fw finmal thesis work.doc

Leadstar University College
Faculty of Business and Leadership
Department of Business Administration, MBA
Program
Specialization: SUPPLY CHAIN
MANAGEMENT
FACTORS AFFECTING PROCUREMENT PERFORMANCE
(The Case of Ethiopian Industrial Inputs Development Enterprise)
For Partial Fulfillment of Master of Business Administration
(MBA)
ADVISOR NAME: DR. MERGIYA MEKURIA
BY: FETENE WORKU EWUNETIE
ID NO: DE/GRD/BA/3984/09/4
October, 2019
Addis Ababa, Ethiopia

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Declarations
I FETENE WORKU, Registration Number/I.D. Number DE/GRD/BA/3984/09/4,
do hereby Declare that this study “Factors Affecting Procurement Performance;
The case of Ethiopian Industrial Inputs Development Enterprise” is my original
work and that it has not been submitted partially; Or in full, by any other person for an
award of a degree in any other university/institution.
Declared by:
Name: FETENE WORKU EWUNETIE
Signature _______________________
Date_______________________
This Thesis has been submitted for examination with my approval as University
College supervisor.
Confirmed by Advisor:
Name Dr. MERGIYA MEKURIA
Signature_______________________
Date_______________________

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Dedication
This research study is dedicated to my family and friends for their encouragement and
continuous support throughout MA Program and especially during this research
project.

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APPROVAL
The undersigned certify that they have read and hereby recommend to the Leadstar
University College to accept the Thesis submitted by FETENE WORKU, And
entitled “factors affecting procurement performance: The case of Ethiopian
industrial inputs development enterprise,” in partial fulfillment of the requirements
for the award of a Master’s Degree in Business Administration Specialization Supply
Chain Management.
Name of Supervisor Dr. MERGIYA MEKURIA
Signature………………….
Date………………………
Name of Internal Examiner ………………………….
Signature…………. ……..
Date……………………...
Name of External Examiner …………………………..
Signature…………. ……..
Date……………………....
Name of Head of Department ……………………….
Signature………………….
Date……………. ………..

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Acknowledgements
I wish to express my sincere gratitude to all those who contributed towards the
completion of this work.
First and foremost I owe special thanks to God, Who gave me the commitment and
tolerance to pass various obstacles and come up to the accomplishment of this thesis.
I sincerely acknowledge my Advisor Dr. Mergiya Mekuria Leadstar University
College for giving me the required guidelines all the way till I was through. A special
recognition goes to all my friends, for their support with SPSS, their valuable advice,
and encouraging remarks to the successful completion of this thesis.
My deepest and special thanks also go to my wife Fasika Mitiku for her continuous
moral support throughout the entire duration of this project and all my family who
shared my burden and makes my task smooth. Last but not the least, the respondents
from the staff of Ethiopian industrial inputs development enterprise who provided
valuable information through their response to the questionnaires administered:
without you, the study would not have taken place.
To all of you, kindly accept my appreciation for your great support.

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Table of contents
Declarations................................................................................................................................I
Dedication..................................................................................................................................II
APPROVAL...............................................................................................................................III
Abstract:.....................................................................................................................................X
Acknowledgements....................................................................................................................IV
LIST OF TABLES....................................................................................................................VIII
LIST OF FIGURES.................................................................................................................VIII
ACRONYMS AND ABBREVIATIONS ......................................................................................IX
CHAPTER ONE ............................................................................................................................1
Introduction ...........................................................................................................................1
1.1 Background of the Study ..............................................................................................1
1.2 Statement of the Problem.............................................................................................3
1.3 Research Questions......................................................................................................5
1.4 Research Objectives.....................................................................................................5
1.4.1 General Objective.................................................................................................5
1.4.2 Specific Objectives................................................................................................5
1.5 Significance of the study ..............................................................................................6
1.6 Scope of the Study........................................................................................................6
1.7 Limitations of the Study ...............................................................................................7
1.8 Organization of the Study ............................................................................................7
CHAPTER TWO ...........................................................................................................................8
LITERATURE REVIEW..............................................................................................................8
2.1 Introduction..................................................................................................................8
2.2 Theoretical Review of the Related Literatures.............................................................8
2.2.1 Agency Theory ......................................................................................................8
2.2.2 Normative Ethical Theory...................................................................................10
2.2.3 Institutional Theory.............................................................................................11

