Country Procurement Assessment Report (CPAR) VOLUME II ... · Malawi CPAR, Volume II 3 May 24, 2004...

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Malawi

Country Procurement Assessment Report (CPAR)

VOLUME II DETAILS AND ANNEXES

May 24, 2004

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Malawi CPAR. Volume II i May 24, 2004 Details and Annexes

CURRENCY EQUIVALENTS Currency Unit = Malawi Kwacha (MWK)

US$ 1.00 = MWK 106.50 (September, 2003)

FISCAL YEAR July 1 – June 30

ABBREVIATIONS AND ACRONYMS

ACB - Anti-Corruption Bureau CGS - Central Government Stores CIF - Cost Insurance and Freight CMS - Central Medical Stores COMESA - Common Market for Eastern and Southern Africa DISTMS - Department of Information Systems and Managing Services DoPP - Director of Public Procurement FIMTAP - Financial Management, Transparency and Accountability Project FRDP II Third Fiscal Restructuring and Deregulation Technical Assistance Project GCU - Government Contracting Unit GOM - Government of Malawi HIPC - Heavily-Indebted Poor Countries IFMIS - Integrated Financial Management System IPC - Internal Procurement Committee Kw - Kwacha MDGs - Millenium Development Goals MoF - Ministry of Finance MOH - Ministry of Health MRA - Malawi Revenue Authority NAO - National Audit Office NCIC - National Construction Industry Council OPC - Office of the President Cabinet

PIU - Project Implementing Units PSI - Pre-shipment Inspection PVHO - Plant and Vehicle Hiring Organization SADC - Southern Africa Development Community SPU - Specialized Procurement Units ToT - Training of Trainers

Table of Contents

ABBREVIATIONS AND ACRONYMS...............................................................................i A. SCOPE OF THE CPAR .................................................................................................3

B. BACKGROUND .............................................................................................................3 B.1 RELEVANT COUNTRY INFORMATION ......................................................... 3

B1.1 History ....................................................................................................3 B.1.2 Economic Context ..................................................................................3 B.1.3 Development Picture/Donor Coordination ..............................................4 B.1.4 World Bank Group’s Role.......................................................................4 B.1.5 Bank’s Involvement in Public Procurement Reforms in Malawi .............4 B.1.6 Poverty Reduction Strategy Paper (PRSP) ..............................................5 B.1.7 Country Assistance Strategy (CAS) ........................................................5

C. MORE DETAILS ON A FEW SUBJECTS..................................................................6 C.1 The Anti-Corruption Bureau................................................................................. 6 C.2 E-PROCUREMENT............................................................................................ 7

C.2.1 E-procurement in Malawi .......................................................................7

D. The Malawi Private Sector in Brief..............................................................................11 D.1 Manufacturing Industry .................................................................................... 12 D.2 Imports.............................................................................................................. 12 D.3 Summary of Factors Affecting the Competitiveness of Malawian Manufacturers,

Importers and Local Suppliers in Public Sector Procurement ............................. 16 D.4 Local Construction Industry ............................................................................... 17 D.5 Local Consulting Industry ................................................................................. 18

ANNEXES ..........................................................................................................................19 Box 1: Examples of Procurement Cases Investigated by the ACB...................................19

Box 2: Example of NGO Activities in the Area of Public Procurement ...........................20

Box 3: Examples of Performance Indicators to Monitor Level of Corruption in Public Procurement .......................................................................................................................21 Figure 1: Structure of the Government Procurement and Supply Organization ............22

Figure 2: ACB Organizational Overview .........................................................................23 Table 1. PVHO Financial year 2001/2002 .........................................................................23 Table 2. PVHO Procurement Volume 2002 (estimates)...................................................24

Table 3: Current CGS Staff ...............................................................................................24 Table 4: CGS Procurement Volume 1 July 2002 – 31 June 2003 (estimates)...................25

Table 5.1 Major Registration Lists in Use at the Time of Drafting the CPAR ................26

Table 5.2 Number of Registered Contractors Under Each Category..............................27

Table 6. Malawi Portfolio Status (as of September 30, 2003) ...........................................28

Table 7. Malawi Bank financed projects’ (portfolio) Performance FY 02-03 .................29 Procurement Methods........................................................................................................29

Table 8.1 Procurement Methods Provided for In the Interim Guidelines .......................30

Table 8.2 Procurement Methods Provided for in the New Public Procurement Act......31

Table 9: Composition of IPCs in a Sample........................................................................32

ANNEX – QUESTIONNAIRES ........................................................................................33 Annex A - Checklist comparing National Competitive Bidding Procedures and World

Bank Policy ....................................................................................................... 33 Annex B – Questionnaire on Public Procurement System.......................................... 36

Section A - Legal Framework ........................................................................ 36 Section B - Trade/Customs Practices ............................................................. 40 Section C - Financial/Budgetary Framework.................................................. 40 Section D - Public Sector Procurement of Goods/Works................................ 41 Section E - Public Sector Selection of Consultants......................................... 51 Section F - Procurement Performance ............................................................ 53 Section G - Private Sector Procurement ......................................................... 55 Section H – Emerging Areas of Interest ......................................................... 56

Annex C – List of People Met................................................................................... 57 Annex D. Government Task Force on the Implementation of the Procurement Assessment

Report (Malawi CPAR) ..................................................................................... 60 Annex E – List of Documents Consulted................................................................... 62

Malawi CPAR, Volume II 3 May 24, 2004 Details and Annexes

A. SCOPE OF THE CPAR 1. As this CPAR was carried out at the time when the Procurement Act was in the process of final approval, detailed review of the Act was not conducted. Instead, the CPAR focused on steps needed to enhance implementation of the ongoing procurement reforms. 2. The CPAR also saw, as one of its primary goals, to assess the preparedness of the procurement environment in Malawi for the new legal procurement framework. In that context, it was found relevant to explore, and document, the current practices in several key areas, and indicate whether these practices are in compliance with internationally recognised practices.

B. BACKGROUND

B.1 RELEVANT COUNTRY INFORMATION 1

B1.1 History 3. Malawi became an independent nation in 1964 after 73 years of British rule. The authoritarian one-party rule lasted until 1994, when it was defeated in the first multiparty elections held in Malawi. Local elections were held in the country for the first time in November 2000; the incumbent party won 70 percent of the wards, albeit on very low voter turnout. 4. Malawi’s economy prospered in the 1970s with the assistance of foreign aid and investment, and grew at an annual rate of 6 percent. In general, though, 30 years of authoritarian rule did not spur significant and broad-based economic development. The new government, which has initiated an economic reform agenda, faces challenges on several fronts, among them a rapidly growing population, a high HIV/AIDS infection rate (about 14.9 percent), limited natural resources, high levels of inequality resulting from years of an elitist development strategy, and the corrosive effects of recurring droughts, poor resource management, and environmental degradation.

B.1.2 Economic Context

5. Malawi’s economy is based largely on agriculture, which accounts for more than 90 percent of its export earnings, contributes 45 percent of gross domestic product (GDP), and supports 90 percent of the population. Almost 70 percent of agricultural product comes from smallholder farmers. The country’s export trade is dominated by tobacco, tea, cotton, coffee and sugar.

1 Also available at http://www.worldbank.org/afr/mw2.htm.


6. The Government of Malawi followed good economic policies from 1995 to 1997, but in more recent years the pace of reforms has decelerated, expenditure control has weakened, and agricultural prospects have become more mixed. Tobacco revenues declined in 2000, due to slumping prices, declining yields and declining quality. This, together with a sharp depreciation, high annual inflation (30 percent in February 2001) and high real interest rates, has resulted in slow growth of about 2 percent in 2000 and -1.5 percent in 2001. 7. Over the last couple of years, the Government has tried to implement a growth-oriented reform program with the support of the Bank and the IMF, but results have been mixed. Fiscal slippages in 2001 and early 2002 resulted in limited progress on reducing inflation and high interest rates. In addition, Malawi’s economy was adversely affected by a severe drought in the 2001/02 season agricultural season. As a result, Malawi’s economy still remains heavily dependent on aid from international nearly 60 percent financial institutions and individual donors. Poverty has remained virtually unchanged over the decade and currently nearly 60perecent of Malawians live below the poverty line2. In March 2000 the country started the process for obtaining debt relief under the HIPC initiative.

B.1.3 Development Picture/Donor Coordination

8. The World Bank, the European Union, and the United Nations are the major multilateral agencies active in Malawi. Britain, Canada, Germany, Japan, the Netherlands, and the United States are the major bilateral donors. Almost all donors are involved in a variety of programs in agriculture, infrastructure, finance, the social sectors, and the environment, with a common aim of reducing poverty.

B.1.4 World Bank Group’s Role 9. The active portfolio for Malawi includes 13 projects with total commitments of US$454 million (as of September 30, 2003). The majority of support is concentrated in the social sectors, representing more than 50% of total commitments. 3 The World Bank also provides technical assistance and advisory services on the formulation of sector investment strategies, assessments, and expenditure reviews. 10. The World Bank Institute (WBI) has sponsored a number of workshops and training programs for senior officials and technical personnel of the government in a variety areas including institution building, anti-corruption, fiscal decentralization, health, education, micro-finance, and banking.

B.1.5 Bank’s Involvement in Public Procurement Reforms in Malawi 11. In 1996, Bank financed a diagnostic study (by M/s International Procurement Services Ltd) to pin point problem areas in the public procurement and supply management system.

2 “Malawi Country Economic Memorandum, Policies for Accelerating Growth”, PREM1, Africa Region, World Bank, January 2003.

3 See -Annex “Malawi Portfolio Status as of September 30, 2003”


The implementation of some of the recommendations (phase II of this work) was financed through the Third Fiscal Restructuring and Deregulation Technical Assistance Project (FRDP III-TA). This Phase II support through FRDP III TA has three main components: • Component 1: drafting of the procurement code, Financial management and Audit Acts. The

Procurement Law, inspired by UNICTRAL Model Law on Procurement of Goods, Construction and Services was enacted on August 1, 2003.

• Component 2: capacity building and training program, which was at the commencement stage during the main CPAR mission.

• Component 3: institutional reforms including restructuring of the Central Government Stores, which was also at the commencement stage during the main CPAR mission.

12. Financial Management, Transparency and Accountability Project (FIMTAP)- As some parts of Components 1,2 and 3 of FRDP III TA could not be finished before that project closed, the overflow of the work, and any actions emerging from this CPAR’s Action Plan are expected to be financed through FIMTAP. The objective FIMTAP is to improve the effective and accountable use of public expenditures through capacity building and institutional strengthening for budget implementation and oversight and increased transparency of government institutions.

B.1.6 Poverty Reduction Strategy Paper (PRSP)

13. Government’s Poverty Reduction Strategy Paper (PRSP) was endorsed by the Bank and Fund Boards in August 2002. One of the pillars of the strategy is promoting good governance. The overall objective of this pillar is to ensure that public institutions and systems protect and benefit the poor. This includes ensuring good public expenditure, establishing an effective incentive structure that will improve works ethics and productivity, taking steps to eliminate corruption and fraud by improving prevention measures, developing institutional capacities for local governance (decentralization) etc. This CPAR report has diagnosed the current public procurement system and its environment and has recommended actions that will contribute to the success of the PRSP objectives.

B.1.7 Country Assistance Strategy (CAS) 14. During the proposed CAS period (FY04 to FY06), the Bank will provide limited and selective lending to help the Government achieve a relatively small number of critical outcomes reflecting the priorities of the Government’s PRSP program. 15. This CAS for FY04-06, presents a transitional program, aimed at helping the Government address urgent development issues that the country currently confronts. The program builds on three pillars: (1) strengthening economic management; (2) establishing a platform for growth; and, (3) improving service delivery, and strengthening safety nets. During this period, Bank will provide financing in the low case for projects that could succeed even if the macroeconomic performance is weak, as well as analytical and advisory services, aimed at achieving critical outcomes that restore the country’s development prospects. These outcomes include (a) reduced HIV incidence, (b) macroeconomic stability, (c) selected agriculture reforms, and (d) improved delivery of basic health, and education services.


16. The CAS (FY 04-06) has clearly identified the Country Procurement Assessment Review (CPAR) and Public Expenditure Review (PER) as analytical tools supporting the pillars of the strategy. Among other reasons, this justifies the timing and relevance of the current CPAR.

C. MORE DETAILS ON A FEW SUBJECTS

C.1 The Anti-Corruption Bureau 17. The ACB, which was established under the CPA and is headed by a Director, who is appointed by the President.3 The Director refers to the Minister of Justice on policy related matters, but is not otherwise subject to control or direction in the performance of his professional duties.4 The ACB has developed the following approach in tackling corruption. • Prevention by direct intervention in public and private bodies in order to effectively change

practices and procedures and by educating and empowering people to take a stand against corruption5

• Enforcement through the Investigation and prosecution of offenders 18. The ACB currently employs 85 staff out of 101 designated posts. An organisational overview of the Bureau is shown in Figure 3- Annexes. 19. The ACB interventions in the area of public procurement have mainly been of preventive and investigative nature. Preventive measures have included the introduction of Regulations under the CPA regarding disclosure of information and conflict of interest; the ACB has also worked with the GCU on the development of the Interim Guidelines and with the Ministry of Finance on the identification and removal of “ghost companies”. Also, ACB officers have received specialised training in procurement processes. Thus, in early 2003 all Corruption Prevention Officers attended a course in Lilongwe designed to transfer knowledge of the Public Procurement Processes to the ACB. This was delivered by consultants from the CGS. A second course for those in the new Specialised Unit was given in August 2003. It is too early to judge effect, but it is important for ACB Investigators to have knowledge of the procurement processes. Once the transfer of knowledge is complete, a specialised course will be organised focusing on enhancing implementation skills. On the investigative side, several high-profile procurement cases have been detected. A few examples are provided in Box 1- Annexes. 20. As mentioned above, the ACB is in the process of establishing a specialised investigation unit focusing specifically on procurement and contracts. The unit currently comprises 6 officers and is based in Lilongwe, however, officers based in Blantyre and Mzuzu will also receive procurement training.

