Socio-economic Programs in Federal Government Procurement: Challenges Associated with their Implementation
Public procurement refers to the act through which government organizations or departments purchase products, services, and establishments as well as building undertakings from suppliers in the domestic and global market about the public guidelines of equity, justness, perspicuity, competitively as well as profitability. It involves numerous practices that aid the service delivery of government organizations starting from regular products to complicated establishments and building undertakings. Furthermore, it directly or deviously supports the government’s societal and political objectives (Bolton, 2006). Since the start of the 21st century, numerous developing nations have been restructuring their government purchasing systems to contend with the establishment and advancement of information and communications technologies as well as embrace high tech expert activities, enhance performance and improve value for money attainment. Although the amendment has been crammed with administrative, market, licit, and technological as well as political predicaments or disputes that in turn influence the implementation and accomplishment of procurement processes particularly in the public purchase and donor-financed undertakings (Pauw et al., 2002). There is a high expectation from every government to carry out the public procurement function effectively and efficiently by upholding a very high standard of conduct in ensuring that the delivery of goods and services are of high quality since the above activities account for a huge portion of the taxpayer’s funds.
Government procurement functions in a setting of progressively extreme investigation driven by technology, schedule analysis as well as political anticipations for service enhancements. (Eyaa and Oluka, 2011). According to Pouris et al. (as cited in Pauw,et al., 2002), the objectives of government procurement is to get excellent supply of products and services from the market with regard to peculiarity, timeliness as well as price and at the same time reducing risks, achieving socio-economic goals including rivalry and sustaining probity. The two critical goals of procurement are fundamental and auxiliary. Primary goals relate to the accomplishment of value for money for the purchasing organization, the justness of the procedure on the supplier’s side, perspicuity as well liability to the citizens as taxpayers who fund public purchasing (De La Harpe, 2009).
On the other hand, auxiliary goals of procurement related to purchasing as an aspect or tool to deal with socio-economic matters. The purchasing procedure that aids the supplemental target is referred to as preferential purchasing. A procurement strategy supports goals on top of those linked with the direct objectives of purchasing itself. According to Bolton (2006), utilizing purchasing as a strategic instrument may also be called affluence distribution. That procedure diverts financial resources to initially underprivileged cliques in the community. This is evidenced by the fact that preferential purchasing gives employment as well as commercial opportunities to impoverished people and societies (Govender and Watermeyer, 2000).
For instance, section 217 of the South African constitution needs all departments of the government to purchase all products and services with regard to a structure that is just, perspicuous, equitable, competitive as well as profitable. Every government procurement practice that is inconsistent with these regulatory acts is regarded as flawed and should be precluded. These statutory provisions concerning government purchasing are called the pillars or guidelines of purchasing. This paper shall discuss the components in detail in the subsequent paragraphs. In an endeavor to achieve consistency, this article shall mostly use South Africa as a case study and make a comparison to how this system runs in the United State. The purpose of this paper is to identify the challenges associated with the implementation of socio-economic programs in Federal Government Procurement and suggest how they can be mitigated.
Governments are the most considerable profligates of public finances globally. The amount differs from one nation to another, but ordinarily, government disbursement of public services varies from between 15 percent to 45 percent of a nation’s production. An estimated 25 percent to 50 percent is utilized in acquiring products and services predominantly via government procurement. The absolute amount of this disbursement has a significant influence on the economy, and as such, that procumbent sector has attracted a lot of attention in the recent past (Knight et al. 2003). For instance, the Tanzanian government did realize the significance of the government purchasing purpose and its responsibility in the socio-economic establishment of a nation and its role towards poverty minimization. As a result, the government, starting in the year 1990 has begun numerous procurement transformations in its public purchase system with the goal of making it highly efficient and perspicuous according to the existing and fundamental procurement provisions as well as excellent practices (Public Procurement Policy, 2012).
The transformations resulted to the legislation of the initial government purchasing provision “Act number 3 of 2001,” and after that, it was amended by the government purchasing provision “Act number 21 of 2004” in its laws of 2005. Nevertheless, the endeavors undertaken in the execution of purchasing processes have been thwarted and faced with claims of corruption and concealment instead of clarity. As a result, governments experience huge losses in paying for good not delivered sometimes or services not rendered. Failure of such public purchasing processes is attributed to poor intergovernmental coordination of procurement issues. According to Lolojih (2003, such circumstances can be attributed to lack of purpose amidst the government procurement as well as the establishment of procuring strategies.
Conversely, government-purchasing practitioners have often been encountered predicaments in the execution of procuring processes and strategies put in place due to different environmental or external aspects like market, licit, administrative, as well as socio-economic. Notwithstanding the endeavors set by the federal government as well as its associated entities and the admission that the purchasing sector has the potential of enhancing the organization, a considerable number of internal professionals make their own decisions and often bypass the purchasing sector. All these predicaments both internal and external need development of vivid purchasing processes, execution as well as accomplishment paradigms that will give the decision-makers just, transparent and objective information concerning the methods and execution status as well as the achievement of the purchasing purpose.
