Alpha University College

College of Graduates Studies

Master of Business Administration Program

Challenges of Public Procurement in

Ethiopian Electric Power Corporation

By

Samson Worku Teshome

Submitted to: Temesgen Belayneh (PhD)

January, 2014
Addis Ababa
 Table of Contents
Topics Pages

1. Introduction 1

2. Statement of the Problem 3

3. Objectives of the Study 3

4. Review of Related Literature 5

5. Significance of the Study 6

6. Definition of Terms 6

7. Delimitation of the Study 7

8. Research Methodology 7

8.1 Research Approach 7

8.2 Sources of Data 7

8.3 Data Gathering Instruments 7

8.4 Sampling Techniques 8

8.5 Data Analysis Methods 8

8.6 Pilot Testing 8

8.7 Ethical Consideration 8

9. Organization of the Study 9

10. Time Schedule 9

11. Financial Plan 10

12. References 11
1. Introduction

Public procurement is a government function to purchase the goods and services needed to run

the government and provide government services. Because federal, state and local governments must

obtain goods and services public procurement is an important function of government. Public

procurement is at the center of the way public money is spent since budgets get translated into services

largely through the governments’ purchase of goods and services. In reality governments transfer taxes

and other resources into consumption by government institutions at federal, state and local levels

apparently for the public good.

Public procurement in Ethiopian context includes procurement activity done by different levels

of government from federal down to kebele administration level. Public procurement in Ethiopia

started with the introduction of modern government administration during Emperor Minelik II.

Nevertheless, the first form of rules and regulations of public procurement emerged during the reign of

Haile Selassie. The, second regulation of procurement was issued in the year 1981 during the Derg

regime. Recently, a third version of public procurement has been issued with the aim of separating the

power of public procurement between the Federal and the Regional States.

According to Procurement Regulation No. 1 1991 E.C issued by the Ministry of Finance, the

federal government agencies can make two types of purchases. These are purchases of services and

purchases of goods. Service purchases include construction works and consultancy services obtained

from machines and equipment. The purchase of goods includes the purchase of all movable properties

such as consumable items such as stationery, spare parts and fuels and non-consumable items such as

plants, machinery, equipment and vehicle.

There are five methods of procurement of goods and services used by public organizations in

Ethiopia. These are: Open tender, two stage tender requests for proposal, limited tender, request for

quotation and single supplier (negotiated procurement). Though government offices can use one of
these methods of procurement, they are especially encouraged to use the open bid method and a two

stage bidding method (for the purchase of services) unless there is sufficient ground to use other

methods.

The sources of financing for public procurement in Ethiopia are tax collected from the citizens,

aid and loans. To this effect, each year the government allocates budget to different government

agencies collected from the tax payers to enable them to cover their expenses. Different international

organizations, NGO and donor organizations assist the government when it undertakes projects with the

aim of alleviating different social and economic problems. The government also borrows money from

other governments and local and international banking institutions with the aim of financing major

projects.

Whatever sources a government agency may use for public procurement, it should comply with

the provisions and regulations of the government on matters related to purchases of goods or services.

To this end, any government agency is expected to give due attention to make economical purchase. A

public body has to ensure that it gets best product in return of the public money it spends. There should

be also non-discrimination and equal treatment of suppliers. The regulation also provides priority to

open bidding procedure to ensure transparency. The other issue is there is an increasing level of

accountability of procurement officer. Therefore, any procurement department or officer is responsible

and accountable for whatever procurement decision made and actions taken.

Therefore, the reason for conducting this research is to investigate the factors affecting the

public procurement function in a federal government institution named Ethiopia Electric Power

Corporation.

2. Statement of the Problem

The public sector represents about 40 to 45% of many economies in the developed world in

terms of procuring from private sector. In African countries it can be as 80 percent. A preliminary study
of the problem revealed that public procurement is characterized by long steps of bureaucratic

procedures, negligence behavior of the procurement committee members, fraud and corruption and

lack of incentives. Therefore, this research tries to identify the extent to which these and other factors

are affecting public procurement. Moreover, much of research on procurement focused on the private

sector. Therefore, this research undertaking will fill this gap too.

To this effect, the following research questions are formulated:

1. How the bureaucratic procurement procedures are affecting the procurement activity at EEPC?

2. Do the committee members have a feeling of negligence to their duties in the procurement

committees at EEPC?

3. To what extent the backdoor dealings are affecting the public procurement activity at EEPC?

4. Is there proper incentive to encourage committee members at EEPC?

3. Objectives of the Study

The overall aim of this study is to describe the factors affecting the public procurement activities

at Ethiopian Electric Power Corporation. The specific objectives of the study include:

1. Examine whether the long bureaucratic procedures of public procurement are affecting the

activity at EEPC.