3 CPA Article 5 (1) 4 CPA Article 5 (2) 5 In order to make the ACB more proactively driven, the Corruption Prevention Division of the ACB is developing

Research and Intelligence capabilities. Also, a new Data Bank has been developed and is proven useful.


C.2 E-PROCUREMENT

C.2.1 E-procurement in Malawi 21. E-procurement is a term used to describe a procurement system utilizing the possibilities created by electronic communication and office computers. An e-procurement system is governed by the same basic principles as a normal paper-based system. The main purposes of the system are to promote value for money in public spending, through the application of sound, transparent practices. Besides, an e-procurement system can offer a number of advantages over a normal paper-based system of procurement. Examples could be access for bidders to advertisements, for authorities to legal documents and guidelines, and for oversight authorities to individual electronic procurement protocols and any documents on file. 22. Malawi is a country grappling with major problems of poverty, poor infrastructure, and illiteracy. Is it then not an illusion to promote advanced technology in public procurement, when such basic problems appear more pressing? The answer is: No, e-procurement is an opportunity for Malawi to leap-frog evolution, and reap benefits from comparably small investments. As discussed further below, even the cost incurred by introducing mandatory advertisement by all ministries, through the already existing DISTMS office, is minimal. 23. It is a common misconception to regard the introduction of e-procurement as a question of introducing technology, and thus aligning the success of e-procurement with the rate of penetration for that technology. E-procurement is much more than technology. It is the redesign of workflows and also includes the building of capacity and institutions. All this can be done with the aid of technology. 24. The major issues facing a country such as Malawi, wishing to implement an e-procurement system, can be outlined as follows (Table 3): Table E-Procurement System

Issue areas Basic requirements for e-procurement Situation in Malawi

Governance • Adapted legal framework

• Procurement oversight organisation in place

–

√

Human resources • Capacity to utilize system in place and well trained staff –

Institutions

• Work flows adapted to system

• Coordinating institution in place

• Uniform information (data) schemes applied

• Functioning private market with access to technology and able to

perform under e procurement system

–

√–

–


perform under e-procurement system

Issue areas Basic requirements for e-procurement Situation in Malawi

Technology

• Infrastructure in place

• Access to infrastructure established through office technology

• Necessary e-procurement software in place

(√)

√(√)

On the main issue areas outlined above, the status of Malawi is assessed as follows:

C.2.1.1 Governance and e-procurement 25. With the formation of the DoPP, a procurement oversight organisation is, for the first time, in place in Malawi. The DoPP should understand that introducing e-procurement is not to add yet another task to its long list of responsibilities, but that simple e-procurement initiatives could aid the DoPP in performing its other core tasks. The benefits from introducing countrywide standards and collecting information in a uniform format are obvious when the DoPP monitors the procurement environment of Malawi. Using the Internet to spread procurement information is a cost-effective way for the DoPP to perform its role as the guiding authority. Such information could be rules for implementation, important case law, etc. and on the other hand, prospective bidders could gain easy access to advertisements otherwise scattered in the relevant papers. 26. The new Procurement Act does indeed provide for the necessary legal framework for e-procurement, as it allows information exchange to be electronic, and allows the DoPP to “devise a strategy for, and to promote, the application of modern information and technology communications technology to public procurement”.6 More advanced e-procurement systems will require changes to the country’s basic legal framework in such areas as contract law and general commercial law.7 For e-procurement to advance beyond the initial stages, these additional legal issues must be assessed and solved. 27. The draft Procurement Regulations has a section “Information and Communications Technology for Public Procurement”8, which contains a number of good guiding principles for the new DoPP. The section also requires the formation of an Electronic Procurement Marketplace, which in its simplest form is in line with the recommendations of this report.

C.2.1.2 Human resources 28. The central ministries, besides being well equipped with office technology, also have adequately skilled personnel to operate the equipment. Almost all assistants in the ministries, who are using PCs, have received some form of relevant training.9 On the local level, the knowledge of the use of technology is as scarce as the technology itself. Many local district assemblies are totally without office technology and knowledge thereof. In the private sector knowledge of information technology is almost without exception limited to the very few large companies in the country.

6 The Procurement Act section 16 and section 17 7 Guidance for the legal reforms required before a country can adapt electronic commerce can be found in the

UNCITRAL Model Law for Electronic Commerce. 8 Third draft Procurement Regulations, chapter VII 9 According to the DISTMS office, who conducts and coordinates the training. Relevant statistics on this issue are not

available, but approximately 100 persons receive a diploma from the DISTMS training yearly.


C.2.1.3 Institutions 29. The government of Malawi has proposed the establishment of a representative Civil Service ICT Committee10 to ensure a coordinated government approach to managing, using and investing in office technology. 30. Presently the coordinating office for use of technology in the civil service is the Department of Information Systems and Managing Services (DISTMS) office under the OPC. The DISTMS office holds a central position as the countries coordinating and policymaking body in the field of technology and e-government. The office has a wide-ranging responsibility, ranging from the procurement of computers and data services to capacity building for office assistants in the public sector.11

31. So far, all thoughts on e-government in Malawi have remained at the concept stage, but e-procurement could very well prove to be the first step for the country into e-government and at the same time prove the case on how e-government can provide value without heavy technology investment. 32. In the private sector, only the largest companies have access to the Internet, and access is not perceived as a decisive factor in the competition within the private sector. Certainly, the use of electronic communication as not regarded as a real option when doing business with the public sector. Business associations or any other institutions are not seen actively promoting the spread of information technology in the private sector. Thus, penetration is currently very limited.

C.2.1.4 Technology 33. In Lilongwe almost all central ministries are now connected through a data network.12 For these entities the infrastructure is in place. Other public offices and some districts are connected to the Internet through dial-up connections, often only providing email capability.

10 According to the draft version 3 “ICT Framework”. Representatives are from Ministries of Finance, Information, Health, Education, Defence, Home Affairs, Agriculture, Commerce, and State Corporation Department. Will replace the Government Computer Committee.

11 An overview of the tasks and challenges facing the DISTMS Office can be found in the draft version 3 “ICT Framework” The DISTMS has recently in December 2002 represented the government in the drafting of an “Information Systems Security Policy”

12 The network is known as the Government Wide Area Network and connects the ministries on Capital Hill and elsewhere in Lilongwe


34. E-procurement systems can be categorized as follows:

Table 4: Categories of E-Procurement System E-procurement systems Features Complexity Electronic information system

Supports dissemination of information, monitoring and statistics gathering but does not offer any interactivity between participants

Low. Minimal technical requirements.

Electronic purchasing system

Contains e-commerce features such electronic formation of contracts on pre-determined terms. Suitable for administration of large framework agreements.

Medium. Technical, legal and organisational requirement.

Electronic tendering system

Supports the entire procurement cycle and eliminates the use of paper entirely. Contains functionality for formation of complex contracts, auctioning and complaints handling.

High. Requires mature markets and thorough legal and organisational reforms that cannot be seen outside the context of a larger e-government reform.

35. It is not within the scope of this report to suggest technical solutions or promote any of the proprietary systems that are available on the market. The first steps towards e-procurement in Malawi will naturally be in the form of electronic information systems. Such systems require only the most basic prerequisites, which are commonly available on office PCs.13

36. The central ministries all have a fairly wide penetration of office technology. Most offices are equipped with PCs, and access to the Internet is quite common, even though such connections are often shared among whole offices.14 In the local government on the other hand, there is a more mixed situation. The large city assemblies, such as Blantyre and Lilongwe are at level with the ministries, but in the more rural districts office technology is often non-existent.15 However, because office technology is both sponsored by donors for use in specific projects and government funded, there are no complete statistics as to the penetration of technology in the public sector in Malawi. This fact makes any efforts to promote strategies for use of technology difficult.16

Example: The Mission discussed the issue of information dissemination with the DISTMS office, responsible for maintaining the government web site. Having presented the DISTMS office with a rough estimate of the volume of procurement advertisements to be expected from the central ministries, the office responded that it was ready to put those advertisements on the government web site, and that this could probably be done

13 To disseminate information all that is needed is for the receiving PCs to be equipped with a web browser and access to the Internet.

14 Approximately 90% of offices have PCs in the ministries according to DISTMS 15 DISTMIS was unable to provide any substantiating statistics, but estimates penetration of PCs at district level to

approximately 5% of offices. 16 A large initiative to provide all public employees with smart-cards for identification and thus provide better control

and monitoring of salary expenditure is currently underway. When this project culminates, a side effect is expected to be higher penetration of office technology at all levels.


without increasing staff. So getting basic procurement information on the Internet in Malawi is a question of making the central ministries, all located a few minutes drive from the DISTMS office in Lilongwe, provide the advertisements on a diskette (or even more easily via email) on a weekly basis. This would increase transparency and facilitate gathering of statistics by the DoPP. Even though the number of private bidders able to access the Internet may be limited, such an initiative could be the service that actually prompts them to get that access.

37. This is just an example to illustrate how taking the first basic steps towards e-procurement in Malawi is not an illusion, remote from reality, but an option to be seriously considered by the government as a means of improving transparency and value for money in public procurement. 38. The overall assessment is that Malawi is ready to introduce the first steps of e-procurement by initiating exchange of procurement information through the Internet. As the procurement environment matures with the introduction of the Procurement Act, the DoPP should maintain focus on applying e-procurement as a means of supporting its other goals of transparency, efficiency and value for money in public procurement.

D. The Malawi Private Sector in Brief

39. A summary of large-scale formal businesses in terms of major indicators is shown in the Table below:

TABLE- Economic Indicators of large-scale formal businesses (1998) – Source: National Statistics Office (NSO)

Indicators (%)

Agricul. Mining & quarry

Manufact. Electri. & Water

Build. & Construct.

Distrib. Trans. &comm.

Fin. &RealEst.

Comm. &soc. Serv.

Employment 32.6 0.4 25.2 3.5 7.4 18.7 4.8 7.0 0.4 Remuneration 10.1 0.3 30.6 3.5 3.2 23.9 9.0 17.9 1.5 Total sales 4.9 0.3 30.7 3.8 3.3 44.6 5.3 6.4 0.7 Total purchases

5.1 0.2 29.1 2.0 3.1 49.3 5.2 5.5 0.5

Value added at market prices

3.7 0.4 35.9 7.2 3.4 35.3 5.7 7.3 1.1

Capital investment (Fixed assets)

5.6 1 29.3 35.8 0.7 12.5 2.4 6.6 6.0

Fixed assets (End of Year book value)

4.8 0.2 30.9 32.4 0.8 11.7 5.4 13.1 0.8

Gross profit 1.8 0.5 33.1 9.5 3.9 41.0 5.6 3.4 1.0

40. From the above, the three main sectors relevant from the degree of their participation in public sector procurement are:

• Manufacturing industry

• Building and construction


• Distribution (as it includes suppliers of goods to public sector entities and imports)

D.1 Manufacturing Industry

41. Malawi’s manufacturing industry is small (13% of GDP) and is beset by stagnation of out put, low capacity utilization and falling investment. The manufacturing sector relies heavily on domestic markets and the domestic market is small. As regards to manufactured exports 52% is sugar and sugar products, 42% textile and garments and less than 3% furniture, soap etc. The low and declining level of manufacturing activity is reflected in low capacity utilization, which in Year 2000 was assessed to range from 30% in metal fabrication to 74.3 in the chemicals sub-sector.

D.2 Imports

Statistics

42. In order to facilitate the country’s agro basic economy, fertilizers are one of the major imports of the country with about 125 thousand metric tones imported in 1999. In addition to this, fuels are one of the largest imports for Malawi. The volume of yearly imports and exports is summarized below.

Table- Yearly Trade Statistics17

2000 (M Kwacha) 2001 (M Kwacha) Imports 32,283 39,480 Total Exports 23,625 31,817 Imports cover ratio (E/I)

73% 81%

17 Malawi, national Statistics Office


Table- Major three commodities as a percentage of the total imports (for Year 1999)5

Item % of total imported value

Petrol 6 Diesel 5 % Fertilizer 5% All remaining items 84%

High Cost of Fertilizers

43. Fertilizers prices in Malawi are estimated to be considerably higher than those in the region. One of the reasons is the trading companies’ margins due to little competition and high financial risks as discussed in this section. In year 2002, 40 to 50% of fertilizer trade is undertaken by public and parastatal organizations, manly Agricultural Development and Marketing Corporation (ADMARAC) and Smallholder Farmers’ Fertilizer Revolving Fund of Malawi (SFFRFM). Private importation is carried out by a few large importers.

44. One of the large importers of fertilizers and seeds raised an important issue touching on lack of proper procurement planning. The importer cited cases of bidding documents issued by the government just before these inputs are required with an unrealistically short delivery period. This affects the competition severely with traders importing the commodities from sources who have the commodities ready in stock getting an advantage. A second issue is the large public presence in the trade reducing the volume that private traders handle and reducing their incentives to expand.

Pre-shipment Inspection

45. Pre- shipment inspection is used by governments of developing countries (like Malawi), the main purpose being to safeguard national financial interests (such as prevention of capital flight and commercial fraud for customs duty evasion) and to compensate for inadequacies in administrative infrastructures. The Government’s contract with Society Generally de Surveillance (SGS) has expired in 2003. Subsequently, the government selected Intertek, UK through a competitive process. The latter has started operations since July 2003. Instituting pre-shipment Inspection appears justified given the former PSI firm’s claims on recurring under valuation of imports that it has identified and the fact that pre-shipment services could compensate for the lack of capacity in the customs authorities. 46. Based on the PSI’s report (May 2003), due to under invoicing correction and correction of mis-declaration, the firm’s fee coverage (total savings to the government over the firm’s fees) for the year up to May 2003 is claimed to be about 700%. Although some users indicate that inspection agents might tend to overvalue, the former inspection agent argues that its valuation is based on market research and investigation.