Presently, purchasing is specific importance in the government of South Africa and has been utilized as a strategic instrument because of the prejudice as well as unjust practices experienced in the apartheid era (Bolton, 2006). Purchasing is the heart of the public service delivery structure and supports objectives that are arguably auxiliary to the fundamental purpose of procurement like utilizing purchasing to support societal, industrial or environmental strategies (Cane, 2004). Before the year 1994, government purchasing in South Africa was a preserve for the developed and much-established suppliers. It was almost impossible for new suppliers to take part in public purchasing processes. Although, government purchasing has been given constitutional accolade and identified as a means of dealing with previous prejudice policies and exercises (Bolton, 2006). Transformations in government purchasing were started to support the fundamentals of proper administration and the federal treasury initiated a preference schedule to deal with socioeconomic goals. The transformation procedures were because of the inconsistency in strategy implementation and lack of liability as well as support systems and disintegrated procedures.
Further, according to Matthee (2006), a uniform execution system to purchasing was needed because of a study analysis on opportunities for transformation procedures in the country’s government conducted by the Joint Country Assessment Review (CPAR) and the World Bank in 2001. The inadequacies and the divisions in administration, interpretation, as well as the execution of the preferential purchasing strategy framework provision number 5 of 2000, led to the initiation of supply chain management in the government departments as a strategic instrument. (National Treasury, 2005). In the year 2003, a supply chain management refers to as ‘Supply Chain Management: A guide for accounting officers/authorities’ was established to control the application of the integrated supply chain management purpose and its associated administrative duties. This policy was the government’s effort to attain the anticipated industrial policy results using government purchasing.
Regardless of the transformation procedures in government purchasing as well as the application of the supply chain management as a technical instrument, there are challenges in the South African government purchasing practices. For instance, non-adherence to the purchasing and supply chain management associated regulations and strategies as well as tender anomalies. According to De Lange (2011), the citizens of South Africa were defrauded of 30 billion Rand, and as a result, corruption, inefficiency, as well as dereliction by government workers were to be blamed. Further, in the year 2010, the Government disbursed 26.4 billion rupees in a manner that transgressed laws as well as prescriptions (Smart Procurement, 2011).
GOVERNMENT PURCHASING PREDICAMENTS IN SOUTH AFRICA
It is significant to note that the supply chain management is an essential part of purchasing in the South African government. As a result, it is utilized as an instrument for the administration of government exercises. Although, regardless of the application of the supply chain management as a technical instrument, government purchase still experiences numerous challenges. A number of the problems are listed below:
• Lack of appropriate understanding, expertise, and ability
• Non-adherence with supply chain management strategy regulations
• Deficient planning and the association requisition to the budget
• Liability, scoundrel, and corruption
• Inadequate control and assessment of supply chain management
• Unethical behavior
• Over decentralization of the purchasing structure
• Inadequacy of the black financial empowerment
The challenges are briefly elaborated below:
Lack of appropriate understanding, expertise, and ability
The federal treasury gives support by expediting the establishment of proper training resources to public sectors, municipalities, as well as municipal agencies to to entirely attain the supply chain management goals, Although, the deficiency of expertise has been an asynchronous theme in the public arena. Sheoraj (2007) argues that expertise and ability deficiencies have been determined as the single most significant hindrance to the success of government purchasing in South Africa. Proper capacity in the form of suitable systems with entirely skilled and experienced supply chain management personnel is a significant element for success in the execution of the supply chain management strategy. In other government agencies, to the peculiarity of the supply chain management personnel’s expertise and capacity are well below the paradigms required. According to Migiro, & Ambe (2008), various supply chain management actors in South Africa have been regularly trained on the policy, but they still have not inadequate understanding for appropriate execution. According to McCarthy (2006), there is lack of ability and knowledge by the supply chain management actors to deal with purchasing procedures that have resulted in reduced administration. The South African government initiates programs that train practitioners; however, execution of its plans often fails.
Non-adherence with supply chain management strategy regulations
Numerous associated policies and provisions control the supply chain management. Adhering to this strategies and requirements is a challenge. According to Matthee (2006), some of the actions associated with non-adherence to the rules and processes are linked to the habit to use a rivalry procedure for quotations and bids as well as improper use of the preference point’s structure. On the same note, there is the deficiency of proper bid boards, utilization of incompetent contractors, approving bids for improper purposes, use of improper purchasing procedures about the guidelines, extending of validity time as well as incorrect use of the restricted bidding procedure. Further, there are insufficient controls and processes for dealing with bids, selection of bid board members not adhering to policy prerequisites as well as inadequate encouragement from variations from the supply chain management processes.
