1. DR. LAURENT M. SHIRIMA CHIEF EXECUTIVE OFFICER PPRA, TANZANIA
COLLABORATIVE CROSS BORDER PUBLIC PROCUREMENT OPPORTUNITIES AND CHALLENGES
DR. LAURENT M. SHIRIMA
CHIEF EXECUTIVE OFFICER
PPRA, TANZANIA

2. THE OUTLINE Introduction Types of regional arrangements
Regional ccoperation for procurement
Cross-boarder public procurement issues
Scenarios for collaborative and cross border procurement
Issues for public entities and private businesses in the region
Challenges for collaborative cross border procurement
Concluding remarks

3. INTRODUCTION (1) Single market (East Africa): Aggregation of demand:
Opportunities for people and businesses;
Cross border trade & higher competition;
Aggregation of demand:
Do member states have central procurement bodies?
Strategic or innovative procurement?
Standardization of procurement processes:
Market insight
Cross border collaboration:
Regulatory bodies
Central procurement institutions

4. INTRODUCTION (2) Economic goals:
Creates economic savings; and
Organisational efficiencies
Furthering single market integration and upgrading:
Getting PEs to think more “East African” than “local”;
To approach PP in “East African” perspective

5. TYPES OF REGIONAL ARRANGEMENTS
Trade and welfare effects
Free Trade Area
Trade restrictions among member countries are removed in full;
Each country retains its own trade policy against third countries;
Rules of origin becomes necessary – to establish conditions under which item qualifies for preferential access within the area;
May include provisions to liberalize investment rules, services trade and public procurement
Customs Union
FTA + adopting a common external tariff against third countries
(East Africa Customs Union – January 2005)
Common Market
Customs Union + allowing for free movement of factors of production (capital & labour) among member countries
(Common Market Protocol was launched in July 2010)
Monetary Union
Common market with a single currency and monetary policy
Economic Union
Extends beyond common market by harmonization of some of the member countries’ policies, particularly macro-economic and regulatory policies

6. REGIONAL COOPERATION FOR PROCUREMENT
Information Exchange for Procurement:
Informed Procurement
Member countries share information about prices and suppliers;
Countries conduct procurement individually
Coordinated Informed Procurement
Member countries undertake joint market research, share supplier performance information, and monitor prices;
Collaborative (Pooled) Procurement:
Group contracting:
Member countries jointly negotiate prices and select suppliers.
Member countries agree to purchase from selected suppliers.
Countries conduct purchasing individually
Central contracting and purchasing:
Member countries jointly conduct tenders and award contracts through an organization acting on their behalf;
Central buying unit manages the purchase on behalf of countries

7. MISSION FOR COLLABORATIVE CROSS BORDER PUBLIC PROCUREMENT
To create an environment within industry clusters that drives both collaborative and constructive competition to encourage innovation, competitiveness and to attract and stimulate new businesses in the region
Collaborative procurement:
To enhance transparency through better information sharing;
To enable experience sharing through cross country learning;
To strengthen bargaining power and mitigate against high transaction costs by pooling skills, capacities and through joint negotiations

8. DISCUSSION OF KEY ISSUES
Consider a situation of 3 partner states (PS) in the region;
Subject: Procurement of health sector goods (e.g. medical supplies)
Two PS have central procurement bodies (MSD, KEMSA) for such items and procuring entities (PE);
Potential suppliers available in all three PS;
Framework agreements (FWA) with a single supplier
Domestic procurement:
Centralised procurement (Tz) vs joint procurement (Ke);
Equal access for suppliers from all PS, except where reservation schemes apply

9. DISCUSSION OF KEY ISSUES
Tanzania
Uganda
Kenya
KEMSA-KE
MSD-TZ
PE1 TZ
PE3 KE
EO1 TZ
EO3 UG
EO2 KE
PE4 KE
PE2 TZ

10. PURELY DOMESTIC SCENARIO
Tanzania
Uganda
Kenya
KEMSA-KE
MSD-TZ R1 R3
PE3 KE
PE1 TZ
EO1 TZ
EO2 KE R5
EO3 UG
In a purely domestic scenario: R2 R4
PE2 TZ
FWA-1
PE4 KE
FWA-2

11. DOMESTIC: CENTRALISED SCENARIO (1)
Use of MSD-Tz (or GPSA) by PE1 & PE2 – compulsory;
MSD-Tz provides services in establishing FWA;
PE1 & PE2 use call offs orders;
R1: public to public legal relationship regulated by the PPA (contracting out or delegation);
R2: public to private contractual relationship between PE1/PE2 and supplier EO1-Tz included in the FWA
PE1/PE2 issues call off orders to supplier EO1-Tz; and
PE1/PE2 pays the supplier for each call off or on periodic basis

12. DOMESTIC: CENTRALISED SCENARIO (2)
R3: contractual relationship between MSD-Tz and EO1-Tz, the FWA1 itself which:
Sets the main terms and conditions of the agreement;
May allow MSD-Tz to charge fees to EO1-Tz (is this proper?)
If the supplier is from another PS (EO2-Ke or EO3-UG), FWA1 should resolve any cross border conflict of laws relating to R2 or R3
FWA1 should provide for submission to laws of Tanzania governing the tender and execution of the contract (FWA)
All entities of the public side are in one PS (Tz);
Legal and economic relationships in the framework of legal system and economic context of the PS (Tz)

