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  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION International Journal of Business & Management SEPTEMBER 2013 VOL.1, No,7 Factors Affecting Effective Management of the procurement Function at Nakuru North Sub-County Arbe Bashuna Jomo Kenyatta University of Agriculture and Technology Accepted 28 September 2013 Abstract Procurement function plays a pivotal role in the performance of the public sectors in Kenya. However, it is worth noting that for the function to realise its aims properly it has to be effectively managed. Past studies show that the management of the procurement function is affected by a myriad of factors. The purpose of this study was to assess selected factors affecting effective management of the procurement function at Nakuru North Sub County Procurement Unit. This study carried out a census in the procurement units among departmental heads from all the 30 Ministry departments. The specific objectives guiding the study involved finding out how project financing, accountability, ICT adoption, internal processes and internal control system affect the procurement function at Nakuru North Sub County Procurement Unit The design involved a process of collecting data in order to answer questionnaires concerning the current status of the subjects which include behaviour, attitudes, values and characteristics in a study. Data was collected from the departmental heads of all Ministry departments using questionnaires containing structured and unstructured questions administered personally by the researcher. Data collected were analyzed for descriptive statistics mainly frequencies and percentages; and Pearson Product Moment Correlation using the Statistical Package for Social Sciences. The findings were presented in the form of tables. The study findings show that the management of the procurement function was found to be slightly effective. This was greatly attributed to Project financing, Accountability, ICT adoption and the internal control system as applied in departments. The study thus, recommends that the Government should consider reviewing its policy in respect to project financing especially on funds adequacy and timeliness. Consideration should also be made on improving on ICT adoption and strengthening the internal control system Key Words: Effective Management of the procurement Function, Nakuru North Sub-County 1. Introduction Procurement is a key function of any organisation, public or private and in an era of globalisation with the advent of entrepreneurial organisations, management of purchasing and supply in private as well as in public sectors has gained more prominence. All procurements regardless of their value or complexity follow a standard sequence of actions, which need to be effectively managed to realise the objectives of the procurement function. Effective management of the function prevents the possibility of poor performance and when attributed to non-adherence to proper procurement processes and procedures; is an indicator of poor management of the 262
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION procurement function (Knight, Harland, Telgen, Thai, Callender, and Mcken, 2007 cited in Kakwezi and Nyeko, 2010). Andreasen (2012) in a study by on case companies in Denmark, concludes that the management of the procurement function is quite involving since, procurement processes are complex, given the fact that they involve the completion of a series of activities, such as qualifying new suppliers, procuring different types of inputs, and monitoring supplier performance, that cut across both functional boundaries and organisational boundaries. This is also the case across the world, more so, in developing countries, especially in Africa where the management of the procurement function is dynamic. The dynamic explosion of technology, the shifting demands of consumers, and the new structures of markets combine to convert the world of purchasing into one of change and innovation. The purchasing agent of today is a specialist, a technologist, and above all, a skilled and competent manager. He/she must understand the complexity and change which surround this task (Andreasen, 2012). Procurement encompasses the whole process of acquiring property and/or services. It begins when an agency has identified a need and decided on its procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, contract award, delivery of and payment for the property and/or services and, where relevant, the ongoing management of a contract and consideration of options related to the contract. Procurement also extends to the ultimate disposal of property at the end of its useful life (Waters, 2004). Public procurement systems are central to the effectiveness of development expenditure. Budgets get translated into services largely through the governments’ purchases of goods, services and works. It is estimated that 18.42% of the world’s Gross Domestic Product (GDP) is spent through public procurement (Mahmood, 2010). It is further estimated that public procurement accounts for 9%–13% of the GDP of the economies of developing countries. In Angola, public procurement accounts for 58%, it accounts for 70% of public spending (Thai, 2001), 40% in Malawi, , 58% in Angola, 70% of Uganda’s public spending (Basheka and Bisangabasaija, 2010), and 60% in Kenya (Akech, 2005). But the area of procurement is increasingly prone to internal factors (Trionfetti, 2000). The study aims at evaluating the factors affecting effective management of the procurement function in public sector with specific reference to Nakuru North sub County, Kenya. In the past decades, the public procurement system in Kenya has undergone significant developments. From being a system with no regulations in the 1960s, and a system regulated by Treasury Circulars in the 1970s, 1980s and 1990s, the introduction of the Public Procurement and Disposal Act (PPDA) of 2005 and the Procurement Regulations of 2006 has introduced new standards for public procurement in Kenya. Like any other system, the procurement system has inputs, a process referring the procurement cycle and outputs. The factors investigated in this study are considered to affect various levels of the procurement function; the operationalization of the procurement system. Procuring Entities are responsible for carrying out all the procedures pertaining to the complete procurement cycle. It is important to be familiar with the complete procurement cycle and to ensure that there are effective management procedures in place to properly manage each step (Public Procurement Oversight Authority, (PPOA) 2009). The complete procurement cycle shall include: preparation of procurement plans; preparation of procurement specifications and initiation of the procurement process; preparation of pre-qualification/tender/bid documents; advertisement/initiation of bids; receiving and opening bids; evaluation of bids; adjudication and contract award; notification of contract award; negotiations in areas where applicable; preparation and signing of procurement contract; contract administration; receipt inspection and acceptance of goods, works, services and consulting services; and Storage and Inventory Management (PPOA, 2009). 263
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION According to the PPOA all steps of the procurement cycle must be properly documented with each step being approved by the designated authority. PPOA also ensures that all procurement documentation is properly filed. The management of public procurement function is vested in the hands of all stakeholders involved throughout the implementation of the procurement cycle (PPOA, 2009). These stakeholders include: Supply chain management officers, Authority to Incur Expenditure (AIE) holders, Suppliers, Finance, Audit, Development Officers and Technical Support Staff. Effective management of the function would require joint / collaborative efforts of all of these stakeholders. This study will be evaluating the factors facing these stakeholders in the management of the procurement function. This study focuses on Nakuru North Sub County in Nakuru County, curved out of Nakuru District in the year 2007. The area has been characterised by cases of incomplete and stalled projects; unutilised funds returned to Treasury; and poorly done projects. These situations are linked to various factors which need to be investigated. Effective management of the procurement function is a precursor to the performance of the system in achieving its intended objectives in both the public and the private sector. Different procurement functions and responsibilities such as selection, quantification, product specification, pre-selection of suppliers and adjudication of tenders should be properly managed for the function to realise its objectives (Mendoza, 2008). Procurement should be planned properly and procurement performance should be monitored regularly; monitoring should include an annual external audit. A reliable management information system (MIS) is one of the most important elements in planning and managing procurement. Lack of a functioning MIS or the inability to use it appropriately is a key cause of programme failure. There are reports of stalled and abandoned projects, poorly implemented works, and returns of unutilised project funds in various parts of the country. This trend shows that there are factors affecting the management of the procurement function. A Properly constituted and managed procurement should be able to detect the possibility of such occurrences and prevent them. These challenges have also been reported in Nakuru North Sub County, and thus raising a research dilemma to the existence of management challenges faced by the procurement officers. Research studies mention factors such as accountability ICT adoption, internal operating procedures and internal control system as likely factors to impede or promote the management of the procurement function in the public sector. On the same note, Ngugi and Mugo, (2010) established that that the performance of public procurement function in Kenya is affected by these factor. However, their study did not bring out clearly the issue of how these factors affected effective management of the procurement function. It should be noted that these factors present themselves differently under different operational managerial environment. Given that the management team responsible for manning the procurement function at Nakuru North Sub County operates under a distinct operational environment and has distinct composition, it is important to understand how these factors affect the effective management of the procurement function in this area. The general objective of this study was to evaluate the factors affecting effective management of the procurement function at Nakuru North Sub-County. To determine how project financing influences the effective management of the procurement function at Nakuru North Sub-County. 1) To assess the effect of accountability on the effective management of the procurement function at Nakuru North Sub-County. 2) To examine how Information Communication Technology adoption affects the effective management of the procurement function at Nakuru North Sub-County. 3) To establish how internal control system influences the effective management of the procurement function at Nakuru North Sub-County. 264
