CHAPTER ONE

INTRODUCTION
1.1 Background of the study
Given the impact of procurement activities on the operation and effectiveness of NGOs in
Kenya, it is essential that these activities be performed by qualified staff with high professional
and ethical standards and using sound procedures anchored in appropriate policies and
regulations. This study will investigate how aid effectiveness can be increased by improving the
efficiency of procurement processes in NGOs in Kenya, taking a case of the AMREF Kenya.

According to the United Nations, (2011), procurement is a key function of any organization,
public or private and in an era of globalization with the advent of entrepreneurial organizations,
management of purchasing and supply in private as well as public sector has gained prominence.
All procurement regardless of their value or complexity follow a standard sequence of actions,
which need to be effectively managed to realize the objectives of the procurement function
(Thai, 2011).Effective management of the function prevents the possibility of poor performance
and when attributed to non-adherence to proper procurement processes and procedures; is an
indicator of poor management of the procurement function (Tella& Savedoff, 2011).

An efficient and timely procurement procedure is a key element in reaching policy impact goals
in any sector managed by a public administration. In a market economy, competition is widely
viewed as a way to promote the most optimal balance between economy (frugality) and quality.
In a democracy, fair competition and access to markets are linked to human rights and good
governance.

However, the public’s desire for timely and efficient action by public administration on one
hand, and the principles of good governance (e.g. transparency, equal opportunities, fair
competition, rule of law, etc.) on the other, is often presented as key tensions in the public
procurement policy process. Such tensions and the necessity to, satisfy a wide spectrum of
stakeholders have made public procurement a fast evolving and continuously changing process,
and one that is being framed through a variety of policies. The importance of public
organizations as an entity designed to serve the public, along with the imperative for public
accountability, makes studying the problems associated with the public sector essential
(Tella&Savedoff, 2011).

Unlike in government organizations where there are clear rules and regulations on how goods
and services are purchased, many procurement activities in non-governmental organizations
(NGOs) suffer from neglect, lack of direction, poor co-ordination, lack of open competition and
transparency, and most importantly not having well established rules that are known to the
suppliers. In some NGOs, they lack adequate trained staffs that are competent to conduct and
manage such procurements in a professional, timely and cost effective manner. This has raised
questions of accountability from the public and various public institutions such as the National
Assembly in the recent past(Walsh, 2010). Given that procurement systems are central to the
effectiveness of development expenditure; where budgets get translated into services through
purchase of goods and services, it is important to find ways in which procurement processes can
be made more efficient, hence the need for research studies.
According to the AMREF’s (2007) report, three doctors namely Michael Wood, Archibald
McIndoeand Tom Rees founded AMREF in 1957 in Kenya. According to AMREF’s (2012)
annual report, African Medical & Research Foundation (AMREF) is Africa’s oldest and largest
international health development NGO. AMREF has 150 health projects in communities across
Africa (South Africa, Uganda, Tanzania, Ethiopia, South Sudan, and West Africa) and is a
preferred partner for the World Health Organization (WHO) and national Ministries of Health.
The other AMREF national offices in the north mainly fundraise for the programme in Africa
and AMREF’s headquarter is situated at Langata road, near Wilson Airport in Nairobi. The
AMREF’s seven strategic directions as per AMREF’s 2012 annual reports are as follows:
Maternal Health, Child Health, Fighting Diseases, Water and Sanitation, Clinical and Diagnostic
Services, Research and Advocacy, One AMREF.
According to AMREF’s (2014) annual report, the AMREF Kenya Country Office is currently
implementing 48 projects with activities under five thematic areas: HIV/AIDS, TB and Malaria
(7 projects); APHIA plus IMARISHA; Water, Sanitation and Hygiene (17 projects); Child and
Reproductive Health (16 projects); Clinical and Diagnostics Programme (4 projects); and
Research, Advocacy and Business Development (3 projects).
According to the 2018 board approved budget, the Kenya Country Program current funded
budget FY 2018/2019 is US$ is US$ 36.9 million across Kenya’s 47 Counties. The Kenya
Country Programme continues to closely monitor performance of every project by looking at the
monthly financial, programmatic and Quality of Service performance. Finance department,
which is a service department in AMREF Kenya, is the custodian of donor budgets and its key
roles include: Budget monitoring and tracking, timely reporting – both internal reporting for
management and external reporting to the donors, timely payment of suppliers and imprests,
provision of good customer care to internal and external staff.

1.2 Problem Statement

Procurement efficiency is the pre-condition for supply chain effectiveness in any organization
(Beamon, 2009). According to Blackhurst, Cantor and O’Donnel (2012), procurement efficiency
is calibrated by evaluating the supplies turn-around time, seamlessness in the supplies vis-a-vis
the requisitions, effectiveness of supplies contract execution and the level of adherence to
bilateral service level agreements (SLAs) (Bowersox, Closs, Cooper &Bowersox, 2013).
Bowersoxet al (2013) state that these measures fall below par for Non-Governmental
Organizations (NGOs) in many countries in Africa. The NGO’s procurement processes are slow
and there are concerns about recurrent wrong specifications and hitches in supplier contract
implementation cycle (Burt, Petcavage& Pinkerton, 2010).

Cavalcante (2013) states that there are instances where the level of technology in the NGO’s is
way ahead of the supplier technology estate and this creates supply chain engagement
bottlenecks. The challenges impeding the procurement efficiency and effectiveness in NGOs are
happening despite the deployment of technology and the automation of a large number of supply
chain systems (Wu, Blackhurst& Chidambaram, 2006).According to a Globe Scan poll of
experts, the leading role in achieving sustainability will be played by business (35%), followed
by NGOs (30%), and governments (24%) (Bell, 2003).

