A district somewhere in Uganda needs five laptop computers to facilitate its staff.
It places an advert and a small and medium enterprise applies and gets the contract. The total value of the contract is about Shs 15m. The computers come with a one- year warranty and free service for the same period.
The SME is happy. It will make a small profit once paid, keep its doors open and a few people in the community employed. The SME hopes that this procurement will enable it grow its reputation and be able to provide similar services for the neighboring districts.
However, the government is telling the SME to wait a minute. Apparently, this process of each entity procuring for its goods and services is cumbersome and expensive. Why not do consolidated procurement? What does that even mean?
If a government entity needs something, it informs another entity that places the order on its behalf. If each of 100 government agencies, for example, needs five laptops, the government will order for all the 500 units at once.
Obviously, this is a large procurement by Ugandan standards, which will require a few things in place if it is to go through. Experience in supplying such a big number. A huge bank guarantee and most importantly the capital to supply and wait for forever for payment.
Contracts with manufacturers or similar requirements and such other stuff may also be required. The SME that supplied the other district reads the advert in the newspaper and bookmarks it. They return to it several times. They try to look for the requirements.
The biggest number of laptops they have ever supplied is about 30, but not in a single procurement. Will the bank issue the guarantee? What about the resources required to put the bid together?
They think through all these things and eventually decide that this is beyond them. They forget about the procurement and concentrate on selling flash discs, power banks and other accessories to the community.
They know they will never supply government again. Next time, government may need 5,000 laptop computers. The SME will now remain eternally small without the ability to grow and compete.
This is the likely situation the new government procurement policy is likely to create when they start implementing centralized and consolidated procurements. It will only favour the big boys who have the experience and resources to put together and execute a large procurement contract.
The Ugandan SMEs, which are the backbone of the economy will never be able to compete. We are seeing this already with many sectors. Look at the road sector for example. Many Ugandan construction and engineering companies can’t compete with the Chinese. If they are lucky, they are only doing supervision or removing water and electricity lines.
Or they have decided to concentrate on gravel road projects the foreign ones aren’t interested in. Will it be cheaper as the government says to carry out consolidated procurements? Perhaps not.
They will have to hire people to do this work or perhaps even set up an “authority” with a board and CEO and all sorts of staff. Then they will have to become a logistics business to ensure delivery of what each agency wants countrywide. Most likely, it will require more time to complete a procurement than it currently takes.
And even more time to deliver. If one district say in Karamoja wanted five laptops or car tires, it will become more expensive to deliver them there than if the goods had been procured locally by the district itself.
The SME based in Moroto or Kotido will have them in their store unlike when a Kampala based supplier is hired. They will also have staff based in the region to provide service and troubleshooting during the warranty period.
A large supplier will charge a premium for this and there will be significant delays. And given the size of the procurement, the successful bidder is most likely going to be based in Kampala. How will the businesses out of Kampala grow if they can’t even supply consumables like stationery and toilet paper?
I think agencies should be allowed to procure stuff locally to a certain extent and centralized consolidated procurement should be of certain amount.
If, for example, the goods and services required exceed a billion shillings, then they could be procured centrally. That way, SMEs, especially in the countryside, wouldn’t be locked out of the lucrative government procurements.
djjuuko@gmail.com
The writer is a communication and visibility consultant.