ALPHA UNIVERSITY COLLEGE

DEPARTMENT OF BUSINESS ADMINSTRATION

Practices and Challenges of Centralized Procurement:The case of

Addis Ababa Public Procurement and Property Disposal Agency

A Thesis Proposal submitted to the Alpha University College in

Partial Fulfillment for The Master of Art in Business Administration

BY; Ashenafi Lemma MBA/D2/17/038/2013

Advisor: Daniel mulugeta (PhD)

September, 2022 G.C

Addis Ababa, Ethiopia

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Contents
CHAPTER ONE: INTRODUCTION.......................................................................................................................1

1.1 Background of the Study........................................................................................................................1

1.2 Statement of the Problem......................................................................................................................3

1.3. Research Question.................................................................................................................................4

1.4 Objective of the Study............................................................................................................................4

1.4.1 General Objective of the Study........................................................................................................4

1.4.2 Specific Objective of the Research...................................................................................................4

1.5 Scope of the Study..................................................................................................................................5

1.6 Significance of the Study........................................................................................................................5

1.7 Organization of the Study.......................................................................................................................5

CHAPTER TWO: REVIEW OF RELATED LITERATURE..........................................................................................6

2.1 Theoretical Review.................................................................................................................................6

2.1.1 Definition of Public Procurement....................................................................................................6

2.1.2Principles of public Procurement......................................................................................................7

2.1.3 Public Procurement process............................................................................................................8

2.1.4 Public Procurement Planning..........................................................................................................9

2.1.5 Framework Agreement in Public Procurement.............................................................................11

2.2 Empirical Review..................................................................................................................................12

2.2.1 Centralized procurement in International Experience...................................................................12

2.2.2 Centralized procurement in African Experience............................................................................14

2.1.3 Centralized Procurement in Ethiopia Experience..........................................................................14

2.1.4 Major Challenges in public Procurement......................................................................................15

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 2.3 Conceptual Framework........................................................................................................................17

CHAPTER THREE: RESEARCH METHODOLOGY................................................................................................18

3.1. Research Design..................................................................................................................................18

3.2. Research Approach..............................................................................................................................18

3.3. Sample Design.....................................................................................................................................18

3.3.1. Target population.........................................................................................................................18

3.3.2. Sampling Frame............................................................................................................................19

3.3.3. Sampling Unit...............................................................................................................................19

3.3.4. Sampling Technique.....................................................................................................................19

3.3.5. Sample Size...................................................................................................................................20

3.4. Sources of Data....................................................................................................................................21

3.5. Data collection method and instrument..............................................................................................21

3.6. Data analysis and presentation...........................................................................................................22

3.7. Validity and Reliability Test..................................................................................................................22

3.7.1. Validity..........................................................................................................................................22

3.7.2 Reliability.......................................................................................................................................22

Table 3.3: logical framework................................................................................................................26

4. Work Plan/Schedule....................................................................................................................................1

Table 4.1 Activities plan.............................................................................................................................1

Table 4.2 Financial Budget Plan time.......................................................................................................1

REFERENCES.....................................................................................................................................................2

APPENDIX.........................................................................................................................................................8

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CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Public procurement is a key tool to promote objectives of an economic, environmental and social
nature, gaining much attention globally over the past decades. In developing countries, it is one of
the main instruments to the achievement of development goals such as reducing poverty and
providing health, infrastructure, education and other services hence immensely contribute to best,
and each country’s public procurement practitioners face different types of challenges, or the same
types of challenges but at different levels from their counterparts in other countries utilization of
public resources (Mlinga, 2019).
According to OECD (2017) public procurements is faced by major challenges of lack of sufficient
demand assessment, inadequate procurement planning, unrealistic budgeting that ensue budget
deficiency, insufficient use of open competitive tendering and absence of monitoring and
evaluation. Thus, in order for public procurement practices to be effective & efficient these
challenges have to be properly addressed so that economic development objectives set out by
policy makers will be achieved in due time.
Public procurement is increasingly recognized as a profession that plays a key role in the
successful management of public resources, and a number of countries have become increasingly
aware of the significance of procurement as an area vulnerable to mismanagement and corruption
and have thus made an effort to integrate procurement into a more strategic view of government
efforts. As part of the efforts to adopt a long term and strategic view of their procurement needs
and management, most countries have resorted to using their annual procurement plans as a
possible problem solver (Mahmood, 2020: 103).
Many procurement activities still suffer from neglect, lack of proper direction, poor co-ordination,
slow with a lot of bureaucracy, lack of open competition and transparency, differing levels of
corruption and not having a cadre of trained and qualified procurement specialists who are
competent to conduct and manage the procurement process in a professional, timely and cost
effective manner (Mburu & Njeru 2014).Thai, et al. (2015) “provide that public procurement
practitioners have and will always face many challenges. Each country has its own economic,
social, cultural and political environment.”