Inadequate planning and the association requisition to the budget
Requisition control is essential to the supply chain management procedure. It describes the resolution-making method that permits sections to purchase at the correct moment, at the right location and right expense. Although, numerous government agencies are still encountering predicaments of incorrect arrangements as well as associating requisition to budget Ambe and Badenhorst-Weiss, 2011). Cost-effective purchasing relies on a consultant’s expertise to ensure that purchasing the prerequisites are accurately identified, proper contract techniques are established, contracts are well administered, and opportunities are taken to catch the best business at the appropriate period and the best cost. The significance of coming up with correct and actual strategic arrangements may not be overestimated. Sometimes there is lack of coherent mechanisms. Some public agencies may not correctly quantify the requirements of those that need their services or accurately estimated expenses nor can they successfully track, manage, or report on disbursement. Further, according to Luyt (2008), there is dire necessity to observe the delivery of services precisely to make sure that limited resources are appropriately and adequately purchased. Inadequate arrangements and budgeting have also influenced the execution of supply chain management. It is, therefore, essential that supply chain management practitioners sufficiently associate requisition to budget.
Liability, scoundrel, and corruption
The obligation is among the primary pillars of government purchasing. Without perspicuous and liable structures, the immense resources that pass through the government purchasing systems face a risk of being involved with raised corruption as well as misuse of finances (Jeppesen, 2010). Scoundrel and corruption expense South African citizens hundreds of millions and possibly billions of rand annually. In the recent years, the influence of scoundrel had resulted to the formation of different laws and enhancement of existing statutes that led to the establishment of Directorate of different operations also known as Scorpions (Mahlaba, 2004).
Boateng (2008) argues that since 1994, South Africa had experienced unique societal and infrastructural schedules. However, the numerous individual that anticipated that freedom would lead to significant socio-economic emancipation and enhancement are getting progressively annoyed towards government due to issues like deficiency of expected peculiarity of governance, service delivery failure, scoundrel, and corruption in some parts of the economy as well as disappointments with empowerment strategies. According to De Lange (2011), the public service commission board indicated that 7766 corruption petitions had been sent to the federal anti-corruption Hotline since it was started in September 2004 until June 2010. De Lange (2011) note that taxpayers were fleeced of R30 billion (3.675 billion USD). Corruption, incompetence, and negligence by public servants were to be blamed (De Lange, 2011). About 20 percent of government’s procurement budget alone ‘went down the drain each year.
This kind of corruption was attributed to executives factoring their figures in the bills and overpaying for the goods and services or failed to observe how funds were utilized. Among the public agencies that were investigated for purchasing anomalies was the Tshwane Metro where 65 executives were probed being involved in businesses that were paid around 185 million rands with their council (Pauw, 2011). The federal and provincial governments and their agencies incised 21 billion Rands in irregular disbursement in the year 2010 with accounted for 62 percent increase over the past year. The auditor general pointed out at the frailty in supply chain management, management of information advancement, human resource management, and capital properties as well as accomplishment reporting during a briefing to parliament’s standing board on public account. Thus, there is dire necessity to rethink creative ways of minimizing corruption and various managerial evil doings within South African departments of government. To effectively fight the affliction of misgovernment, misuse of funds, scoundrel, and fraud, the states ought to improve and analyze the existing internal management structures to identify imperfections.
Inadequate control and assessment of supply chain management
Efficient strategy making needs information on whether governments are correctly conducting their businesses and if they are attaining the anticipated outcomes. Robust monitoring and assessment structures give the means gather and combine this valuable data into the strategy cycle hence providing the foundation for proper administration and liable government strategies (Acevedo et al., 2010). Insufficient monitoring and assessment are associated to the lack of or inadequate presence of a monitoring surrounding, and the government agencies are placed in a difficult situation to give effect to or execute the supply chain management as prescribed by the policy. Therefore, variations or non-adherence goes unidentified or recognized after the fact. Purchasing officers in government have disbursed millions of rand in manners that infringe the laws and provisions. The federal and provincial governments and their agencies have increased irregular, illegal, futile, and wasteful disbursements that violate rules and regulations. There is a deficiency of appropriate monitoring and assessment as needed (Stemele, 2009).
Morality refers to the study of ethical decisions and the right and wrong behavior. Morality and conflict of interest profoundly influence supply chain management execution. Some chief economic officers exert a lot of authority, but there is a deficiency of appropriate consultation with the senior executives. While the federal treasury’s direction to accounting executives decrees a paradigm approach towards supply chain management process, in most cases there is deficient compliance as well as the adoption of the guidelines. According to McCarthy (2006), this aha led to a distinction in approaches and deficient in normalization. The completeness tender documents in numerous municipalities are hard to confirm.
