PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC

ASSETS AUTHORITY (PPDA)

PROCUREMENT AND DISPOSAL AUDIT REPORT FOR

BUTABIKA NATIONAL REFERRAL HOSPITAL
FOR THE FINANCIAL YEARS 2004/2005 AND 2005/2006

EXECUTIVE SUMMARY

DECEMBER 2007
 Public Procurement and Disposal of Public Assets Authority 1

ABBREVIATION AND ACRONYMS

ADB African Development Bank

ADF African Development Fund
AO Accounting Officer
BH Butabika hospital
CC Contracts Committee
DN Delivery Note
EC Evaluation Committee
ER Evaluation Report
GDN Goods delivered note
GoU Government of Uganda
GRN Goods Received Note
LOI Letter of Invitation
LPO Local Purchase Order
PDU Procurement and Disposal Unit
PO Procurement Officer
PPDA Public Procurement and Disposal of Public Assets Authority
RFP Request for Proposals
RFQ Request for Quotations
SG Solicitor General
SHSSPP Support to health sector strategy plan project
SPO Senior Procurement Officer
TOR Terms of Reference
UDs User Departments
VHT Village health team
VAT Value Added Tax

Executive Summary for Butabika National Referral Hospital FY 2004/06 & 2005/06 1 of 15
TABLE OF CONTENTS

ABBREVIATION AND ACRONYMS ........................................................................... 1

EXECUTIVE SUMMARY 3

THE OBJECTIVES AND FUNCTIONS OF PPDA 3

SPECIFIC PROCUREMENT AUDIT OBJECTIVES 5

AUDIT SCOPE 5

AUDIT METHODOLOGY 6

REPORTING 7

SUMMARY OF PERFORMANCE OF THE PDE 8

SUMMARY OF GENERAL PERFORMANCE 11

SUMMARY OF HIGH RISK CASES 12

ACTION PLANS 14

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 2 of 15
 EXECUTIVE SUMMARY

1.1 Background

Under the reformed procurement system in Uganda, procurement has been decentralized
to government ministries and institutions and Local Governments, referred to as
Procuring and Disposing Entities (PDEs). Each PDE is responsible for the planning and
implementation of all their procurement and disposal needs in line with Public
Procurement and Disposal of Public Assets Act and Regulations, 2003. The Public
Procurement and Disposal of Public Assets Authority (PPDA), has the overall mandate to
oversee and implement procurement reforms on behalf of the Government of Uganda and
also to ensure compliance by the various PDEs. PPDA was created, as part of a wider
objective of contributing to public sector management, to ensure transparency, non-
discrimination, fairness, competition, accountability, economy and effectiveness in the
process of public procurement and disposal in all PDEs.

Under Sections 7 (j) (iii) of the Public Procurement and Disposal of Public Assets Act,
2003, PPDA is required to audit the procurement activities of various PDEs. This is
considered an important role in view of the recent decentralization of procurements. In
exercising its mandate, PPDA commissioned a procurement audit for the Butabika
Hospital (BH).

The Authority through Associated Procurement Consultants (ASSPRO) carried out the
audit of the Butabika Hospital, (BH). The audit covered the review of the entire
procurement cycle carried out, right from planning through initiation, execution, contract
award, signing, delivery and payments for sampled procurements for the financial years
2004 / 2005 and 2005 / 2006. It also involved carrying out the review of the entire
procurement practices in the years under consideration, 2004 / 2005 and 2005 / 2006.

1.2 The Objectives and Functions of PPDA

The objectives of PPDA are contained in section six (6) of the PPDA Act 2003 and they
include the following:

• Ensure the application of fair, competitive, transparent, and non-

discriminatory and value for money procurement and disposal standards and
practices
• Harmonize the procurement and disposal policies, systems and practices of
central government, local government and statutory bodies
• Set standards for the public procurement and disposal systems in Uganda
• Monitor compliance of procuring and disposing entities; and
• Build procurement and disposal capacity in Uganda

1.3 The functions of the PPDA

The functions of PPDA are as follows:

