Tag Archives: Ministry of Finance and Economic Development

Ethiopian Public Procurement Law applicable only to the private sector


“this Proclamation does not apply to contracts a public body enters into with another public body for the provision of goods, works, consultancy or other services at cost.”

The Ethiopian Federal Government Procurement and Property administration Proclamation No.649/2009 Article 3(2) (b)

In developing countries like Ethiopia, the provision of services to the citizen is one of the central functions of government. To fully realize it’s in providing services which meet the standard of the best quality, but at the same time with the minimum cost, the government in Ethiopia, uses the best mechanisms available, which may generally be categorized in to two. First, in areas where the private sector is considered to be at an infant stage, the government directly involves itself in the management and operation of the provision of services. The provision of electricity, telecommunication and water for instance, is under the exclusive control of government. Second, in areas which do not require direct involvement of the government, the provision of public services will be realized by involving the private sector for carrying out works and providing goods and services. Even in the second case, the government is not totally out of the picture. Public enterprises and other government business organizations equally participate in this process. Similarly, the direct provision of services by the government, to some extent allows the participation of the private sector. To a certain degree, the private sector plays a role in carrying out public works and providing goods and services in areas under the exclusive control of the government

Irrespective of the role played and the level of participation of the government or the private sector, the provision of the best quality of services with a minimum cost, requires an efficient and effective system of public procurement. “Public procurement is a central instrument to ensure an efficient management of public resources. Promoting good governance in public acquisition system aims at providing best value to its citizens through processes that are transparent and results-oriented”

Irrespective of variations in the existing political, economic and legal environment peculiar to a specific country, an efficient and effective system of public procurement is ultimately built upon four basic pillars: procurement laws and regulations, procurement workforce, procurement process and methods, and procurement organizational structure. Ideally, procurement laws and regulations should be clear, consistent, comprehensive, and flexible. (Khi V. Thai, procurement: concepts and practices, in International handbook of public procurement ed. Khi V. Thai p6-9)

Generally speaking, the regulatory framework of public procurement as tool in the formulation and implementation of an effective and efficient system of public procurement should be guide by some internationally accepted basic principles. These principles are: transparency, accountability, objectivity, fairness and non-discrimination.

The principle of transparency helps to attract a greater number of participation, thereby encouraging competitiveness. It also makes the whole procurement process open and fair, thus avoiding the possibility of favoritism and discrimination. Transparency also makes it easy for procuring entities and officials to be accountable. Most importantly, it is an effective tool to curb corruption.

The Ethiopian procurement law is still at an infant stage. In recent years, the Federal government has taken measures to revise the existing law, so as to make it responsive to the growth and expansion of the quantity and quality of provision of public services. Each year, a significant portion of public money is allocated as a result of  award of contracts for the construction of public works, supply of goods and provision of services.

Until 2005, there was no comprehensive procurement law at a national level. There were only few articles in the civil code regulating the procurement procedure. In 2005, the Federal government enacted a law providing a detailed procedure of Public Procurement (providing the procedures of Public Procurement and establishing its Supervisory Agency Proclamation No. 430/2005.) This law also establishes a federal agency empowered with regulating the procurement of works, goods  and services by Federal agencies. Another significant change introduced by this law was that it tried to embrace the basic principles of transparency, accountability, fairness and non-discrimination as its guiding principles.

After four years of the issuance of this law, it was revised and replaced by a new law (The Ethiopian Federal Government Procurement and Property administration Proclamation No.649/2009.) This second proclamation comes with more detailed and clear procedures. It has also widened its scope by providing for the regulation of public property, which was not dealt by the previous proclamation.

In addition to the legislative reforms taken by the legislative organ, the issuance of secondary legislation by the executive organ is also another significant development in the process of creating an efficient and effective legal framework. As a supplement to proclamation no. 649/2009, the Ministry of Finance and Economic Development issued a Federal Procurement Directive in June 2010. A month later, in July 2010, the Council of Ministers issued a regulation providing for public procurement and property disposal services establishment (regulation no. 181/2010)

Since procurement is not an exclusively federal matter, some regional states (e.g. Amhara regional state) including the Addis Ababa and Dire Dawa administrations have followed the footsteps of the federal government in devising their own procurement laws.

So far so good!

From the above brief assessment, you see only the positive side of Ethiopian procurement law. Yes it is true; efforts have been made to make the law clear, comprehensive and flexible. It is also true that the current law embraces basic principles of public procurement. But, it seems,  something big, something fundamental went wrong!

Just look into the scope of this law. According to article 3 of The Ethiopian Federal Government Procurement and Property administration Proclamation No.649/2009, the law is exclusively a federal law and its applicability is limited to Federal Government procurement and property administration. By way of exception article 3(2) (a) excludes procurement affecting national security or national defence. This is acceptable taking in to consideration the sensitive nature of such type of procurement and similar form of exclusions also exist in most jurisdictions. The exclusion also is not absolute because the type of procurement procedure is still to be decided by the Ministry of Finance and Economic development through consultation with relevant authorities.

Then comes article 3(2) (b). This article reads: “this Proclamation does not apply to contracts a public body enters into with another public body for the provision of goods, works, consultancy or other services at cost.” According to article 2 of sub article 6 of the proclamation, Public Body means any public body, which is partly or wholly financed by the Federal Government budget, higher education institutions and public institutions of like nature. So, public bodies are not subject to procurement procedures if they intend to participate in the provision of goods, works, consultancy or other services at cost. They will simply get awarded of a contract without competing with the private sector.  In effect, they will get preferential treatment. Doesn’t this then destroy the principle of fairness and non-discrimination? What is worse, no alternative procedure which ensures transparency and accountability, is devised for  contract of public works, goods and services if it is between two public bodies.

As a result, the procurement proclamation which professes to be rooted in the basic principles of transparency, accountability, fairness and non-discrimination, almost destroys itself by including such ‘suicidal provision.’ Remember, the government widely participates in every activity of undertakings related to carrying out public works, supply of goods and provision of services. When a public body gets a preferential treatment, it surely will not be competitive. This makes achieving the basic objectives of the procurement proclamation unattainable. The ultimate objective of any procurement legislation is the provision of the best quality of service with a minimum cost or to use the statement in the preamble of the proclamation, it is “the utilization of the large sum of public money spent on procurement in a manner that ensures greater economy and efficiency.” In the absence of competition, this is doomed to fail.

The proclamation seems to advance competition, but, as article 3(2)(b) of the proclamation has made it clear, public bodies are an exception to competition. Not only that, they are an exception to the principle of transparency, accountability, fairness and non-discrimination.

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