Over decentralization of the purchasing structure
In South Africa, public purchase of own domestic products and services is mostly decentralized to entities, provinces as well as municipalities. If one considers the number of tender scoundrels and deficient of services on all levels of government into account, then one ought to ask if these agencies are aware and if they have the interest of efficiently utilizing public finances. Centralizations influence scales to minimize expenses. On the other hand, decentralization depends on local understanding to build relations (Fawcett, Ellram& Ogden, 2007). Normalization provides benefits like influence because of capacity, a decrease of duplication of procurement endeavors, better monitoring, as well as the establishment of specialized skills of procuring personnel. Conversely, decentralization always leads to better sensitivity to acquiring requirements, a better comprehension of special domestic needs and is nearer to contractors and taking ownership of resolutions that influence on one’s budget. Although, if the benefits of centralization are to be achieved, proper contract administration and supplier relation administration ought to be enhanced. For instance, the schoolbook scandal in different provinces in South Africa in the year 2012, where textbooks were not delivered to schools by the third term of the learning year is a perfect scenario where inefficient contract administration can play.
Inadequacy of the black financial empowerment
The government of South Africa embraced the regulation of the black financial empowerment to support previously disadvantaged individuals rather than only a few black investors. To this day, it adopted “Broad-Based Black Economic Empowerment Act (BBBEEA)” that calls for extended opportunities for employees and smaller businesses and new representative ownership and administration (Zuma, 2009). Contemporary black financial empowerment regulations have, although, on most occasions failed to make sure a broad-based approach, instead of imposing substantial expenses on the economy without aiding employment creation or development. The Current black financial empowerment models remain highly concentrated on transactions that deal with existing property and those that benefit a small number of people. The execution of the black economic empowerment has faced the following predicaments:
• Ownership and senior administration issues get different stress. The unintended effects of this trend comprise fronting, supposition as well as tender abuse.
• The provisions do not sufficiently compensate employment creation, support for small businesses as well as domestic purchasing. The preferential purchasing aggravate this condition by privileging dominion over internal performance
• The Broad-Based Black Economic Empowerment Act provisions penalize government agencies as contractors. The democratic state possesses government agencies on behalf of its people, yet the regulations do not regard them as “Black empowered.” (Zuma, 2009). Following the discussion above, it is apparent that there are restrictions on purchasing practices in the South African government. These challenges may profoundly influence or be blamed for deficient inappropriate understanding, expertise, and ability. As a result, the South African state will require dealing with these predicaments in order to entirely attain the strategic goal of government purchasing.
Pillars of Government Procurement Policy
1. Principle of Fairness
According to Bolton (2007), a just purchasing system is one where public contracts are broadly advertised; all suppliers ought to be familiar with the regulations of the competition as well as all the suppliers ought to be given adequate time to take part in the procedure. Therefore, this implies that all suppliers ought to be subjected to similar regulations of the game when they are doing business with the government and this fundamentally needs that no supplier should be preferred or discriminated in the procedure. Practically, the latter provision means that every individual that does business with the government ought to be handled equally. For instance, when an agency advertises a tender, it is needed regarding purchasing regulations to do an information session on the specifications that were announced so that everybody gets access to similar information and that whoever needs clarifications can be helped. However, this is a better administrative exercise initiated by the federal treasury, executives most times neglect this practice when they prefer to encourage for a variation from standard or general rivalry bidding procedures.
The second type of justness in government purchasing is the one that is formed in the general purchasing directions issued by the federal treasury that need officials to be involved in government purchasing to disclose any conflict of interest. This element is very significant for a just government purchasing structure. If it not attended to, it may result in a loss of public trust as well as the conviction in government purchasing.
The third, type of operational naturally needs that for the execution of a just purchasing structure, an annual invitation for the listing of expected contractors on local contractors database ought to be undertaken. The department of women, kids, as well as persons with disabilities, is an example of a federal sector that has been deficient in meeting this prerequisite recently. This department is just one example of the many sectors that do not comply with the requirement of a fair procurement system. Finally, the
2. Principle of Equity
The better administration pillar of fairness imposes a responsibility on those tasked with carrying out the government purchasing system to concentrate on purchasing interventions that target small microfinance enterprises and well as home delivery incontinence supplies. The embracing of the 10-point arrangement in a single strategy initiative by the government intended at supporting admittance to the small microfinance enterprises as well as home delivery incontinence supplies to government business opportunities. Therefore according to Bolton, the reference to fairness in section 217 (1), may hence be intended indeed in dealing with the unfairness and unjustness prejudice practices.
Indeed, the matter regarding fairness prerequisite has been a subject of distortion as well as delusion by some of the executives implementing the public purchasing strategy. Due to the misconception of government purchasing strategies, officials have incorrectly applied the preference point-scoring structure in some cases. Therefore, it is apparent that federal treasury ought to up its game on thorough training schedules particularly tailored at looking at the rendition of section 21 (1) since the present research show a deficient of training of policy 14243144061 understanding level as well as policy execution level. Further, it is substantial to inform the small microfinance enterprises, and the home delivery incontinence supplies that the fairness prerequisite in government purchasing is not meant to support low standards of performance whenever it comes to service delivery. The government is presently suffering from a crisis of administration because of the rising number of service delivery objections as a result of the poor record of service delivery. For instance, the 2015 federal treasury government SCM analysis refers to this predicament of poor service delivery history of government that is linked to the frailty in government purchasing policy execution. Finally, a research of the case studies on the implementation of a fair government purchase system indicates an abuse of the preference point structure to favor specific organizations at the cost of commercial deliberations like peculiarity and value.