13. DOMESTIC: COLLABORATIVE SCENARIO
R4: public to public cooperation relationship between PE3 and PE4:
Established before they can tender, enter into FWA2 with EO2-Ke and issue call off orders;
Regulated by public law (e.g. PPA) rather than a contract;
R5: FWA2 between PE3/PE4 and the supplier EO2-Ke;
Will set out the main contractual relationship governing the FWA2;
If the supplier is from another PS (EO1-Tz or EO3-UG), FWA2 should resolve any cross border conflict of laws relating to R4 or R5
FWA2 should provide for submission to laws of Kenya governing the tender and execution of the contract (FWA)
All entities of the public side are in one PS (Ke);
Legal and economic relationships in the framework of legal system and economic context of the PS (Ke)

14. CROSS BORDER COLLABORATIVE (1)
Two PS agree on cross border collaborative procurement of specific health sector goods;
MSD-Tz and KEMSA-Ke decide to collaborate for the cross border procurement;
They establish FWA3 to be administered by MSD-Tz from which PEs in Kenya will be allowed to call off;
For PEs and suppliers in Tanzania (EO1-TZ), the scheme remains domestic (FWA1);
Sheer size of FWA3:
Participation of more suppliers from the region;
Large number of cross border issues;
Suppliers from other PS to be subjected to laws of the country from which FWA3 is administered (acceptable?)

15. CROSS-BORDER COLLABORATIVE (2)
Tanzania
Uganda
Kenya R6
MSD-TZ
KEMSA-KE R3 R1
PE1 TZ
PE3 KE
EO2 KE
EO3 UG R7
EO1 TZ
PE2 TZ R7
PE4 KE
FWA-3

16. CROSS BORDER COLLABORATIVE (3)
R6: A cross border collaborative mechanism between MSD-Tz and Kemsa-Ke:
Can be contractual or informal;
Does it require international treaty?
How will international public law, constitutional law and administrative law play out?
Once R6 is established:
PE3 and PE4 will have public-public or contractual relationship with KEMSA-Ke (just like R1);
KEMSA-Ke will not administer FWA3;
Communication between PE3/PE4 and MSD-Tz, either:
Through the MSD-Tz KEMSA-Ke relationship (R6) or
Direct relationship between PE3/PE4 and MSD-Tz

17. CROSS BORDER COLLABORATIVE (4)
R7: PE3/PE4 in a contractual relationship through call off orders with suppliers under FWA3
If FWA3 includes provisions subjecting it to the laws of Tanzania:
Will the contractual obligations derived from the call offs be subjected to the laws of Tanzania or the laws of Kenya?
Are PE3/PE4 free to enter into choice of law decisions, or where compliance with domestic laws is a matter of public interest/policy?
If MSD-Tz charges fees from suppliers included in FWA3?
Will the revenue be shared with KEMSA?
How about legal and political repercussions?

18. INFORMAL COLLABORATIVE (1)
R6B: MSD-Tz and KEMSA-Ke cooperate in an informal way to allow MSD-Tz create FWA4 usable to PE3 & PE4;
KEMSA-Ke will not be a party, possibly not mentioned in the FWA4;
PE3/PE4 will establish a direct (international) relationship with MSD-Tz;
If FWA4 generates revenue for MSD-Tz, expect the same challenges mentioned in the previous scenarios

19. CROSS-BORDER PUBLIC PROCUREMENT
Tanzania
Uganda
Kenya
R6B
MSD-TZ
KEMSA-KE R3 R1
PE1 TZ
PE3 KE
EO2 KE
EO3 UG R7
EO1 TZ
PE2 TZ R7
PE4 KE
FWA-3
R1B

20. CROSS-BORDER PP ISSUES FOR BUSINESSES IN THE REGION (1)
Need to analyse and equip for different ways of bidding:
Bidding directly cross border; or
Bidding indirectly cross border :
Bidding through affiliate located abroad
Including local foreign subcontractor(s)
Including local foreign consortium partner(s)
Acting as a subcontractor for a foreign lead contractor
Selling through local wholesaler(s)
Acting as a consortium partner for foreign consortium lead
Some ways are more effective to SMEs while others are more suited to larger commercial entities
Need to appreciate different bidding procedures (open, restricted, negotiated)

21. CROSS-BORDER PP ISSUES FOR BUSINESSES IN THE REGION (2)
Cross-border procurement is higher in markets with a low number of competitors (negotiated procedure more likely)
Potential obstacles:
Lack of experience with doing business abroad;
Language barriers;
High extent of competition with national bidders;
Legal requirements leading to market entry barriers in the awarding country;
Special permits or procedures necessary for offering services abroad
Perception that procuring entities prefer domestic bidders

22. CHALLENGES Political and institutional constraints;
Size of the country & its economy, strength of its procurement institutions;
Excessive aggregation for collaborative procurement vs. Negative impact on SMEs participation;
Tension between centralization and devolution or empowerment e.g. LGAs;
Allocation of costs and benefits of centralization and cross border collaboration;
Legal uncertainties: lack of mechanisms to handle conflict of laws.

23. CONCLUDING REMARKS (1)
EAC should develop a policy to facilitate and promote cross border collaborative public procurement in the region;
There is need to make such public procurement more efficient and strategic;
Improving transparency and competition will benefit both procuring entities and economic operators;
Strong political commitment and mutual trust among purchasing partners in order to succeed;
Conduct research in this important area;
Adopt progressive approach:
Starting with collaboration in information sharing and knowledge exchange before moving towards joint procurement activities

24. THANK YOU FOR YOUR ATTENTION ANY QUESTIONS