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2.2.4 Procurement Performance..................................................................................12
2.2.5 Procurement Performance Indicators ................................................................12
2.2.6 Procurement Professionalism on Procurement Performance ............................13
2.2.7 Adoption of ICT on Procurement Performance..................................................14
2.2.8 Procurement Performance Models .....................................................................15
2.3 Empirical Review of the related literatures ...............................................................15
2.3.1 Influence of Procurement Planning on Procurement Performance....................17
2.3.2 Influence of Staff Competency on Procurement Performance............................19
2.3.3 Influence of Contractual Management on Procurement Performance...............20
2.3.4 Influence of Information Communication Technology on Procurement
Performance.................................................................................................................21
2.4 Conceptual Framework .............................................................................................24
2.5 Summary ....................................................................................................................25
CHAPTER THREE.......................................................................................................................26
RESEARCH METHODOLOGY .................................................................................................26
3.1 Introduction................................................................................................................26
3.2 Research Design ........................................................................................................26
3.3 Target Population......................................................................................................27
3.4 Sample Design ...........................................................................................................27
3.5 Sample Size and Sampling Technique........................................................................27
3.5.1 Determination of Sample Size.............................................................................27
3.5.2 Sampling Technique............................................................................................28
3.6 Data Collection Instrument........................................................................................29
3.7 Instrument Reliability.................................................................................................29
3.8 Data Collection Procedure........................................................................................29
3.9 Data Analysis and Presentation.................................................................................29
CHAPTER FOUR ........................................................................................................................31
RESEARCH FINDINGS AND DISCUSSION...............................................................................31
4.1 Introduction................................................................................................................31
4.2 Reliability Test Results...............................................................................................31
4.2 Response Rate............................................................................................................32

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4.4 Demographic Characteristics of the Participants .....................................................32
4.4.1: Gender Distribution of the Participants............................................................32
4.4.2 Age of the Participants........................................................................................32
4.4.3 Positions Held by Participants ...........................................................................33
4.4.4 Participants Highest Level of Education ............................................................33
4.4.5 Working Experience of the Participants .............................................................34
4.5 Descriptive Statistics..................................................................................................34
Performance.................................................................................................................40
4.5.5 Procurement Performance..................................................................................41
4.6 Inferential Statistics ...................................................................................................43
4.6.1 Correlation Analysis...........................................................................................43
4.6.2 Regression Analysis ............................................................................................46
CHAPTER FIVE ..........................................................................................................................49
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS.......................................................49
5.1 Introduction................................................................................................................49
5.2 Summary of Findings.................................................................................................49
Performance.................................................................................................................50
5.3 Conclusions of the Study............................................................................................51
5.4 Recommendations of the Study ..................................................................................52
5.5 Recommendations for further study...........................................................................52
REFERENCES.............................................................................................................................53
Appendex A .................................................................................................................................i

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LIST OF TABLES
Table 3.1 Target Population Distribution Table
Table 3.2 Sample Size Distribution
Table 4.1 Reliability Test Results
Table 4.2 Response Rate
Table 4.3 Gender Distribution of the Participants
Table 4. 4 Ages of the Participants
Table 4.5: Positions Held by Participants
Table 4.6 Participants Highest Level of Education
Table 4.7 Working Experience of the Participants
Table 4.8 Influence of Procurement Planning on Procurement Performance
Table 4.9 Influence of Staff Competency on Procurement Performance
Table 4. 10 Influence of Contractual Management on Procurement Performance
Table 4.11: Information Communication Technology on Procurement
Performance
Table 4.12 Procurement Performance
Table 4.13 Relationship between Procurement Planning and Procurement Performance
Table 4.14 Relationship between Staff Competency and Procurement Performance
Table 4.15 Relationship between Contractual Management and Procurement
Perfmance
Table 4.16 Relationship between ICT and Procurement Performance
Table 4.18 Analysis of Variance of the Model
Table 4.17 Model Summary
Table 4.19 Model Regression Coefficient
LIST OF FIGURES
Figure 2. 1: Conceptual framework

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ACRONYMS
EIIDE- ETHIOPIAN INDUSTRIAL INPUTS DEVELOPMENT ENTERPRISE
UNDOC - UNITED NATIONS OFFICE ON DRUGS AND CRIMES
OECD - ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ICT- INFORMATION COMMUNICATION TECHNOLOGY
GDP- GROTH DOMESTIC PRODUCT
CGES-CENTRAL GOVERNMENT ENTITIES
LGES- LOCAL GOVERNMENT ENTITIES IN
PDES- PROCUREMENT AND DISPOSAL ENTITIES
SPSS - STATISTICAL PACKAGE FOR SOCIAL SCIENCES
MBA- MASTER OF BUSINESSADMINISTRATION
ICT- INFORMATION COMMUNICATION TECHNOLOGY
IMF- INTERNATIONAL MONETARY FUND
PPA- PUBLIC PROCUREMENT ADMINISTRATION