3. Principle of Transparency
The excellent administration principle of perspicuity in government purchasing is intended to comply with government strategy notion of checks and balances in the administration of federal resources by the elected officials via the system of government formalities. The national treasury has directed sectors to advertise government business opportunities in the local websites, notice boards, tender bulletins, as well as local newspapers to enhance openness in government purchasing. According to Bolton (2006), the latter statement indicating that the objective of executing a perspicuous government purchasing system is for everyone to be permitted to question any procedure flowed during the awarding of a public tender. Although, this strategy analysis has identified that executives are turning to measures that vary from the principle of transparency in the tender processes due to the assessment and adjudication procedures are carried out without the participation of the public. This challenge is among the sectors that the federal treasury requires to enhance on since it influences negatively on the promotion of administration in government purchasing. There exists no element prohibiting the national treasury from permitting the public to be active monitors during the assessment and adjudication stages in government procedures. This strategy will need a standard change in the policy execution phase of government purchasing, as it will initiate a radical approach to the enhancement of the pillar of perspicuity as enshrined in the constitution.
On the same note, according to Bolton (2006), the federal treasury via the 2015 public sector SCM analysis activity came to acknowledge that more needs to be done to shift the manner in which tender information is passed to the public. For instance, the 2015 analysis indicates that the fact that information contained in the purchasing arrangements and awarded contracts will henceforth be made public at particular intervals and will impose higher civil liability on executives involved in government purchasing. This strategy analysis argues that this will significantly reduce on variations from general rivalry bidding that is concealed as restricted bids because of the nature of the work involved. Lastly, the review of the case studies indicates that perspicuity in government purchasing espouses the level of political interference in resolution making on awarding of tenders.
4. Principle of Competition
The doctrine of rivalry within the context of government purchasing may be described as a procedure where more than a single capable contractor or supplier is permitted to submit quotations or proposals for the announced public job. This principle needs that local officials carrying out the purchasing function do a market survey and establish a sourcing policy that will permit maximum rivalry. This doctrine of contention in purchasing ought to allow a level of trust and association amidst the contractor and the buyer. (Hugo, et al., 2004). According to Hugo et al., the latter is still a challenge in government purchasing with regard to the results of the review of case analyses. Some government executives are unable to form this environment since they engage in exercises that favor one supplier over others.
Further, according to Bolton (2006), among the benefits of competition is that an agency utilizing competitive processes is in a position to vary costs and peculiarity and therefore decide to award the tender to a supplier giving the best possible offer. Consequently, it has been revealed in a review of case studies that regardless the prerequisite of varying costs and peculiarity, some suppliers often get public tenders even if they fail to fulfill the required doctrines. Therefore, this fact implies that there is disengagement regarding what the federal treasury is directing departments to apply in line with the policy necessities of public purchasing as well as what the executives are executing on the ground.
Still, on the same note, the training of small microfinance enterprises with regard to public business procedures is one manner of enhancing competition. The expense of operating or conducting training sessions for small microfinance enterprises elaborating government purchasing procedures may not outdo the future opportunities to be formed for such companies. It is motivating to note that the federal treasury has been encouraging government sectors to conduct a supplier’s day. The supplier’s day is in reality, a profitable endeavor from the national treasury in making sure that a competitive doctrine of proper administration in government purchasing is being supported.
Further still on the principle of competitiveness, the other prerequisite for complying with the competitive government purchasing structure is value for money. The objective of competing in the business sense is to get the value for pecuniary. Consequently, this is associated with the doctrine of profitability of better administration (Bolton, 2006). In some cases, the strategy review on the case studies revealed that the government executives involved with the assessment procedures in government purchasing used their minds only to set prices and neglected any reflection to matters of peculiarity as well as capacity by contractors to do the job. Although, according to Bolton this strategy analysis that federal treasury ought to give directions on the interpretation of what structures competitive pricing as the cost is not only monetary value but also takes into account matters of peculiarity that ought to be valued in the quoted amount. Finally, on the competitive doctrine, the cost referencing incipient from the federal treasury is commendable and positively influences enhancing competition, as it will reduce on matters of overpricing. As a result, the public will be informed of the composition of reasonable costs and contractors will get it hard to cooperate with rogue executives for reasons of undermining competition, as the rationality of costs will be identified above board. Since the Eastern Cape Province already has a system of price referencing in place (ECSCM Circular 24 of 2010/11: Procurement Value Management Intervention – Price Benchmarking for Goods and Services), to create uniformity, it is recommended that National Treasury develop one price referencing system for the entire government.