47. In the medium to long term, consideration needs to be given to strengthen the customs authorities to enable it to effectively carry out Destination Inspection and valuation to gradually replace pre-shipment inspection.

Letters of Credit 48. Since the liberalization measures of 1994, importers have the option to have a letter of credit from any one of the commercial Banks. According to the National Bank of Malawi, the following are the conditions for opening an L/C:

• Performa invoice from supplier and terms;

• 100% cash upfront in Malawi Kwacha; • Established customers may apply for credit facility for 30,60,90,180 days in which case

they will not be required for cash cover.

• The opening charges for Letters of Credit, according to the National Bank, are: • Without Cash upfront: 0.5% for establishment fee per month or part thereof with a

minimum of 2500 Kwacha;

• With cash upfront: 0.5% for every three month or part thereof with minimum 2000 Kwacha

Commercial Practices 49. Based on interviews with some suppliers/ contractors, the prevalent method of procurement seems to be based on relationships with preferred supplier/suppliers (this does not include privatized parastatals like ESCOM that have rigorous procurement methods, including ICB). Tenders for supply are not common. Conducting market surveys is also not common. The factors driving such direct contracting are:

• Lack of entrepreneurship and expertise thereby inhibiting active sourcing of suppliers and conducting market surveys;

• Security being an important consideration in the formation of commercial relations

between private sector firms, long term relationships with known suppliers are favored, often to the exclusion of new suppliers. New suppliers could envisage risk and require irrevocable confirmed L/Cs with increased price to their quotations and to the local importer.

• Small size of the local market might not justify preparing a rigorous bidding process

every time a bidding opportunity surfaces. Further, procuring larger volumes in anticipation of government contracts might not be justifiable given the relatively small size of the market.

50. Value Chain Analysis: It is worth noting that efficiency and effectiveness of the procurement function is only part of the value chain. For enhanced competitive advantage i.e. if Malawi private sector is to enhance its competitiveness in domestic market (both government and


non-government contracts), the regional and international market, all activities of the value chain starting from the moment of initial sourcing of inputs to the moment of final receipt of payment the customer should be assessed to be able to add competitive value at each stage of a firm’s activity. For manufacturing sector, for example, such activities18 may comprise of:

• Primary activities: inbound logistics (receiving, storing material handling), operations (machine packaging, assembly etc.), outbound logistics (storing, distribution), marketing and sales and service

• Support activities: firm infrastructure (General management, planning etc.), human

resourced management, technology development and procurement. 51. The value chain is one of the models for assessing and developing competitive advantage. The purpose here is not to recommend one model or another but rather to emphasize that for enhanced competitiveness of the private sector, public and private institutions in support of businesses need to support the private sector to enhance its competitiveness, among other things, based on systematic evaluation of and improvement in the whole set of major activities (procurement, storing, distribution, support activities etc.) 52. INCOTERMS (particularly CIF and FOB) are generally understood and commonly used in the country. 53. There are widespread reports from both the private and public sector that suppliers are colluding and engaging in price-fixing and forming cartels with the purpose of fixing prices. As a result competition suffers and prices are kept artificially high, leading to the public sector receiving less value for money. Especially the transport sector seems to suffer under such practices. Such practices are in direct contradiction with the purpose of the Competition Act, but the Ministry of Trade does not seem intent on rectifying the situation. This is a barrier to the efficient development of the marketplace, and the development of a private sector able to provide the public sector with the functioning market that is a prerequisite for achieving value for money in public procurement. In this regard, it is recommended that the Ministry of Trade and Industry strengthen the enforcement of the Fair Competition Act.

Banking Sector19

54. The Malawian financial system is relatively small, consisting of 8 banking institutions, 1 building society, 4 development financing institutions, 3 leasing/ finance companies, the Malawi Rural Finance Company and several other micro and rural finance institutions and 9 insurance firms. There is a small stock market with 9 listed companies, 1 stockbroker and 16 foreign exchange bureaus. The Banking sector is still concentrated with the National Bank of Malawi representing about 65% of the loan market followed by the commercial Bank of Malawi with approximately 30%. The financial systems are under the regulatory and supervisory oversight of the Reserve Bank of Malawi.

18 Porter, M.E. (1985) Competitive Advantage: Creating and sustaining superior performance, New York, The Free Press

19 “Malawi Financial Sector Review”, Interim Report, June 2003, Finance Private Sector and Infrastructure, Africa Region, World Bank


55. Bank ownership is dominated by the private sector, including both domestic and non-resident investors. Government has progressively divested its ownership interests in the banking sector standing at around 2% of total assets. Although direct government interference appears to be a thing of the past, government influence on the banking system is reflected in the use of domestic savings, as the government is the largest single borrower from the sector (in 2002, total banking system credit to the government) stood at 42% of their total portfolio. 56. The concentration of bank’s investment in Treasury bills has resulted in significant crowding out with the share of private sector loans in total banking assets falling. As at end of 2002, bank credit to the private sector represented 40% of total credit. A notable feature of bank credit in Malawi is the large share of overdrafts in total advances with overdrafts representing 70% of the total loan portfolio in 2002. 57. Lack of access to credit is one of the major constraints to the private sector, affecting its performance including its degree of participation and competitiveness in public sector procurement. As mentioned earlier, given the current circumstances, providing long term commercial credit is not attractive to the banks. Many suppliers and contractors find it very difficult to borrow not only due to the lack of attractiveness to the banks but also due to high interest rates. The Banks interviewed argue that they provide loans and securities based on a careful assessment of their clients and regrettably state that a number of contractors fail to even submit acceptable financial statements to enable determination of their creditworthiness. The problem is therefore multi-fold: a) lack of entrepreneur capacity on the part of the private sector; b) lack of access to credit due to concentration of bank’s investment in T-bills; and c) high cost of capital.

D.3 Summary of Factors Affecting the Competitiveness of Malawian Manufacturers, Importers and Local Suppliers in Public

Sector Procurement • Delayed payments: Contractors complain of delayed payments on government-financed

projects. They report of payments delayed by several months. This has a serious impact on the contractor’s performance (if not existence), particularly given the volatile macro economic environment and high cost of capital discussed in the early parts of this section.

• Bidding in local currency only: Given the rapid inflation rate, high rates of depreciation of the Kwacha, restricting contractors to the local currency increases their costs. The contractors envisaging this financial risk either bid for a very high price or otherwise bid low thereby putting the successful completion of the project at risk. Except for very small contracts (where the financial risk might not be significant), bidders should be given the opportunity to bid in a freely convertible currency of their choice. The reasonableness of the proportions of currencies used needs to be justified based on the source of input.

• Lack of access to credit: As stated earlier in relation to the banking sector, long term commercial credit is not readily available to the local private sector;


• Letters of Credit: although the Banks’ positions of requiring 100% cash cover is understandable, this could be a limitation to small and medium sized importers who may not have credit facilities with the Banks.

• Bid securities and performance guarantees: Contractors produce bank guarantees for bid securities and performance securities. Small and medium sized contractors who have not established relationships with the Bank (in which case they may have credit facilities) are required to use their own assets and deposits as collateral to secure bid securities and performance guarantees i.e. 100% cash cover and 125% property cover. The bank charges for such securities are 1.5% per annum. A number of bid evaluation reports ( in, for example, World Bank Projects) show that a number of low priced local bidders fail in the preliminary examination of their bids for either: a) lack of bid security; or b) lack of submission of appropriate security20. Reasonable percentages for the maximum of bid and performance securities therefore need to be specified in the regulations to ease the strain on working capital of small and medium enterprises; for procurement below a certain amount, the risk is minimal and hence the requirement for bid security should be waived. They should also state that bidding documents may give the option to bidders to provide Bank guarantees or bid bonds from insurance companies. The forms to be attached to the standard bidding documents should follow international practice and prepared in close consultation with banking and insurance sectors.

D.4 Local Construction Industry 58. With the assistance of donors, including the Bank, the Secretariat of the National Industry Council (NCIC) was established to strengthen the registration process, build capacity in the national construction industry. Based on NCIC, less than 30% of the volume of construction works in Malawi is carried out by local firms. The construction industry is not adequately developed, suffering internally from lack of capacity and externally affected buy the macro environment as discussed above. The number of national contractors under each category is shown in the Annex section of this report. As can be seen from the table, a large portion of the local civil contractors falls under the US$ 50,000 equivalent category, which is extremely low by international standards.

59. Even the largest domestic contractors have limited annual turnover; one of the largest domestic contractors has an annual turnover of less than US$ 5 million.

60. Local contractors site that the relatively high turnover in Donor (such as the World Bank’s financed projects) makes it almost impossible for them to increase their capacity and hence demand for lower turnover requirements. This cannot solve the problem, as there is justification in specifying and annual turnover of about twice the contractors’ annual turnover in the recent past. This is done to minimize the risk of employing a less qualified contactor with the consequences of undue delays or even termination due to mal performance.

20 During the main CPAR field work, the Mission incidentally met two local contractors outside of one of the banks complaining that they were caught in between - the bidding documents require a certain form and the issuing bank would like to modify the wording of the Guarantee form attached to the bidding documents.


61. As mentioned earlier, the construction industry is not yet developed and not yet capable to participate in relatively large contracts requiring an annual turnover exceeding US$ 2 to US$ 3 million. Internally, the main problem is lack of entrepreneurship, lack of adequately skilled experts (finance, procurement, contract management, engineering etc.). Government agencies have indicated that a number of local contractors fail in the biding process due to omissions in their bid: amount of bid securities, not attaching relevant qualification information, not filling the bid form properly, not filling the required schedules correctly etc. The same agencies also state the lack of adequate performance by some local construction firms resulting in poor quality and/ or delays in completion period:

62. Externally, the following could be cited as the main obstacles to the development of the local construction industry

• Delays in contract award processes and delayed payments: Contractors complain of delays

in bid evaluation and delayed payments on government-financed projects. This issue is already discussed earlier.

• Bidding in local currency only: As mentioned earlier

• Lack of access to credit: As examined earlier in relation to the banking sector- Long term commercial credit is not readily availed as explained earlier.

• Bid securities and performance guarantees: As discussed earlier.

D.5 Local Consulting Industry

63. Despite concerted efforts with the assistance of a local consultant, the Team could not succeed in getting comprehensive and consistent records on the local consulting industry. Most of the government consulting assignments are donor funded and are open to international competitive processes. Though not supported by exact data, the general feeling is that most of the assignments go to foreign firms. As consultants are normally selected on quality and cost based with a relatively higher weight for quality, the fact that local consultants do not get a major portion of this assignments shows the limitations on local availability and/or outstanding technical competence in the major consulting categories.

64. Based on available information, the consulting industry is therefore not yet adequately developed and local consulting firms are for the most one-man firms. The local consulting is mostly limited to general consultancy, architects and quantity surveyors, economics, auditing and finance. A number of issues have been identified with regards to the local consulting industry:

• Delays in evaluation of proposals and award process (both on the side of implementing

agencies and donors) and delayed payments: this is a recurrent issue that has been reappearing through out this report. In the case of consultants, delays in award extending beyond the validity period (usually 90 days) means loosing hardly acquired key staff that were the basis of the technical evaluation and subsequent complications. Delays in award and/or payment also increase consultants’ financial risks (usually reflected in increased price) and with negative impact on the cash flow (when it happens)


• Lack of capacity to obtain advance payment guarantees and required insurance covers in Request for Proposals.

• The necessity for fair and transparent evaluation criteria including assigning reasonable points to local participation in the evaluation criteria (as applicable and as relevant) public opening of the financial proposals.

ANNEXES

Box 1: Examples of Procurement Cases Investigated by the ACB

The SECUOM case21 Investigations were concluded and it was established that public officers involved in awarding the contract acted in a manner conducive and connected to corrupt practices. The contract was awarded without following Government procedures and the contracts was cancelled. The Government was to spend more than USD 26 million on the contract as compared to USD 16 million offered by De la Rue, a UK based company, which was earlier properly evaluated by a technical committee appointed by Government. Over USD 10 million of unnecessary expenditure was therefore avoided.

The Apex Car Sales Limited contract Like the SECUOM case public officers involved in the award of the contract in a manner conducive and connected to corrupt practices. The investigation have been concluded and it was further established that the Land Rovers were heavily overpriced and that Government was to incur unnecessary expenditure of over MK 150 million (app. USD 1.7 million).

21 From the ACB Annual report covering the period July 2000 to June 2001.


Box 2: Example of NGO Activities in the Area of Public Procurement Guidelines and analysis of Public Procurement in Slovakia In Slovakia, TI has established a working group on public procurement. The outcome of activities of this group is a practical instruction brochure for procurers and applicants in the system of public procurement - “How to proceed in the public procurement process,” as well as an analysis of the current system of public procurement - “Public procurement in Slovakia – some thoughts for further development.”

Licitenet.com, Ecuador In Ecuador the national chapter of TI has developed an online database to inform the public about the process of public procurement in the country. The initiative is formed jointly by the private sector and civil society. A number of public institutions also assisted in the development of the database, including the State Attorney General and the Association of Municipalities. The general objective of the Licitinet database was to establish a website portal from which citizens can monitor the acquisition of goods and services by the public sector. Licitinet provides information on different procurement processes: current, closed and pending. A search can be made based on the date of bidding; name of the institution issuing the tender; place of execution; type of project or service; type of contract; or type of participant.

Russian Regional Integrity Initiative In Russia the national chapter of TI has developed a local integrity system, focusing on access to information, codes of conduct for public officials and public procurement. The integrity system is implemented in two model communities. The initiative is combined with a training programme for governmental institutions.

