339.
20 Bolton, P and Quinot, G “Social policies in procurement and the government procurement agreement: A perspective from South Africa” in Arrowsmith, S and Anderson, RD (eds) The WTO Regime on Government Procurement: Recent Developments and Challenges Ahead (2011, Cambridge University Press)Google Scholar 459 at 459 (emphasis added). Profs Bolton and Quinot noted the “horizontal policies” concept was adopted by Arrowsmith and Kunzlik in preference to these other terms, in part because the label “horizontal policies” does not imply that these policies are in any way of lesser importance than other objectives of procurement: id at footnote 2. See also Arrowsmith, S and Kunzlik, P (eds) Social and Environmental Policies in EC Procurement Law: New Directives and New Directions (2009, Cambridge University Press)CrossRefGoogle Scholar, chap I. The author's view is that no procurement system can be implemented effectively if its objectives are ill-defined; to this extent, not all goals can reasonably be primary in a procurement system. Some must necessarily be primary and others must necessarily be secondary. Therefore, it is appropriate to describe as “collateral” policy goals or implementation goals which, though important in the procurement system, are not primary to the purpose which the system is designed to achieve.
21 Badcoe, P “Best value – A new approach in the UK” in Arrowsmith, S and Trybus, M (eds) Public Procurement: The Continuing Revolution (2003, Kluwer Law International)Google Scholar 198 at 198 defines best value for money in the procurement context as: “the provision of economic, efficient and effective services [works and supplies], of a quality that is fit for purpose, which are valued by their customers, and are delivered at a price acceptable to the taxpayers who fund them”.
22 Muchlinski, PTMultinational Enterprises and the Law (2nd ed, 2007, Oxford University Press)CrossRefGoogle Scholar at 385.
23 Id at 385–86. There are three broad varieties of ways business enterprises may engage in anti-competitive practices. First, there may be arrangements or concerted practices between independent competitors that serve to reduce competition between them. Where these arrangements arise between competitors at the same level of business practice, such as between rival producers in the same market, the arrangements are known as horizontal arrangements. Such arrangements may also be concluded between enterprises at different levels of the productive process such as a distribution agreement between a producer and a reseller. This form of arrangement is called vertical integration. Anti-competitive practices may also take the form of price fixing cartels. Secondly, anti-competitive practices may also stem from the acquisition by an enterprise of a dominant position in a market. The risk in such dominance is that the enterprise can create scarcity through lowering output, thereby forcing consumers to pay higher prices for a commodity when there are no alternatives. A third category of anti-competitive conduct relates to mergers and acquisitions. It can be said that these are the broad categories of anti-competitive practices that competition laws generally seek to regulate: id at 384–427.
24 The PPA, sec 92(2)(a).
25 Nash, R Jr, Schooner, SL and O'Brien, KRThe Government Contracts Reference Book: A Comprehensive Guide to the Language of Procurement (2nd ed, 1998, CCH)Google Scholar at 109–10.
26 Schooner, SL “Desiderata: Objectives for a system of government contract law” (2002) 11 Public Procurement Law Review 103Google Scholar, available at: <http://scholarship.law.gwu.edu/cgi/viewcontent.cgi?article=1101&context=faculty_publications> (last accessed 6 May 2014).
27 Ibid.
28 Ibid. Writing on the subject of “Enhancing competition in federal acquisition”, PA Denett of the Office of Federal Procurement Policy rightly observed that: “Competition is the cornerstone of our acquisition system. The benefits of competition are well established. Competition saves money for the taxpayer, improves contractor performance, curbs fraud, and promotes accountability for results”: “Memorandum for chief acquisition officers, senior procurement executives: Enhancing competition in federal acquisition” (31 May 2007), available at: <http://www.whitehouse.gov/omb/procurement/comp_contracting/competition_memo_053107.pdf> (last accessed 2 May 2014).
29 The PPA, secs 25 and 35 respectively.
30 Id, sec 25. Requiring the use of competition procedures in procurement recognizes that, in some cases, requirements for the use of national and international competitive tendering procedures may be restricted and subjects the competitive requirement to these procedures, as provided for in id, secs 44, 45 and 46.
31 Id, sec 33.
32 Id, sec 33(1)(a)(b) and (c).
33 Id, sec 33(2).
34 Id, sec 33(3).
35 Id, sec 47.
36 Id, sec 38.
37 Id, sec 40.
38 Id, sec 55.
39 Id, secs 55(4), 66(7) and 65(9)(b).
40 Id, sec 44(1).
41 Ozawa, T “Foreign direct investment and economic development” (1992) 1(1) Transnational CorporationsGoogle Scholar 27 at 28.
42 Ibid.
43 Yukins, CR and Schooner, SL “Incrementalism: Eroding the impediments to a global public procurement market” (2007) 38 Georgetown Journal of International LawGoogle Scholar 529 at 534–35.
44 The PPA, sec 45(1). See a similar requirement in id, sec 46.
45 Note though the comments on the limitations of the requirements for the use of international competitive tendering in Dagbanja The Law of Public Procurement in Ghana, above at note 6.
46 Organisation for Economic Cooperation and Development “Methodology for assessment of national procurement systems” (version 4, 17 July 2006) at 11.