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 3 of 15
 i. Advise central government, Local governments and statutory bodies on all public
procurement and disposal policies, principles and practices.
ii. Monitor and report on the performance of the Public Procurement and disposal systems
in Uganda and advice on desirable changes.
iii. Set training standards, competence levels, certification requirements and professional
development paths in consultation with competent Authorities.
iv. Prepare, update and issue authorized versions of standardized bidding documents,
procedural forms and any other attendant documents to procuring and disposing
entities.
v. Ensure that any deviation from the use of the standardized bidding documents,
procedural forms and any other attendant documents are affected only after the prior,
written approval of the authority.
vi. Issue guidelines under section 97 of this Act.
vii. Organize and maintain a system for the publication of data on public procurement and
disposal opportunity awards and any other information of public interest as may be
determined by the Authority.
viii. Maintain a register of providers of works, services and supplies.
ix. Conduct periodic inspections of the records and proceedings of the procuring and
disposing entities to ensure full and correct application of the Act;
x. Institute:-
• Procurement or disposal audits during the bid preparatory process.
• Contract audits in the course of the execution of an awarded bid.
• Performance audits after the completion of the contract in respect of any procurement
or disposal, as may be required.

xi. Adopts, adapt and update common specifications standards, the use of which shall be
Mandatory for all procuring and disposing entities.
xii. Determine, develop, introduce, maintain and update related system – wide data – bases
and technology.
xiii. Develop policies and maintain an operational plan on capacity building, both for
institutional and human resource development.
xiv. Agree on a list, which shall be reviewed annually, of works, services and supplies in
common use by more than one procuring and disposing entity which may be subject to
common procurement or disposal.
xv. Established and maintain institutional linkage with entities with professional and related
interest in public procurement and disposal.
xvi. Undertake procurement and disposal research and surveys national and internationally.
xvii. Undertake any activities that may be necessary for the execution of its functions
and
xviii. Administer and enforce compliance with all the provisions of this Act, regulations and
guidelines issued under this Act.

The creation of the PPDA was to foster transparency, non-discrimination, fairness,

competition, accountability, economy and efficiency in procurement and disposal
processes and to strengthen the public sector management aspects. It was expected that

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 4 of 15
government ministries and departments would play an increased role in the procurement
and disposal process while the Authority provides the policy, regulations, co-ordination,
monitoring, supervision and control so as to achieve value for money in procurement and
deposal process in Uganda.

1.3 Specific Procurement Audit Objectives

The audit of Butabika Hospital for the period 2004 / 2005 and 2005 / 2006 was conducted
from July 11th, 2007 to August 24th, 2007. Specifically this assignment aimed at
achieving the following objectives:
• To audit the whole procurement and disposal processes of all the sampled
procurement and disposal activities carried out, right from the point of
procurement planning to the end of the contract and determine whether the
procurement and disposal process was in line with the PPDA Act and
Regulations.
• To determine whether the awarding of the contracts was fair, competitive,
equitable and cost effective; and whether they were properly authorized
and approved.
• To assess the documentation of the procurement processes and the entity’s
records management system.
• To review reporting system at the PDE as compared to the requirements of
the Authority and.
• To assess the procurement and disposal operational systems and structures
of the PDE.
• To make recommendations to improve procurement and disposal
practices.

1.4 Audit Scope

The audit of the BH covered the entire procurement and disposal process carried out from
planning through initiation; execution; contract award, signing, delivery and payments for
sampled procurements and disposals. It also involved carrying out the review of the entire
procurement and disposal practices in the years under consideration, 2004/2005 and
2005/2006. The procurements and disposals were conducted following the Public
Procurement and Disposal of Public Assets Act and Regulations (2003).

The audit covered 60 procurement samples. In the Financial Year 2004 / 2005, fourteen
(14) procurements were sampled valued at UG Shs. 169,012,000/= and forty six (46)
procurements were sampled from Financial Year 2005 / 2006 valued at UG Shs.
13,813,359,271/= with the total sampled contract value of UG Shs. 13,982,371,271/=.
The audit also covered the environment for conducting procurement and disposal at the
entity at the time of the audit. The selection of the sample to be audited was based on the
following:

• Size of procurement i.e. to ensure there was coverage of both large, medium and
small procurements;

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 5 of 15
 • Coverage in terms of method of procurements to ensure that all methods were
selected;
• Coverage in terms of goods, services and works to ensure that all types are fairly
covered;
• Having a fair distribution among the procuring departments in BH;
• Selection of contracts where there is frequent selection of specific contractors
/suppliers;
• Procurements that were awarded to non pre-qualified providers outside open
domestic bidding.
Below is a table showing the numbers, percentage selected and the values involved in
procurements under review:

Table 1: The distribution of the Sampled Procurements for Audit

No Procurement Number of Total Procurement value

method procurement
No Percentage Amount (Shs) Percentage
1 Open bidding 10 17% 11,196,188,368 80%
2 Restricted bidding 06 10% 270,248,922 2%
3 RFQ/RFP 44 73% 2,516,353,021 18%

Total 60 100% 13,982,371,271 100%

A graphical representation of the summary is illustrated below:

Sampled Procurement Method Distribution By Sampled Procurement Method Distribuion By

Numbers Value

17% 18%

10% Open bidding 2% Open bidding

Restricted bidding Restricted bidding
RFQ/RFP RFQ/RFP
73% 80%

1.4.1 Limited of Scope

The documentation relating to some of the procurements selected was scattered in

different places, particularly for the SHSSPP, where the project had long closed and the
documents for the sampled procurement had to be retrieved from where they were stored.

1.5 Audit Methodology

1.5.1 Review of Documents:

The documents were reviewed to examine and evaluate procurement information. The
audit team reviewed the procurements on case-by-case basis. The key procurement action
files were organized by the Senior Procurement Officer (Head of the PDU) with
assistance of the Procurement Officer and reviewed at the entity’s premises.

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 6 of 15
1.5.2 Meetings

The auditors held meetings with the entity’s officials. The first one was the pre-audit
meeting on July 11, 2007. In this meeting, the team discussed the audit scope;
implementation of the audit with respect to expected output, types of documents to be
provided, working space for auditors, identification of the contact person and the
schedule for implementation of the audit. The auditors also obtained background
information on the procurement activities and organizational set up of the entity. Audit
inquiry meetings were also held to discuss preliminary findings, and received comments
and clarifications from the entity’s officials.

1.6 Reporting

This report presents audit findings and recommendations on the procurement audit of the
BH for the 24-month period ending 30th June 2006. During the course of this
procurement and disposal audit, we reviewed a number of contracts with varied levels of
performance. The report has been set out in a format, which summarizes the nature of the
findings, identifies exceptions and the levels of risks as well as the recommendations for
improvement. The procurements have been rated according to the weaknesses identified
as follows:

Table 2: Description of Risks Rating and Implications

Rating Implying
High-Risk Procurements with serious weaknesses, which could cause material,
financial, regulatory or reputation risks warranting immediate attention by
senior management. Significant deviations from established policies and
principles and/or generally accepted standards will normally be rated
“high”.
Medium - Procurements with weaknesses which, although less likely to lead to
Risk material, financial, regulatory or reputation risk, warrant timely
management action using the existing framework to ensure a formal and
effective system of controls exists in BH. These will be identified as
“medium”.
Low-Risk Procurements with weaknesses where resolution within the normal
management framework is considered desirable to improve efficiency or
ensure that there have been best practice. Deviations from laid down
detailed procedures would normally be graded “low” provided there is
sufficient evidence of management action to put in place and monitor
compliance with detailed procedures.
Satisfactory Procurements for which, based on the records/information availed to us
and the evidence collected, there were no weaknesses that came to our
notice.

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 7 of 15
1.7 Summary of Performance of the PDE
Table 3 shows the risk distribution with 5% high risk; 8.3% medium risk; 33.3% low risk
% and 53.3% satisfactory cases by procurement numbers. And by contract value the
distribution is as follows 0.2% high risk; 6.4% medium risk; 29% low risk and
64.4%satisfactory cases.

Table 3: Summary of Risks Assessment Distribution of Selected Procurement Cases

Risk Total Total Value Comments
Numbers Contracts
No % Amount %
. (USH)
1 High risk 3 5% 29,600,000 0.2% Audit has recommended specific
action for each of these cases as
detailed below.
2 Medium risk 5 8.3% 895,196,400 6.4% The PDU should take the
recommendations as action points
and implement them going forward.
3 Low risk 20 33.3% 4,050,691,310 29% The control environment should be
strengthened to ensure that the risks
identified are mitigated.
4 Satisfactory 32 53.3% 9,005,886,161 64.4% The entity to use the experiences to
benchmark future procurement
practices
Total 60 100% 13,982,371,271 100%

The Exchange rates used were: [a] US Dollar @ 1750; [b] Euro @ 2288; [c] Pound
Sterling @ 3365; and [d] Japanese Yen @ 15=.

