By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government is targeting savings of up to 20 per cent through planned public procurement reforms, while aiming to annually award the same percentage value to Bahamian small businesses.
Flagging plans to boost transparency and ‘level the playing field’ when it comes to bidding on government contracts, Michael Halkitis, minister of state for finance, yesterday said the public procurement reforms would bring the Bahamas into line with its Economic Partnership Agreement (EPA) commitments.
Kicking-off the 2013-2014 Budget debate, Mr Halkitis said the draft regulations envisaged creating a Public Procurement Board, which will replace the existing Tenders Board.
This will be supported by the creation of a Public Procurement Department within the Ministry of Finance, headed by a chief procurement officer, and aggrieved bidders will have the opportunity to appeal Board decisions to a Public Procurement Review Tribunal.
“The principal function of the Public Procurement Department will be to ensure that procurement is done in a fair and equitable manner,” Mr Halkitis said.
Government contracts are a vital tool of national development, as they provide the opportunity for Bahamian-owned businesses to grow an thrive.
The Christie administration appears to have recognised this, Mr Halkitis disclosing that the Public Procurement Board will be mandated to use “best efforts” to ensure that “20 per cent in value” of all government procurement contracts will be awarded to Bahamian-owned small businesses.
These, he added, were defined as companies with 25 employees or less.
In addition, the proposed regulations will also prevent government ministries, departments or corporations “from executing contracts once Parliament has been dissolved” if they have not been executed, and/or not come into force.
This, on the face of it, is designed to prevent situations such as the alleged ‘Stop, Review and Cancel’ that occurred when the Ingraham administration took office in May 2007, and consistent claims of governing parties awarding millions of dollars in contracts just prior to a general election to help them retain office.
“This is a comprehensive and needed reform,” Mr Halkitis said. “The present system is 40 years-old and highly centralised with major gaps in coverage. For example, it does not cover public corporations which rely on tax revenues to cover their operations.
“Studies on procurement reform in other developing countries have shown that savings of up to 20 per cent in procurement of goods and services are possible. The initiative is therefore consistent with the Government’s deficit reduction goals.”
The Minister said the Government was proposing to implement the public procurement reforms over a two-year period, once the Bill and regulations were passed into law.
Reacting to the Government’s plans, Godfrey Forbes, the Bahamian Contractors Association’s (BCA) president, said that in the case of the construction industry, the “20 per cent in value to small businesses” goal needed to be applied on a “case by case” basis.
“As far as I’m concerned, the Government contracts hardly amount to more than $10-$15 million at any one time,” the BCA president told Tribune Business.
Looking at how the case-by-case treatment should be applied, Mr Forbes said that in the case of large multi-million dollar projects, such as the New Providence Road Improvement Project, they should be broken down into smaller chunks to enable Bahamians to bid.
“If the Government wants to be proactive in ensuring Bahamians get the lion’s share, it should have them split into packages so Bahamians can bid on it,” he told this newspaper.
Mr Forbes said projects such as the Government housing programme could be contracted out 100 per cent to small Bahamian contractors, given the size and value of buildings.
And larger projects, such as the Princess Margaret Hospital critical care block, could also remain 100 per cent Bahamian. That development is, with Cavalier Construction as the lead contractor, and numerous other sub-contractors and firms also involved.
“You have to look at it more realistically in terms of individual opportunities to see what it is you’re looking at, and what you’re doing in giving 20 per cent to small businesses,” Mr Forbes told Tribune Business.
“It has to be looked at on a case-by-case, individual project basis.”
Comments
hbjohns 10 years, 10 months ago
Minister your efforts are notable here to assist Bahamian businesses.
Our organization, New Level Logistics Co. Ltd. (NLL) has actual experience in procurement cost savings with business of over 20% and 'greater' for Bahamian companies. How does NLL do it? I speak of this on my LinkedIn profile page, 'Henry Johns'- New Level Logistics Co. Ltd. Go to www.LinkedIn.com, in the search window, enter in my name and read the 'summary section' of what NLL is doing to educate businesses.