2. Investigate whether there is a negligence behavior among the procurement committee members

at EEPC.

3. Explore whether there is a backdoor dealings at Ethiopia Electric Power Corporation.

4. Examine the presence of incentives that encourage the committee members to work in the

committees at EEPC.
4. Review of Related Literature

Public procurement refers to the government activity of procurement the goods and services

needed to perform its functions (Arrowsmith 2010:11). According to Gopalakrishanan (1990:272),

Procurement is the function of buying machinery, tools, general supplies, raw materials etc. required by

organization. (Nair 2004:117) Public procurement is buying for the public and in the public. Public

procurement according to Odhiamo and Kamau (2003:10) can be broadly defined as the procurement,

hiring or obtaining by any contractual means, goods, construction works and services by the public

sector.

Public procurement in this research is an activity in which government organizations acquire

goods and services from suppliers in the local and foreign markets, subject to general principles of

fairness, equitability, transparency, competitiveness and cost-effectiveness.

Historically, the main role of public procurement was to obtain goods and services for the

military. Procurement activities gradually expanded along with the roles of government and became a

core function of public administration (Schiavo-Campon and Hazel 2008:248-249).

Public procurement serves a wide variety of purposes. Uyarra and Flanagan (2009:2) states,

besides the fiduciary obligations to deliver goods and services to the constituents of the particular

government administration, public procurement addresses a wide range of objectives. Accordingly,

Bolton 2006:50 and Thai 2006:123) it has been used by governments to achieve socio economic

objectives such as stimulating economic activity, protecting national industries from foreign

competition, improving the competitiveness of certain industrial sectors and remedying national

disparities. Arrowsmith (2010:4) squabbles, the objectives of public procurement are achieved through

various means and legal and regulatory rules on conducting public procurement.
 According to Gopalakrishanan (2005:271) government buying involves buying the required

items at the optimum price, in accordance with all applicable laws, regulations, policies, procedures and

monitoring systems. Moreover, the procedures of public procurement are comprised of key principles

like competition, publicity, tendering and transparency to avoid malpractices. OECD (2007:18-19)

discusses these key factors as follows:

Competition means that the contracts are awarded by comparing offers from certain numbers

of contracts in order to establish which one can provide the most favorable terms for delivering the

government’s requirement. The publicity (the public notice) principle supplements the competition

principle since it ensures that contractors find out about the contracts and propose their services or

goods. Public procurement can take through different types of tendering. The main types of formal

competition for tenders are: (1) open (or limited) procurement (2) selective procurement (restricted to

pre-selected categories of supplies invited to bid and (3) limited (a negotiated procurement including

individual, sole-source, or direct tendering. The concept of transparency refers to the idea that

procurement procedures should be characterized by clear rules and by means to verify that those rules

were followed.

Besides, Dobler and Burt (2001:767) state to varying degrees, governmental purchasing

departments are far more open than industrial purchasing offices to scrutiny and criticism by the

general public, the media, suppliers and others.

5. Significance of the Study

The contributions of this research undertaking are the following:

1. The research undertaking will pinpoint that the long bureaucratic public procurement procedure is

highly affecting the activity.

2. The other contribution is that it will help in assessing the opinions of the employees about the

negligent behavior of public procurement committee members.

3. This investigation will also disclose the backdoor dealings are affecting the public procurement

activity at EEPC.

4. This study will also show proper incentives encourage committee members to work efficiently and

effectively at EEPC.

5. This study will also add to the pool of research knowledge available on public procurement.

6. Last but not the least, this research undertaking will be used as a spring board for further an in

depth study.

6. Definition of Terms

The following definitions are provided to ensure uniformity and understanding of these terms

throughout the study.

Public: refers to the level of government from federal down to kebele administration.

Procurement: refers to the acquisition of goods and services with the exchange of money.

Public Procurement: refers to procurement activity done by the different government bodies.

7. Delimitation of the Study

To make the study manageable this study is delimited to at Ethiopian Electric Power

Corporation.

8. Research Methodology

8.1 Research Approach

The research approach for this study will be mixed research approach. This approach is used for
the reason that the use of this approach helps to take advantage of the strengths of each approach and
counterbalance their different weaknesses. It could also provide more comprehensive answer to the
research questions going beyond the limitations of a single approach. Moreover, the use of mixed
research helps to unearth the problem under investigation. The type of research method to be used will
be descriptive Survey. Descriptive survey is used in this research because this research is concerned
with the prevailing practices of public procurement, the attitudes held by the parties in the public
procurement and the processes that are going on in public procurement

8.2 Sources of Data

The sources of data will be employees, procurement committee members, and administrators

of the organization.