5. Principle of Cost Effectiveness
A profitable government purchasing structure as doctrines of better administration is one that reflects in the proper and sufficient use of purchasing procedures from the time the requirement for purchase is determined until the time when accomplishment requires to be appraised. As a result, the cost-effectiveness prerequisite imposes a responsibility on executives involved with purchasing to do a review of the value chain during the purchase of products and services in the government procurement arena. According to Bolton (2006), the 2015 analysis document of federal treasury approves these predicaments linked to complying with a cost-effective structure particularly during the post-contract stage when contractors give deficient material as well as quality goods that are compromised. That might also be linked to an inadequate articulation of the requirements in a deficiently drafted specifications document, however, at times during the assessment stages, the utility criteria that deals with the past work history and ability to deliver or supplier being assessed are shifted to include another contractor or supplier.
On the same note, according to Bolton, (2006), there exists a thin line dividing the prerequisites for competition and cost-effectiveness as the doctrines of proper administration in government purchasing. That is because both principles deal with the competence of the contractor or supplier to deliver as per the prerequisites of the quotation or tender. In the review of these case studies, Bolton argues that the execution of poor requisition administration policies is the cause for non-adherence to profitable government purchasing. Mainly, it is due to deficiently drafted specifications or due to the embracement of a sourcing policy aimed at favoring a particular supplier or contractor. Therefore, in these latter scenarios, politics often play an essential role or lack of declaring interests. Consequently, it becomes crucial that the public is permitted to take part as monitors in the assessment and adjudication committees before tenders are awarded. That is in line with the licit process where judges hear in public submissions from the representatives of the government and the agents of the accused.
Concerning the costs that are not effective because of poor quality, it is just a matter of contract management. It is during this stage that issues of risk management should to and indeed the National Treasury has started by issuing the general conditions of the contract that is standard across all government contracts for goods. The general state of the contract is mostly also applicable to contracts for Services. However, as can be seen from the analysis of the case studies, this measure is not sufficient to prevent the imperfections within a system, which needs to promote cost-effectiveness. Instead, National Treasury should make it compulsory for the evaluation committees to conduct site inspections for all the suppliers or service providers who have submitted responses to an advert for listing in their respective departmental suppliers’ database. Even if National Treasury is considering the centralization of a suppliers database for the whole of government, It should allow these inspection visits to take place.
Transformations in Government Purchasing Policy
After the democratic election, happen in the year 1994, the novel South African government utilized government-purchasing policy as an instrument for the socio-economic establishment. This action was intended at reversing the impacts of the execution of the past government’s purchasing strategies that excluded most of the people from substantially doing business with the government of the day. For instance, in the year 1996, the South African government embraced a 10-point arrangement to confirm and adopt the doctrines of the restructuring and establishment program in government purchasing, while making sure that small enterprises are the primary beneficiaries for the transformations (Raga and Taylor, 2010). Raga & Taylor further argues that the 10-point arrangement was a tool utilized to satisfy the fairness doctrine of better administration in government purchasing as it enhanced warding of government tenders to small microfinance enterprises as well as possessed by home delivery incontinence supplies. Therefore, the utilization of government purchasing as a strategic instrument to reverse the imbalances of the previous governments so as to give a framework of public entitlements as well as liability is a significant step towards achieving justness in public purchasing.
Consequently, the new government produced a “Green Paper” on government purchasing in South Africa whereby the two aims of purchasing transformations in the public sector were given as the attainment of socio-economic targets as well as enhancement of better administration. The Green Paper intensified the doctrines of better management by suggesting that the tender processes ought to be simplified to motivate justness and perspicuity. On the same note, the public announcement of government prerequisites in the tender bulletin, as well as domestic newspapers, was intended to make sure that the market caters for small microfinance enterprises to take part in order to enhance competition in the government purchasing spheres. Thus, Manchidi and Harmond (2002) argue that:
South Africa’s public sector procurement reform has focused on small business in the construction industry to redress skewed patterns of business ownership arising from the previous political dispensation and to bring about reductions in levels of poverty by: Providing access to markets for small businesses and increasing the market share of those companies that are owned, managed or controlled by PDI’s through preferential procurement; and addressing the impediments to the productive and profitable participation of such business in government procurement through supply-side interventions, such as emerging contractor development programs.
According to Ambe (2012), while discussing the second aim of the transformations in the public purchase policies, the enhancement of better administration, he argues that alterations in government purchasing in South Africa were started to enhance the doctrines of better management. Due to these establishments, the federal treasury did a detailed analysis during the late 1990s as well as early 2000s, giving out some discussion papers as well as strategy documents to direct consistency during the rollout of purchasing transformations in government strategies. The initial report was announced by the federal treasury and was presented to the cabinet in October 2003. It was titled “Policy Strategy to Guide Uniformity in Procurement Reform Processes in Government (“The Policy Strategy”) which concisely describes the background to purchasing transformations after the 1994 democratic elections. The Policy Strategy (2003, p. 2) states that:
Procurement reforms in government started in 1995 and were directed at two broad areas, namely, the promotion of principles of good governance and the introduction of a preference system to address specific socio-economic objectives.