Changing the rules of the games – procurement reform in the Philippines In the Philippines an NGO coalition, “Procurement Watch Inc.” (PWI) has been heavily involved in the reform of the Philippine procurement system. The coalition has ensured that the participation of civil society in the procurement process has been institutionalised in the Procurement Act and that NGO representatives may act as observes throughout. For more information on the extensive activities and results of PWI see www.procurementwatch.org.ph


Box 3: Examples of Performance Indicators to Monitor Level of Corruption in Public Procurement

• Number and percentage of contracts awarded using methods that are less competitive than those set out in the approved procurement plan.

• Total value of contracts awarded using methods that are less competitive than those set out in the approved procurement plan, and their value as a percentage of all public contracts awarded.

• Number and percentage of public contracts awarded without a bidding procedure. • Total value of all public contracts awarded without a bidding procedure, and their value as

apercentage of the total value of all public contracts awarded. • Number and percentage of approved contract variations that exceed the thresholds set out

in the Public Procurement Regulations • Total value of approved contract variations that exceed the thresholds set out in the Public

Procurement Regulations, and their value as a percentage of the total value of the contracts to which they are related.

• Number and percentage of contracts terminated early by ministries and departments after payments were made but before goods and services were delivered.

• Total value of payments issued against contracts terminated early by ministries and departments before goods and services were delivered and the value of this amount as a percentage of the total value of the contracts to which they are related.

• Number and percentage of contracts abandoned by contractors after payments were received but before goods and services were delivered.

• Total value of payments issued against contracts abandoned by contractors before goods and services were delivered, and the value of this amount as a percentage of the total value of the contracts to which they are related.

• Number of applications to a potential procurement hotline • Number of applications forwarded to the ACB for investigation • Number of procurement cases prosecuted • Number of procurement convictions • Number of NGOs monitoring procurement processes • Number of information activities regarding procurement being conducted • Number of civil servants trained under the various procurement training programs


Figure 1: Structure of the Government Procurement and Supply Organization

Director of Procurement

Revenue

Expenditure

Accounts Data Training Human ResourcesDeputy Director

Procurement

Receipts and distribution

Inspection and audit

Supply depots

BlantyreZomba

Lilongwe

Mzuzu

Liwonde

Kasungu


Figure 2: ACB Organizational Overview

Director

Deputy D irector

Assistant D irector Assistant D irector Bureau SecretarySenior System s

Analyst

InvestigationsD ivis ion (B lantyre)

InvestigationsD ivis ion (Lilongwe)

InvestigationsDivision (Mzuzu)

Public EducationD ivis ion (Lilongwe)

Corruption PreventionD ivis ion (Lilongwe)

P rosecutionsDivis ion (B lantyre)

O ffice ServicesDivision (Lilongwe)

HR Managem ent D ivision (Lilongwe)

Accounts & AuditD ivision (Lilongwe)

Press RelationsO fficer

Operations Departm entSupport Services

Departm entManagem ent Inform ation

System s Departm ent

Table 1. PVHO Financial year 2001/2002

Income/ Expenditure Kw USD % of total Operating income 178.118.026 2.022.765 - - hereof plant and vehicle hire 153.622.253 1.744.583 84 - hereof engineering service 24.495.773 278.182 13 Other revenue 5.090.016 57.804 3 Total income 183.208.042 2.080.568 100 Total expenditure 175.124.006 1.988.763 100 - hereof salaries 47.300.183 537.156 27 - hereof on materials 50.030.092 568.158 29 - hereof on depreciation and provisions

29.736.050 337.692 17

- hereof on repairs and maintenance 1.802.084 20.465 1 Net profit 8.084.036 91.805 -

Source: PVHO Financial report 2001/2002


Table 2. PVHO Procurement Volume 2002 (estimates)

Procurement volume Kw USD %Total annual procurement volume 40.000.000 454.253 100 Of total volume, how much is Government funded

Nil - -

Of total volume, how much is donor funded 4.000.000 45.425 10 Types of procurement - of total volume Kw USD %

Works 2.000.000 22.713 5Goods 32.000.000 363.402 80 Services 6.000.000 68.138 15 Procurement method - Approximate percentage of total procured through:

Kw USD %

- Shopping (use of quotations) 3.000.000 34.069 7,5 - Open tendering 5.000.000 56.782 12,5 - Restricted tendering 30.000.000 340.689 75 - Single source procurement 2.000.000 22.713 5

Average length of time between bid submission and contract award –when using:

Days

- Shopping 3 - Open tendering 21 - Restricted tendering (with pre-qualification) 30

Payment of suppliers Days Average time between receiving invoice and payment 30-60

Source: Estimates provided by the PVHO, June 2003.

Table 3: Current CGS Staff

Stores posts in the CGS 236 Stores posts in Common Service 455 Others, i.e. accounting service 35 Human resource management services 69 Data services 19 Total 814

Source: CGS, June 2003


Table 4: CGS Procurement Volume 1 July 2002 – 31 June 2003 (estimates)

Procurement volume Kw USD %Total annual procurement volume 67.000.000 641.376 100 Of total volume, how much is Government funded

67.000.000 641.376 100

Types of procurement - of total volume Kw USD %

Goods 67.000.000 641.376 100 Procurement method - Approximate percentage of total procured through:

Kw USD %

- Shopping (use of quotations) 4.000.000 38.291 6- Open tendering 27.000.000 258.465 40 - Restricted tendering 34.000.000 325.474 51 - Single source procurement 2.000.000 19.146 3

Average length of time between bid submission and contract award – when using:

Days (working)

- Shopping 2 - Open tendering 40 - Restricted tendering (with pre-qualification) 5

Payment of suppliers Days Average time between receiving invoice and payment 30-60 Source: Estimates provided by the CGS, August 2003.

\


Table 5.1 Major Registration Lists in Use at the Time of Drafting the CPAR

Registration Characteristics GCU list of approved suppliers

A register of approved suppliers of goods, civil works, and consultancy services for use by all government institutions. Application is limited to maximum 3 out of 8 geographical areas and requires previous registration with the NCIC (for works). The list is used by procuring entities when picking firms to be approached for quotations. According to the GCU, the firms are only picked for the list for small value procurement (below 100.000 K), even though this is not mentioned in the advertisement calling for applications. With the demise of the GCU, this list should cease to exist.

NCIC list of contractors

According to the NCIC Act, all contractors and consultants (construction) must be registered with the NCIC to bid for work in Malawi. Companies are registered in various categories depending on their capacity and past record. Registration follows internal guidelines issued by the NCIC and must be renewed annually. The NCIC does audit some of the applications received, but very few, and only in the higher categories. Outside the annual renewals, information on registered bidders is not updated.

Registration Characteristics National Roads Authority list of contractors

In line with most major procuring entities, the NRA maintains registration lists of their own for works and consultancy. A contractor seeking to be short-listed by the NRA would have to be registered both with the NRA and the NCIC.


Table 5.2 Number of Registered Contractors Under Each Category22

Category Number

Building- Unlimited 39 Building- 30 Million Kwacha23 95 Building- 10 Million Kwacha 27 Building- 5 million Kwacha 50 Building- 1 million Kwacha 7 Borehole and drilling 21 Landscape 5 Civil Contractors- Unlimited 14 Civil Contractors-50 million Kwacha 11 Civil contractors- 15 million Kwacha 52 Civil contractors- 5 million Kwacha 223 Civil contractors- 2.5 million Kwacha

5

Electrical contractors- Unlimited 6 Electrical contractors- 15 million 3 Electrical contractors- 7.5 million 1 Electrical contractors- 5 million category

4

Electrical contractors- 2.5 million 24 Electrical contractors- 250,000 Kwacha

4

Consulting engineers (Construction) 25 Consulting architects 10 Quantity surveyors 8

22 Source: National Industry Council, Malawi 23 1US$ = 97.5 Malawi Kwacha (as of August 17, 2003)


Table 6. Malawi Portfolio Status (as of September 30, 2003)

DA

TE

,APP

RO

VA

L

DA

TE

,SIG

NIN

G

DA

TE

,EFF

EC

TV

DA

TE

,OR

IGIN

AL

CL

OSI

NG

DA

TE

,RE

VC

LO

SNG

AG

EY

RS

NE

TC

OM

MA

MT

TO

TD

ISB

#PR

OB

PRO

J

LA

TE

STD

O

LA

TE

STIP

#R

ISK

FLG

S

CR

ITIC

AL

RSK

EFF

DL

Y

FIN

PER

F

SLO

WD

ISB

MASAF II 10/15/98 12/4/98 2/10/99 5/31/03 11/30/03 5.0 66.00 62.45 0 S S 2 1

Secondary Education 3/24/98 4/17/98 8/19/98 6/30/03 6/30/04 5.6 48.20 29.53 0 S S 2 1

Privatization and Utility Reform Project 6/27/00 9/28/00 1/27/01 12/31/04 12/31/04 3.3 28.90 5.68 0 S S 2 1

Regional Trade Fac. Proj. - Malawi 4/3/01 8/20/01 2/5/02 6/30/11 6/30/11 2.6 15.00 3.75 0 S S 2 1

Pop./Family Planning 9/23/98 10/13/98 4/14/99 6/30/02 12/31/03 5.1 5.00 2.86 0 S S 2 1

ROAD MAIN. & REHAB 6/10/99 6/30/99 11/19/99 3/31/05 3/31/05 4.4 30.00 15.80 0 S S 1

EMERGENCY DROUGHT RECOVERY PROJECT 11/5/02 12/19/02 1/13/03 11/30/04 11/30/04 1.0 50.00 33.32 0 S S 1

NAT WATER DEV 6/28/95 11/1/95 5/1/96 6/30/03 12/31/03 8.3 82.40 65.66 0 S S 1

Mulanje Mt. Biodiversity Conservation Pr 4/17/01 7/9/01 8/15/01 6/30/08 6/30/08 2.5 6.75 0.57 0 S S 1

FIN. MGMT, TRANSPARENCY, ACCOUNTABILITY 3/6/03 4/24/03 6/2/03 3/1/08 3/1/08 0.6 23.70 2.67 0 S S 1

TA - ADJUSTMENT (FRDP III) 12/21/00 1/11/01 1/23/01 12/31/03 12/31/03 2.8 3.00 1.05 0 S S 1

MASAF III 6/10/03 7/9/03#24 12/31/06 12/31/06 0.4 60.00 0.00 0 S S 1

Multi-Sectoral AIDS Project (MAP) 8/25/03 9/11/03# # 12/31/08 0.2 35.00 0.00 0 # # 1

ENVIRONMENTAL MANAGEMENT 6/12/97 9/12/97 12/8/97# 12/31/02 0.0 0.00 0.00 0 U U 0

DO: Development objective IP: Implementation Progress

24 While this CPAR report was in progress, Malawi Social Action Fund (MASAIII) became Effective on 11/12/2003


Table 7. Malawi Bank financed projects’ (portfolio) Performance FY 02-03 25

INDICATORS PERFORMANCE Financial management

Disbursement applications Rejection & Reduction Rate

8% in value and 28% in number of applications

Qualified financial staff

-All projects now have engaged qualified Finance Managers -Projects with more than one year of implementation remaining have accounting systems and Accounting Systems Manuals in place.

Audit reports All active projects submitted their FY01/02 audit reports within a reasonable period (most by December 2002) and the quality of reports was acceptable For FY02/03, financial managers have agreed to submit all required audit reports by 15 December.

Counterpart funds Inadequate budget allocations and delayed release of counterpart funds

Procurement Formally agreed procurement plans with the Bank

Only 6 projects have formally agreed procurement plans

Procurement staff Almost all projects with one year or more of implementation period have procurement officers

Monitoring and evaluation

Line ministry-project linkages Various arrangements between line ministries and project implementation units

Monitoring and evaluation (M& E) staff

Four projects have M&E officers (2 projects are in process of recruitment and in two projects, this is combined with Finance)

Regular progress reports Almost all projects produce regular progress reports

Procurement Methods

25 Based on “Malawi Government/World Bank Joint Project Implementation Committee- Progress Report for First Quarter FY 200/2004”, September 30, 2003


Table 8.1 Procurement Methods Provided for In the Interim Guidelines Procurement method Characteristics Open tendering process

The preferred method for procurement of goods above the threshold. All works must be tendered unless approval for other method is given. No specific criteria for such approval are listed.

Restricted/selective tendering

Allowed only with approval of GCU. No specific criteria for such approval are listed. Bidders can be picked from shortlist/registration list maintained by the procuring entity.

Direct agreement/negotiation

Allowed only with approval from GCU. Criteria mentioned in the Guidelines.

Request for quotations

Allowed for all purchases of goods under the threshold. Only bidders from the registration list of approved suppliers from GCU are allowed. Minimum of three quotations must be requested. For works bidders must be registered with the NCIC.

Request for proposals for services

Preferred method for procurement of services.

Single source procurement or direct contracting

Allowed only for services in continuation of existing projects or emergency.


Table 8.2 Procurement Methods Provided for in the New Public Procurement Act Procurement method Characteristics International tender

(a) when the estimated value of the stated procurement exceeds the amount set by regulation (b) when the goods, works or services are not available under competitive price and other conditions from more than two suppliers in Malawi, or (c) when a supplier was not identified by a national tendering proceeding. A tender in which the participation of foreign bidders is solicited. Shall involve publication in international media of the invitation to submit tenders, or to apply for pre-qualification, if such procedures take place.

National tender Is the procurement method to be used, when none of the exceptions apply.

Restricted tender

(a) when the goods, works or services are only available from a limited number of suppliers, all of whom are known to the procuring entity (b) when the time and cost of considering a large number of tenders is disproportionate to the value of the procurement.

Two-stage tendering

(a) when it is not feasible at the outset of the procurement proceedings to define fully the technical or contractual aspects of the procurement (b) when, because of the complex nature of the goods, works and services to be produced, the procuring entity wishes to consider various technical or contractual solutions, and to negotiate with bidders about the relative merits of those variants, before deciding on the final technical or contractual specifications.