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION How does project financing influence the effective management of the procurement function at Nakuru North Sub-County? What is the role of accountability on the effective management of the procurement function at Nakuru North Sub-County? How does Information Communication Technology adoption contribute to the effective management of the procurement function at Nakuru North Sub-County? How does internal control system influence the effective management of the procurement function at Nakuru North Sub-County? The procurement function has not been given the recognition it deserves in developing countries, in most public entities, regardless of the effort by the partners like the World Bank, the International Trade Organisation, the United Nations Conference on Trade and Development, the World Trade Organisation and, others (Basheka and Bisangabasaija, 2010). This could be deliberate or sheer ignorance on the value the procurement function could contribute to any Organization. In Kenya a lot of state resources are channeled towards procurement of goods and services, with an aim of ensuring that the full cycle is completed efficiently (Akech, 2005). However, there reports of dissatisfaction with the whole or part of the process of procurement, which are said to subsequently impede successful implementation of government projects. Arguably this failure is widely blamed on the inefficient management of the procurement function. This study established the factors affecting the effective management of the procurement function. Information obtained from the study will be useful to the Government, all procurement units at the Ministry offices and other interested stakeholders for guidance in coming up with a comprehensive policy that is supportive to effective management of the procurement function. The findings may also be useful as reference materials guiding future studies. The study was carried out in the procurement unit at the Nakuru North Sub-County offices among the Heads of Departments from the select user / Ministry departments. These key persons were used for the study given that they were the Authority to Incur Expenditure (AIE) holders; and thus were in a strategic position to provide information sought in the study. The study was expected to be completed within nine months covering the period from January 2013 to September 2013. Some of the respondents were reluctant to provide information sought due to its sensitivity; that is especially, on policy and implementation issues. To overcome this limitation the respondents were assured of confidentiality of information provided and informed of the purpose of the study, which in this case was purely for academic purpose. 2. Literature review The chapter presents a review of past research studies and publications conducted regarding the effect of Government Finance Policy on the procurement cycle at the procurement units, in the advent of the devolved government system. The chapter contains an overview of Procurement System; Procurement Process; Procurement Cycle 2.1Theoretical Review This section presents the theoretical framework and conceptual framework guiding the study. This study is supported by the principal agent theory and the general systems theory which are explained below. 2.1.1The Principal-Agent Theory This study will be guided by “The Agency Theory” as initially put across by Jensen and Meckling, (1976) and later expounded on by Sarens and Abdolmohammadi, (2010). The principal-agent theory is an agency model developed by economists that deals with situations in which the principal is in position to induce the agent, to perform some task in the principal’s interest, but not necessarily the agent’s (Health and Norman, 2004) Donahue, 265
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION (1989) explains that procurement managers including all civil servants concerned with public procurement must play the agent role for elected representatives. This theory will help us to investigate whether procurement managers adhere to the procurement policy that guides the flow in the procurement cycle. The factors affecting effective management of the procurement function present as obstacles to the principal agent relationship that exists between the procurement managers and the stakeholders they represent: the clients and the appointing authority. 2.1.2The General Systems Theory The most widely employed conceptual framework in the policy sciences is the systems model (Easton, 1953; 1965; Dye 1966), which may be seen as an application of general system theory (von Bertalanffy, 1968) to public policy. For many social science applications, this model is referred to as an “open systems” model, which reflects the idea that all elements of the model are open to influences from the external environment. Thus, outputs and feedback are functions not only of the conversion element, but of other environmental factors as well. In this study, the procurement system is considered to be influenced by factors which include: project financing, accountability, ICT adoption, operating procedures, and internal control system. Thai (2000) adapts the systems model to capture “the whole scope of public procurement” (p. 17). He is particularly concerned to portray the core elements of any procurement system and the relationships between and among them. Thai places the policy-making function with management executives at the top level of a procurement system. This has the effect of discounting the importance of policy roles that may be played in other elements of his model, for example, his “regulations” element or his “operations” element. 2.1.3 Overview of Procurement System In all countries, governments are significant buyers of goods and services. The value of the contestable government procurement the world over was estimated at $2000 billion in 1998 (OECD Report 2001). Odhiambo and Kamau (2003) points out that this is equivalent to 7% of the world GDP and 30% of the world merchandise. In East Africa, the public procurement market of Kenya and Tanzania reflect a situation in line with the international average. The stakes are therefore very high for the optimal utilisation of public funds in Uganda and indeed the rest of the world. Global effort towards opening up public procurement markets is not a new phenomenon. The GATT negotiations of 1947 rejected subjecting government procurement to GATT guidelines. The arguments were mainly based on ‘nationalistic’ tendencies. The Tokyo Round of 1979 was not successful either. Only a Code on Government Procurement was achieved with only few countries agreeing to be bound. Despite this importance derived from the procurement function most countries in the developing world seem to ignore this fact and fail to monitor the functioning of the procurement system. After several years of discussion the Uruguay Round, which gave birth to the Agreement on Government Procurement (GPA), is so far the most successful as far as efforts towards opening up government procurement markets are concerned. Assented to by various parties in 1996, the GPA is a plurilateral agreement, requiring its member states to abide by the obligations set out in its framework. The obligations set out in GPA have two dimensions; substantial and procedural. Under the substantial obligations, member countries are required to impress upon the covered purchasing agencies not to give price and other preferences to domestic producers and also not to discriminate against foreign suppliers. That is, transactions that are based on other criteria rather than best value for money should be avoided. Under the procedural obligations member countries are required to put in place a procurement system that is transparent and encourages open competition. The current membership of GPA is 28 (Zanamwe, 2003) most of them developed countries and none from Africa. Osei- Tutu, Mensah, and Ameyaw, (2011) argue that increasing the effectiveness, efficiency and transparency of procurement systems is an on-going concern of governments and the international development 266
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION community. Performance of the procurement function is measured through its efficiency and effectiveness in meeting procurement aims. All countries have recognized that increasing the effectiveness of the use of public funds, including funds provided through official development assistance (ODA) requires the existence of an adequate national procurement system that meets international standards and that operates as intended. Public procurement is the process whereby public sector organisations acquire goods, services and works from third parties. It includes much that supports the work of government and ranges from routine items (e.g. stationery, temporary office staff, furniture or printed forms), to complex spend areas (e.g. construction, Private Finance Initiative projects, aircraft carriers or support to major change initiatives). It also includes a growing spend where the private and third sectors provide key services directly to citizens in areas such as welfare-to-work, further education, social care and health. Such services may also be provided by the public sector directly, and in some cases even this public provision can be handled through procurement mechanisms. A public body may bid for government work against private sector firms through a formal competitive process (Office of Government Commerce, United Kingdom, 2012). 2.1.4 Procurement Process Procurement encompasses the whole process of acquiring property and/or services. It begins when an agency has identified a need and decided on its procurement requirement. Procurement continues through the processes of risk assessment, seeking and evaluating alternative solutions, contract award, delivery of and payment for the property and/or services and, where relevant, the ongoing management of a contract and consideration of options related to the contract. Procurement also extends to the ultimate disposal of property at the end of its useful life (Waters, 2004). An effective procurement process ensures the availability of the right goods and services in the right quantities, available at the right time, for the right customers and at reasonable prices, and at recognizable standards of quality (WHO, 2007). Sound public procurement policies and practices are among the essential elements of good governance (KIPPRA, 2006). Otieno (2004) notes the irregular procurement activities in public institutions provide the biggest loophole through which public resources are misappropriated. According to Thai (2001), the basic principles of good procurement practice include accountability, where effective mechanisms must be in place in order to enable procuring entities spend the limited resources carefully, knowing clearly that they are accountable to members of the public; competitive supply, which requires the procurement be carried out by competition unless there are convincing reasons for single sourcing; and consistency, which emphasizes the equal treatment of all bidders irrespective of race, nationality or political affiliation. 2.1.5 Procurement Cycle All procurements regardless of their value or complexity follow a standard sequence of actions. This is known as the procurement cycle. The cycle involves a series of steps that must take place to supply a production line or to replenish stock in a distribution center. Identifying the items that must be procured and determining the necessary quantities is the first step. This information is used to generate a requisition which is sent to the purchasing department. The assigned buyer requests bids and awards the purchase order to a vendor. When the ordered items arrive, they are entered into the inventory system. The parameters for a procurement cycle may be set by a known production schedule or vary based on consumer demand or other factors. The procurement cycle occurs at the manufacturer/supplier interface and includes all processes necessary to ensure that materials are available for manufacturing to occur according to schedule (Sunil and Meindl, 2004). During the procurement cycle, the manufacturer order components from suppliers that replenish the component inventories. The relationship is quite similar to that between a distributor and manufacturer with one significant difference. Whereas retailer/distributor orders are triggered by uncertain customer demand, component orders 267