47 Ibid.
48 In Pyne & Associates v Department of Urban Roads the complainant was disqualified by the Tender Evaluation Panel during post-qualification evaluation, based on poor work quality and unjustifiable delays on previous contracts awarded. The issue was whether the respondent, the Department of Feeder Roads, dissatisfied with the complainant's previous performance in a tender awarded, could use this as a basis for disqualification from another project. In deciding against the complainant, the Authority noted that the disqualification of the complainant had been duly decided based on published post-qualification evaluation criteria. It is significant to note that arguments were made to the effect that, ordinarily, a contractor could not be barred from a subsequent project based on previous performance, as disqualification is specific to a project. If this were not the case, most contractors would be out of business. It was also noted that, under the Authority manuals (2003), history of poor performance may be considered sufficient justification for failing post-qualification evaluation if the tenderer is unable to demonstrate that steps have been taken to resolve previous problems. Post-qualification evaluation was a published requirement in this tender process. In this case, it is not clear whether past performance should have been a relevant factor in deciding not to make an award to the complainant. It should be stressed that, if the complainant demonstrates in all certainty that it is capable of performing a contract if an award is made and the procurement entity is satisfied as to the evidence produced by the complainant supporting its claim, then an award should not be refused because of a previous failure to perform. Past performance particularly becomes irrelevant if the previous project on which the tenderer failed to perform has no similarity with the current project. The decision on Pyne & Associates v Department of Urban Roads is available at: <http://www.ppaghana.org/documents/APPEALSandCOMPLAINTSCASES.pdf> (last accessed 28 April 2014).
49 See Dagbanja, DN “The nature and scope of contractor qualification systems: A cross-jurisprudential inquiry” (2009) 7 Journal of Contract ManagementGoogle Scholar 65.
50 Schooner “Desiderata”, above at note 26.
51 Ibid. See also Arrowsmith, S “Towards a multilateral agreement on transparency in government procurement” (1998) 47 International and Comparative Law QuarterlyCrossRefGoogle Scholar 793 at 796.
52 Schooner “Desiderata”, above at note 26.
53 <www.ppaghana.org> (last accessed 28 April 2014).
54 The PPA, sec 59(c).
55 Id, sec 60(1).
56 The Authority in its “Guidelines for margin of preference to local suppliers, contractors and consultants” (2006) at 7 (Guidelines for margin of preference) has rightly observed that, in procurement for goods: “Eligibility for preference for goods is determined by the sources of the domestic goods and not by the nationality of the Tenderer. The Nationality of the Tenderer or Supplier is irrelevant, making it clear that preference is given to the GOODS and not to the Tenderer.” In the case of goods contracts, the guidelines are not for domestic suppliers or contractors or consultants, but also for foreign firms as well. In that sense, the title of the guidelines is quite inaccurate, since it creates the impression that the guidelines are for local suppliers, contractors and consultants.
57 Ibid.
58 UN Conference on International Trade Law (UNCITRAL) Guide to Enactment of UNCITRAL Model Law on Procurement of Goods, Construction and Services (A/CN.9/403, 1994), art 26, available at: <http://www.uncitral.org/pdf/english/texts/procurem/ml-procurement/ml-procure.pdf> (last accessed 3 May 2014).
59 Where “ex-works” applies in a transaction, the seller's responsibility is to make the goods available to the purchaser at the seller's premises. The purchaser bears the cost and risk of transporting the goods.
60 “Guidelines for margin of preference”, above at note 56 at 7.
61 Ibid.
62 Id at 7 and 8.
63 Id at 8.
64 Art 296 of the Constitution of Ghana defines the basis for exercising discretion in Ghana.
65 UNCITRAL Model Law on Procurement of Goods, Construction and Services with Guide to Enactment (1994).
66 Above at note 58.
67 Id, art 26.
68 Ibid.
69 Ibid.
70 The PPA, sec 3(3) (emphasis added).
71 Id, sec 2.
72 Dagbanja “The regulatory framework”, above at note 11 at 80.
73 The PPA, sec 3(t) (emphasis added).
74 Id, sec 59(4)(c)(v).
75 Bolton, P “Government procurement as a policy tool in South Africa” (2006) 6/3Journal of Public ProcurementGoogle Scholar 193 at 193 and 194.
76 Id at 198.
77 Id at 194.
78 Id at 197.
79 Id at 203.
80 Id at 202.
81 Id at 201.
82 Watermeyer, R “The use of targeted procurement as an instrument of poverty alleviation and job creation in infrastructure projects” (2000) 9/5Public Procurement Law Review 226Google Scholar.
83 Watermeyer suggests that affirmative procurement policy has resulted in increased participation by the target group, the formalization of the small businesses sector, more structured relationships within the industry and an increase in the government's tax base: ibid.
84 Bolton “Government procurement as a policy tool”, above at note 75 at 200.
85 Id at 195.
86 Id at 203–04.
87 For further reading on this subject see: Bolton, P “The use of government procurement as an instrument of policy” (2004) 121/3South African Law Journal 619Google Scholar; Bolton, P “The regulation of preferential procurement in state-owned enterprises” (2010) 1 Journal of South African Law 101Google Scholar; Bolton, P “Incorporating environmental considerations into government procurement in South Africa” (2008) Journal of South African Law 3Google Scholar; Bolton, P “Protecting the environment through public procurement: The case of South Africa” (2008) 32 Natural Resources Forum 1CrossRefGoogle Scholar; Bolton, P “An analysis of the preferential procurement legislation in South Africa” (2007) 16/1Public Procurement Law Review 36Google Scholar; and Arrowsmith, S “Public procurement as an instrument the impact of market liberalization” (1995) 11 Law Quarterly Review 235Google Scholar.
88 15 USC 631.
89 15 USC 631(a).
90 A fuller reading on collateral policies in procurement can be found in Cibinic and Nash Formation of Government Contracts, above at note 18, from which this summary was sourced.
91 Ibid.
92 515 US 200.
93 Bolton “Government procurement as a policy tool”, above at note 75 at 195.
94 See for example the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Ghana for the Promotion and Protection of Investments, signed on 22 March 1989, which entered into force on 25 October 1991.