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To apply centralized procurement method government as establish federal public procurement and
property disposal agency, city administration and regional government has also establish their own
institutions to procure common goods and services and national strategic significance goods.
Purchasing centralization is fuelled by drive to reduce costs and increase purchasing process
efficiently. Advantages of centralized procurement are said to be for example economies of scale
(e.g. lower prices through pooled volume ) standardization of purchased products and material,
better purchasing policy deployment throughout the organization better financial control and
common information and communications technology and system (Cousins, et.al., 2018).
Centralization procurement offers advantages such as leverage due to volumes, reduction of
duplication of purchasing effort, better control and development of specialized expertise of
purchasing personnel (Handfield, et al., 2011: 160–61). On the other hand, decentralization often
leads to better responsiveness to purchasing needs, a better understanding of unique local needs,
and is closer to suppliers and taking ownership of decisions that impact on one’s own budget
(Handfield, et al,. 2011: 162). However, if the advantages of centralization procurement are to be
realized, efficient contract management and supplier relationship management is a pre-condition.
To assure the intended objective public procurement activity in Addis Ababa city government
established the procurement agency. In accordance to the Addis Ababa City Government Public
Procurement and Property administration proclamation the Addis Ababa City Government Public
Procurement and Property Disposal Agency (AAPPPDA) was established by the Addis Ababa city
government regulation No. 55/2013 with the following objectives: first, To enable the timely
supply of goods and services, which are commonly used by public bodies as well as goods and
services that have national strategic significance in the desired quality and at prices attributable to
economies of scale resulting from bulk purchases; second enable speedy disposal by sale of
properties of public bodies at fair prices, Thread assist public enterprises in the procurement of
goods and services and disposal of assets. However, problem participating of local suppliers,
problem of foreign currency, problem of efficiency, accountability on the purchasing process,
complaints over delay of supply from supplier side are perceived to be the weakness of the system.
In this study, the researcher has tried to come up with ideas and create dialogue on the
government’s centralized public procurement practices. It also tried to assess the challenge that
faces the centralized public procurement system.

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1.2 Statement of the Problem
The key function of procurement is to expand the organization’s productivity and profitability by
maximizing the cost savings, or in another way, minimize the purchasing costs (Baily,et al.,
1998,). In other words, all the costs which generated from procurement activity directly influence
the bottom-line of business financial performance (Iloranta, et al., 2012). However, the cost factor
is not the only consideration for the success of procurement function. Other considerations such as
quality and delivery also contribute to the successful procurement (Weele, 2014).

To apply centralized procurement method government as establish federal public procurement and
property disposal agency, city administration and regional government has also establish their own
institutions to procure common goods and services and national strategic significance goods.
Purchasing centralization is fuelled by drive to reduce costs and increase purchasing process
efficiently. Advantages of centralized procurement are said to be for example economies of scale
(e.g. lower prices through pooled volume ) standardization of purchased products and material,
better purchasing policy deployment throughout the organization better financial control and
common information and communications technology and system (Cousins, et.al., 2018).
In Addis Ababa City administration, Public Procurement and Property Disposal Agency
(AAPPPDA), was established by the Addis Ababa City Government Regulation No. 55/2013 dated
August 16/2013 to carried out the central procurement in order to enable the timely supply of
goods and services which are commonly used by public bodies as well as goods and services
which have national strategic significance, in the desired quality and at reasonable price
attributable to economies of scale resulting from bulk purchases Having city-wide significance and
supplies for which a demand is shown by more than one public body and it is found necessary to
utilize the high amount of public money allocated for procurement in a manner that ensures saving
and effectiveness. However, the process of centralized procurement carried out by AAPPPDA
has risen complain frequently by user public organization especially on quality and time of
delivery. As a result of this it has been becoming serious obstacle to deliver service on city
administration public organization. These observed problems initiated to investigate the process
and identify real challenges faced on centralized procurement in AAPPPDA.

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In addition, The APPPDA 2019/2020 annual report shows that there are problems faced in the
agency like late submission of procurement need and lack of procurement plan, insufficient
staffing of procurement unit in terms of number and skill, inefficient contract management and
monitoring; and shortage of foreign currency are problems that challenge the centralized
procurement process to deliver good and service at right time and right quality.
However, as to the researcher knowledge, no study had been done in AAPPPDA to examine
challenges faced on implementation of centralized procurement. Therefore, this study will focus on
to fill this study gap and identify the major challenges of centralized procurement at Addis Ababa
Public Procurement and Property Disposal Agency (AAPPPDA).

1.3. Research Question

This research will have the following research questions:

 What are the trends of centralized procurement process in AAPPPDA?

 How do contract Administration is performed in AAPPPDA?

 What is the extent of procurement planning practice in AAPPPDA?

 How is the competency of staff in AAPPPDA?

1.4 Objective of the Study

1.4.1 General Objective of the Study

 The general objective of the study will be to assess the practices and challenges of
centralized procurement in AAPPPDA.

1.4.2 Specific Objective of the Research

This research will have the following specific objectives

 To assess the trends of centralized procurement process in AAPPPDA.

 To assess the practice of contract administration in AAPPPA.
 To assess the trend of procurement planning in AAPPPDA.
 To assess the competency of staff in AAPPPDA.

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1.5 Scope of the Study
The scope of the study will be focused on the procurement activities of Addis Ababa City Public
Procurement and Property Disposal Agency (AAPPPDA), specifically on practice and challenge
centralized public procurement system. Due to the limitation of time and finance the data will be
collected from the selected respondents of AAPPPDA staff, suppliers and beneficiary public body.
The main focus will also be on procurement activities under framework contracts which consume
big portion of AAPPPDA procurement arrangements.

1.6 Significance of the Study

This study will believed to help for the clear understanding of the challenges of central
procurement practice at AAPPPA. Given the importance of achieving the centralized public
procurement in Ethiopia at such high time of government`s endeavor to boost the economy and
provide wide range of basic services, the significance of researches like this would be high to
government and policy makers and AAPPPDA itself. Also it will serve as a benchmark to those
institutions that did not fully implement centralized procurement system. The research will also
expect to provide important inputs to AAPPPDA and other stakeholders. It will also provides
input for future researches around the subject matter.

1.7 Organization of the Study

The study will be organized into five chapters. The first chapter will presents the introduction,
background of the study, a statement of the problem, research questions, research objectives, the
scope of the study, significance of the study, limitations of the study, operational definition and
organization of paper, the second chapter will examines related researches and review relevant
literature, chapter three will covers research methodology, in the fourth chapter data will be
presented, analyzed and discussed and the last chapter will deals with the major findings,
conclusion and recommendation and Suggestion for Further Study.