A graphical representation of the summary is illustrated below:

Summary of risk assessment by Numbers Summary of risk assessment by procurement

value

5.0% 8.3% 0.2% 6.4%

High risk
29.0% High risk
Medium risk
Medium risk
Low risk
53.3% Low risk
33.3% satisfactory
64.4% Satisfactory

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 8 of 15
1.8 Overview of the PDE

1.8.1 The Accounting Officer

The Accounting Officer in the PDE did not change during the audit period.
Name Designation
Dr. Fred Kigozi Executive Director

1.8.2 The Contracts Committee (CC)

Effective May 27, 2003 for a three years term ending May 26, 2006
No Designation Name
1 Chairperson Dr. David Basangwa
2 Secretary Alexander Kikwaya
3 Member Gad Twikirize
4 Member Francis Katende
5 Member Mr. J. B. Suuza

On May 18, 2006, the AO nominated members of the CC for the PS/ST approval. On
June 13, 2006 Mr. C. M. Kassami PS/ST approved the nomination. Appointment was
effective August 1, 2006 for a three years term. However, effective April 2, 2007, the AO
appointed Gad Twikirize as the acting secretary of CC because Alexander Kikwaya was
transferred to Mbarara Hospital.

No Designation Name
1 Chairperson Dr. David Basangwa
2 Secretary Alexander Kikwaya
3 Member Gad Twikirize
4 Member Sarah K. Byakika
5 Member Mr. J. B. Suuza

1.8.3 The Procurement and Disposal Unit (PDU)

No Designation Name
1 Senior Procurement Officer/ Head PDU Joel Kakira
2 Procurement Officer Doreen Turinawe Nabasa
3 Secretary/ Administrative Assistant Mirembe Irene
4 Office Attendant/ Records Assistant Genza Allan

Table 4: The PDU Personnel Profile

The PDU is housed in a separate block consisting of three offices with another dedicated
filing room with cabinets managed by the office attendant and the secretary under the
supervision of the Head PDU. It is apparent that the files are well organized and mastered
by the Record Assistant and the Secretary. To access any files or documents, we had to
deal with the two. A situation that could be considered best practices to be emulated by
all other entities under the regulatory function of PPDA. There is systematic record
keeping of the procurement transaction file for one to trace whatever happens during the
procurement process.

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 9 of 15
1.8.4 User Department
From the procurement and disposal point of view, BH has only one (1) user department,
Administration as the vote holder for Vote 162, Butabika National Referral Hospital. The
various sections include: Pharmacy, PDU, Food/Catering, Laboratory, X-ray, Out patient,
Stores and clinical.

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 10 of 15
2.0 Summary of General Findings

The general findings relating to the procurement environment, systems and structures in BH are provided below:

Table 5: Summary of General Findings

No Area Key Exceptions Entity’s Response Remarks/Recommendation

1 PPDA Reg. 96 The entity had no procurement plan for This was a period of transition The AO through BH
– 102 the two years under audit. There was no into procurement function in Administrator and the Head PDU
Procurement compliance by the User Departments and accordance with PPDA Act 2003 to ensure procurement planning in
Planning the PDU. requirement. Preparing accordance with the legal
procurement plan for FY 2007/08. provision.
2 PPDA Act Non-compliance with Sect. 27(4), the AO AO officer nominated members for The AO to inform PPDA on
Section 27 did not inform PPDA as required by law. appointment well before the expiry appointment of new CC. The AO
Contracts Between May 27, 2006 to August 1, 2006, of the previous CC terms. to formally appoint the Secretary.
Committee there was no legitimate CC appointed. In However the approval of in future, the AO to nominate CC
the current and previous CC, no evidence nomination by PS/ST did not come members for PS/ST approval in
that Mr. J. B. Suuza signed the in time. good time to avoid vacuum due to
appointment letter and Ethical Code of delays in PS/ST approval.
conduct as required. The Secretary is in
acting capacity.
3 Pre- There was a pre-qualification list for the This was for supply of canon fax The Head of the PDU to ensure
qualification for two financial years. However, M/s machine part that could only be that pre-qualification process
2004/2005 and Anisuma Investment Ltd was awarded got from M/s Anisuma Investment covers all the requirements of the
2005/2006 contracts in RFQs procurement when it is being the sole agent. entity.
not on the pre-qualification list.