Request for quotations

(a) readily available commercially standard goods not specially manufactured to the particular specifications of the procuring entity, when the estimated value of the procurement does not exceed the amount set by regulation (b) small works, when the estimated value of the procurement does not exceed the amount set by regulation (c) routine services, when the estimated value of the procurement does not exceed the amount set by regulation. In addition a “local request-for-quotations” method requires that goods or works are ordinarily available at competitive prices.

Single source procurement

(a) when the estimated value of the procurement does not exceed the amount set in the Regulations (b) when only one supplier has the technical capability or capacity to fulfil the procurement requirement, or only one supplier has the exclusive right to realize manufacture of the goods, carry out the works, or perform the services to be procured (c) when there is an emergency need for the goods, works and services, involving an imminent threat to the physical safety of the population or of damage to property, and engaging in tendering proceedings or other procurement methods would therefore be impractical (d) when the procuring entity, having procured goods, works and services from a supplier, determines that additional goods, construction or services must be procured from the same source for reasons of standardization or because of the need for compatibility with existing goods, equipment, technology, construction or services. This takes into account the effectiveness of the original procurement in meeting the needs of the procuring entity, the limited size of the proposed procurement in relation to the original procurement, the reasonableness of the price and the unsuitability of alternatives to the goods or services in question.


Procurement method Characteristics Request for proposals for services

Method to be used for the procurement of consultants’ services and other types of intellectual services.

Table 9: Composition of IPCs in a Sample 26 Number % of total Number of IPCs included in list 35 100% IPCs which include a store officer 21 60% Total IPC members on the list 163 100% Number of stores officers 25 15% IPC members with no higher education27 86 53% IPC members who has participated in any training/ further professional development

3 2%

26 In connection with a World Bank funded consultancy on Capacity Building and Training in Procurement (2003), the GCU had submitted a list of IPC members in need of procurement training. The list included 163 IPC members from 35 ministries and departments. While only covering a selection of the large number of IPCs in the public administration, the list provides interesting information on the composition of some of the current IPCs and their background. 27 Beyond high school level


ANNEX – QUESTIONNAIRES

Annex A - Checklist comparing National Competitive Bidding Procedures and World Bank Policy

Yes No Bank Policy Are there eligibility restrictions based on nationality of bidder and/or origin of goods (other than primary boycotts)?

XNot allowed

Are there primary boycotts, which are established by law?

X Only primary boycotts are acceptable

Are bidding opportunities advertised in the local press?

X Required

Are prospective bidders allowed at least 30 days for bid preparation (except for commodities/small goods contracts)?

X Required

Are contractors/suppliers pre-qualified for large/specialized contracts?

X Required

Are minimum experience, technical and financial requirements (for pre- or post-qualification) explicitly stated in the documents?

Registration should not be used as a substitute for advertisement when open competition is required. However, when advertising for civil works, borrowers could indicate the required minimum category of contractor specified in the registration system.

X

X

Required

Required

Is an invitation to pre-qualify advertised for each procurement involving large or complex potential contracts?

X Required

Are joint ventures with local firms required for foreign firms’ eligibility?

X Not allowed

Are joint venture partners jointly liable? X

Required

Are there set limitations to the number of firms who can bid for a contract?

X Not allowed



Are parastatals allowed to bid? X

Acceptable only if they (i) are financially autonomous, (ii) operate under commercial law, and (iii) are independent from borrower and its purchasing/contracting authority.

Are bidders required to register with a local or federal authority as a prior condition for bidding?

X Should be discouraged. Acceptable only if registration criteria, process and cost reasonable/efficient and qualified foreign firms are not precluded from competing.

Are extensions to bid validity allowed? X

Acceptable only if justified by exceptional circumstances.

Are there restrictions on the means of delivery of bids?

XNot allowed, except when bidders have to submit physical samples. Then they can be required to deliver bids by mail, by courier, by hand, etc.

Is preference given to suppliers or contractors based on region or locality of registration, small size, ethnic ownership, etc.?

X

Not allowed

Are there restrictions on sources of labour and material?

X Not allowed, except for unskilled labour, if available locally.

Is public bid opening required? X Required Is a “two envelope” bid opening procedure permitted for procurement of goods or works? 28 X

Should be discouraged. Allowed only if (i) domestic law precludes the use of one envelope and (ii) provided adequate safeguards against retaining unopened second envelope are incorporated in the two envelope procedures and that effective bid protest mechanisms are already in place for the due processing of bid complaints.

28 All technical envelopes are opened first and, after review, price envelopes of all or only qualified/responsive bids are opened in the second round.



Is automatic rebidding required if too few bids are received?

X

Acceptable, provided all responsive bidders are allowed to bid, the process is efficient and no serious delays result.

Is “bracketing” used in bid evaluations? 29

Are bid evaluation criteria other than price allowed?

X

X Not allowed

Only if quantified in monetary terms

Is award made to lowest evaluated qualified and responsive bidder?

X Required

Are price negotiations conducted with “winning” bidders prior to contract signature?

X Not allowed, except where the bid price is substantially above market or budget levels and then only if negotiations are carried out to try to reach a satisfactory contract through reduction in scope and/or reallocation of risk and responsibility which can be reflected in a reduction in Contract Price. (See Guidelines para 2.60)

Are price adjustment provisions generally used? X

Not required, but recommended for works contracts of one year or more in duration when domestic inflation rate is high.

Are the terms and conditions used in goods and works procurement generally appropriate for the size and nature of contract intended?

X

Required (to be acceptable they should be balanced, reasonable, and clearly address the most important issues that lead to problems during performance, e.g. risk allocation, payment, inspection, completion/acceptance, insurance, warranties, changes, contract remedies, force majeure, governing law, termination, etc.)

Are contract scope/conditions modified during implementation?

X Acceptable, but the Bank’s approval is required for changes in those contracts that were subject to prior review under the Loan Agreement.

29 Rejection of bids outside a range or “bracket” of bid values.


Annex B – Questionnaire on Public Procurement System

Section A - Legal Framework GENERAL FEATURES

Identify predominant legal system (i.e. Common/Civil Law; Socialist; other).

Common Law. Identify form of government (i.e. federal or centralized).

Malawi is a republic with centralized government. However, since 1998 a process of decentralization of authority to the district assemblies has been ongoing. Does the Constitution (if there is one) contain any provision directly bearing on public sector procurement? (If so, describe).

No Is the country a signatory (or planning to become one) to the Agreement on Government Procurement of the World Trade Organization?

No Does the basic contract law contain any provision directly bearing on public sector procurement? (If so, describe).

No Is there a separate body of law, which regulates public sector procurement, or is it governed by regulations issued under an organic finance act?

Yes, the Procurement Act covering all public procurement at both central and local levels. Is the system clear, comprehensive and consistent? Does it cover all essential aspects with no unduly complicated, unnecessary, conflicting or outdated regulations? Are rules found in various distinct sources or within a well-coordinated legal framework?

With the enactment of the Procurement Act, and subsequent issue of the Procurement Regulations, the legal system for public procurement will be consistent. Is the hierarchy of the sources of procurement rules well established?

Yes, with the enactment of the new Procurement Act, the hierarchy for procurement rules will be well established. What is the scope of coverage for the procurement legal framework? Does it cover sub-national government? Does it include coverage of all government procurement including security and military procurement?

All public procurement in Malawi is covered by the Act, with the exception of procurement by parastatals not utilizing “public funds” but includes to some extent procurement of a sensitive nature by the military and security forces.


Are there separate procurement rules established for parastatals? Describe.

No, but several large parastatals, such as ESCOM (electricity provider) have internal procurement rules of their own. Is the procurement function decentralized? If so, describe basic structure, name the main decentralized procuring entities and indicate their role, rights, and responsibilities.

No, the Government Contracting Out Unit (GCU) is responsible for approving all procurement above a certain threshold. With the introduction of the Procurement Act, procurement decisions will be decentralized to the Internal Procurement Committees, which every procurement entity are required to establish. All centralized approvals will cease, and the central authority, the office of Director of Public Procurement (DoPP) will transform into a monitoring, oversight and policy making body. Is there an entity(ies) with oversight responsibilities for procurement functions throughout public administration (e.g., with primary regulatory powers, responsible for harmonization of rules and monitoring of compliance)? If so, identify and describe responsibilities and structure.

No, not currently, but the Procurement Act will introduce the office of the Director of Public Procurement. The DoPP will be detached from the procurement process and responsible for policy and monitoring. Is there a Central Tender Board or a similar institution? What are its duties and responsibilities?

With the Procurement Act all centralized approvals will cease. Does the system allow/facilitate the introduction of new and innovative techniques and contracting practices without compromising basic principles?

Even though the Procurement Act and Regulations are quite detailed, there is adequate room for adaptation of new techniques within the overall legal framework. Are there rules/procedures regarding bidder suspension and debarment?

Yes, IPCs and DoPP can debar (blacklist) bidders based on previous performance/irregularities. Is the country a member of regional trade/customs agreements? (If so, specify)

Yes. COMESA, SADC, and PTA. 17. Are there primary/secondary boycotts? (Specify) *No 18. Are there provisions regarding preferences for particular categories of suppliers of goods, works and services? (Specify)

Yes, domestic preference is allowed in the new Procurement Act. 19. Are there arbitration rules applicable to procurement contracts? Are they consistent with international rules such as those embodied in the UNCITRAL Model Law on Arbitration? (Highlight major differences)

The new Procurement Act allows arbitration in public procurement contracts. There are no standard contracts but terms for public contracts often contain arbitration clauses. Without such specific agreement, public contracts are subject to the legal procedures of the courts. There is no Arbitration Act or similar in Malawi.


20. Are there laws or regulations governing policies and procedures for awarding concessions/contracts for private sector provision/operation of power, water or other infrastructure facilities? (BOO, BOT, etc.) Do any general conditions of contract apply as a matter of law or regulation?

No, the Procurement Act applies. However, the procurement Act does not apply to entities unless they utilize “public funds”. Publicly owned companies funded by subscriptions/user levees are thereby outside the scope of the Act.

BASIS OF TRANSPARENCY

Is there a legal or regulatory requirement for public disclosure of procurement legal texts?

Yes, legal texts are published in the Government Gazette. Are there mandatory requirements for maintaining written records of procurement? To what extent are they available to the general public?

Yes, public entities are required to preserve all files. With the introduction of the Procurement Act a comprehensive Procurement Record will be mandatory. The content of the Record will be available to the public, with certain limitations. Are requirements for advertisement of contracting opportunities adequate? Does the country have anational gazette (or other similar publication) published in a timely fashion? Is it easily available to the general public?

Advertisement of procurement opportunities is conducted through (international) newspapers and the Government Gazette. Are requirements regarding public bid opening, if any, appropriate?

Yes, the new Procurement Act contains adequate rules. Are negotiations after bid opening or award selection allowed? Do the rules on negotiated procurement, if any, provide the basis for a fair and transparent process?

According to the Procurement Act pre-contract negotiation is forbidden, the procuring entity may only seek clarifications, but not negotiate. Are conditions for use of various procurement methods clearly established? Is there an explicit requirement that open competitive bidding is the preferred or default method?

Yes, competitive bidding is the preferred method, but a number of loosely defined exceptions leave room for interpretation and irregularities. Is there a requirement for public notice of contract awards?

No, but there will be under the new Procurement Act. Are there clear and appropriate requirements for bid and contract securities?

Currently there are no standards on such requirements. Requirements differ from tender to tender.


Are qualification requirements for bidders, if any, fair and appropriate for the purpose of the contract?

No, but comprehensive and adequate qualification requirement are contained in the standard new Procurement Act. Do requirements for bid examination and evaluation provide the basis for a rational and fair process?

The current guidelines are rudimentary, but the Procurement Act contains the necessary provisions for a rational and fair process. Are summaries of information about public procurement published (e.g. number of bids received, number of contracts awarded, names of successful bidders)? If so, describe scope and frequency.

No, except for NRA tenders, but this will become a requirement through the Procurement Act.

12. Does government hold regular meetings with the business community to discuss public procurement issues?

No. 13. Is there a conflict of interest policy in effect? (If so, describe its essential features).

Yes, both the Anti-Corruption legislation and the new Procurement Act specifically outlaws decisions made by public employees in conflicts of interest. 14. Are there laws on bribery of government officials and are they enforced? Do government bidding documents and contracts contain anti-bribery and anti-corruption conditions?

Yes, bribes are covered by the Anti-Corruption legislation, which is enforced by the Anti-Corruption Bureau.

BASIS OF ACCOUNTABILITY

Are government employees expected to follow a published code of ethics? If so, describe its basic features.

Currently no code of ethics for government employees exists. However, the HRMD of the OPC is currently working on a code of conduct for the Malawi Civil Service. While still fragmentary, it appears that the Code of Conduct will address key issues of relevance to public procurement such as conflict of interest; confidentiality versus freedom of access to information; work ethics, including care of government property; etc. Is there an accessible and secure process for bidders to report bribes by others and solicitation/extortion of bribes by government officials?

Bribes can be reported through the hotline operated by the Anti-Corruption Bureau (ACB). Do bidders have adequate access to administrative or judicial review/appeal?

The Procurement Act will introduce the DoPP as a specialized procurement appeals body.


Are there measures/initiatives to curb/control corruption, e.g. anti-corruption statutes and/or bodies, whistle-blower statutes, comprehensive reforms of the civil service/judiciary, regional initiatives, provisions in the criminal law, anti-bribery provisions, etc.? (If so, describe)

Anti-corruption initiatives are spearheaded by the ACB, whose mandate and legality derives from the Corrupt Practices Act (CPA) No. 18 of 1995. A working group under the Malawi Law Commission reviewed the Act in 2002, and a number of amendments have been suggested. If approved, these amendments will broaden the scope and operating field of the ACB, for example by allowing the Bureau to prosecute cases without obtaining prior approval by the Director of Public Prosecution. No national framework, such as a national anti-corruption strategy and action plan, exists.

Section B - Trade/Customs Practices Are foreign firms engaged in trade with the country required to use a local agent?