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION can be determined precisely once the manufacturer has decided what the production schedule will be. Component orders depend on the production schedule. Thus it is important that suppliers be linked to the manufacturer‘s production schedule. Of course, if a supplier’s lead times are long, the supplier has to produce to forecast because the manufacturer’s production schedule may not be fixed that far in advance. 2.1.6 Procurement Function Most major companies and even some government organizations have a purchasing or procurement department as part of everyday operations. These departments provide a service that is the backbone of many manufacturing, retail, military and other industrial organizations (Alexis, 2013). Not long ago, purchase function was seen to be a desk job, monotonous paper work, dull and passive and more of an administrative function. The purchase managements were the most affected group whose only aim was to keep feeding shop floor and avoiding stock out situation. Today the situation has changed totally. Procurement function is considered to be a strategic initiative and seen to be adding value to entire business process. Profile of the procurement managers has changed and expectations from these managers are different. Modern day procurement managers manage procurement and sourcing function both at strategic and operational levels. They are proactively engaged in building supplier networks, estimating, controlling and reducing costs besides performing other functions and ensuring service levels. Their job functions are increasingly becoming cross functional together with supply chain and manufacturing functions. According to KPMG, (2012), the main functions are: to ensure the consistent and optimised management of the purchasing processes; to analyze and provide the necessary business information for decision-making; to implement e-procurement procedures and systems integration with suppliers; to manage the vendor selection and evaluation systems; and to promote innovation in the procurement function. Procurement function as explained above is one part of the sourcing function. In the Public Sector enabled environment, procurement function consists of detailed indenting process, procurement budget management, purchase order release, shipment schedule planning with seller coupled with ensuring compliance with documentation and system updating processes. Procurement function deals not only with procurement of raw materials and components, but also with capital equipments, project procurement, spare parts procurement for after market, managing rejections, defective returns, warranty replacement process with suppliers too. Vendor development is a key function in procurement. Sourcing and vendor development are some of the skill sets required to be developed by Procurement team. Procurement function works closely with procurement logistics or inbound supply chain. A procurement professional needs to have operational knowledge of logistical activities in supply chain network, the various agencies, knowledge of policies, customs rules, Taxation, commercial, logistical and customs documentation besides knowledge of commercial trade rules and terms (KPMG, 2012). 2.2 Conceptual Framework The study conceptualises that effective management of the procurement function, the dependent variable, which is measured in terms of project financing, accountability, ICT adoption, internal processes, and internal control system; the independent variables, have an effect on the procurement function. Project financing is measured though adequacy and reliability, while project funds disbursement is measured through aspects like timeliness. Arguably when funds are disbursed late they make the procurement cycle lengthy. The researcher also conceptualises that the soundness of the internal control system has an effect on the effectiveness and reliability of the project cycles. Figure 2.1 presents the conceptual framework. 268
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Public Procurement and Disposal Act Project Financing Accountability Independent Variables Intervening Variable Effective management Dependent Variable of the Procurement function ICT Adoption Internal processes Internal Control System Figure 2. 1: Conceptual Framework showing the factors affecting effective management of the procurement function 2.2.1 Project financing and the Procurement Function Government officials and elected leaders have increasingly come to realize that public agencies must utilize ICT in order to enhance the procurement processes in the public sector. Faced with tight budgets and a retiring workforce, today’s government agencies are operating in an environment defined by the need to ‘do more with less’. Public authorities are expected to provide excellent service to their constituents in an effective and transparent manner, all the while working under constant resource constraints by adopting ICT (Hagén, and Zeed, 2005). This requirement means that if this aspect is underfunded the support it is expected to offer to the procurement cycle will not be realised. Country Procurement Assessment Report (CPAR), prepared by a team of Government officials, World Bank and donor staff, and national consultants, reveals substantial inefficiency in public procurement and concludes that the principle of “value for money” is not achieved. This is true for both governments financed and donor financed procurement. The main findings of the 2002 Country Portfolio Performance Review of World Bank projects also reviewed slow project implementation and disbursement among other factors due to, a large extent of inadequate procurement planning, non-transparent procurement procedures and poor contract management. Inadequate procurement planning leads to challenges such as insufficient funding and subsequently poor performance of the procurement function. A review in 2002 of 132 works contracts which constitute an important part of public expenditure indicated that about 84% incurred cost-overruns of up to 30% of the initial amount (World Bank, 2003). Similar findings of public procurement weaknesses attributed to poor financing were recorded in the 1996 Country Procurement 269
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Assessment Report (World Bank, 1996). In Kenya, there have been cases of stalled and incomplete projects due to delayed financing from the Government or insufficient funding linked to lack of foresight. However, there seems to little research on this aspect in the case of public procurement. There is still a knowledge gap on how the procurement process can contribute to improved performance of the procurement function in developing countries. Purchasing efficiency and purchasing effectiveness represent different competencies and capabilities for the purchasing function. CIPS Australia (2005) presents the differences between efficiency and effectiveness. Efficiency reflects that the organisation is “doing things right” whereas effectiveness relates to the organisation “doing the right thing”. This means an Organisation can be effective and fail to be efficient, the challenge being to balance between the two. Issues to do with timeliness in the disbursement of funds to the government units help in improving the process of procurement. The procurement unit needs to be assured of funds availability before preparing procurement plans and entering into negotiations with the suppliers. This literature fails to recognise delays in financing project as a possible aspect of this factor. A funding mechanism is necessary to maintain a system that, due to the volume and complexities of public procurement, will invariably consume time and resources. Yet, funding from the same source that funds the awards committees will render the distinction between the two irrelevant. 2.2.2 Accountability and the Procurement Function Public procurement means purchasing of goods, services or public works contracts by the contracting authorities that have been defined in the procurement law. Public procurement must follow the procedures that are stated in the law. Accountability is government's obligation to demonstrate effectiveness in carrying out goals and producing the types of services that the public wants and needs (Segal and Summers, 2002). Public procurement functions’ efficacy thrives on accountability. Lack of accountability creates opportunities for corruption. Brinkerhoff (2004) identifies three key components of accountability, including the measurement of goals and results, the justification or explanation of those results to internal or external monitors, and punishment or sanctions for non-performance or corrupt behavior. Strategies to help increase accountability include information systems which measure how inputs are used to produce outputs; watchdog organizations, health boards or other civic organizations to demand explanation of results; performance incentives to reward good performance; and sanctions for poor performance. For In South Africa, a district health planning and reporting system was used to improve management control and hold government agents accountable for their decisions. By combining financial and service data, the reporting system drew attention to clinics and programmes that had unusual indicators, and helped officials to explore root causes for performance differences, including possible corruption (Vian and Collins, 2006). Accountability shows how the public interest has been protected in the expenditure of public funds. Maintaining integrity in public procurement is one of the most important pillars of modern national procurement systems (Barrett, 2000). Ensuring the accountability of procurement officials is perhaps the most essential aspect of this goal. The accountability of procurement officials is not only important from a public or administrative law perspective, but also has economic implications. Transparency in public procurement is about information. The access to key procurement information by civil society, the media and other stakeholders, and the ways in which these actors can use the information, directly affects accountability. Furthermore, transparency is considered a highly cost-effective way of achieving greater accountability (Schapper, 2008). Accountability constitutes a central pillar of any public procurement system. Without transparent and accountable systems enabling governments and citizens to engage in a mutually responsive way, the vast 270