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 11 of 15
No Area Key Exceptions Entity’s Response Remarks/Recommendation
4 PPDA Reg. 224 In some cases, the display period was less Some of the procurements were The AO through the head of PDU
Public Notice of than the provision of the law. By the time done under emergency where to ensure adherence to the law of
The Best of audit, the Notice Board had been drugs and foodstuff have run out displaying and notification of the
Evaluated vandalized by the BH patients, and public and there is no way the best-evaluated bidders.
Bidder notice is being done in PDU offices. procurement process could wait
for display period to expire.
However in all cases, there are
evidence of the display and
notification of the best evaluated
bidders in accordance with the
law.

3.0 Summary of High Risk Cases

Table 4: Summary of High Risks Cases

Procurement Key Exceptions Entity’s Response Remarks/Recommendation
1 Contract No: • Bid receipt and opening on 16- The entity needed food supply The entity to plan and ensure
BH/SPLS/05- 11-2005, urgently because of out of stock regular supply through a
06/00141 • Best evaluated bidders notice due to un expected surge in the framework/term contract.
Procurement: Supply on 17-11-2005 numbers of patient
of food staffs • LPO issued on 18-11-2005,
Amount: UG SHS one day after the display of the
12,200,000 best evaluated bidder contrary
to the law

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 12 of 15
 Procurement Key Exceptions Entity’s Response Remarks/Recommendation
2 Contract.BH/SPLS/05- • The procurement process from It was an emergency case due In future, the head of PDU to
06/00180 Initiation to delivery was done to cholera out break at the ensure emergency situation is
Procurement: Non on the same date of hospital addressed separately as required
medical sundries 22/12/2005. by law.
Amount 7,500,000 • The Contract was signed on the
same day the initiation of the
procurement was done in
contravention of regulation
224(4b)
• The Goods were delivered on
same day of 22/12/2005
3 Contract No: • Notice of best evaluated bidders The entity needed food supply In future, the AO and the Head
BH/SPLS/05- was not displayed for five days urgently because it was out of PDU to ensure compliance with
06/00148 as is stated in the regulation 224 stock due to un expected surge the legal requirement for best
Procurement: Non (4b) in the numbers of patient evaluated bidders display period
Medical sundries • Bid opening 22–11–2005 before entering into contract.
Amount: UG SH • Bid award 22-11-2005
9,900,000 • Display Best evaluated bidder 22-
11-2005
• LPO issued on 22-11-2005

4.0. General Conclusion

The PDE has demonstrated compliance with the legal requirement and procurement best practices as shown by the low percentage of
high risk. However there is room for improvement as demonstrated through the shortcomings identified. Management should use the
audit findings to consolidate compliance with the legal requirement and procurement best practices.

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 13 of 15
5.0 ACTION PLAN

General Recommendation and Action Plan

Area Description Recommendation Action Parties Time Frame
Procurement Planning Ensure procurement planning is done in accordance with The AO through BH Within the first
the legal provision. Administrator and the quarter of every
Head PDU financial year
Contracts Committee Inform PPDA in writing on appointment of the current The AO Within 3
Appointment CC members. months on
receipt of the
report
Pre-qualification The entity to ensure that only pre-qualified suppliers are The Head of the PDU Continuous
contracted to offer their services, work and supplies to
the entity.
Public Notice of The Best The entity should ensure adherence to the law of The AO through the Continuous
Evaluated Bidder displaying and notification of the best-evaluated bidders. head of PDU
Sample Cases Recommendations Action Party Time Frame
BH/SPLS/05-06/00141 The entity to plan and ensure regular supply of food stuff The Head of the PDU Within three
Procurement: Supply of through a framework/term contract to avoid unnecessary months on
food staffs Amount: UG emergency cases in the procurement receipt of the
SHS 12,200,000 report
.BH/SPLS/05-06/00180 The head of PDU should ensure emergency situation is The Head of the PDU Continous
Procurement: Non addressed separately as required by law Regulation 110 to
medical sundries Amount reduce on the cases of direct procurement where it is not
7,500,000 applicable.
BH/SPLS/05-06/00148 The AO and the Head PDU should ensure compliance The AO and the Head Continuous
Procurement: non with the legal requirement for best evaluated bidders PDU
Medical sundries UG Shs display period before entering into contract.
9,900,000

Executive Summary for Butabika National Referral Hospital FY 2003/04 & 2004/05 14 of 15