There is no legal framework for such a requirement. Some foreign firm have local agents. Is there evidence of any trade malpractice affecting public sector procurement?

No Is inspection conducted according to generally established procedures? Are there indications that the inspection is not effective?

Malawi has pre-shipment inspection conducted according to generally established practices. There is no strong evidence supporting the ineffectiveness of pre-shipment inspection. Do pre-shipment/post-shipment inspection, if any, unduly increase the procurement lead time?

Average lead time is one week according to importers. Is counter-trade used? Barter agreements? For what percentage of the country’s total trade?

Generally no, although it cannot be excluded that counter-trade is used in special cases, i.e. weapons import.Are the ICC’s INCOTERMS generally understood and commonly used in the Country? Are other trade terms used?

Yes, they are generally used by importers and exporters Are licensing and customs procedures generally transparent and efficient?

No major issue with customs has been raised.Are “facilitation” payments normally necessary to clear goods through customs, obtain work permits for expatriate labour, process monthly payment certificates/invoices?

No, not common as per the Chamber of Commerce Are staff familiar with shipping and other trade documents? With documentary credits?

Yes, no major problem in this regard (as per assessment of the Chamber of Commerce)

Section C - Financial/Budgetary Framework


Are banks capable of issuing Letters of Credit?

Yes Are banks generally creditworthy?

Yes

Can bid, performance and advance payment securities be obtained easily? What formats are permitted? Bank guarantees? Bonds? Other? Provide details on cost, if available.

Bidders complain of 100% cash cover as collateral. Both Bank guarantees and bid bonds are used. Are the requirements for issuance of bid, performance, and other securities to suppliers/contractors reasonable?

As mentioned above

Do suppliers/contractors have reasonable access to credit?

Access to credit, particularly for the small firms is limited- cost of capital is high with interest rates of about 50%; exchange rate is volatile and inflation rate is high. Do implementing agencies obtain budgetary authorizations for contract payments falling due beyond the current financial year?

Generally, Yes Are major projects or programs clearly identified in government budget estimates?

Yes What procedures are followed to ensure the procuring entity obtains budget authorization prior to inviting bids?

Bids are invited only after securing the budget.

Do procuring entities reliably receive the monies authorized? Or is the budget subject to revision during the year by a restrictive cash release system?

The budget is subject to revision- Cash budget system.

Section D - Public Sector Procurement of Goods/Works GENERAL RISK ASSESSMENT Is staff working in public sector procurement area held in high regard?

Typically, the staff working in public sector procurement is low-grade stores officers, without sufficient procurement training and expertise. The procurement profession is not recognized as a cadre in its own right within the civil service system. This contributes to the general low regard for staff working in public sector procurement. Are pay levels for staff working on procurement comparable to that for other public and private sector technical specialists?

Generally, the pay levels are lower than for both public and private sector technical specialist as procurement is being undertaken by low-graded stores /material management officers.


Does a code of ethics exist that staff working in procurement are expected to follow?

No specialized code of ethics for procurement officials exists. Are the authorities relating to procurement clearly delegated to the entities carrying out the process? Are the applicable procedures clearly defined?

The composition and roles of the parties involved in the procurement process are clearly defined in the new Procurement Act. Clear procedures for practical implementation remains to be defined. Are procurement decisions overridden by higher governmental agencies? If so, by whom? To what degree is the procurement decision-making process independent and based on transparent criteria?

With the decentralized procurement system invoked by the new Procurement Act, the decentralized procurement units (the OPC) will make their own and independent procurement decisions. However, in certain instances, for example in cases of large-scale procurement, the DoPP may nominate additional members to the IPC. It remains to be seen, whether these members will be left to operate independently from the DoPP or whether they will serve as a mechanism for the DoPP to retain control over certain tenders. Notably, the current GCU, has developed an informal practice of soliciting decision making from the OPP. Does the highest level of government encourage/support/enforce compliance with existing procurement regulations? Are violations investigated and procurement/other responsible officials held accountable?

Among others the President have on several occasions voiced their commitment to the anti-corruption cause in general and to combating corruption in procurement specifically. However, lack of enforcement poses one of the major risks to the further development of the procurement system. Thus, there is a general lack of resources and capability to investigate more complex procurement cases. Despite this there has been occasions, where even senior people in government have been held accountable for violations in relations to procurement. Are there indications suggesting price-fixing in open bidding?

Fixed prices were mentioned as one of the irregularities regularly spotted.

ORGANIZATION

Is appropriate information on procurement adequately disseminated (i.e. procurement staff are aware of updated rules and thresholds, and other issues relevant to their assigned responsibilities)?

There is a general information void. Even staff tasked with procurement duties are not duly familiar with the contents and implications of the new Procurement Act


Are the procurement and supply management functions clearly distinguished?

No. But the new Procurement Act introduces the notion. However, the distinction must be further spelled out in the accompanying Regulations.

Is contracting authority reasonably delegated (i.e. there are no unnecessary levels of approvals or cumbersome procedures)?

The Procurement Act delegates full procurement authority to the IPCs. Exact procedures within the procuring entities remain to be developed. Are the thresholds for contracting authorities regularly updated?

Under the auspices of the GCU, the thresholds were rarely updated. Practise in line with the Procurement Act has not yet been established. Do procuring entities have internal quality and control mechanisms? Are they regularly audited?

Only the larger procurers, who are already operating under donor rules. Are procurement staff experienced in international procurement?

Only in few and exceptional cases and on an individual basis. Do adequate formal and on-the-job training programs exist for entry- and higher-level staff that contribute to proper professional career development? Does knowledge of procurement lead to career advancement?

As confirmed by a World Bank financed capacity building consultancy, no adequate (formal and on-the-job) training exists. Are there additional training resources in the country that are currently utilized or that could be utilized to complement Government/donor-administered programs (e.g. universities and private institutions)?

Limited and mostly based on individual resource persons, without proper institutional back up.

Did previous training programs (if any) lead to an obvious improvement in the quality/productivity of procurement work?

Generally, the only procurement staff dealing with donor-financed projects has received training from the respective donor. This has lead to some improvement in this area. However, with the general lack of training offers, no obvious improvements have been detected. Does procurement staff have adequate project/contract management capabilities?

No – rarely. Are procurement agents used? Under what circumstances? How are they selected? Describe normal basis for compensation and contract duration.

Procurement agents do exist, but they do not appear to handle any significant amount of non-donor funded public procurement. However, no statistics are available. Agents are normally hired on a project-by-project basis and are compensated by a percentage of the contract sum.


Is procurement monitoring and administration computerized? How adequately do procurement entities track the key steps in the procurement process and collect appropriate project-related cost and schedule information?

There is a general lack of procurement monitoring and keeping record of the procurement process. Only limited information is computerized.

PROCUREMENT PLANNING

Are project implementation units adequately staffed with trained procurement, planning, scheduling, expediting and cost estimating personnel?

No, there is a chronic shortage of adequately trained staff with knowledge of the legal framework. This shortage will be accentuated with the introduction of the new Procurement Act. Is overall planning for complex goods, works and other contracts done in sufficient detail to produce realistic project definition, achievable completion schedules, and accurate cost estimates?

No, poor quality in all planning stages is a major problem. Is the early technical and financial planning well coordinated so that projects are fully funded when work needs to begin, based on accurate cost estimates?

No, lack of accurate information affects quality of planning. Are appropriate methodologies used to plan multiple inter-related procurement activities on large projects (e.g. the critical path method)?

Rarely for projects funded and run by the government. 5. Are project components appropriately packaged for procurement purposes?

No, often the packaging does not take into account the structure of the market and the available bidders. 6. Are completion schedules generally met for goods, works and consultant services contracts? If not, what is the major cause for slippage? Is sufficient time generally allowed for external reviews/clearances?

No. Poor planning, inadequate specifications and tardy payments often cause delays. There are no reports of delays due to external reviews/clearance. 7. Do procurement units regularly conduct market surveys to update their knowledge of prevailing prices for goods and works?

Generally not, even though some do. 8. Are procedures and methodologies for planning procurement of recurrent items (i.e. inventory control, forecasting of future requirements, classification, coding, accounting/financial management, spare parts management, and delivery systems) adequate?

Stores Managers and Supplies Managers handle these tasks, but general procurement planning is perceived to be of low quality.


DOCUMENT PREPARATION

Do standard documents exist for goods, works and other types of contract? List. Are other international contract formats used? If so, identify.

No, for government-funded procurement there are no standard documents, even though the new Procurement Act allows such documents to be issued by the DPP. Various donor documents are in use. Are these documents, if any, readily adaptable to specific contract situations (i.e. by modifications made through a Bid Data Sheet, Special Conditions of Contract or similar)?

N/A Are there separate documents for international and national competitive bidding not financed by the Bank?

No. Do Instructions to Bidders (ITBs) contain all information necessary to prepare responsive bids and clearly understand evaluation criteria and their method of application?

No, often the ITB’s are incomplete or not suited to the specific project.Do they contain other necessary information, such as eligibility requirements, basis of bid, language and currency of bids, common currency for purposes of evaluation, source and date of the exchange rate, etc.? Are sample forms and other appropriate sections of the documents provided?

No, there are no standards and they are often of poor quality. Are bidders required to provide bid security in an appropriate amount as a condition of responsiveness of their bid?

Sometimes, but this is not a common requirement. Is pre- or post-qualification provided for?

Both are allowed. Currently neither is very common as the registration lists are used for qualification purposes only. Some works procurement involves pre-qualification. Under the Procurement Act both options are available. Are qualification criteria appropriate and clearly described?

Not in the Guidelines but when qualification is performed. The Procurement Act does have adequate and well-described criteria. Are conditions of contract equitable? Do they provide adequate coverage for most important commercial and legal issues (for the method of procurement, size, nature and type of contract used) and provide adequate protection to the Government, without putting undue risk on bidders?

There are no standards, and applied terms are often ill suited and not adjusted to the specific project. Are standard purchase orders used for shopping?

Yes.


PRE-QUALIFICATION

Is pre-qualification carried out when appropriate? What types of contracts is it used for? Works? Goods? Other?

Under the Procurement Act both pre- and post qualification are an option. Currently neither is very common as the registration lists are used for qualification purposes. Some works procurement involve pre-qualification. Is the pre-qualification process fair and transparent? Are decisions made promptly? Are foreign firms allowed to apply?

Yes, when performed, the process is fair and open. Are standard pre-qualification documents used? Do they clearly and completely describe all the prerequisites for submitting responsive applications for pre-qualification? Is financial information routinely requested and critically evaluated to assess an applicant’s financial capacity to perform?

No, often-varying donor documents are applied. The quality is very uneven. Do procuring entities verify prior to contract award if a successful bidder continues to meet pre-qualification requirements?

No. Are suppliers required to have a local agent in order to qualify to bid for goods or services?

No. Do procuring entities maintain updated lists of qualified suppliers and contractors and updated market information on commonly procured goods, including spares and consumables? Is supplier and contractor performance routinely evaluated and are any standing lists of pre-qualified suppliers and contractors updated and modified based on this information. Can newcomers readily apply and be qualified?

Some procuring entities maintain internal lists. There are no common rules for the administration procedures of such lists. The quality of the administration and information in these lists varies, and as a consequence hereof, the bidders can expect very different kinds levels of treatment from different procuring entities.

7. Is the procedure for registration of domestic contractors fair, providing timely access to the bidding process to all potentially qualified bidders? Are bidders should be allowed to register by mail and, if the conditions in the country allow, through the internet? Is registration permanently opened to bidders for registration or update, is there a deadline imposed in relation to a specific bidding process? Is the time taken for registration reasonable?

Bidders for works are required to be registered with the NCIC in different classes based on capacity. The registration process appears cumbersome but fair, but there are complaints of excessive time used for processing.


ADVERTISEMENT

Are contracts to be awarded by competitive bidding publicly advertised?

Yes, in newspapers and the Gazette. Is sufficient time allowed to obtain documents and prepare bids?

Yes, 28 days Do the requirements specify use of publications or websites that are readily available to the public and are known to the private sector as sources of information on public procurement opportunities?

Yes, newspapers are well known sources, but there is no central media for procurement information and internet publication is not used.

COMMUNICATIONS BETWEEN BIDDERS AND THE PROCURING AGENCY

Are requests for clarifications answered promptly and completely in a written form?

Yes, even though reports of delays are frequent. Are clarifications, minutes of the pre-bid conference, if any, and modifications of the documents promptly communicated to all prospective bidders? Yes, at least in the large projects. Are bidders afforded sufficient time to revise their bids following a modification of the documents? Yes, that is the general perception.Do procuring entities maintain accurate records of all communications with the bidders (before and after the deadline for submission)? No, record keeping is of poor quality.

RECEIPT OF BIDS AND OPENING Are bids received prior to the deadline securely stored? Yes Are public bid openings conducted? Yes If so, are they conducted at a specified place closely following the deadline for submission? Yes What information is read out at the opening ceremony? Are minutes kept? Information on name of bidders and bid are read out and recorded in the minutes.


5. Do bid opening procedures differ for goods, works or other types of contracts? If so, how?

Procedures for all types of tenders are identical.

BID EXAMINATION AND EVALUATION Are evaluations conducted by qualified evaluating committees? Yes, often consultants are employed to do the evaluation Are evaluating committees appointed ad hoc for each evaluation? Yes. Is responsiveness determined on the basis of the documentary requirements described in the documents and according to established practice? Yes. Are bid evaluations carried out thoroughly and on the basis of the criteria specified in the documents? Often non-advertised criteria are applied due to lack of quality in the bidding documents. Is the successful bidder’s qualification to perform the contract determined solely on the basis of the criteria stated in the documents? (See above) If not, what other criteria are considered? No, application of non-advertised criteria is seen, often because of poor quality of bidding documents leading to adjustments after bid submission. Are evaluations normally completed within the original bid validity period? No, there are widespread complaints of delays with long evaluation and award periods. Are bid evaluation reports prepared containing all essential information (i.e. a clear and complete description of the evaluation process, including the reasons for rejecting any bid as non-responsive, how the stated evaluation criteria were applied, and how the successful bidder’s qualifications were verified)? The rules require such reports, but they are often not complete. Describe any significant differences between goods and works procurement relating to the above. The issue of non-advertised criteria is even more outspoken for works procurement, where quality in the bidding documents is of higher importance.