NLL's thinking is that your new board should solicit the expertise of a third party- 3PL logistics, procurement service provider that will reduced transportation cost for the government in all its procurement exercises. NLL feels that government bid winners, i.e. 'small businesses' should submit to the government, EXW, Ex-Works quotes on 'goods', as the 'winning' bid tenders for government purchases not the current process of 'total landed', inclusive with product cost.
Why? Because, all bids submitted as winning bids includes 'suppliers' FOB, CIF, inflated, un-checked inflationary transportation cost added on as a result of what that purchase term conveys. Those bids that are declared 'winners' in our opinion is management lost of control toward procurement cost savings. This in itself has cost the 'government' and 'importers', millions annually due to un-checked, inflationary cost by US and world suppliers on (FOB, CIF) purchase terms. These purchase terms allow the 'supplier' to control and manage the 'ground or air' shipment of products purchased and delivered to the ocean forwarders or to the Bahamas directly. This macro process is not good toward managing cost. Why? Because, 'suppliers' trigger a unknown, practice known as 'Pre-pay & Add'-'PP&A'. This is an insidious practice by 'suppliers' that has cost companies tons of money collectively, unseen to them. Understanding 'logistics' is another factor where cost is also impacted to the buyer of the goods.
Again, all terms for any government bids should be EXW, quotes by 'bidders' which means that no transportation cost should be added to the amount when bids are submitted. The government is allowing 'total landed cost' variable as an acceptable standard of doing business. This must change if the government is expecting to see a cost reduction in an area that can be controlled. Giving away business opportunities is fine, but the government must control the process. This is the 'black hole' costing the government potentially millions annually due to this practice.
NLL feels that the government should take on the micro procurement process by simply changing the bidding terms, and by utilizing a third party logistics procurement company that can assist the government in real procurement savings.
Marilyn Smith-Johns -CEO Henry Johns-VP New Level Logistics Co. Ltd New Level Logistics US, LLC Nassau-Atlanta, GA. www.newlevellogistics.com
hbjohns 10 years, 10 months ago
For those who can not go directly to LinkedIn...here is the Summary page I spoke about. http://www.linkedin.com/profile/view?...">http://www.linkedin.com/profile/view?...
New Level Logistics Co. Ltd. is educating 'off shore', importers, and consumers to take full 'control' of their 'supply chain from international and U.S. 'suppliers'. For decades, most 'buyers' have resigned themselves to accept 'total landed cost' as their 'only' accounting metric-variable, to watch and monitor import freight costs. There are other areas of import 'cost' to manage which are at best 'invisible', 'un-checked', and 'inflationary'. Much of this loss, collectively, in the millions annually, are triggered by import buyer's utilizing unfavorable 'purchase terms' (i.e. FOB, CIF) for their goods, called 'incoterms'. Hence, as a result of what the term conveys allows 'suppliers' 'full control' over 'shipping' their merchandise to 'ocean forwarders' or delivered direct by 'air' to the island. This is management loss of control. A training program designed by NLL, entitled 'The Logistics of US Logistics' has been designed to assist Bahamian importers, initially to understand the unseen cost 'drivers' which are triggered by these incoterms, and the consequence this has on 'inland freight', 'air' freight' and final 'freight clearance assessment' customs tax. We teach elements of understanding common carrier rates. What is the N.M.F.C.? 'Balanced & in-balanced' freight lanes, and how they relate to cost. FLA vs. ATL, -Which state is cheaper to import from to the Bahamas? You'll be really surprised where the real gateway to the Bahamas is located. 'What is 'Pre-Pay an Add' Cleaver ways in which PP & A 'mark up' is hidden from you in the 'product' or 'unit cost' of purchases. Cleaver schemes 'suppliers' employ to make you think that 'inland freight is 'FREE'; when you spend over a certain dollar amount. Ex-Works, (EXW), a favorable purchase incoterm empowers importers to really see their 'base cost' for goods purchased without 'inland freight' added. Do you want to know more? Go to the 'contacts tab' at (www.newlevellogistics.org) and contact us.
Sign in to comment
Or login with:
OpenID