Procurement Governance

What is it?

Procurement governance refers to the rules, policies, systems, processes, structures and controls by which procurement activities are undertaken within an organisation. It is particularly important to maintain governance standards in procurement due to its management of large sums of organisational funds.

The organisation first of all needs to ensure that it complies with all external legislation. Secondly, it needs a strong internal control environment. Examples include:

• Clear policies, standards and codes of practice
• Fair, transparent and consistently applied procedures
• Defined working methods
• Effective budgetary control
• Defined roles, responsibilities, accountabilities and reporting structures
• Controlled authority levels
• Robust authorisation and approval processes
• Clear audit trails
• Segregation of procurement duties
• Performance measurement
• Internal and external audits

Procurement governance should seek to achieve, not just compliance, but also commitment to the underlying ethos, achieved through effective communication, clear performance measurement and robust review.

What does it look like?

How does it work in practice?

Public procurement in Kenya is governed by the Public Procurement and Asset Disposal Act 2015. The Public Procurement Regulatory Authority (PPRA) was established by the Act to monitor compliance and provide some technical assistance. The offices of the National Treasury (Ministry of Finance) and Attorney General are represented on the Board, together with independent representation. The national Ministry of Health sets policy, direction, standards, guidance, and capacity building on pharmaceutical services.

PPRA has published a Public Procurement Manual which provides detailed guidance on general issues in healthcare procurement. The manual sets out the functional relationships and internal controls that promote transparency and accountability in the procurement process. The procedures cover the acquisition, receiving, storage, distribution and disposal of pharmaceuticals, non-pharmaceuticals and medical equipment in the public health sector in Kenya, encompassing the complete procurement cycle up to and after the receipt and acceptance of items procured.

Kenya Medical Supplies Authority (KEMSA) is responsible for healthcare procurement in the country.

A recent review identified that an improvement would be a separate procurement policy within KEMSA encompassing a range of areas such as: an introduction from the CEO outlining the importance of procurement; the values and behaviours adopted; the separation of duties within the requisition to pay process; the delegations of authority; a commitment to paying suppliers on time; the ethical policy; risk management and mitigation; and commitment to corporate social responsibility. This policy could then be communicated internally within KEMSA as well as externally to relevant stakeholders.

In South Africa, the Public Finance Management Act (1999) regulates the processes to be followed at national and provincial level. The Preferential Procurement Policy Framework Act (2000) provides a framework for contracting with historically disadvantaged persons. Other relevant legislation includes the Prevention and Combating Corrupt Activities Act (2004) and the Broad Based Black Economic Empowerment Act (2003). The National Treasury Chief Procurement Officer’s (CPO) Office is accountable for overseeing compliance with the relevant procurement legislation and policies.

There is evidence at both national and provincial levels of internal procurement policy, processes and procedures and documents that are consistent with legal requirements. There is strong  awareness of the contents of these documents in relation to specification, bid evaluation and financial delegation. Each of the provinces has a range of different general hospitals, which are delegated a maximum threshold for procurement of R500,000.

Separation of duties is achieved through the existence of distinct sub-teams (specification and demand planning are carried out separate from tendering activity), distinct committees that provide oversight and governance (specifications, tender evaluation, tender adjudication) for which there are clear terms of reference, and multiple signatures providing support before formal financial approval by the Director General.

There is an Internal Code of Conduct for all public sector employees, and a more specific Code of Conduct for staff involved in procurement and supply chain management activity. Communication and understanding are reinforced through the annual declaration process for all staff and specific conflict of interest declarations for members of tender evaluation and other committees. The scope of periodic audits also reviews compliance.

Public procurement in Nigeria is governed by the Public Procurement Act 2007, with subsidiary regulations such as the Public Procurement Regulations for Goods and Works (2007), and the Public Procurement Regulations for Consultancy Services (2007). The Bureau of Public Procurement was established by the act as the regulatory authority responsible for the monitoring and oversight of public procurement, by regulating, setting standards and developing the legal framework and professional capacity for public procurement in Nigeria.

Most procurement is undertaken at the state level, therefore the federal act and regulatory authority are mirrored within each State, i.e. each state has its own Public Procurement Law and regulatory body Public Procurement Agency (PPA) that is broadly consistent with that of the federation. The Federal Ministry of Health sets health policies. The link to the states is provided by the National Council of Health.

There are clear policies in place for pharmaceuticals and medical supplies and a strong procurement manual. However, this has not been reviewed for 5 years and the policies would benefit from simplification along with clear protocols and templates to support implementation. Emergency procurements often do not adhere to the stipulated process. The procurement of medical equipment follows state laws but there is no evidence of a process manual localised to the needs of the state.

A Code of Conduct for Public Service in Lagos State was unveiled in 2015. Whilst this covers a wide range of matters from media interviews through to corruption, it is not a code of conduct relating to procurement practices and related ethical principles. Similarly the PPA has not issued a formal code of conduct, although it does provide guidance on ethical matters.