CONTRACT AWARD AND EFFECTIVENESS Are contracts required to be awarded to the lowest evaluated responsive bidder who has been determined to be qualified to perform the contract satisfactorily? Merit point system is applied. Are negotiations conducted with bidders, before or after selection? Yes, often pre-contract negotiations are performed due to poor quality in technical specifications or corruption.


Are additional Government approvals required before contracts can be made effective? Yes. Is performance security required in a reasonable amount and in a reasonable format? Yes, but often security is waived by the procuring entity 5. Describe any differences between goods and works relating to the above. Negotiations are more widespread in works procurement, which often are of a more complex nature than goods procurement.

CONTRACT ADMINISTRATION Are there manual or computerized procurement and/or contract monitoring systems? Some entities apply manual systems, but there are no standards Are suppliers and contractors generally paid on time? What is the normal time lapse from invoice submission to final payment? No, payment is often more than 60 days after invoice. Are there appropriate procedures to monitor delivery of goods and services to verify quantity, quality and timeliness? No general procedures are in place. Practices differ from entity to entity. Some apply a progress register. Are contract changes or variations handled promptly in accordance with the contract conditions and established practice (i.e. change/variation orders are given and/or confirmed in writing, constructive change orders are avoided, unit rates in the contract are honoured but the supplier or contractor is allowed to agree to any new unit rates introduced and the completion schedule for each change or variation, etc.)? Variations are often handled informally without observing contract terms. Do procuring entities normally make a good faith attempt to resolve disagreements through informal negotiations? Yes. If this fails, are the resulting disputes handled in accordance with the contract conditions? No, there is a general tendency to rely on informal negotiations and ignore actual contractual terms. Are supplier and contractor claims handled fairly based on a clear recognition of both parties’ obligations under the contract? Yes, but only through negotiations.


Are contract managers/administrators skilled in resolving problems in a timely manner and dealing with unforeseen circumstances arising during the life of the contract? Do they adequately document all actions of contractual import taken by the purchase/employer during implementation? No, contract managers are often without knowledge of the legal framework and the basic principles of dispute settlement. Are contractual remedies utilized only when appropriate and in accordance with the contract conditions? Generally, contract remedies are not applied. Are contracts generally completed on schedule and within the originally approved contract price? Or are cost and time overruns frequent? If so, in which sectors and for which particular kinds of contracts? Are fair final acceptance procedures used and certificates issued in a timely fashion? Delays are frequent, but are often the result of poor planning and specifications. Both cost and time overruns are frequent, especially for works. Final acceptance procedures are in use but no standards exist. Are contracts generally administered in a fair and equitable manner (e.g. the purchaser/employer grants extensions of time when delays are attributable to its untimely action, fair compensation is provided to offset additional costs caused by its mistakes, etc.) Yes. Are under-inspection, over-inspection and/or improper rejection of goods, materials or methods of carrying out the works a common problem? Works are under-inspected due to shortage of staff. Goods are subject to PSI. Are disruptions of the supplier’s or contractor’s orderly performance common? Yes, delayed payments often cause performance to suffer. Can any of the improper contract administrative practices identified above, be attributable to a problem identified in the local procurement environment? Specify. Yes, the poor quality of planning and technical specifications is often the cause of improper administrative practices and this opens opportunities for corruption. Are procurement evaluations/audits conducted? If so, describe scope, frequency, who carries them out, etc. No, procurement audits are not performed, neither on central or local levels.

RECORD KEEPING


For contracts to be awarded on the basis of competitive bidding, does the procuring entity maintain a complete record of the process? This would include e.g. copies of all public advertisements, pre-qualification documents (if used), the pre-qualification evaluation report documenting any decisions not to pre-qualify certain potential bidders, the bidding documents and any addenda, a record of any pre-bid meetings, the bid opening minutes, the final bid evaluation report (including a detailed record of the reasons used to accept or reject each bid, copies of bids, appeals against procedures or award recommendations, a signed copy of the final contract and any performance and advance payment securities issued, etc. The civil service is required to record all relevant information. However, this rarely happens, and the requirement is not enforced. The Procurement Act will introduce the Procurement Record as an adequate instrument for maintaining relevant information. Are adequate contract administration records maintained? (These would include contractual notices issued by the supplier, contractor, purchaser or employer; a detailed record of all change or variation orders issued affecting the scope, quantities, timing or price of the contract; records of invoices and payments; certificates of inspection, acceptance and completion; records of claims and disputes and their outcome; etc.) The civil service is required to record all relevant information. However, this rarely happens, and the requirement is not enforced. The Procurement Act will introduce the Procurement Record as an adequate instrument for maintaining relevant information. Is a database maintained showing the current market price for commonly needed items? No, procuring entities conduct ad hoc surveys, which often leads to poor quality in cost assessment. The GCU sometimes quote prices when required. Are periodic reports prepared on overall procurement activities? By and for Whom? Only for Central Government Stores, otherwise no.

Section E - Public Sector Selection of Consultants Are procuring entities capable of carrying out a professional selection process for consultant services? Do they administer consultant contracts effectively? Yes, this is normally the case. Is the winning consultant firm normally chosen by comparing competitive proposals submitted by a list of qualified firms? Where do implementing agencies obtain the information necessary to develop lists? Specify what other methods are used and when they are used. Short lists are compiled on the basis of expressions of interest following public advertisement. The GCU approves direct contracting when continuation is needed. Do requests for proposals clearly describe the selection process and evaluation criteria? Yes, this is normally the case. Do the Terms of Reference describe the requirements of the assignment clearly and completely, including background, scope and objectives, deliverables, time frame, anticipated staff-time, and government contributions? No on government-funded projects there is a general issue of low quality in the description of requirements and specifications.


Is selection based only on technical considerations or also on price? Both. Normally the split is 75% on the technical criteria and 25% on price. Are technical criteria detailed and appropriate and their relative weights reasonable? They are often inadequately detailed but appropriate and reasonably weighted. If price is also a selection factor, are technical evaluations completed before opening and consideration of price proposals? Are the relative weights chosen for each factor appropriate? Yes and Yes. Are there standard conditions of contract? Are they fair and equitable to the consultant? Do they adequately protect the interests of the client? Standard terms (based on World Bank documents) are often applied, but there are no government standards. What form of compensation is used? Unit rates? Lump sum based on milestones? Other? Lump sum based on measurable deliverables. Are consultants required to submit proposal, performance and/or advance payment securities? No normally not. Is there a conflict of interest policy provision included in the conditions of contract? (If so, describe) Yes, this is often the case. Are evaluations conducted by committees with appropriate expertise? Yes, the relevant IPC is responsible for appointing the committee member in accordance with the Guidelines. Are general criteria broken down into appropriate detailed criteria agreed by the evaluating committee before conducting the evaluation? Yes, this is normally the case. Are all criteria applied consistently, fairly and impartially by the evaluators? Are the individual score sheets kept as part of the procurement record? Yes, this is normally the case. Are evaluations conducted individually by each member of the committee and the results averaged? Yes, this is normally the case. Are new factors or weights added after the issuance of the request for proposals which are considered during the evaluation? No, this is not the general perception.


Are evaluation reports prepared containing essential details of the process, results, and matters to betaken up during contract negotiations? Such reports are mandatory, but are often not available due to poor enforcement of rules and inadequate filing system. Are evaluations normally completed within the time originally requested for the validity of proposals? Yes, but drawn out evaluation and award periods are common.

Section F - Procurement Performance

STATISTICS What are the approximate annual values of public procurement for goods, works, and consultant services, respectively? If possible, distinguish between procurement for projects and ongoing programs. Total (2001/2002) in the range of US$292 million ( about 16% of GDP) – about 50% goods and services and the remaining 50% works. Despite continuous attempts further breakdown as required below was not possible due to lack and/or inconsistency of figures. This again reflects the current problem of lack of systematic recording and compiling of procurement related data. What are the approximate percentages of goods, works, and consultant services financed by external donors? What percentage of public procurement follows competitive bidding procedures? Other methods? What percentage of competitively bid procurement is donor financed?

GENERAL EXPERIENCE Are government organizations generally perceived by suppliers/contractors/consultants/the public as fair and efficient in their procurement practices? No, there is a perception of widespread corruption in the public service. Which of the following factors are considered to be problems by persons familiar with public procurement in the country?

Yes No

Inappropriate or outdated laws and regulations x Poor compliance with and enforcement of existing laws x Poor information about procurement needs x Shortage of experienced professional staff x Poor training of procurement staff x Low pay for procurement staff x Poor procurement training x Weak procurement planning x Poor procurement methods and procedures x


Lack of good standard procurement documents x Poor technical specifications (Goods only? Works?)both x Cumbersome contract approval procedures x Lack of clear delegation of contracting authority x Interference by higher level officials x Inadequate appeals mechanism x Lack of anti-corruption measures and enforcement x

EXPERIENCE WITH WORLD BANK-ASSISTED PROJECTS How many Bank projects have been completed in the country? Since the first two loans were approved in 1967. Total number of IDA Credits and Grants to date

amounts to 105 with a total commitment of 2,302,500,000. The current active portfolio includes of US$359 million (October 2003). The majority of support is concentrated in the social sectors, with 3 projects representing 40% of total commitments. The remaining projects are distributed as follows: 2 in infrastructure (38%), 2 in environment (6%), and 3 multi-sectoral projects (16%). Two Projects; Multi- Sectoral Aids and Third Social Action Fund are awaiting Effectiveness thereby bringing the total commitment in the portfolio to US$ 454 million. Which organizations have been responsible for procurement on these projects? Project implementing units are normally formed for implementation of Bank financed projects. What thresholds for ICB, IS, NS, and prior review for goods, works, and consultant services are currently in effect for ongoing projects? Are they the same for all projects? How long have they been in effect? ICB: >US$ 100,000; IS/NS:US$30,000 Prior review: generally US$100,000 (goods); US$250,000 (works); US$100,000 (consulting firms); US$50,000 (individual consultants). Do project audits/completion reports/supervision reports indicate significant procurement problems? Have any cases of misprocurement occurred? Describe. In some case, lack of capacity, procurement plans and sufficient filing systems; only very few

cases of mis-procurement. Have procurement issues caused serious implementation delays, cost overruns, disbursement delays? Describe. Not serious; delays of several months and cost overruns have occurred in some civil works

contracts Does the Bank receive a large number of complaints about procurement procedures, selection decisions in the country? Relatively few. Are contracts generally awarded within the planned, usual time frame that would be required for similar operations by other experienced and efficient organizations? Generally yes; delays have been observed, usually due to poor quality of procurement documents


Are there serious problems or conflicts between national and/or local practices and World Bank guidelines which should be addressed on an interim basis pending implementation of recommended long-term action plans? Yes, there were a number of problems with the now defunct procurement guidelines of 2001. The

new procurement law has no major conflict with Bank’s guidelines

Section G - Private Sector Procurement Is there a reasonably well-developed private sector, which freely trades goods and procures works and other services? The private sector is developing and has good prospects. Malawi has made significant steps in the 1990’s to liberalize its trade regime.

Does the private sector compete actively in opportunities advertised by the government? Is this evidenced by number of bids/proposals received when open competition is sought? Yes, it actively participates, as witnessed by the average number of bidders that participate when a bid is issued.Do private sector companies feel comfortable in exercising their right to complain or seek the private remedies under the public procurement system (to the extent the system provides for this right)? Yes, particularly the new procurement Law has given them comfort. What is the performance record of private sector companies on government contracts? (Is there evidence of deliberate under pricing, poor performance on government contracts or excessive price increases after contract award during performance)? Based on information from both Employers and the private sector, though the private sector (contractors, consultants) are developing and few contracts that have been delayed or with cost over-runs have been mentioned, this can not be taken to be the general trend. Is there evidence that private sector companies are aware of requirements and have the capacity to submit acceptable bids/proposals (i.e. understand the system)? Are many bids/proposals rejected for procedural reasons? Yes, this is a problem area. Many firms are rejected at the preliminary examination stage due to incompleteness of their bids in both the technical and commercial parts. The other major concern is submitting acceptable bid security. This is an area to be addressed. Has there been any experience with private sector contracts for the provision, operation, maintenance of infrastructure for various public services (BOO/BOT/BOOT/etc.)? Describe. No experience recorded.

Do private sector companies have access to commercial loans at a reasonable interest rate? Not in an adequate manner, interest rates are as high as 50% + collateral


Are bonds commonly used? If so, is there a regulatory authority overseeing the activities of bonding companies? Is there a mechanism to suspend companies that have not honoured their obligations to pay or execute bonds? Is there a satisfactory track record of calling of bonds? The preferred security instrument is bank guarantees. Bid bonds are also used but not as

common as bank guarantees. The Malawi Insurance association regulates.

Section H – Emerging Areas of Interest Is military expenditure covered by the public procurement systems laws and regulations? Briefly describe coverage and exceptions. Not currently but The Procurement Act states that the Army and Police shall have their own IPC’s but follow the same rules as other government entities. Does the public procurement system and accompanying control environment (including the financial accountability system) control the flow of funds so as to ensure that funds budgeted for valid expenditures are not diverted to finance illicit activities (e.g. money laundering, terrorism)? Does the country have policies aimed at promoting environmentally and socially responsible procurement? Briefly describe coverage or initiatives that will contribute to such procurement practices. No specific policies are in place.