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CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Theoretical Review

2.1.1 Definition of Public Procurement

It is a process of identifying and obtaining goods and services. It includes sourcing, purchasing and
covers all activities from identifying potential suppliers through to delivery from supplier to the
users or beneficiary. It is favorable that the goods/services are appropriate and that they are
procured at the best possible cost to meet the needs of the purchaser in terms of quality and
quantity, time, and location (Mangan, et al,. 2018).
According to Tony, (2011) public procurement involves acquisition of goods and services by the
public sector and it ranges from routine supplies to official tendering and contracts for sizable
infrastructural projects. Purchase of commodities and contracting of construction works and are
also included in public procurement and usually such acquisition is effected with resources from
state and local authority budgets, state foundation funds, domestic loans or foreign loans
guaranteed by the state, foreign aid and revenue received from the economic activity of state
(AMBE, 2012)..
According to the Ethiopian Public Procurement Proclamation (No 649/2009) also states that
procurement means “obtaining goods, works, consultancy or other services through purchasing,
hiring or obtaining by any other contractual means.” From the above definitions, the overall tasks
of procurement is to obtain goods, works, consultancy services and other services at the right
quality, in the right quantity, from the right sources, at the right time, place and price to achieve
organizational objectives.
Public procurement, generally speaking, is the process that public entities engage in for the
acquisition of goods, works and services that will be used for discharging public or government
obligations. The ultimate objective of public procurement is to implement utilization of public
financial resource on purchase of goods and services for intended purposes in an accountable,
transparent and cost-effective manner by providing equal platform for all competitors. Along with
ensuring the most value for money, the process should also have tools for preventing corruption
and any form of unfair practices (Krasniqi, 2012).

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Public procurement needs to ensure acquisition of goods and Services of the desired quality, from
the right source, with the least cost and to be delivered in the demanded quantity, to the needed
place, at the right time. The ultimate need for efficient management of public procurements
emanates from their taking large part of government expenditure budget and significant
government investment (FDRE, 2011).

2.1.2Principles of public Procurement

According to Thai, (2017), the principles of public procurement are:
Economy: Procurement is a purchasing activity whose purpose is to give the purchaser best value
for money. For complex purchases, value may imply more than just price, for example, since
quality issues also need to be addressed. Moreover, lowest initial price may not equate to lowest
cost over the operating life of the item procured. But the basic point is the same: the ultimate
purpose of sound procurement is to obtain maximum value for money.
Efficiency: The best public procurement is simple and swift, producing positive results without
protracted delays. In addition, efficiency implies practicality, especially in terms of compatibility
with the administrative resources and professional capabilities of the purchasing entity and its
procurement personnel.
Fairness: Good procurement is impartial, consistent, and therefore reliable. It offers all interested
contractors, suppliers and consultants a level playing field on which to compete and thereby,
directly expands the purchaser’s options and opportunities. Erridge et al, (1999), believe that
competitive tendering would avoid accusations of favoritism and fraud and that the openness of the
system would encourage more suppliers to participate and that increased competition would help
reduce prices, improve quality and lead to greater competitiveness among suppliers.
Transparency: Good procurement establishes and then maintains rules and procedures that are
accessible and unambiguous. It is not only fair, but it is seen to be fair.
Accountability and Ethical Standards: Good procurement holds its practitioners responsible for
enforcing and obeying the rules. It makes them subject to challenge and to sanction, if appropriate,
for neglecting or bending those rules. Accountability is at once a key inducement to individual and
institutional probity, a key deterrent to collusion and corruption, and a key prerequisite for
procurement credibility.

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Also there are „six rights‟ in procurement and they can be achieved through following specific
objectives of procurement (Benslimane et al, 2015).
Right price: - a right price should not necessary be the list price, rather it is a kind of price that is
reasonable and fair both to the buyer and the seller.
The right place:- a vendor located at a relatively far of place as compared to local stockiest or
short distance supplier is likely to cause much more problem in processing the purchase activities
and making follow up.
Right time: - there is a considerable time gap created between the identification of need for an
item until it is approved for use after placing an order, manufacturing, transporting and inspecting.
Right quality: - from purchasing point of view quality is suitability of a product to intended
purposes. The best quality product may not necessarily be the right quality if it doesn’t conform to
the purpose intended for.
Right quantity: - the right quantity is the right level of quantity that is not too much, or too few
but a moderate one. If the company orders an item with large quantity, the inventory caring cost
will go up, and if the order is small size, the company may face high ordering cost and a possibility
of interruption of operation.
Right source: - Development of sources of supply plays a great role in the purchasing strategy of
the organization and this, in turn will undoubtedly, have a bearing on the corporate long term
strategy analysis.

2.1.3 Public Procurement process

Procurement process is each step followed or undertaken to purchase any kind of items starting
from the request of items till delivery of items. The Procurement Cycle begins with the
identification of a requirement and ends with the award of a contract. Contract Administration, on
the other hand, begins with contract award and ends with either the completion, or termination, and
the closing out of the contract (Jorge Lynch, 2014). A major undertaking of the national economy
in which a large amount of the government money is spent through procuring goods, works and
services is covered by public procurement entities.

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In that regard, they are required to ensure that prudent economic decisions are made to open up
market opportunities to business entities (big, medium and small), to increase their participation in
the domestic and competitive international markets (United Republic of Tanzania, 2012). The
main procedures in public procurement are discussed below.