8.3 Data Gathering Instruments

The data gathering instruments will be questionnaire and focused group discussion. To this end,

two types of questionnaires will be prepared for the employee respondents and administrator

respondents. In the questionnaire, both open ended and close ended questions will be prepared. The

focused group discussion will be held with the purchase committee members.

8.4 Sampling Techniques

The population of this study is the public employees at Ethiopian Electric Power Corporation.

The total number of the population is 12,172 of which 10,168 are male and 2004 are female. To reach

on a representative sample simple random sampling method will be used.

8.5 Data Analysis Methods

For systematic searching and arrangement of the gathered data through different instruments,
presentation of the data will be made in tabular form for the quantitative data. Also statistical
treatment of data such as frequency counts, percentages, means and standard deviations will be made.
The use of SPSS will be made to these effects. Thus, the quantitative data will be analyzed by SPSS 20.0
software program. Qualitative data analysis will be used for the data to be obtained from the interview
and close-ended question on the questionnaire. Also qualitative analysis of data will be used in which
describing, summarizing and looking for the relationships between various themes that have emerged
through the analysis process.

8.6 Pilot Testing

Pilot testing of the questionnaires will be made on a small scale to refine the data gathering
instruments. To this end, subjects similar to those who will be in the study sample that comprised of
employees, committee members and administrator at Ethiopian Electric Power Corporation will
serve as subjects for the pilot testing. The result of pilot testing will be used to revise and adjust the
instrument before distributing it to the actual sample.

8.7 Ethical Consideration

In order to abide by the ethical principles of research undertaking, first the researcher has

tried to have informed consent; respondents must agree to participate in the research undertaking.

Second is confidentiality because respondents are sharing information. Moreover, honesty and

truthfulness in presenting the data also considered.

9. Organization of the Study

This research undertaking will be organized into five chapters. These include: Chapter one:

Introduction. It will be consisted of background of the study, purpose of the study, statement of the

Problem, significance of the study, definition of terms, delimitation of the Study and organization of the

Study. Chapter Two will be review of the related literature.

Chapter Three: Research Methodology. This chapter will include: Research approach, sources of

data, data gathering instruments, sampling techniques, data analysis methods, pilot testing and ethical

considerations.

Chapter Four: Data Analysis and Interpretation.

Chapter Five: Summary of Findings, Conclusions and Recommendation.

10. Time Schedule

For effective planning and control of this research project the following gant chart will be used.

Task Semester I Semester II

(October -January 2013) (February-May 2013)

Months Months

1 2 3 4 5 6 7 8

Submission of Research Title

Submission of Research Proposal, defending

and Incorporations of Comments

Review Literature

Developing Questionnaire

Pilot Test

Distribution of instruments and Data

Collection

Data Entry and Analyzing

Report Writing, submitting to the department

and defending

11. Financial Plan

For effective implementation of this research undertaking the following resources will be

required.
 ITEMS COSTS

Stationery (10 reams X 110 Birr) 1,110

Secretarial Service (150 Pages X3 Copies X 5 Birr) 2,250

Transportation 2,000

Research Assistants-Data Collectors (5 persons X 70 Birr X 15 days) 5,250

Sub-total 10,610

Contingency (10%) 1061

Total 11671
References

Arrowsmith, S (2010). Public Procurement: Basic Concepts and the Coverage of Procurement Rules.

London: EU Asia Interuniversity Network.

Bolton, P. (2006). Government Procurement as a Policy Tool in South Africa. Journal of Public

Procurement 6(3), 193-217.

Dobler, D. W. and Burt, D. N. (2001). Purchasing and Supply Management: Text and Cases. 6th ed. New

Delhi: Tata McGraw-Hill Company.

Gopalakrishnan, P. (1990). Procurement and Materials Management. New Delhi: Tata McGraw Hill

Publishing Company Ltd.

______________ (2005). Handbook of Materials Management. New Delhi: Prentice-Hall of India.

Nair, N. K. (2004) Procurement and materials management. 2nd Revised Ed. New Delhi: Vikas Publishing

House PVT Ltd.

Odhiamo, W and Kamu, P. (2003). Public Procurement: Lessons from Kenya, Tanzania and Uganda.

Paris: OCED.

OECD (2007). Bribery in Public Procurement Methods, Actors and Counter-Measures. Danvers: OECD

Publishing.

Shiavo-Campo and Hazel, M. (2008). Public Management in Global Perspective. New York: M. E. Sharpe

Inc.

Thai, K.V. (2006). Advancing Public Procurement: Practices, innovation and Knowledge Sharing. Journal

of Public Procurement, Volume 1, Issue 1, 9-50.

Uyarra, E and Flanagan, K. (2009). Understanding the Innovation Impacts of Public Procurement.

Available at: http://www.mbs.ac.UK/research/workingpapers/ (accessed in 9 January 2014).