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Abstract:
Procurement is the nerve center of performance in every institution, whether public or
private and thus needs a tight system to be followed and adopted. This research aims
to examine factors affecting procurement performance in: the case of Ethiopian
industrial inputs development enterprise. Based on literature reviews, the researcher
identified four factors that affect the procurement performance. These includes:
procurement planning, staff competency, contractual management and Information
Communication Technology. The hypothesis of the study was the procurement factors
(independent variables) affect the procurement performance (dependent variable) of
Ethiopian industrial inputs development enterprise. The research design is made
based on descriptive and explanatory research approaches. The researcher
distributed 215 questionnaires and 198 were filled and returned. Both primary and
secondary data were used throughout this research. For primary data, both
structured and semi structured type questionnaires were prepared. The results of this
study indicate that the independent variables (Procurement Planning, Staff
Competency, contractual management and Information Communication Technology)
positively affect the dependent variable (procurement performance) to a significant
extent. These factors explain 73.1% of procurement performance, while the rest
26.9% is explained by other factors which are not subject of this study.
Key words: Procurement Planning, Staff Competency, contractual management,
Information Communication Technology.

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CHAPTER ONE
Introduction
This study sought to investigate the factors affecting the performance of procurement
at the Ethiopian industrial inputs development enterprise (EIIDE). Ethiopian industrial
inputs development enterprise is faced with the problems of not complying with the
procedures and is therefore unable to determine their efficiency and effectiveness.
This introductory chapter discusses the background, the statement of the problem,
general and the specific objectives of the study, research questions, and the signifi-
cance of the study, scope of the study, limitation of the study and organization of the
study.
1.1 Background of the Study
Nowadays, organizations have been forced to reinvent their regulations with custom-
ers and suppliers due to the weakening global economic conditions. Procurement be-
ing a crucial role in most organizations can assist in achieving sustainability and the
ultimate performance goals through lowering of costs throughout the procurement
process by focusing on value addition. Procurement involves the whole process of
acquiring goods and or services and it begins the moment an organization identifies a
need and decides 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, where relevant, the
ongoing management of a contract and consideration of options related to the contract
(Musau, 2015).
A substantial portion of firm’s resources and time is utilized in the procurement pro-
cess hence its proper management is paramount. It is necessary for every firm to
maintain an efficient and effective procurement function to cut administration cost
and to keep abreast of the market conditions to procure material and services at the
right price, quality and time (Kasisi, Mumo&Mwangi, 2014). To achieve an efficient
and effective procurement process, bottlenecks must be removed and rewards distrib-
uted in an equitable way to key players in the process with the working principle be-
ing the creation of customer satisfaction at the end (Chimwani, Iravo&Tirimba, 2014).
For decades, procurement performance has been attracting great attention from prac-

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titioners, academicians and researchers due to poor performance. An adoption of e-
procurement has rapidly increased since 1990’s yet organizations still face challenges
associated with its advent and use (Kimani, 2013). Public procurement is a key tool to
promote objectives of an economic, environmental and social nature gaining much
attention globally over the past decades. In developing countries, it is one of the main
instruments to the achievement of development goals such as reducing poverty and
providing health, infrastructure, education and other services Mlinga, (2009).
Public procurement accounts for 15-30% of the gross domestic products (GDP) for
many countries in the world (United Nations Office on Drugs and Crimes (UNDOC),
2013). While public procurement represents an estimated 15% of GDP in Organiza-
tion for Economic Co-operation and Development (OECD), countries and up to 25%
of GDP in developing countries OECD, (2007).The share is believed to be much
higher in developing and least developed countries, where development of basic infra-
structure is still the prime focus of governments and consumes huge budget
Basheka&Bisangabasaija, (2010). In developing countries, public procurement is in-
creasingly recognized as essential in service delivery and it accounts for a high pro-
portion of total expenditure. For example, public procurement accounts for 60% in
Kenya Akech, (2013), 58% in Angola, 40% in Malawi and 70% of Uganda’s public
spending Basheka and Bisangabasaija, (2010).
In Ethiopia, more than 60% of the total public expenditure has been spent through
public procurement in a year. It is a huge amount of money that public bodies spent
via public procurement. The expenditure on public procurement is increasing from
year to year. However, the resource spent on public procurement is not used properly
and in an economical manner and in the current Ethiopian public procurement
process, the compliant on public procurement process shows increment from year to
year. Efficiently and effectively handling this size of Procurement outlay has been a
policy and management concern as well as a challenge for governments PPA Annual
Report, (2014).
Public Procurement procedures are decision making processes. The procuring
authority has to compare the proposals against pre-set criteria specified on the bid and
needs to choose one of them or reject all of them. The decision logic of procurement
can be characterized as "One Winner" selection process from known alternatives,
where the alternatives are compared at the same time using a previously determined,