2.1.4 Public Procurement Planning

Basically, public procurement planning is an organized activity of scheduling what, how and when
to purchase goods and services to public entities for a given period that streamlines the
procurement process. This planning helps to do away with sudden purchases and minimize
possibilities of emergency procurements which are likely to face cash flow shortages (Abada, &
Muhindo, 2014). Public procurement planning clearly identifies the need for both the government
entity and the supplier. It paves the way for a well-coordinated and integrated procurement process
to fulfill a need for goods, works or services in good time with economic efficiency. It also avoids
unnecessary rushing at time of need that might result in ineffective and non-transparent dealings.
Furthermore, updating of the procurement plan ahead of time throughout the implementation
process helps the public entity to cope up with the ever-changing economic environment. With the
inclusion of contingency planning, public procurement planning ensures readiness for future
uncertainties (UN, 2016).

Need Identification and Specification of Goods and Services: Public entities should clearly
identify their needs in order to discharge their responsibilities. Upon identification of the needs, the
procurement department then takes the next step of developing and communicating a plan that lays
down how the needed goods and services will be acquired. Coordination with the other
departments is crucial in developing the procurement plan to provide for organizational integrity,
(Shaw, 2020). According to Thai (2007) a specification is a detailed description of the design, the
service, or materials. It describes in detail the requirements to which the supplies or services must
conform.

Sourcing, Awarding, and Supplier Management: Hinson and McCue (2014) say that Sourcing
is the process of identifying suppliers that can meet procurement requirements of the public entity
for goods and services.
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The process of the sourcing will differ from circumstance to circumstance on the time available to
carry out sourcing. The steps in the sourcing process will include market enquiry which is the
process of inviting and evaluating tenders or quotations depending upon an entity’s own internal
procedures, and evaluation and awarding with the process of determining the actual quality,
reliability, delivery, of the goods and services.

The evaluation of tenders and awarding of contracts to suppliers is an important phase of the
procurement process (Maurer, 2014). It is the process that determines the actual quality, reliability,
delivery, etc. of the goods and services. The procurement department coordinates activities of
analyzing and evaluating the bids against set criteria, specification requirements and presenting the
analysis to an procurement appointed committee, verification of supplier capability and quality
control, reviewing product inspection results, verification of technical evaluation reports,
negotiates with vendors, placing orders and expediting the delivery.

After evaluating and awarding of tender, orders are placed for the goods or services with the
supplier and the approval processes may be more detailed. The orders establish contractual
relationships between the organization and the supplier (Shaw, 2020). Once the order is placed and
the supplier has confirmed receipt and agreed to the contract terms and conditions, the role and the
amount of work that staff in procurement have to undertake will be affected by the performance of
the suppliers (Bovis,2017). It is necessary therefore, for the procurement staff to monitor the
progress of orders and the performance of the suppliers. The continuous monitoring enables the
organization to pick out break-down points in the system and quickly identify solutions (Shaw,
2010).

Contract administration: A contract is a written agreement, enforceable by law, between a

procuring entity and a supplier, contractor or service provider for the provision of goods, works
and services. Contract administration involves all activities related to the monitoring of suppliers,
contractors and service providers’ performance in the fulfillment of their contractual obligations,
and to ensure appropriate actions are taken to promptly remedy any deficiencies observed in
contract implementation, scope or terms and conditions (John & sons, 2017).

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The goal of contract administration is to ensure proper mechanisms are in place to monitor and
evaluate contractors, suppliers and service providers’ performance in the fulfillment of their
contractual obligations, and to ensure appropriate actions are taken to promptly remedy any
deficiencies observed in contract execution or the contract scope, terms and conditions (Jorge
Lynch, 2014).

The contractual goal of the procurement of any good or service is successful project completion.
Successful project completion is defined, by the National Institute of Governmental Purchasing
(NIGP), as successful procurement of the right item, in the right quantity, for the right price, at the
right time, with the right quality, known as the “5 R’s” (Thai, 2017). To complete a project
successfully, contractual goals should be established to accomplish each of the “5 R’s” (NIGP,
2000). The establishment of contract goals begins with identifying the typical contract risks and
potential contract administration problems associated with the purchase that could affect any of the
“5 R’s” (Davison & Wright, 2014).

Preparation for contract administration begins with planning which should begin during the
bidding and selection process. This planning includes the nomination of contract administrators, a
strategy for undertaking periodic performance review, the timeframe for certifying performance
and acceptance of contract deliverables in order to avoid payment delays, and an understanding of
the contract terms and conditions to ensure effective oversight (Davison & Wright, 2014).

2.1.5 Framework Agreement in Public Procurement

Framework agreement, according to Glover (2018) is an agreement which is reached between two
parties to cover a long-term collaborative arrangement. It is an agreement between one or more
contracting authorities and /or economic operators it is often kwon as umbrella agreement that
involves parties such as employer and contractor or supplier. It provides a mechanism for warding
in straight forward manner. Thus, the framework agreement is not intended for use with a single
stand-alone contract; it is designed for use where a number of similar sets of works or services
required. It allows public bodies to order goods or services throughout the term of agreement (it
provides a mechanism for calling off purchase orders from catalogue of goods or services as and
when PB needs to buy something within the scope of FA).
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However, the contract does not place no obligation on the PB to place future purchase order and
not require to issue any minimum number or value of order. Issuance of purchase order to obtain
the supplier‟s goods and services is wholly within the discretion of PB‟s. Call-off contract means
individual contract between PB and supplier according to the terms and conditions of established
in FA determining goods and services to be supplied by the supplier. The public bodies
administering framework procurement undertake a full procurement (FPPPAA, 2011).
Framework agreement uses terms that may be unfamiliar such as “call off”; task; enquiry; pricing
document and provider among other. Call off is the act of awarding a contract awarded under
framework agreement. It does not need to advertise and tendered. Task is the particular works or
services to be carried out; enquiry is an invitation to tender made by employer to a prospective
provider to carry out a task and pricing documentation is the returned pricing document and
provider is the contractor, consultant or supplier under framework agreement (Glover, 2018).
Public procuring entities face problem of increasing clerical and routine works in procurement
process and other problem include: increased in price differences among procuring entities, long
lead time, high inventory levels, recurring stock out situation and price rise during the period of
contract coverage, which result in cost increase in tendering process. Framework agreements are
contract which procuring entities enter into arrangements with suppliers or service providers to
supply goods or services under agreed conditions for a specified period of time normally two to
four years. (Glover, 2018).