The policy strategy document and other strategies were intended to give directions on the rendition of what comprises a just, fair, perspicuous, competitive, and profitable government purchasing structure. It is the researcher’s submission that the latter move was the correct one as the promulgation of some pieces of regulations as well as strategies established during this time linking government purchasing presented a possible for distortion by government executives involved in purchasing
Another element of better administration during the period of transformations that emerges from the discussions above is that the federal treasury’s position on the enhancement of better management may be associated to the narrow managerial expression of administration advocated by the World Bank. In this scenario, the World Bank used the idea of control to its relationship with the government’s management of its issues or government resources, and as a result, this is how institutions such as World Bank and International Monetary Fund affected the transformations in South African public purchasing strategy. The federal treasury confidently provides trust or assurance to this argument as they did a collective nation purchasing evaluation analysis in 2001/2002 with the World Bank (Policy Strategy, 2003). In the summary of findings and recommendations of the nation evaluation analysis Report, the relation between better purchasing and better administration is highlighted. The report further suggests an overhaul of the constitutional structure monitoring government purchasing and the initiation of new institutions such as a federal Compliance Office.
In the Policy Strategy (2003) the idea of better administration as it relates to government purchasing structure is presented as comprising the following features:
• Preserve the highest standards of honesty, integrity, impartiality, and objectivity
• Be fair, efficient, firm and courteous
• Achieve the highest professional standards in the awarding of contracts, to maximize value for money while adhering to international standards
• Provide clear specifications of requirements which encourage innovation and refer, where appropriate, to relevant technical and other measures
• Make available as much information as suppliers need to respond to the bidding process, and to define and publicize procurement contact points
• Manage the bidding process so that genuine competition is preserved and discrimination is avoided
• Make available the broad criteria intended for the evaluation of bids, to evaluate proposals objectively, and to notify the outcome promptly
• Within the bounds of commercial confidentiality, to debrief un/successful bidders of the result of the bidding process to facilitate better performance on future occasions
• Achieve the highest professional standards in the management of contracts
• Pay promptly for work done following criteria as set by a legal and binding agreement
• Respond quickly, courteously and efficiently to suggestions, inquiries, and complaints.”
If one reviews the above-stated features of better administration, it is apparent that morality and conduct of the executives handling government purchasing are subject to high paradigms. Although, the case studies will divulge a clear picture of behavior that is anticipated from executives, as in some cases suppliers had business relationships with executives that make resolutions during the awarding of tenders. That reflects poorly on the discrimination of executives as the prerequisite of justness for government purchasing imposes a responsibility upon all executives to act to when handling the contractors and service providers.
United States Federal Government Procurement program
The procurement system in the United States contains policies and laws that compel the federal government procurement budget to be spent in a manner that strives to improve the socio-economic aspects of the people (DiNitto & Johnson, 2015). In the procurement process, the government needs to give preferential treatment to disadvantaged groups, minority groups, and small businesses with the aim of improving their welfare and development (DiNitto & Johnson, 2015). This essay will analyze the socio-economic programs in the Federal Government procurement in the United States, challenges associated with the socio-economic programs, and its comparison with socio-economic programs of South Africa.
Overview of the Socio-economic Programs
The socio-economic programs originated from the Small Business Act. Under the section 8(d) of the Small Business Act, the small businesses in the United States should have utmost opportunity to participate in the procurement system of the Federal Government that may include contracts and subcontracts (Kaye Nijaki & Worrel, 2012). The aim of the small business program is to encourage fair competition which is the main driver of economic prosperity of the United States. The economic prosperity of the country cannot be achieved unless small businesses are taken into account and developed. Contracting small firms ensures the economy grows and strengthens, levels the competition, encourages innovations, creates more jobs, and promotes good business practices. The Small Business Mobilization Act of 1947 acknowledges that small business could not compete with large firms for tenders at the Federal Government because they have disadvantaged economies of scale (Kaye Nijaki & Worrel, 2012). The Armed Services Procurement Act of 1947 recognized that fair proportion of all federal purchases and contracts be given to small business firms both in time of war and peace (Schwartz, 2010).
The major five socio-economic programs that have been defined to limit competitions on certain contracts to allow for small businesses such that small firms do not need to compete with the large firms for similar contracts as defined in the Small Business Act section 8(a) include (Kaye Nijaki & Worrel, 2012):
1. Women-owned small business program that is certified and is owned by at least 51% of one or more women and its daily operations are controlled by one or more women. The program also constitutes the small business firms that are owned by women and are economically disadvantaged. To qualify for the program the firm needs to have been registered and is officially identified as owned by women.
2. Hub-zone program which includes the companies that are located in areas considered economically disadvantaged. However, for a firm to qualify under the program it must be owned and controlled by US citizen and have at least 35% of its total workforce working in the hub-zone area.
3. Service Disabled Veteran program which targets the small businesses that are at least 51% owned and controlled by one or more service-disabled veteran and the daily operation of the businesses are owned by the veterans.