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION resources channelled through public procurement systems run the danger of increased corruption and misuse of funds. Even in a system with low levels of corruption, public and civic oversight can help identify inefficiencies, thereby increasing procurement efficiency and effectiveness for the benefit of improved service delivery and ultimately citizens. According to Grierson and Needham, (2006) argue that demonstrated accountability and transparency reduces the likelihood of unethical behaviour, reassures the community and instils confidence in all stakeholders concerning the integrity of decisions. According to Wee (2002) ethics are the moral principles or values that guide officials in all aspects of their work. Ethical behaviour encompasses the concepts of honesty, integrity, probity, diligence, fairness, trust, respect and consistency. Ethical behavior includes avoiding conflicts of interest, and not making improper use of an individual's position. Ethical behavior is important in public procurement as it involves the expenditure of public money, and is subject to public scrutiny. Public officials should always behave ethically and fairly, including in their business undertakings. Ethical behavior supports openness and accountability in a procurement process and gives suppliers confidence to participate in the Government marketplace. Ethical behavior can also reduce the cost of managing risks associated with fraud, theft, corruption, and other improper behavior; and enhance confidence in public administration (Wee, 2002). An important and effective way to maintain ethics awareness in agencies is to provide training for employees (Amos and Weathington, 2008). Ethics training and seminars can be provided, along with training in more specific areas, such as procurement procedures, record keeping, records management, and accountability and administrative law. Regular reviews or audits of procurement processes can be done to ensure probity is being considered and achieved (Amos and Weathington, 2008). Ethics is all about what is morally right and morally wrong, so procurement ethics is concerned with what is morally right in procurement as profession, (Wood, 1995). This is very important in procurement management because procurement staffs deal with suppliers represents the whole organization and that will determine the face of the organization towards the suppliers which may create goodwill or destroy it. 2.2.3 Information and Communication Technology (ICT) Adoption Government officials and elected leaders have increasingly come to realize that public agencies must utilize ICT in order to enhance the procurement processes in the public sector. Faced with tight budgets and a retiring workforce, today’s government agencies are operating in an environment defined by the need to ‘do more with less’. Public authorities are expected to provide excellent service to their constituents in an effective and transparent manner, all the while working under constant resource constraints by adopting ICT (Hagén, and Zeed, 2005). In order to meet today’s operating challenges, regional and local governments are turning to ICT to enhance the services for residents, businesses and visitors, and improve internal efficiencies by lowering costs and increasing productivity. Public authorities are implementing scalable communication infrastructures to promote economic development, attract new businesses and residents, and above all, provide excellent service to constituents (Abouzeedan and Busler, 2002). According Kirungu, (2011) in Kenya, manual systems are a source of major inefficiencies in regulation and operations of the function. ICT needs to be adopted to ensure proper functioning of the procurement system. This does not only involve computerization of the system but scaling communication technology. E-procurement system is a product of the new world order where everybody is going digital. With globalization and internet connectivity, there is need to upscale the function in Kenya. The old way of doing business consists of buyers managing forecasts and communicating requirements to suppliers via phone, fax and e-mail. Spreadsheets and manual reports are passed between the trading partners. These manual processes are slow and cumbersome. They cannot support today’s demand-driven enterprises. 271
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Supply chain procurement professionals spend too much time “putting out fires” and reacting to daily problems (Thomson and Jackson, 2007). They cannot seem to find the time to develop strategic relationships with suppliers and deploy improved business processes that eliminate shortages. Factors that hinders ICT growth in developing nations are Infrastructure, business environment (financial, legal), social factors (such as poverty, illiteracy, urbanization level), educational factors and cultural environment. Procurement of goods, works, and services through Internet - based information technologies (e-procurement) is emerging worldwide with the potential to reform processes, improve market access, and promote integrity in public procurement”. However, rather than a technical solution, e-procurement should be considered part of procurement reform in general (Schapper, 2008). Studies in other countries show that ICT is a precursor to quality performance of the procurement system. For instance, Kramer, Jenkins, and Katz , (2007) report that the Government of Chile is using ICTs to facilitate the procurement from small businesses using a new business model and this has positively effected on the functioning of the procurement system especially, since the integration of online services in the system. Information access has been improved tremendously due to this. The system in Kenya if properly strengthened through integration of ICT can also yield these benefits. E-procurement can take many forms, from uploading select information such as tender notices to a website to very comprehensive systems including the entire procurement process. Whatever complexity an e-procurement system might display, using the Internet creates an immediate potential for making information public and widely available and thereby enhance transparency. Still, introducing e-procurement is not without risks. The integrity and security of an Internet - based system can be compromised and there is a risk that erroneous information be uploaded. Further, implementing e-procurement is often seen as the main solution to systemic procurement challenges, but a public procurement system will still require a solid legal and regulatory framework, qualified procurement officers, and an oversight mechanism among others to be well-functioning. 2.2.4 Internal Control System (ICS) and the Procurement Function Internal controls refer to the measures instituted by an organization so as to ensure attainment of the entity’s objectives, goals and missions. They are a set of policies and procedures adopted by an entity in ensuring that an organization’s transactions are processed in the appropriate manner to avoid waste, theft and misuse of organization resources. Internal Controls are processes designed and effected by those charged with governance, management, and other personnel to provide reasonable assurance about the achievement of an entity’s objectives with regard to reliability of the a system such as the procurement system, effectiveness and efficiency of operations and compliance with applicable laws and regulations (Mwindi, 2008). According to Hayes et al., 2005 internal control comprises five components; the control environment, the entity’s risk assessment process, the information and communication systems, control activities and the monitoring of controls. The likelihood of achievement of the procurement system aims is affected by limitations inherent in all systems of internal control” (Hayes et al., 2005). It therefore important the procurement function is subjected to an effective internal control system. This can be strengthened by organizing seminars to enhance the capacity of procurement staff on compliance to the Procurement standards. Internal audit provides for purchasing audit. Purchasing audit is a management tool used in assessing how goals and objectives are being met while utilizing organisational limited resources (Van Weele, 2006). The resources are inputs (personnel, budgets, time, and equipment) that need to be used effectively and efficiently in fulfilling different goals and objectives. Effective performance of the procurement function is facilitated by proper planning and budgeting by proper controls, though, this cannot be proved by the research results. The public sector the major “push” is on reducing costs, this focus has consequences on performance. Effective 272
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION procurement function is one that is cost effective and this can be achieved when there are effective internal controls in place. Experience shows that when organisations focus on reducing costs, the quality of goods and services procured suffers, and when organisations focus on quality, costs come down. Seminega (2012) reports that in most developing countries, the Procurement Officers are provided with procurement guidelines, manuals or a handbook which he argues must be complied. A good system will provide room for an effective internal control system subjected to periodic checks. Such a system should include issues related to: organizational structure; record keeping; division and segregation of duties; authorizations and approvals; internal checks; and competency of the staff. He asserts that in order to prevent bad practices in public procurement and contract management and take corrective measures if they happen, the Chief Budget Manager should ensure that the internal control system is in place and communicated to all concerned with public procurement operations. The value of the ICS is emphasised since, the survival and efficacy of the procurement unit and function depends on it. In his survey on the role of ICS on the performance of Rwanda public procurement units, he further, postulates that the internal control system in a procurement unit should ensure the balance between quick decision making and risk control. It should also provide updated information on the respect of standards in order to take appropriate measures. As it emerges in this section it is therefore, important to note that internal control system strengthen the functioning of the procurement system and its omission in the system would compromise the performance of the entire function at the unit. There is however, a gap in literature in respect to the role of ICS in the performance of the Public Procurement function in Kenya (Seminega, 2012). Tan, Chong and Uchenna, (2009) argue that public procurement has, for long, been overshadowed with inefficiency, corruption and disregard of fundamental "value for money" considerations. This has adversely impacted the rate and quality of progress in realizing the objectives of national development, especially in developing and transition countries (Tan et al., 2009). Employees may neither engage in, nor give the appearance of engaging in, dishonest or unethical actions. Both are injurious to the public’s perception of honest government. As a government employee, you might have access to procurement and other nonpublic information that could affect a contract bid or the award process (Wymer and Regan, 2005). Improper disclosure of such protected information could violate numerous laws, as well as ethics rules. It also could subject you to administrative actions, as well as civil or criminal penalties. Management in contracting authorities should ensure that there is an appropriate focus on good practice in purchasing and, where there is a significant procurement function that procedures are in place to ensure compliance with all relevant guidelines. Procurement staff, departmental heads and all related stakeholders will need training, particularly in how to resolve dilemmas and competing priorities. Useful monitoring and due diligence tools include Supplier Engagement Forums and supplier questionnaires during tendering and at other stages of the relationship such as contract renewal. Public officials should not accept benefits of any kind from a third party which might reasonably be seen to compromise their personal judgment or integrity. Thomson and Jackson (2007) established that the actions of public officials must be above suspicion and not give rise to any actual or potential conflict of interest and their dealings with commercial and other interests should bear the closest possible scrutiny. Officials involved in procurement must not make improper use of their position (Tan et al., 2009). Officials may have access to very confidential and/or market sensitive information. It is unethical to use inside information provided to the agency as part of a tender process, either for the material benefit of the official or for another person. Criminal sanctions apply to such behaviour. The public procurement system is also influenced by culture and technology. In a culture where giving gifts is a 273