2.2 Empirical Review

In the previous section we have stated the theoretical or conceptual literature that related with the
topic under investigation. In this section, we are going to talk about the empirical literature which
shows the real Practices and Challenges of Centralized Procurement in different countries.

2.2.1 Centralized procurement in International Experience

The Danish public sector purchases goods and services for approximately €40 billion annually
(14% of GDP), which is approximately two percentage points above the OECD average (OECD
2017). Denmark serves as an informative setting for the evaluation of centralized procurement
because public purchasing has been subjected to widespread centralization reforms in recent years
(EU, 2019).

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In fact, the Danish policy rationale for aggregating public purchases in central framework
agreements is largely consistent with theoretical arguments in the academic literature: i) gain
economies of scale and reduce purchasing prices; ii) benefit from purchasing synergies across
several units; and iii) ensure legal compliance with the national and EU purchasing requirements
(most notably, the EU procurement directive and Danish Public Procurement Act). (EU, 2019).

The most common type of centralized procurement among Danish public organizations is binding
and non-binding framework agreements (similar to master contracts in the US), which are being
implemented across product categories such as office supplies, computers, software, air travel,
office cleaning, internet connections, and much more (there are currently 41 different framework
agreements). These framework agreements are managed by either of the two Danish centralized
procurement units (‘SKI’ and ‘Statens Indkøb’), and each framework contract offers a catalogue of
authorized providers and products from which public organizations can (or are obliged to)
purchase the product. The procurement of air travel by central government employees ‒ the
empirical focus in this study ‒ is a mandatory framework agreement which all central government
agencies must use to purchase air travel. The framework agreement covers the ‘raw prices’ on air
travel (purchased from different airline carriers) and travel agency services (provided by a private
travel agency). All purchases are subject to a 1 per cent fee to the central procurement unit plus a
fixed fee to the private travel agency, which is responsible for bookings, ticketing, and invoices.
(EU, 2019).

The central framework agreement for government air travel is a fixed-term, 4-year contract with a
total estimated contract value of DKK 335,000,000 (approx. €45,000,000) plus 25% Danish sales
tax/VAT (National Procurement Ltd. Denmark 2014). The framework agreement is divided into
four overall route categories: domestic, Nordic, European, and intercontinental routes. While the
tender documents specify that the central framework provider asked for bids on 500 different
routes (National Procurement Ltd. Denmark 2014, p. 3), the signed framework agreement shows
that it only received compliant bids for 268 routes, most of which are covered by three European
airline carriers.

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2.2.2 Centralized procurement in African Experience
Kiage (2013) on Kenyan public procurement performance and concluded that procurement
planning, coupled with sound contract management was the most crucial factor for its
effectiveness. Same idea was reflected by others who conclude that lack of sound planning and
management of public procurement is the main challenge where procurement requirements that are
not well identified, crudely prepared budgets and insufficiency of the staffs‟ professional
competence to handle such big job.

2.1.3 Centralized Procurement in Ethiopia Experience

Although Ethiopia enacted several rules and regulations, have successive review of the public
procurements, there were short comings such as not fitted with well recognized international
models, absence of clearly defined central oversight and public bodies at all level, shortage of
experienced management and procurement staffs, lack of transparency in the procurement
processes, absence of procedures for modern form of procurement activities and unclear
institutional and organizational arrangement required in the management of the public procurement
process (Getnet and Tillahun, 2014).
Therefore, the Federal Government of Ethiopia Procurement and Property Administration
Proclamation No 649/2009 were enacted by parliament replacing the previous procurement laws.
According to Hunga (2003) the aim of the reform programmed in many developing countries as
being to establish a strong and well-functioning procurement system that is governed by a clear
legal framework establishing rules for transparency, efficiency and mechanisms of enforcement,
coupled with an institutional arrangement that ensures consistency in overall policy formulation
and implementation.
Ethiopia has prepared centralized procurement system starting from September 2009, even though
the implementation is late. According to proclamation no. 649/2009, article 60 a central body,
which shall be in charge of the execution of large value procurements having national significance
procurements of supplies for which a demand is shown by more than one public body and sale of
public property to be disposed of, by a regulation to be issued by the Council of Ministers.

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Matewos (2019) conducted a research on effectiveness of the centralized procurement at federal
government public procurement and property disposal service (PPPDS) his research findings
shows that problems like insufficient staff, lack of contract follow up, lack of procurement plan,
inadequate utilization of ICT and inadequate performance assessment are major challenges for
effectiveness of centralized procurement

2.1.4 Major Challenges in public Procurement

Abera Gelgelu (2016) based on his study of public procurement planning and implementation
assessment argues that limited capacity in conducting needs assessment, description of needs, and
late submission of requirements, insufficient staffing of procurement unit in terms of number and
skill required, limited quality training in planning activities and preparation of procurement
document at each stage, inadequate review procedure of requirement submitted by public bodies,
lack of practice in announcement of annual procurement plan, limited capacity in conducting
market survey, costing and scheduling procurement activities, contract management, and
monitoring; shortage and turnover of qualified professional, limited practice in periodic review of
effectiveness in planning and implementation of public procurement are among major challenges
of the public procurement.