4. Basic Small business program which includes small businesses that are for profit, but is not dominant in the industry they operate.
5. Small Disadvantaged Business Program which includes the small business firms that are at least 51% owned by the socially and economically disadvantaged groups such as the Black Americans, Hispanic Americans, Asian Americans, Pacific Americans, and Indigenous Americans.
Under the Small Business Act, procurements over $3,500, but under $150,000 are by design set aside for small businesses, unless the contracting officer determines that there are no expectations of obtaining a viable offer from the small businesses (Kaye Nijaki & Worrel, 2012). In the nuclear, chemical, radiological defense, biological, and certain unforeseen operations the threshold for small businesses are between $20,000 and $300,000 (Kaye Nijaki & Worrel, 2012). The Federal Government procurement is guided by the socio-economic aspect in line with issues such as; buy American (empowering American firms), work wage and work hour’s requirements, usage of US facilities such as ships and airplanes, drug free workplace, safety in the workplace, protection of environment, and equal opportunity in employment (Kaye Nijaki & Worrel, 2012).
Challenges Associated with Socio-economic Programs
Despite the good intention of the socio-economic programs in the Federal Government, there are various challenges that have affected the programs. The major challenge associated with the socio-economic programs is the inability of the small businesses to meet the expectations of the procurement contracts (Lember, Kattel, & Kalvet, 2013). The government has done well to legislate on the socio-economic programs to favor the small business firms and ensure that they are not affected by the competition the large firms bring. However, the small businesses have not been reliable in delivering the expectations of the procurement contract. These are largely due to their low capacity, small personnel, or lack of proper expertise in the given field. Some also lack experience in dealing with the Federal Government Procurement leading to incompetence and lack of proper guidelines protocol. The second challenge is that the US is full of small businesses that meet the specification of the socio-economic programs (Walker & Brammer, 2012). Therefore, the Federal Government receives many procurement applications from several interest small businesses each with different socio-economic program specification generating immense competition. Such situation occurs when small business firms owned by different interest groups such as women-owned businesses, disabled veteran-owned businesses, and minority-owned business apply similar procurement tender. The contract officer will have to strictly use some factors to eliminate some firms and award the most deserving business a procurement contract. There is also an issue of political instability and challenges from other institutions which make some of the socioeconomic programs fail, especially in developing countries.
Comparison with South African Socio-economic Program
Socio-economic programs in South Africa are quite similar with that in the United States. As in the case of United States, the socio-economic programs are aimed at empowering the minority or disadvantaged groups. However, unlike the United States, South Africa does not have a specific focus on small businesses. South Africa also allows foreign companies to apply for government procurement contract as long as the company has an agent in South Africa that can apply the contract on its behalf. In the South African setting, the procurement process by the government must be in accordance with fairness, accountability, equitable, competitiveness, and cost-effectiveness (export.gov, 2017). The South African socio-economic program has put a lot of emphasis on broad-based black economic empowerment where the government and government agencies are required to give special preference to previously disadvantaged individuals which largely consist of blacks. The criteria of selecting black-owned firms include; black ownership, black management control, a percentage of the black employees, skill development initiatives, and many other factors as contained in the Broad-Based Black Economic Empowerment Act of 2003 (export.gov, 2017).
It is apparent that there exist numerous challenges in the endeavor to implement socio-economic programs in federal governments. The problems are more practical in implementing an equitable, just, and competitive government procurement system. States should, therefore, strive to implement the pillars of public procurement policy. Within the structure of a theoretical systematic approach, an analysis of appropriate literature as well as government purchasing exercises, predicaments experienced by the South African government is discussed in this research. Government purchasing progressively identified as a major idea that contributes a substantial function in the efficient management of government resources. Therefore, numerous nations have realized the significance of purchasing as a sphere vulnerable to maladministration and corruption and hence initiated endeavors to integrate purchasing in a technical position of government endeavors. With a view to embracing a sustained and technical approach to their purchasing and administration, numerous nations have resolved to turn their yearly purchasing arrangements into a potential solution.
Government purchasing fundamentally aims to be just, fair, perspicuous and profitable. Due to its significance, it may also be utilized at an auxiliary level as a solution to predicaments. Because of the massive challenges experienced in South Africa, particularly since the nation’s previous inequality, government purchasing is of specific importance and has been given an inherent status. Consequently, there are classifications of preference in the award of tenders and the protection of people or categories of people deprived by unjust discrimination.
Socioeconomic programs help agencies to curb competitions on some types of contracts for qualified organizations to ensure that some other firms especially the smaller ones do not necessarily have to with the larger firms for the same or such contracts. Socio-economic programs had done well in empowering the traditionally disadvantaged groups. In the normal setting, the small business or business firms owned by disadvantaged people stand no chance of securing a procurement contract. Therefore, despite all the challenges associated with the socio-economic programs with regard to federal government procurement, both the government of the United States and South Africa have done well in ensuring that the disadvantaged groups are accounted in the issuance of procurement contracts.
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