Annex C – List of People Met

MALAWI CPAR

Name Title Institution/ Company Mr. Soko Head of Economic Affairs Ministry of Finance

Geoffrey Chikuta Principal Investigations Officer Anti Corruption Bureau Mary Phombeya Corruption Prevention Officer Anti Corruption Bureau Ipyana Musopole Corruption Prevention Officer Anti Corruption Bureau Fenwick Kamanya Corruption Prevention Officer Anti Corruption Bureau Victor C. Banda Assistant Director Anti Corruption Bureau

Aggrey Kawonga Technical Director National Construction Industry Council

Wilfred Kasakula Training Director National Construction Industry Council

Johnny J. Somba Executive Secretary National Construction Industry Council

Gerald T. Scott Finance Manager National Construction Industry Council

Reuben Banda Finance Manager National Construction Industry Council

Mr. Kalongonda Auditor General National Audit Office

Medson Kasambala Principal Procurement Officer Government Central Stores Caroline E. Soko Assistant Accountant Government Central Stores Christine Chioko Programmer Government Central Stores Martha F. Pangani Principal Human Resource

Management Officer Government Central Stores

Lenard V.H. Malipa Human Resource Management Officer

Government Central Stores

Clementine Zimba Senior Stores Officer Government Central Stores Violet G.J. Matale Chief Stores Officer Government Central Stores E. A. Mateyu Chief Stores Officer

(Procurement) Government Central Stores

Isaac Chilima Acting Director of Finance & Administration

Malawi Revenue Authority

Mr. Kachiwala Operations Director National Roads Authority Mr. Zambezi Technical Director – Procurement National Roads Authority

Hennox Mazengera Executive Director Society of Accountants in Malawi (SOCAM)

Tom Mtenje Project Manager Consumers’ Association of Malawi (CAMA)

Mr. Nakanga Director of Supplies Unit Ministry of Education Mr. Mbilika Internal Procurement Committee

Secretary Ministry of Education

G.B. Kadewele Controller Central Medical Stores D.B.M. Nyirenda Chief Stores Officer Central Medical Stores


Name Title Institution/ Company

Collins Majalasi National Coordinator Malawi Economic Justice Network Mavuto Bamusi Economic Literacy Coordinator Malawi Economic Justice Network

William Chadza Principal Auditor Government Contracting Out Unit Arnold M. Chirwa Procurement Specialist Government Contracting Out Unit R.P. Dzanjalimodzi Director Government Contracting Out Unit J.C.K. Mhango Deputy Director Government Contracting Out Unit

Mrs. K. Kaluma Executive Secretary National Local Government Finance Committee

J. Ndawala Assistant Commissioner of Statistics

National Statistical Office

George J. Honde Chief Economist Privatisation Commission

Isaac M.C. Chimutu Operations Director Malawi Confederation of Chambers of Commerce & Industry

Rt. Hon. Lord Justice J.B. Kalaile Court of Justice of COMESA

Dr. Allexon A. Chiwaya Deputy Chief Executive Officer ESCOM Limited Mr. Fauel T. Nkhono Chief Procurement Officer ESCOM Limited

Mr. Alfred N.M. Chumachao Director of Financial Services Blantyre City Assembly

Mr. Steve K. Mwanza Controller Plant & Vehicle Hire Organisation (PVHO)

Swart Chilinga General Manager Malawi Finance Company (1997) limited

Mr. Christos Giannakis Managing Director Farmers’ World Limited

Mr. Luckie Kanyamula Sikwese Deputy Director (Planning & Development)

Department of Local Government

Tamizuddin K. Ghumra Managing Director Taai Construction

Mr. N. Amin Osman Director (Contracts) Delta Constructions

Dr. Benson F. Kandoole Executive Director Malawi Institute of Management

Patrick V. Kachimera Principal Secretary Human Resource Management & Development, OPC

Darlington G.K. Mtupa Stores Officer (Procurement & Supplies)

Government Press

Mr. Chrispin Singo Procurement Officer Ministry of Health & Population

Mr. Jones Stambuli Chairman Chamber of Commerce, Central Region

Ms. Flora Gondwe Chamber of Commerce, Central Region

Mr. Barnold Saka Business Analyst Commercial Bank Of Malawi Mrs. Beatrice M. Kambalametore Regional Manager Nico General Insurance Co. Ltd. Mr. Criag Wilson Contract Manager SGS


Name Title Institution/ Company Prof. Donton S.J. Mkandawiere Chief Executive Lilongwe City Assembly PMUs for MASAF, National Roads and EDMU

B. Zingano*

Managing Director Zingano & Associates

U. Loga*

Managing Director Littleways Building Contractors

D. Lungu*

Managing Director DECO Construction

G. Thindwa*

Economics Association of Malawi – ECAM

G. Nyirenda*

Managing Director Maneno Enterprises

C. Chimwaza*

Regional Manager Business Computer Services

*Met during preliminary mission


Annex D. Government Task Force on the Implementation of the Procurement Assessment Report (Malawi CPAR)

The Director Government Contracting-Out Unit Private Bag 301 City Centre Lilongwe 3. Attention: Mr. A. M. J. Chirwa The Solicitor General and Secretary for Justice Ministry of Justice Private Bag 333 Lilongwe 3 Attention: Mr. S. Matenje The Auditor General National Audit Office P.O. Box 30045 Lilongwe 3 Attention: Mr. Nazombe The Director Central Government Stores P.O. Box 401 Blantyre Attention: Mr. Kasonda The Secretary for Commerce and Industry P.O. Box 30366 Lilongwe 3. Attention: Mr. J. Banda The Commissioner General Malawi Revenue Authority Private Bag 247 Blantyre Attention: Mr. I. Z. Chilima


The General Manager Malawi Bureau of Standards P.O. Box 946 Blantyre Attention: Mr. A. S. Khulumula The Executive Secretary Malawi Confederation of Chambers of Commerce And Industry Private Bag 1 Blantyre Attention: Mr. I. M. C. Chimutu The Director Consumer Association of Malawi Private Bag 6 Maselema Blantyre Attention: Mr. Kapito The Governor Reserve Bank of Malawi P.O. Box 30063 Lilongwe 3 Attention: Mr. B. J. A. Chingoli The President Society of Accountants In Malawi P.O. Box 1 Blantyre


Annex E – List of Documents Consulted

No. Document title Issued by Month/year Type of document

1 Circular No. GCU/1/2002 – Ref. no. GCU/49/Vol.1

CGU 2002 Legal

2 Surtax Act GOM 2001 Legal

3 List of Management, financial and business consultants

The privatization commission

1996 List

4 Laws of Malawi – Plant and Vehicle Hire Organization Fund Order

GOM 1984 Legal

5 Act. No. 19 of 1996 – National Construction Industry

GOM 1996 Legal

6 Audit and final accounts for local authorities

N/A 2003 Report

7 Malawi Decentralization Policy Decentralization Secretariat, Lilongwe

- Policy paper

8 Draft Financial Regulations Malawi Local Authorities

2002 Legal

9 Review of The Decentralization Process in Malawi

A Joint Review Team of Government and Donors

2001 Report

10 Privatization policy, act and regulations booklet

The secretariat, The privatization Commission

1997 Legal

11 Report of the law commission on the review of the corrupt practices act – Report No. 8

Malawi Law Commission

2002 Report

12 Draft public finance management Act - 2002 Legal

13 Draft public Audit Bill - 2002 Legal

14 Bill for public audit act no. of 2002 – Explanatory note

- 2002 Legal

15 Report on an integrated socio-economic and ICT policy and plan development Framework for Malawi

International Institute for Information Technology (INIT)

2002 Report

17 Legal drafting of the Malawi public procurement code – Draft procurement regulations, Third draft

GCU/ independent consultant

2001 Legal



18 Report No. 22440 – Malawi Expenditures – Issues and Options

World Bank 2001 Report

19 Report No. 25293-MAI – Malawi Country Economic Memorandum, Policies for Accelerating Growth

Poverty Reduction and Economic Management 1 – Africa Region

2003 Report

20 District Development Fund, Financial management and Accounting Procedures Manual

Decentralization Secretariat, Dept. of Local Government

2001 Manual

21 Financial Management and Accounting Procedures for District Assemblies


2001 Manual

22 Local Government Act, 1998 Republic of Malawi

1998 Legal

23 Corrupt Practices Act (No. 18 of 1995) Malawi Government

1995 Legal

24 Five Years On– Annual Report 2001 The privatization Commission

2001 Report

25 Annual Report 2002 The privatization Commission

2002 Report

26 Quantification of Core items for Malawi Central Medical Stores


27 Strengthening Central Medical Stores Project, Malawi (Phase 1): Surgical and Dental Equipment and Consumables Assessment


28 Strengthening Central Medical Stores Project, Malawi (Phase 1): Quality Assurance


29 Year 2003: Prospectus Malawi Institute of Management (MIM)

2003 Course Catalogue

30 Training Consultancy Services to National Construction Industry Council (NCIC)

NCIC/ Contractor 2003 Inception Report

31 Malawi Government Press Fund: Financial Accounts for the year ended 30th June 2001

Government Press Fund

2002 Report



32 Bidding Document/Government Press: Tender No. GP1/2002 – Contract Agreement and special conditions and terms for supply of printing materials to government press

Government Press 2002 Minutes

33 Bidding Document: Price Recording Sheet

Government Press - -

34 Bid Evaluation Report: IPC Minute for meeting on 14th May 2002 in the Controller’s Office

Government Press 2002 Minutes

35 Public Finance Management Act - 2002 Legal

36 Public Finance Management Bill - 2002 Legal

37 ACB Strategic Plan 2002-2005 Anti Corruption Bureau, Malawi

2002 Strategy Document

38 ACB: Annual Report for the period 1st

July 2000 to June 2001 Anti Corruption Bureau

2000-2001 Report

39 ACB: Annual Report for the period 1st July 1999 to June 2000

Anti Corruption Bureau

1999-2000 Report

40 List of NGOs working with ACB ACB - List

41 Report of the Law Commission on the Review of the Corrupt Practices Act

Malawi Law Commission

2002 Report

42 Corrupt Practices Act (No 18 of 1995) Malawi Government

1995 Legal

43 Terms of Reference and Scope of Services for Consultancy Service

Anti Corruption Bureau, Malawi

2003 ToR

44 Staff Terms and Conditions of Services Anti-Corruption Bureau; Malawi

1997-onwards

Legal

45 DFID Project Support to the Anti-Corruption Bureau: Progress Reports

ACB 1997-2001 Progress Reports

46 DFID Project Support to the Anti Corruption Bureau: Quarterly Progress Reports

ACB July 2001- Dec 2002

Progress Reports

47 Public Procurement and Supply Management Reform: Phase 1 – Consolidated Diagnostic Study

GOM/ World Bank 1996 Report



48 Public Audit Bill: Memorandum The Malawi Gazette Supplement

2003 Legal

49 Project Appraisal Document on a proposed credit

The World Bank 2002 -

50 Functional Review of Government Central Stores Organization

GOM - Report

51 Ref. No. CONF/CGS/GCU/3 Tender – supply of floor polishes and lifebuoy

Government Central Stores Fund

2003 Minutes

52 Initiating Memorandum for a (CFAA) The World Bank 2001 Memorandum

53 Country Financial Accountability Assessment

The World Bank 2002 Report

54 Financial Statement: Budget Document No. 5

Malawi Government

1999-2000 -

55 District Development Fund – Financial Management and Accounting Procedures Manual


2001 Manual

56 Auditors Report: Financial Statements for the Year ended 30th June, 2000

The Auditor General

2000 Report

57 2001/02 - Revised and 2002/2003 Budget Estimates

National Local Government Finance Committee, Dept. of Local Government and District Administration, Malawi

2001/02 &

2002/03

Report

58 Approved and revised 2000/2001 and 2001/2002 estimates for Malawi Local authorities as laid before Parliament

The Minister of Local Government

2000/01 & 2001/02

Report

59 Consolidated Local Authorities Financial Report

National Local Government Finance Committee

2003 Report

60 Financial Management and Accounting Procedures for District Assemblies

Decentralization Secretariat, Department of Local Government

2001 Legal



61 Malawi: Selected Issues and Statistical Appendix

International Monetary Fund

August 2002 Report

62 Malawi Public Expenditures: Issues and Options

The World Bank Sept. 2001 Report

63 Malawi Country Economic Memorandum: Policies for Accelerating Growth

The World Bank 2003 Report

64 Draft Estimates of Expenditure on Recurrent and Capital Accounts for the Financial Year 2002/03: Budget Doc. Nr. 4A

GOM 2002/03 Report

65 Draft Estimates of Expenditure on Recurrent and Capital Accounts for the financial year 2001/2002 – Doc. Nr. 4Q

GOM 2001/2002 Report

66 Economic Report 2002: National Economic Council – Budget Doc. No. 2

GOM 2002 Report

67 Report of the Auditor General on the accounts of the government of the Republic of Malawi

NAO For the year ended 30th June, 1999

Report

68 Financial Statement - Budget Doc. No. 3

GOM 2001-2002 Report

69 Central Medical Stores –Tender 031/20002/02/01 – Lot 1

CMS Lot 1 (Part 1-10)

Tender document

70 Summary of Tender 031/2002/02/01 Award Recommendations by Medical Buying Committee

CMS Lot 1 – (Part 1-10)

Tender document

71 Consolidated Expenditure Report Central Medical Stores 30/06/2003

30/06/2003 Report

72 Evaluation of tender 031/2002/02/01: Drugs and Medical Supplies

Ministry of Health 2003 Minutes

73 Preshipment Inspection Progress Report SGS 2003 Report

74 Annual Statistics NSO 2002

75 Annual Financial and Economic Report Reserve Bank of Malawi

2002 Report

76 Country Portfolio Review Report World Bank 2003 Report

77 Country portfolio Progress Report World Bank 2003 Report

Country Procurement Assessment Report (CPAR) VOLUME II ... · Malawi CPAR, Volume II 3 May 24, 2004...

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Transcript of Country Procurement Assessment Report (CPAR) VOLUME II ... · Malawi CPAR, Volume II 3 May 24, 2004...