Lack of proper knowledge, skills and capacity

The shortage of skills has the major problems in public procurement. According to Sheoraj (2007)
skills and capacity shortages have been identified as the single greatest impediment to the success
of public procurement. Adequate capacity in the form of appropriate structures with fully skilled
and professional personnel is a key success factor for proper procurement implementation. In some
government entities, the quality of procurement personnel’s skills and ability are well below
standard.

Inadequate planning and linking demand to the budget Demand

Inadequate procurement planning and poor drafting of specifications is among the main challenges
affecting the public procurement performance. It is up to user government entities to plan lists of
intended procurements for the forthcoming financial year with the necessary level of procurement
details.
15
The procurement schedule shall indicate the goods, services and works it intends to acquire within
the allocated budget. This will allow the procuring entities to align its intended procurements with
policies and the range of goods available and at the same time enable suppliers and contractors to
take preparatory steps to submit comprehensive bid and to ensure time and resources are available
to undertake the contract (Jones, 2013).
Many government entities are still faced with the challenges of improper planning and linking
demand to budget (Ambe & Badenhorst-Weiss, 2011a). Cost-effective procurement depends on a
specialist’s skills to ensure that buying requirements are reliably determined, appropriate contract
strategies are developed, contracts are well managed and opportunities are seized to secure the best
deals at the right time and at the right price.
Inadequate measures for monitoring and evaluation.

Effective policy-making requires information on whether governments are doing things right and
whether they achieve the results intended (Acevedo, et al,. 2010).Strong monitoring and evaluation
systems provide the means to compile and integrate this valuable information into the policy cycle,
thus providing the basis for sound governance and accountable public policies (Acevedo et al.,
2010). Inadequate monitoring and evaluation is linked to the absence or the poor presence of a
control environment, and the government entities are placed in a difficult position to give effect to
or implement procurement as required by the policy.

Accountability, fraud and corruption

Accountability constitutes a central pillar to public procurement (Soudry, 2007). Without

transparent and accountable systems, the vast resources channeled through public procurement
systems run the danger of being entangled with increased corruption and misuse of funds
(Jeppesen, 2010). Hence, there is an urgent need to rethink innovative ways of curbing corruption
and some other administrative malpractices within South African spheres of government. To fight
the scourge of maladministration, mismanagement of finances, fraud and corruption, government
needs to strengthen and review existing internal control systems to detect deficiencies

16
2.3 Conceptual Framework
According to Mathieson (2001), a conceptual framework is a written or virtual product that
explains, either in narrative or in graphically form, the main things to be studied, the key elements
being variables, concepts and the presumed relationships among them. According to Stratman &
Roth (2004), Conceptual framework are structured from a set of broad theories and ideas that help
a researcher in properly identifying the problem they are looking at, frame their research questions
and find suitable literature. In this study right quality and delivery time are the dependent variable
since its success depends on independent variables: procurement planning, procurement process,
contract administrative, and procurement staff competency. Both independent variable and
dependent variable are depicted in figure 2.1:

Figure 2.1 Conceptual Framework

Independent
variables Dependent
variables

Procurement planning

Procurement process

Right quality and

Contract time of delivery
administration

Procurement staff
competency

Source: Adapted from (Bogdan & Biklen, 2015

17
CHAPTER THREE: RESEARCH METHODOLOGY
3.1. Research Design
This study will use both descriptive and explanatory type of research method with the help of
quantitative and qualitative study techniques, because it describes the characteristics of objects,
people group, organization or environments. Descriptive research design will be used to describe
independent and dependent variables and it is a scientific method of carrying out a systematic or
formal inquiry in which data is collected and analyzed in order to describe the current conditions,
terms concerning a in a certain specific field Problem (Mugenda and Mugenda, 2003).

3.2. Research Approach

There are two basic approaches to research, quantitative approach and the qualitative approach.
This study will use the mixed method design in sequential descriptive way. Because, mixed
research is useful to capture the best of both qualitative and quantitative approaches and in these
the researcher also intended to assess detail features of procurement practices in the institution.
The advantage of using mixed methods is that it enables to triangulate and support the data and
result collected by questionnaire (Greener, 2008 and Saunders et.al, 2007).

3.3. Sample Design

The study will used to adopt the five sampling steps of (Malhotra et al., 2006); “these steps are
closely interrelated and relevant to all aspects of the research.” Those are identified target
population, determine the sampling frame, select sampling techniques, determine the sample size
and execute the sampling process. The study will use probability and non-probability method for
selecting the sample in which each item which are relation to the study are included. It will use the
purposive/judgmental sampling from the non-probability method and simple random sampling
from probability method.

3.3.1. Target population

The whole set of the universe from which a sample is taken is called the population (Saunders et
al, 2007). Target population refers to the larger population to which the researcher ultimately
would like to generalize the results of the study (Mugenda, 2003). The population for this research
will be 223.
18
(i.e. 70 employees from Addis Ababa City Government Public procurement and property disposal
staffs from Procurement, contract administration, Information communication Technology and
Internal auditors, 97 budgetary sector organization found in city and Sub City level, and 56
Suppliers those are entering in framework agreement contract and delivering common user items
and strategic goods in 2014 EC, by taking the data from Human Resource Directorate and Contract
Administration directorate recorded document of AAPPPDA.

3.3.2. Sampling Frame

The sample frame of this study will be mangers, directorates, team leaders, senior officers and
medium officer are included from three directorates of AAPPPDA (i.e. procurement directorate,
contract administration directorate , Internal audit directorate and Information Communication
Technology directorates ) and team leaders & senior officers from procurement department of
Addis Ababa City Government beneficiary sector and mangers from suppliers was include in
sampling frame of this study.