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION common public relation practice, it is difficult to distinguish between gifts and bribes. Moreover, rapidly advanced technology has forced public procurement to (a) adopt new procurement methods, such as the use of e-signature and purchase cards; and (b) be knowledgeable in many aspects and considerations of how to procure information technology. Internal processes need to be properly streamlined and coordinated to function well to generate required objectives. Choosing the supplier, product or subcontractor has an essential role in the potential growth of turnover. How the organisation’s brand is perceived in the market affects the sales numbers. Sometimes the buyer can feel that they are receiving a better product because of a good brand image. This means that the supplier can actually have a positive impact on the decision made by the buyer. It’s important not to forget the power of word of mouth marketing. It’s a factor that can determine whether your product gets chosen over the competitor’s one (Iloranta 2008). Procurement has direct and indirect costs that clearly affect the effectiveness. The organisational structure, division of work and operation efficiency; are components that modify the effectiveness of procurement function. The procurement processes and procedures have a close relation to other functions on the organisation and on their efficiency as well. 2.2.5 Public Procurement and Disposal Act of Kenya The public procurement system in Kenya has evolved to an orderly and legally regulated system governed by the PPDA, 2005. Prior to this, in Central Government it was governed by Treasury Circulars from 1969, then the Supplies Manual of 1978, before the promulgation of the Exchequer and Audit (Public Procurement) Regulations, 2001.The PPDA, effective as of 1st January 2007, applies to all procurement of goods, works and services, as well as the disposal of assets by public entities. The Public procurement processes is a complex issue because of the multiple interests and objectives it strives to achieve simultaneously coupled by the multiple regulatory policies and bodes it has to adhere to (Kagendo, 2012). The public procurement system in Kenya has therefore evolved from a crude system to an orderly regulated, legal and constitutional regime. Kenya’s public procurement system can be traced back to 1955 during the colonial days (Public Procurement Oversight Authority, 2009). As a country therefore, Kenya has largely failed to effectively harness the spirit and letter of Public Procurement and Disposal Act of 2005 and other related enabling legislations in delivering transparency, accountability, and good governance in public procurement sector. The law as it exists today has not been able to eradicate corruption and related challenges in this sector as anticipated. This therefore, makes it difficult for procurement managers to effectively play their role. Public Procurement and Disposal Act of Kenya is an ACT of Parliament to establish procedures for efficient public procurement and for the disposal of unserviceable, obsolete or surplus stores, assets and equipment by public entities and to provide for other related matters. This Act applies with respect to: (a) procurement by a public entity; (b) contract management; (c) supply chain management, including inventory and distribution; and (d) disposal by a public entity of stores and equipment that are unserviceable, obsolete or surplus. In an environment whereby the stakeholders are not aware of the provisions and implications of the Act, they are likely to work against it, thus affecting effective implementation of the procurement function. 2.3 Critique of the Existing Literature CIPS Australia (2005) presents the differences between efficiency and effectiveness and mentions the importance of timeliness of disbursement of funds to a project’s procurement function. However, the study fails to link this aspect to effective management of the procurement function. The Literature above indicates that purchasing efficiency and purchasing effectiveness represent different competencies and capabilities for the purchasing function, but does not clearly demonstrate the link between this management function and project 274
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION financing. Grierson and Needham (2006) argue that that demonstrated accountability and transparency reduces the likelihood of unethical behaviour, reassures the community and instils confidence in all stakeholders concerning the integrity of decisions. This is not the case in Kenya, where demonstrated accountability does not always match the reduction of unethical behaviour. For instance, recent scandals such as the Anglo-Leasing security contracts, maize importation, Free Primary Education (FPE) funds, sale of Grand Regency Hotel to Libyan investors without following the due process of law, Triton Oil importation scam, sale of Kenya’s Embassy in Japan and many other scandals which relate to corruption in public procurement is worrying (Mars Group, 2011). The Mars Group estimates that recent major grand corruption scandals have cost Kenya over KSh700bn (£5bn). It has reached a point where the citizenry are frustrated by the corruption and impunity exhibited by state officials in collaboration with other actors who misuse public resources despite the tightening legal regime. With these happenings in the public sector, there is need to establish whether accountability contributes to effective management of the procurement function. Literature on ICT adoption shows that the public procurement systems that have adopted ICT have effective management systems that support the procurement function (Kramer, Jenkins, and Katz, 2007). However, this cannot be generalised to all cases, for instance in Kenya, where public procurement is not fully ICT compliant, thus it remains unclear how this omission is affecting effective management of the procurement function. Literature review shows the important role of the ICS in the management of the procurement function. An efficiently upheld ICS would mean adherence to the PPDA in Kenya and compliance to set internal policy guidelines. The literature however, falls short of the ICS effectiveness and its effect on the management of the public procurement in Kenya. This is because past studies have in most cases been centred in the developed world, since public procurement is a new concept in developing countries such as Kenya. 2.4 Summary Procurement reform is a protracted process and there are many obstacles along the way and therefore needs to be effectively managed. This chapter has presented literature on selected factors that influence the procurement function. These factors are: project financing, accountability, Information and Communication Technology adoption and internal control system. The overriding objective of a state’s public procurement system is to deliver efficiency and “value for money” in the use of public funds. The literature review in the above sections shows that this objective can be achieved effectively, if factors such as project financing, accountability throughout the procurement system; efficiencies in the internal processes and a functioning and effective internal control system are paid attention. 2.5 Research Gaps Developing countries have need for a well-functioning public procurement system. This is particularly true for developing countries, where procurement usually accounts for a high proportion of total expenditure. Kenya is committed to improving efficiency in the public procurement system at every opportunity for the purpose of enhancing: accountability in decision-making structures; responsiveness to citizens of the country; professionalism to improve performance; transparency in the procedures and policies; and appeal rights to redress meritorious grievances of suppliers. However, this can only be achieved with a full understanding of the factors influencing the management of the procurement function at the basic level. There is lack of sufficient information on these variables, locally to enable the government fulfill its commitment. Existing literature in Kenya fails to capture the influence of these factors on the effective management of the Procurement function at Sub-County level. This study will evaluate the factors affecting effective management of the procurement 275
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION function at Nakuru North Sub County. 3. Research Methodology 3.1 Introduction This chapter discusses the methodological procedures that will be used in data collection and analysis. Discussed in details are the research design; the location of the study; population of the study; sampling procedure and sample size; instrumentation; data collection, data analysis and the method used by the study in analyzing data collected. 3.2 Research Design The study adopted descriptive survey research design in examining the factors affecting the effective management of Procurement function in Nakuru North Sub-County’s procurement unit. The descriptive survey design method was appropriate and useful in exploring how internal factors affect the performance of the procurement function in the study area. This research design was used because it is an efficient approach of collecting descriptive data regarding characteristics of a sample of a population, current practices, conditions or needs. 3.3 Population The target population of the study was the procurement units the procurement units at the Nakuru North Sub-County offices form which heads of departments of all Ministry departments were interviewed. There are 30 heads of department in Nakuru North County each representing a Ministry. These were used for the study given that they are the Authority to Incur Expenditure (AIE) holders; and thus are in a strategic position to provide information sought in this study. 3.4 Census The study employed a census technique in determination of the size of the population to be used for the study. In this study the technique is considered ideal, since individual Government Ministries have distinct characteristics; and the study was keen in collecting information from all the Ministries for comparison of arising attributes of variables of the phenomenon under study (Currivan, 2013). A census was, thus, conducted on all the Authority to Incur Expenditure (AIE) holders; one in each of the 30 Government Ministries at the Nakuru North Sub-County. 3.5 Research Instruments Data was collected from heads of department of all user / Ministry departments using questionnaires containing structured and unstructured questionnaires. The questionnaires were prepared thematically on the basis of the research questions. The questionnaire is divided into five sections. The first section; Section A, captures personal information of the respondents, while Section B to E captures information in addressing research questions (i) to (iv). Prior to use the research instruments were validated and subjected to reliability analysis as presented in the sections below. 3.6 Validity and Reliability of Instruments According to Mutai (2000), an instrument can be validated by proving that its items or Content and construct validity was established to determine if the items are a representative sample of the skills and traits that comprise the area to be measured. A pilot study was carried out in the procurement units within Nakuru town. The supervisors provided guidance on the content of the instruments; that is ensuring that all the research objectives are addressed by the questions or information sought in the instruments. The manner of construction of the questionnaires was also checked to ensure that the questions were not misinterpreted and only relevant information is obtained. According to Cohen, Manion and Keith (2007), Validity is ensured by; choosing an appropriate scale, ensuring that there are adequate resources for the required research to be undertaken, selecting 276