From empirical review of studies on procurement, procurement capacity development efforts

have focused on improving procurement techniques; the means of achieving the acquisition of
goods and services, with less emphasis on integrating this work into broader development or
reform activities in the public sector. This approach fails to address factors within the NGO
sector environment that are critical to successful, efficient, and sustainable procurement
practices. These factors include strong supportive policies, legislation, and public financial-
management practices, (OECD, 2010). At AMREF Kenya, there have been witnessed some
hitches on supplier payment modes and non-flawless tender administration in general. This is a
symptom of gaps in the procurement cycle. Given that procurement is at the very heart of the
service delivery charters of NGOs in Kenya and AMREF in particular, it is vital that a study is
conducted to establish the root causes and prescribe remedies for the highlighted procurement

1.3 General Objective of the Study

The broad objective of this study was to assess factors that determine effectiveness of
procurement processes in NGOs, taking a case of AMREF in Kenya.

1.4Specific Objectives
The broad objective of the research was simplified into the following specific objectives:
i. To establish the effect of information technology adoption on the effectiveness of
procurement performance at AMREF Kenya.
ii. To determine the effect of staff awareness of procurement policies on effectiveness of
procurement performance at AMREF Kenya.
iii. To establish the effect of internal control systems on the effectiveness of procurement
performance at AMREF Kenya.
iv. To determine the sustainability of procurement practices on the effectiveness of
procurement performance at AMREF Kenya
1.5 Research questions
I) How to establish the effect of information technology adoption on the
effectiveness of procurement performance at AMREF Kenya?
II) How to determine the effect of staff awareness of procurement policies on
effectiveness of procurement performance at AMREF Kenya?
III) How to establish the effect of internal control systems on the effectiveness of
procurement performance at AMREF Kenya?
 IV) How to determine the sustainability of procurement practices on the effectiveness
of procurement performance at AMREF Kenya?

1.6 The Significance of the Study

The importance of an NGO as an entity is designed to serve the public, along with the imperative
for public accountability, makes studying the problems associated with the public sector
essential. This research is of benefit to a wide array of stakeholders:

1.6.1 Non-Governmental Organizations

The intention of this study is to come up with findings and recommendations that can help
NGOs, including AMREF, in Kenya to strengthen their procurement systems.

1.6.2 Donors
The NGOs obtain their financial resources through donor funding. Since effective procurement
can make aid more effective to eradicate poverty and promote sustainable; this study will be of
importance to donors in formulating policies on how procurement of project material and other
resources should be effectively procured.
1.6.3 Public Sector Policy Makers
Policy makers may use the findings of this research as a guide to on how well they can formulate
polices such as providing good leadership of procurement for the organization, sourcing
management, ownership and accountability for sourcing processes, communication of purpose,
process and pay off, collaboration and partnering, and teamwork.

1.6.4 The Kenyan Government

The government planners, will gain an understanding of the factors affecting maximum use of
donor aid through effective procurement management, and will therefore undertake a policy
review and formulate policies that address the findings of the research. This will enhance the
chances of not only meeting the Millennium

1.6.5 Other Scholars

This research generates both empirical data and theoretical information that can be of use by
supply chain scholars. The study will make recommendations for areas requiring further research
and hence provides opportunities for other scholars to further expand knowledge on the
procurement domain.
The researcher hopes that the report from this study may be useful to future scholars who may be
interested in doing further research in the field of procurement and management.

1.7 The Scope of the Study and Expected Limitations

The study involved all staff members in the procuring department, the heads of other
departments and field supervisors working for AMREF. The sampling frame included the list of
all the field supervisors and department heads.
It is worth noting that a study of this size and sensitivity cannot be possible without limitations.
To start with, there are many field supervisors and heads of departments at AMREF whose
offices are located in different parts of the country with their headquarters in Nairobi. Taking a
census proved hard; to overcome this obstacle, a representative sample was taken to represent the
population without compromising the precision desired for this study.
1.8 Definition of terms
Procurement: the act of obtaining or buying goods and services. The process includes
preparation of a demand as well as the end receipt and approval payment. It often involves
purchase planning, standard determination, specifications development, supplier research and
selection, value analysis, financing price negotiation, making the purchase, supply contract
administration, inventory control and disposals (Mayson et al, 2007).

Monitoring: It is the process of supervising activities in progress to ensure they are on-course
and on-schedule in meeting the objectives and performance targets. Monitoring means regularly
collecting information on your project and analysing it to see how things are going. (Madina,
2010)

Performance: The accomplishment of a given task measured against pre-set known standards of
accuracy, completeness, cost, and speed. It is the objective of that process to provide an
integrated control system, where the corporate and functional strategies are deployed to all
business processes, activities, tasks and personnel, and feedback is obtained through the
performance measurement system to enable appropriate management decisions (Bailey et al,
2006).

Resource Allocation:it is a plan for using available resources, for example human resources,
especially in the near term, to achieve goals for the future. It is the process of allocating scarce
resources among the various projects or business units (Samwel, 2007)

Supply Chain: A supply chain is a system of organizations, people, activities, information, and
resources involved in moving a product or service from supplier to customer. Supply chain
activities transform natural resources, raw materials, and components into a finished product that
is delivered to the end customer Davis Sramek, B (2009).

Supply Chain Management: Traditionally Supply chain management is the management of

flow of goods. It includes the movement and storage of raw materials, work-in-process
inventory, and finished goods from point of origin to point of consumption. This has further been
defined as the integration of key business processes across the supply chain for the purpose of
creating value for customers and stakeholders (Lambert, 2008).