3.3.3. Sampling Unit

The researcher will have to decide one or more of sampling that he has to select for his study
(Kothari, 2004). The sampling unit of this study was procurement directorate, contract
administration directorate, internal audit directorate and Information Communication Technology
directorates from AAPPPDA and procurement department from selected beneficiary sectors and
managers from selected suppliers.

3.3.4. Sampling Technique

In regarding to selection of respondents, the researcher will use both probability and non-
probability sampling (Saunders et.al, 2007). This study will use purposive or judgmental sampling
method for directorates, team leaders, senior and medium officer who are working in procurement,
contract administration, Internal audit & ICT directorates in AAPPPDA because it uses the
purposive/judgmental sampling method the investigator does not necessarily have a quota to fill
from within various strata, as in quota sampling, but neither does he just pick the nearest warm
bodies, as in convenience sampling. Rather, the researcher will use his own judgment about which
respondents to choose, and picks only those who best meet the purpose on the study
(Bailey.1982.99).
19
The obvious advantage of purposive or deliberate sampling is that the research can use his research
skill and prior knowledge to choose respondents. Also the researcher will use simple random
sampling technique to select participants from beneficiary sectors and suppliers from entering in
framework agreement contract and delivering of common user item in 2014 E.C by using lottery
system. The reason behind selecting this technique is the researcher to have an equal chance for all
respondents those are include in sample unit.

3.3.5. Sample Size

There are numerous formulas to determine the sample size of study. For the purpose of this study
the formula set by (Kothari, 2004), will be used.
Therefore, the sample size will be calculated as follows:

Where,
p = proportion of success = 75%

q = proportion of fail = 25%

z = confidence level = 1.96

e = standard error = 5%

N= Total population = 223

n = sample size,

1.962 ( 0.75 ) ( 0.25 )∗223

Therefore the sample size was: n= 2 2
0.05 ( 223−1 )+ 1.96 ∗( 0.75 )( 0.25 )

n= 126

Therefore, the sample size of Addis Ababa City Government beneficiary sector will be 55
(126/223)*97, the sample size of suppliers those participating on framework agreement will be 32
(126/223)*56, the Sample size of AAPPPDA staff will be 39 (126/223)*70.

20
 Table3.1. Distribution of sample population

No Sampling frame Number of Sample Sampling

population size Techniques
1 Addis Ababa city Government beneficiary sector 97 55 simple

2 suppliers participating on framework agreement 56 32 random

sampling
3 AAPPPDA Staff 70 39 Purposive
3.1. Procurement staffs 40 23 sampling
3.2 Contract Administration staffs 22 12
3.3 ICT staffs 4 2
3.4 Internal audit staff 4 2
Source: AAPPPDA human resource and Contract Administration records document.

According to Patrick, B. (2003) the return or success rate 50% is ‘adequate’; 60% response rate is
‘good’ and 70% rate or higher is ‘very good’. Based on the above sample size determination the
questioners are distributed to respondents. The researcher will use for this study 75% response rate
will be expecting and remaining 25% may be non-response rate, and sample size will be
determine at 95% confidence level and margins of error at 5%.

3.4. Sources of Data

There are two types of data sources, namely primary and secondary data. Researcher might use
either both or one of the types of data depends on the research type and data collect by researcher
(Saunders et.al, 2007). So, for this study researcher will use both primary and secondary data:
primary data was collected from respondents by using questionnaire and secondary data was
collected from books, journals, manuals, directives, proclamation, annual reports and previous
research papers.

3.5. Data collection method and instrument

For this research the data will be collected by using a self-developed questionnaire containing self-
assessment items measured on the 5-point Likert type of scale. The levels of response are:
strongly agree=5, agree=4, neutral=3, disagree 2, strongly disagree =1,

21
3.6. Data analysis and presentation
According to Kombo and Tromp, (2011), the data analysis procedure includes the process of
packaging the collected information putting in order and structuring its main components in a way
that the findings can be communicated easily and effectively.

The data analysis will be done using Microsoft Excel and SPSS software through descriptive
analysis techniques including measures of central tendency (e.g. mean, standard Deviation)
measure of distributional shape (i.e., skewness ) by assumption test of linearity, inferential
analysis( e.g. correlation, regression, ANOVA). The data will be presented by using statistical
tools like tables, figures and others.

3.7. Validity and Reliability Test

3.7.1. Validity
Regarding to validity, validation of questionnaires item will be carried out through initial
consultation of experts to judge the research instrument. The researcher will use construct validity,
because of more accurate and meaningful results and extent to which a measure adequate
represents. To increase the validity of the data collected using questionnaires the researcher will
look for the data based on the objectives of the research. In addition, to enrich the validity of the
questionnaire a pilot study will be undertaken on AAPPDA staff, procuring entity and supplier.

3.7.2 Reliability
Also to check item reliability Cronbach‟s alpha coefficient will calculate to all items arranged in a
five point Likert scale. The Alpha value is ranges from a maximum of 1.0 for a perfect score to
minimum of zero, good measure of the alpha should be 0.70 or higher (Neuman, 2007). According
to William and Barry (2010) “scales exhibiting a coefficient alpha between 0.80 and 0.96 are
considered to have very good reliability, between 0.70 and 0.80 are considered to have good
reliability, and alpha value between 0.60 and 0.70 indicates fair reliability and when the coefficient
alpha is below 0.60, the scale has poor reliability.”