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION an appropriate methodology for ensuring the research questions, avoiding having too long or too short an interval between pretest and post-test, ensuring standardized procedures for gathering data or for information administering tests, and tailoring the instruments to the concentration span of the respondents. Mugenda and Mugenda (2003) defined reliability as a measure of the degree to which a research instrument yields consistent results or data after repeated trials. Piloting was done at Rongai Sub County using 3 AIE holders; representing 10% of the population to test the reliability of the instrument. The respondents were given the measuring instruments. The procurement units for piloting were outside the study area. A reliability coefficient of 0.7 or over was assumed to reflect the internal reliability of the instruments (Mugenda and Mugenda, 2003). Cronbach’s alpha is an index of reliability associated with the variation accounted for by the true scores of the underlying construct. Construct is the hypothetical variable that is being measured. 3.7 Data Processing and Analysis The data collected from the field was coded and entered into the computer for analysis using the Statistical Package for Social Sciences (SPSS) version 20 for windows. Both qualitative and quantitative data were analyzed. Qualitative data was analyzed by reading the questionnaire. Descriptive statistics (frequencies and percentages) were computed for all the five objectives. Quantitative data was computed for inferential statistics (Pearson Moment Correlations) with a 0.05 test significance level. According to Kabiru and Njenga (2009) Pearson correlation method is used to compare the variables, where two sets of variables were compared to see the extent to which they were related and if they were used to predict each other. The correlation between two sets of variables was indicated by means of correlation coefficients which were positive. A positive coefficient ranges from 0 to 1.0 while a negative coefficient ranges from -0 to- 1.0. 1 was a perfect correlation and 0 indicates that there was no correlation between two sets of variables. 4. Research findings and discussion 4.1 Introduction This chapter presents the findings of the study analyzed using the research methodology discussed in Chapter 3. The findings are presented thematically under the subheadings namely: general characteristics of the respondents; Effect of Project financing on the effective management of the procurement function; the role of accountability on the effective management of the procurement function; Contribution of adoption of Information Communication Technology to the effective management of the procurement function and Influence of internal control system on the effective management of the procurement function. 4.1.1Response Rate The research study was a census of 30 heads of departments at Nakuru North Sub County. Out of the 30 questionnaires distributed, 25 were re-collected which translated to a response rate of 83.33%. 4.2 General Information of the Respondents This section describes the general characteristics of the respondents such as gender, age, educational level, years of service and their designation. 4.2.1Gender of the respondents The respondents were asked to indicate their gender. The result was then cross tabulated against their designation and the result was as given in Table 4.1 277
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Table 4. 2: Gender of the respondents Designation Head of department / unit/ division 8 4 2 1 47.1% 80.0% 100.0% 100.0% F 9 1 0 0 52.9% 20.0% .0% .0% 17 5 2 1 % Total F F Female Medical superintendent % Male S.P.H.O % Gender Assistant Head 100.0% 100.0% 100.0% 100.0% The findings show that 47.1% of the male respondents were heads of Departments, 80% of the Assistant heads of Department were male, all the S.P.H.O and the medical superintendent was a male while the rest in each category of designation were female. It emerges thus that a sizeable percentage of 52.9% were female working as heads of Department. This was bound to influence their perception of the phenomenon under investigation as well as enable the public sector to deliver better quality public services effectively. According to the Gender Equality Duty, (2012) Guidance for Great Britain, incorporating gender equality into procurement will enable the public sector to deliver better quality public services. The gender equality duty will mean that public bodies will have to ensure that the works, goods or services they buy are responsive to and genuinely meet the needs of both men and women – thereby increasing the quality of the service they are providing. This therefore means that management of procurement function in Nakuru North Sub County was poised to yield good results due to the gender mix in departmental headship. 4.2.2 Age of the respondents Age of the respondents was considered in this study to influence the respondents’ perception of effective management of the procurement function. The result was cross tabulated against years of service in their departments and was as shown in Table 4.2 Table 4. 3: Age of the respondents Years of service/ working period 1-5 years Age 35 – 40 years Over 10 years F 2 0 0 % 25 - 30 Years 6-10 years 50.0% .0% .0% F 1 0 0 278
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION % 1 2 4 25.0% 66.7% 22.2% F 0 1 9 .0% 33.3% 50.0% F 0 0 5 .0% .0% 27.8% F 4 3 18 % Total F % Over 51 years .0% % 45 – 50 years .0% % 41 – 44 years 25.0% 100.0% 100.0% 100.0% The findings show that 50% of the employed in the departments for a period of 1 to 5 years were aged 25 to 30 years, 25% of those who had for the same period (1 to 5years) were aged between 35 to 40 years and 25% of those in service for that period were of 41-44 years. It is also established that 66.7% of those who had served for a period of 6 to 10 years were in age of 41-44 years, 33.3% of those who had served for a period of 6 to 10 years belong to 45-50 years of age. The findings further show that 22.2% of those who served for a period of over 10 years were aged between 41 and 44 years, 50.0% of the respondents who had served for a period of over 10 years were of 45-50 years of age and 27.8% of those who had served for a period of over 10 years were aged over 51 years. This implied that most persons involved in the procurement function had an experience of over 10 years and were above 45 years of age. This also shows that there was less involvement of the youth in public procurement. 4.2.3 Level of Education Level of education, in this case was in reference to the academic level of education attained. That is K.C.P.E at primary school level, KCSE at secondary school level, professional certificate and Diplomas at college level and the Bachelors or Masters Degree level at the University .The responses to the level of Education attained were as provided in Table 4.3. Table 4. 4: Level of Education Response Frequency Percentage K.C.S.E 1 4.0 College 13 52.0 Bachelors' degree 10 40.0 1 4.0 25 100.0 Masters Total 279
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION The findings show that 52% of the respondents indicated that their highest attained level was college level, 40% indicated Bachelors Degree, 4% indicated masters level, while 4% indicated KSCE level was their highest attained level. This implied that most persons had attained a level sufficient to influence favorably their comprehension of antecedents to effective management of the procurement function. 4.3 Effect of Project financing on the procurement function This section contains the findings in respect to objective 1 which sought to examine the effect of Project financing on the effective management of the procurement function at Nakuru North Sub-County. 4.3.1 Extent of effect of project financing on the procurement process The respondents were asked to indicate the extent to which project financing affected the procurement process of supplies in the public and the result was as given in Table 4.4. Table 4. 5: Extent of effect of project financing on the procurement process Response Frequency Percentage Not at all 0 .0 Small extent 1 4.0 Moderate extent 3 12.0 12 48.0 9 36.0 25 100.0 Great extent Very great extent Total The findings show that 48% of the respondents indicated that project finance affected procurement process to a great extent, 36% indicated to a very great extent, 12% to a moderate extent and 4% to a small extent. This implied that according to most of the respondents’ project financing affected the procurement process of supplies in the public sector. There was therefore possibility that some projects were underfunded and experienced inadequacies when funds were required. This was likely to affect project performance. This is in agreement with Hagén, and Zeed, (2005) who argues that when the project is underfunded the support it is expected to offer to the procurement cycle will not be realized. 4.3.2 Effect of project finance aspects on the procurement function The respondents were asked to indicate the extent to which select aspect of project financing affected the management of procurement function and the response was as provided in this section, they were asked to indicate the level of extent to which the following project financing aspects affect the effectiveness of the procurement management on a scale of 1-5, where 1 represented Very Great Extent while 5 represented „Not at All‟. As shown in Table 4.5 Table 4. 6: Effect of Project Finance Aspects on the Procurement Process N Inadequate project financing Minimum 25 1.00 280 Maximum 4.00 Mean 1.6000 Std. Deviation .95743
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Timely disbursement of funds 25 1.00 5.00 1.8800 1.20139 Flexibility procurement 25 1.00 4.00 1.9200 .99666 Bureaucratic bottlenecks in time 25 1.00 5.00 2.2000 1.32288 25 1.00 5.00 2.5800 1.24231 of budgets of payments Public Disposal Procurement Act ( and contract management and procurement procedures Valid N (listwise) 25 The findings indicated that inadequate project financing influence the procurement function to a very great extent, great extent or moderate extent, all the outlined aspects of project financing affected the effective management of the procurement function as indicated by mean scores of less than 2.5 with the exception of Public Procurement and Disposal Act which had a mean score of 2.58. This is not healthy, since an effective procurement process ensures the availability of the right goods and services in the right quantities, available at the right time, for the right customers and at reasonable prices, and at recognizable standards of quality. This view is also supported by a report by WHO, (2007). Table 4.6 below presents the Effects of Project Financing on procurement of Supplies Table 4. 7: Descriptive Statistics on Effects of Project financing on procurement of Supplies Statement N Minimum Maximum Mean Std. Deviation Project funds are always released on time, thus 25 1.00 5.00 3.3200 1.24900 25 1.00 5.00 2.5600 1.75784 25 1.00 4.00 1.6400 1.03602 25 1.00 5.00 2.0400 1.46856 making management of the project easy Most stalled projects are due to inadequate funding It is difficult to relocate unutilized votes for other poorly financed areas It takes time to get approvals / authorizations for procurement of required items Valid N (listwise) 25 Table 4.6 shows that according to most of the respondents, it is difficult to relocate unutilized votes for other 281
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION poorly financed areas recording a mean score of 1.64. It is also established that it takes time to get approvals / authorizations for procurement of required items with a mean score of 2.04. This is below the mid mean score mark of 2.5, implying that these aspects were affecting the procurement of Supplies negatively. It is important to note that findings also show that most stalled projects are due to inadequate funding with dispersion higher than the moderate extent (2.56), Implying also that there was a high possibility that most of the stalled projects could be linked to inadequate funding. Project funds are not always released on time, thus making management of the project difficult as shown by mean score of 3.32 for a reverse assertion. 4.4 The effect of accountability on the procurement function This section contains the findings in respect to objective 2 which sought to assess the role of accountability on the effective management of the procurement function at Nakuru North Sub-County. Accountability constitutes a central pillar of any public procurement system. Without transparent and accountable systems enabling governments and citizens to engage in a mutually responsive way, the vast resources channelled through public procurement systems run the danger of increased corruption and misuse of funds. Even in a system with low levels of corruption, public and civic oversight can help identify inefficiencies, thereby increasing procurement efficiency and effectiveness for the benefit of improved service delivery and ultimately citizens. 4.4.1 Extent to which accountability affects procurement process of supplies The respondents were asked to indicate the extent to which key components of accountability affected management of their procurement function and the response was as provided in Table 4.7 Table 4. 8: Extent of effect accountability on the procurement process of supplies Response Frequency Percentage Very great extent 5 20.0 Moderate extent 10 40.0 Small extent 1 4.0 Not at all 9 36.0 Total 25 100.0 The findings show 20% of the respondents indicated that accountability affected procurement process of supplies in the public sector to a very great extent, 40% indicated that it was a moderate extent, 4% indicated that the effect was to a small extent, while 4% indicated not at all. This implied that accountability did affect procurement process of supplies in the public sector greatly as indicated by most of the respondents. 4.4.2 Effect of Key components of accountability on the procurement function The respondents were asked to indicate the extent to which key components of accountability affected management of their procurement function and the response was as provided in Table 4.8 Table 4. 9: Effect of accountability on the procurement function Statement N Minimum Maximum Mean The measurement of goals and results 25 1.00 5.00 2.3600 The justification or explanation of those results to internal or 25 1.00 5.00 2.7200 external monitors 282
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Punishment or sanctions for non-performance or corrupt 25 1.00 5.00 2.8800 behavior Valid N (listwise) 25 The mean scores for the effects of key components of accountability on the management of the procurement function were as follows: the measurement of goals and results (2.36); the justification or explanation of those results to internal or external monitors (2.72); and punishment or sanctions for non-performance or corrupt behavior (2.88). Though the scores are above the mid mean mark of 2.5, the scores are below 3.0 which represent the moderate extent as per the likert scale used in this study. This implied that all the three aspects were above moderate extent and thus affected the procurement of supplies in most Ministry departments. This finding is is in agreement with a study by Vian and Collins (2006) who posits that lack of accountability can lead to project failure since, it precipitates corruption. 4.4.3 The Influence of Accountability on the Procurement Function The influence of accountability on the management of procurement function was also assessed through select statements to which they agreed with their assertion. The response was as presented in Table 4.9 Table 4. 10: The Influence of Accountability on the Procurement Function Statement N Minimum Maximum Mean Accountability is government's obligation to demonstrate 25 1.00 5.00 1.8000 Lack of accountability creates opportunities for corruption. 25 1.00 5.00 1.3200 Government officials use discretion to license and accredit 25 1.00 5.00 2.4000 25 1.00 5.00 1.7600 effectiveness in carrying out goals and producing the types of services that the public wants and needs facilities, providers, services and products, opening risk of abuse of power and use of resources. High amounts of discretion without adequate controls can create opportunities for corruption. Valid N (listwise) 25 Accountability is government's obligation to demonstrate effectiveness in carrying out goals and producing the types of services that the public wants and needs (1.8); Lack of accountability creates opportunities for corruption (1.32); Government officials use discretion to license and accredit facilities, providers, services and products, opening risk of abuse of power and use of resources (2.4); High amounts of discretion without adequate controls can create opportunities for corruption (1.76). All these scores are above the mid mark of 2.5, implying that they were aspects that could not be ignored since; they affected the effectiveness of the procurement function. 4.5 Contribution of ICT Adoption to the Procurement Function This section contains the findings in respect to objective 3 which sought to assess the contribution of Information Communication Technology adoption to the effective management of the procurement function at Nakuru North Sub-County. 4.5.1 Effect of ICT Adoption on procurement of suppliers in the Public sector The respondents were asked to what extent ICT adoption affected procurement of suppliers in the public sector and the response was as provided in Table 4.10 283
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Table 4. 11: Effect of ICT Adoption on procurement of suppliers in the Public sector Response Frequency Percentage Very great extent 7 28.0 Great extent 3 12.0 Moderate extent 4 16.0 Small extent 6 24.0 Not at all 5 20.0 Total 25 100.0 The findings show that 28% of the respondents indicated that ICT adoption affected procurement of suppliers in the public sector to a very great extent, 24% indicated that it did affect to a great extent, 20% indicated that there was no effect at all, 16% indicated that the effect was to a moderate extent, while 24% indicated that the effect was to a small extent, The implication here is that ICT adoption was an important factor affecting the procurement function according to most of the respondents. 4.5.2 Effect of Key components of ICT adoption on the procurement function The respondents were asked to indicate their level of agreement with the following statements that relate to the effect of ICT adoption on management of your procurement function. To this they responded as provided in Table 4.11 Table 4. 12: Effect of Key components of ICT adoption on the procurement function Statement N Minimum Maximum Mean Government officials and elected leaders have increasingly 25 1.00 5.00 1.9200 25 1.00 4.00 1.7200 25 1.00 4.00 1.6400 25 1.00 4.00 2.0400 25 1.00 5.00 3.0400 come to realize that public agencies must utilize ICT in order to enhance the procurement processes in the public sector. Public authorities are expected to provide excellent service to their constituents in an effective and transparent manner In order to meet today’s operating challenges, regional and local governments are turning to ICT to enhance the services by lowering costs and increasing productivity Public authorities are implementing scalable communication infrastructures to promote economic development African nations are lagging severely in ICT adoptions despite the benefits from ICT experienced by others Valid N (listwise) 25 According to findings, Government officials and elected leaders have increasingly come to realize that public agencies must utilize ICT in order to enhance the procurement processes in the public sector. This is true as it is evidenced by the mean score of 1.92. Most of the respondents upheld the view that public authorities are expected to provide excellent service to their constituents in an effective and transparent manner and this assertion scored a mean of 1.72. With a mean score of 1.64, it is suffices that according to most departmental 284
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION representatives, it was evident that in order to meet today’s operating challenges, regional and local governments are turning to ICT to enhance the services by lowering costs and increasing productivity. The statement that purports that public authorities are implementing scalable communication infrastructures to promote economic development recorded an mean score of 2.04, while he view that African nations are lagging severely in ICT adoptions despite the benefits from ICT experienced by others score a mean of 3.04. it can be argued that these respondents had realized the value attached to ICT and believed that Africa was averagely on the right path. This implied that most respondents appreciated the importance of ICT as a factor positively influencing procurement function. These findings are in agreement with Hagén, and Zeed, (2005) who postulates that in order to meet today’s operating challenges, regional and local governments are turning to ICT to enhance the services for residents, businesses and visitors, and improve internal efficiencies by lowering costs and increasing productivity. This is also in support to the view held by Kirungu, (2011) in Kenyan study, who argues that manual systems are a source of major inefficiencies in regulation and operations of the function. ICT needs to be adopted to ensure proper functioning of the procurement system. 4.6 Influence of Internal Control System on the Procurement Function This section contains the findings in respect to objective 4 which sought to assess the influence of internal control system on the effective management of the procurement function at Nakuru North Sub-County. 4.6.1 Effect of Internal Processes on Procurement of Supplies The respondents were asked to indicate the extent to which internal processes affects procurement of supplies in the public sector and the response was as provided in Table 4.12 Table 4. 13: Effect of Internal Processes on Procurement of Supplies. Response Frequency Percentage Very great extent 6 24.0 Great extent 5 20.0 Moderate extent 5 20.0 Small extent 6 24.0 Not at all 3 12.0 Total 25 100.0 The findings 44% of the respondents indicated that internal processes affected procurement of suppliers in the public sector to a great extent, 20% indicated that the effect was to a moderate extent, 24% indicated a small extent, and 12% not at all .This implied that according to most of the respondents internal processes had an influence on the procurement of supplies and thus this could not be ignored. 4.6.2 Effect of Internal Processes on the procurement function The respondents were asked to indicate their level of agreement with the following statements that relate to the effect of internal processes on management of your procurement function. To this they responded as provided in Table 4.13 285