22
 Table 3.3: logical framework
Objective Measurable variables Data type Research Data analysis tool
tool
Prim Seco Ques Inter Cor perc regr qual
ary ndar tione view rela enta essi itati
y r tion ge on ve
To assess the trends sufficient number of bidder are participate √ √ √ √ √ √ √
of centralized proper quality specification that meets the intended purpose √ √ √ √ √ √ √
procurement
Specification is prepared by concerning technical experts √ √ √ √ √ √ √
process in
information technology to facilitates procurement process √ √ √ √ √ √ √
AAPPPDA.
To assess the The bidders are signed the contract on time manner √ √ √ √ √ √ √
practice of contract AAPPPDA have proper contract document √ √ √ √ √ √ √
administration in have lead time information for all goods and service √ √ √ √ √ √ √
AAPPPA.
Contract document are clearly understand by suppliers √ √ √ √ √ √ √
The shortage of foreign currency affects the quality and time √ √ √ √ √ √ √
of delivery has request the procurement need at a right time
To assess the trend AAPPPDA √ √ √ √ √ √ √
of procurement AAPPDA have proper annual procurement plan √ √ √ √ √ √ √
planning in The procurement process is implemented according to plan √ √ √ √ √ √ √
AAPPPDA.
To assess the Education background of staff √ √ √ √ √ √ √
competency of staff competent staff members for prepare quality specification √ √ √ √ √ √ √
in AAPPPDA competent staff members for evaluation of bids √ √ √ √ √ √ √

26
4. Work Plan/Schedule
The research work will consume about 8 months from August 2022 to December 2022

Table 4.1 Activities plan

Details of Tasks to be Performed Time Operation Period Remark
needed
1 Topic Identification and modification 30 days August 2022
getting authorization from Department
2 Working on chapter one and two 20 days August 2022
3 Working on chapter three 30 days September 2022
4 Compiling and submitting the proposal 20 days October , 2022
and development of Questionnaires
5 Pre- testing of the Questionnaire and 30 days November, 2022
orientation of the data collectors
6 Data Collection 30 Days December, 2022
7 Data Analysis 30 days January , 2022
8 Report Writing 20 days February, 2022
Finalizing: editing, printing & 20 days March, 2022
Submitting final paper

Table 4.2 Financial Budget Plan time

Details of Tasks to be Performed Cost in Birr

1 Commission for data collectors 3500

2 Cost of Stationery Services 2000

3 Cost of copy, printing and binding 2000

4 Transportation Cost 1500

5 Contingency 1,000.00
Total 10000.00

1
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7
APPENDIX

Alpha University College

Department of Business Administration
Questionnaire to be filled by AAPPPDA staff , procuring entities and suppliers

Dear Respondent, thank you very much in advance for your kind cooperation. My name is
Ashenafi lemma, a candidate for masters on Department of Business Administration currently
doing research titled Practices and Challenges of Centralized Procurement in Ethiopia the Case of
Addis Ababa Public Procurement and Property Disposal Agency. One of the tools for gathering
data is this questionnaire. The study will provide information on the Practices and Challenges of
Centralized Procurement. This questionnaire for academic purpose only and will have no negative
impact on the respondents. As your genuine cooperation determines the effectiveness of the study,
I would like to kindly request your honesty and openness, and hereby assure you of confidentiality
of the respondents. I, therefore, request you to fill the questionnaire honestly and frankly. Once
again, thank you for your cooperation.
If you have question about the questionnaire, kindly contact me by the following address: email:

ashenafi16@gmail.com

Pone No: +251 92 234 9288

General Instructions
Please choose among the alternative answers for the questions below and circle the letter of your
choice.

8
 I. Personal information
1. Sex
a. Male b. female
2. Educational qualification
a. College diploma b. Bachelor’s Degree
c. Master’s Degree: d. PhD and above
3. Years of service in public procurement
a. 0-3 b. 3-6 c. 6-10 d. above 10 years
4. What is the position you are currently holding?
a. Expert I b. Expert II c. Senior Expert

d. Team leader e. Director f. manger g. Other

II. Question related to Employees competency

1. Procurement staff of AAPPPDA have the relevant Education background
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
2. AAPPPDA have competent staff members for prepare quality specification
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
3. AAPPPDA have competent staff members for evaluation of bids

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

III. Question related to Procurement plan
1. AAPPPDA has request the procurement need at a right time?
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
2. The procuring entities has submit their procurement needs at a right time
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
3. AAPPDA have proper annual procurement plan
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
4. The procurement process is start and implemented according to plan
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

9
IV. Question related to Procurement process
1. In AAPPDA sufficient number of bidder are participate

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

2. AAPPPDA takes too short time to preparation and evaluation of bid document

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

3. AAPPPDA have proper quality specification that meets the intended purpose

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

4. Specification is prepared by concerning technical experts or organization

5.
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
b.
6. AAPPPDA use information technology to facilitates procurement process

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

b.
7. The shortage of foreign currency affects the quality and time of delivery

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

8. AAPPPDA has sufficient amount of foreign currency allocated for Procurement purpose

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

10
V. Question related to Contract Administration
1. The bidders are signed the contract on time manner
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
2. AAPPPDA have efficient contract management and monitoring practice
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
3. AAPPPDA have proper contract document
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

4. Contract document are clearly understand by Procuring entities and suppliers

a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
5. AAPPPDA have lead time information for all goods and service
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
6. Procuring entities are provided purchase order in accordance to plan
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
7. Procure entities are carried out proper quality inspection before receiving of goods and service
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

VI. Question related to indicter of right Quality and delivery time

1. Procuring goods and service are suitable to the desired purpose
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
2. procuring Goods and services has highly durable
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
3. Goods are delivered before the level of stock reaches the minimum
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
4. Service delivery activity of procuring entity are carried out without material shortage
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree
5. Goods and services delivered in accordance to schedule
a. Strongly agree b. Agree c. Neutral d. Disagree e. strongly disagree

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 Mention your opinion regarding to improvement in centralized procurement to deliver goods
and service on timely and at right quality.
i. ……………………………………………………………………

ii. ………………………………………………………………………

iii. ………………………………………………………………………

iv. ………………………………………………………………………

Thank for your time and cooperation!

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