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Table 4. 14: Effect of Internal Processes on the procurement function Statement N Minimum Maximum Mean Professional and job-related responsibilities are placed before 25 1.00 5.00 2.1200 25 1.00 5.00 2.1200 25 1.00 5.00 2.2000 personal gain and individual interest Employees may neither engage in, nor give the appearance of engaging in, dishonest or unethical actions Value for money is the core principle underpinning public procurement, incorporating ethical behavior and the ethical use of resources. Officials involved in procurement must not make improper use 25 1.00 5.00 1.6000 of their position Valid N (listwise) 25 Table 4.13 presents the results showing the mean scores for the effect of Key components of internal processes on the management of their procurement function as follows: professional and job-related responsibilities are placed before personal gain and individual interest (2.12); employees may neither engage in, nor give the appearance of engaging in, dishonest or unethical actions (2.12); value for money is the core principle underpinning public procurement, incorporating ethical behavior and the ethical use of resources (2.20); and officials involved in procurement must not make improper use of their position (1.60). This implied that all the components of internal processes in the table above were affecting the procurement function in most of the departments. 4.6.3 Effect of Internal Control System on the Procurement Function The respondents were asked to indicate their level of agreement with the following key components of Internal Control System affected management of their procurement function. To this they responded as provided in Table 4.14 Table 4. 15: Effect of Internal Control System on the Procurement Function Statement N Minimum Maximum Mean Organizational structure; 25 1.00 5.00 1.8400 Record keeping; 25 1.00 5.00 1.8000 Division and segregation of duties; 25 1.00 5.00 1.8400 286
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Authorizations and approvals; 25 1.00 5.00 1.9600 Internal checks; 25 1.00 5.00 2.0000 Competency of the staff 25 1.00 5.00 2.0000 Valid N (listwise) 25 The mean scores for the effect of key components of Internal Control System on management of your procurement function are as follows: organizational structure (1.84); record keeping (1.80); division and segregation of duties (1.84); authorizations and approvals (1.96); internal checks (2.0); and competency of the staff (2.0). The findings show most of the departmental heads were in agreement with the fact that components of Internal Control System positively affected the procurement function. This is agreement with Seminega (2012) who reported that internal controls play a pivotal role towards ensuring effective management of the procurement function. It means thus, that with proper application of these controls enhance the effectiveness of the management process. 4.7 Relationship between Effective management of procurement and independent variables A Pearson Correlation was computed between the independent variables (Project financing, Accountability, ICT adoption and internal processes) and (Dependent Variable) Effective management of procurement with the aim of establishing whether there was a causal relationship between these study variables. The results were as presented in Table 4.15 Table 4. 16: Relationship between Effective management of procurement and independent variables VARIABLES EMOPF PF R Sig. (2-tailed) N R Sig. (2-tailed) N EMOPF PF A ICT IP 1 . 25 .324 .114 .324 .114 25 1 . .306 .136 25 .263 .204 .416(*) .039 25 .242 .244 .336 .101 25 -.083 .694 25 25 25 25 25 A R Sig. (2-tailed) N .306 .136 25 .263 .204 25 1 . 25 .693(**) .000 25 .157 .454 25 ICT R Sig. (2-tailed) N R Sig. (2-tailed) N .416(*) .039 25 .336 .101 25 .242 .244 25 -.083 .694 25 .693(**) .000 25 .157 .454 25 1 . 25 .387 .056 25 .387 .056 25 1 . 25 IP * Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed). EMOPF: Effective Management of Procurement Function 287
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION PF: Project Financing A: Accountability ICT: Adoption of Information Communication Technology IP: Internal Processes R = Correlation value The findings show that that there is a positive correlation between the dependent variable (effective management of procurement function) and independent variables (Project financing, Accountability, ICT adoption and internal processes). This implies that the independent variables are responsible for the current level of the effectiveness in managing the procurement function. Project financing is positively correlated with effective management of procurement function at 0.324 at 0.114 significance level; Accountability at 0.306 at 0.136 significance level, ICT adoption at 0.416 at 0.039 significance level; and Internal processes at 0.336 at 0.101. All these values were above the test significance level at 0.05, this implying that the independent variables negatively affected the effective management of procurement function. 5. Summary of findings, conclusions and recommendations 5.1 Introduction This chapter presents a summary of research findings, conclusions, and recommendations drawn from conclusions. The purpose of this study was to evaluate the factors affecting effective management of the procurement function at Nakuru North Sub-County. In this study, data was collected using questionnaires heads of departments of all user / Ministry departments. Analysis of data was conducted with the aid of the Statistical Package for Social Sciences (SPSS) version 21.0 for windows. The analysis entailed computation of descriptive statistics (frequencies and percentages). 5.2 Summary of Findings The study findings show that project financing had an influence on effective management of the procurement function at Nakuru North Sub-County. This was evidenced by 84% of the respondents, who indicated project financing affected the procurement process of supplies in the public sector. However, it is worth noting that timely disbursement of funds, flexibility of procurement budgets, and bureaucratic bottlenecks in time of payments did not affect the procurement function in this sub county. The respondents appear to almost unanimously agree that Public Procurement and Disposal Act (contract management and procurement procedures) affected the management of the procurement function. Accountability had an influence on the effective management of the procurement function at Nakuru North Sub-County. It is noted that as embraced at the sub county, it did not affect the procurement function. Measurement of goals and results, justification or explanation of those results to internal or external monitors and punishment or sanctions for non-performance or corrupt behavior appear to be meticulously done in such a way that it favoured the procurement function. Information Communication Technology adoption contributed to the effective management of the procurement function at Nakuru North Sub-County. However, it emerges that the level of adoption was still low as according to most respondents, the Government officials and elected leaders still had not lived to the realization that public agencies must utilize ICT in order to enhance the procurement processes in the public sector. Internal control system influenced the effective management of the procurement function at Nakuru North Sub-County. According to most of the respondents internal processes had an influence on the procurement of supplies. According to most respondents professionalism was not fully embraced and this was bound to affect the procurement function and most of the respondents engaged in dishonesty or unethical actions. However, most 288
  • WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION respondents showed that organizational structure, record keeping, division and segregation of duties, authorizations and approvals, internal checks and competency of the staff as adopted and / or implemented was sufficient to steer effective management of the procurement function. 5.3 Conclusions and recommendations Based on the summary of findings, the following conclusions were made: Project financing had an influence on effective management of the procurement function. Procurement process can contribute to improved performance of the procurement function if the process is timely financed. Delayed disbursement and project funding inadequacies appear to be one of the main reasons behind stalled projects. Hagén, and Zeed, (2005) posits that the procurement unit needs to be assured of availability funds before preparing procurement plans and entering into negotiations with the suppliers. Accountability had an influence on the effective management of the procurement function at Nakuru North Sub-County. Accountability shows how the public interest has been protected in the expenditure of public funds. Maintaining integrity in public procurement is one of the most important pillars of modern national procurement systems (Barrett, 2000). Ensuring the accountability of procurement officials is perhaps the most essential aspect of this goal. The accountability of procurement officials is not only important from a public or administrative law perspective, but also has economic implications. Information Communication Technology adoption contributed to the effective management of the procurement function at Nakuru North Sub-County. The old way of doing business consists of buyers managing forecasts and communicating requirements to suppliers via phone, fax and email. Spreadsheets and manual reports are passed between the trading partners. These manual processes are slow and cumbersome. They cannot support today’s demand-driven enterprises. Supply chain procurement professionals spend too much time “putting out fires” and reacting to daily problems (Thomson and Jackson, 2007).The study thus concludes that ICT adoption affected procurement process at Kenya government ministries to a great extent. ICT adoption enhanced the process of effective tendering through advertising,sourcing reviews, prequalification, potential for cost savings and greater awareness of new development. Adopting ICT enabled Kenya government ministries to provide excellent service to their suppliers in an effective and transparent manner. Internal control system influenced the effective management of the procurement function at Nakuru North Sub-County. According to Thomson and Jackson, (2007), the actions of public officials must be above suspicion and not give rise to any actual or potential conflict of interest and their dealings with commercial and other interests should bear the closest possible scrutiny. It is not possible to give guidelines for every conceivable situation that may arise but if a doubt arises about a particular situation line management should be consulted. This study concludes that the study concludes that operating procedures affected procurement process at Kenya government ministries to a very great extent. Based on the findings and conclusions of the study, the following recommendations were made: The Government of Kenya should consider examination and evaluation of offers is made effective. Accountability and measurement of goals and results need to be considered since they affect procurement process at Kenya government ministries.Also,Procurement results need to be reported to internal or external monitors since this affects procurement process at Kenya government ministries.The government officials need to be encouraged to use discretion to license and accreditfacilities,providers,services and products to reduce opening risk of abuse of power and use of resources. Thirdly, adequate controls should be put in place reducing opportunities for corruption. Performance incentives need to be offered to employees to reward good performance. This will help to increase accountability. Kenya government ministries should adopt ICT. This will enhance the process of effective tendering 289
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