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and unified criteria system. Procurement procedures are also group processes, and
negotiations among the stakeholders is an essential part of completing the task Thai,
(2011).
In a developed or developing country, employees who work on public procurement
have and will face always many challenges. Some of them are lack of employee's
competency in the area of procurement profession, using IT in procurement activities
is very minimal, and preparing procurement plan is very poor. Each country has its
own economic, social, cultural and political environment and each country's public
procurement experts face different types of challenges or the same types of challenges
but at different levels from their counterparts in other countries. All the challenges
and factors need attention since they could influence the performance of the
procurement function. Due to these reasons the researcher will examine the factors
that affect public procurement performance in EIIDE. It is against this background
therefore, that this research study seeks to assess the factors affecting procurement
performance in Ethiopian industrial inputs development enterprise.
1.2 Statement of the Problem
According to Wanyonyi, (2015), procurement is the nerve center of performance in
every institution, whether public or private, and thus, needs a serious attention and
tight system to be adopted and followed.
The procurement function has become increasingly important over the past decades
since purchasing and supply has become a major determinant of corporate success.
Significant business pressure as a result of globalization, innovations, technological
changes, cost pressure, and regulatory compliance has forced the procurement
function to focus on cost reduction and attaining more value for money.
The Procurement function usually takes large amounts of organizations' resources.
Hence it is becoming an expensive undertaking for many organizations and if not
properly done it can lead to significant regret.
Ethiopian public procurement manual (2011) counsels that a procurement plan is an
instrument for implementation of the budget and should be prepared by the user
departments with a view to avoiding or minimizing excess votes in the entities'
budgets and to ensure that procurements do not proceed unless there are funds to pay
for them. This implies that all procurement plans must be well integrated into the

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budget process based on the indicative budget as appropriate and in compliance with
the procurement law.
Mamiro (2010) found that indications which underscores these facts. He concluded
that one of the major setbacks in public procurement is poor procurement planning
and management of the procurement process which include needs that are not well
identified and estimated, unrealistic budgets and inadequacy of skills of procurement
staff responsible for procurement in his research entitled the limping pillar in public
Procurement.
Kakwezi and Nyeko, (2010) concluded in their findings that failure to establish
Performance of the procurement function can lead to irregular and biased decisions
that have costly consequences to any public procuring entity. During his internship
program at Ethiopian industrial inputs development enterprise, the student researcher
has observed that there is a gap between what stakeholders need and what is actually
performed. There have been a lot of complaints since the quality of goods purchased
doesn't fit with the specification. There is also a big gap between purchase request and
delivery of time. These observed problems initiated student researcher to study factors
affecting procurement performance of Ethiopian industrial inputs development
enterprise. Additionally, as an employee of the enterprise , it could be easily observed
that there were instances of shortage of items, quality problems and/or mismatch of
items requested with procured and delivered(wrong quality); excessively delayed
purchases(wrong timing); and incurring additional costs as result of long duration of
the purchase process. Furthermore, it has been becoming serious hurdle for the supply
chain process which is the major goal of the enterprise. Thus, the focus of this study is
examining the relationship between procurement performance and factors such as
procurement planning, contractual management, staff competency, information
technology in Ethiopian industrial inputs development enterprise as one case among
Ethiopian public development enterprise.
Moreover, though there were a lot of international and local empirical studies on
Procurement and procurement performance, none of these studies focused on the
influence of information technology, employee competency, contract management,
and procurement planning on procurement performance. Likewise, most of these
studies have been conducted in other countries with varying contexts of
demographics, economic, political and environmental factors and institutional settings
than Ethiopian industrial inputs development enterprise. Hence their findings couldn't

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be generalized to the Ethiopian industrial inputs development enterprise as subject of
the study. This study sought to fill this research gap by assessing the factors affecting
procurement performance in industrial inputs development enterprise. To this end the
investigation is attempt answering the following research questions.
1.3 Research Questions
Based on the identified problems above, the researcher has developed the following
questions that need to be researched in the context of Ethiopia with special focus on
Ethiopian industrial inputs development enterprise to examine the factors that affect
procurement performance in EIIDE.
1. How procurement planning affect the performance of procurement in EIIDE?
2. How staff competency influence procurement performance in EIIDE?
3. How does procurement contract management influence procurement performance
in EIIDE?
4. What is the effect of adoption of information technology on the procurement
performance in EIIDE?
1.4 Research Objectives
Based on the questions above, the research has the following general and specific
objectives:
1.4.1 General Objective
The general objective of this study is to critically examine factors affecting
the performance of procurement at EIIDE and to examine the implication of
the established procurement practice on organizational performance.
1.4.2 Specific Objectives
To achieve the general objectives mentioned above the following specific objectives
are set.
1. To establish the effect of procurement planning on the performance of public
procurement in EIIDE.
2. To establish the extent in which competency of staff influence the performance of
procurement in EIIDE.
3. To analyze the influence of procurement contract management on
procurement performance in EIIDE.

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4. To investigate how the adoption of Information Communication Technology
can effect on procurement performance in EIIDE.
1.5 Significance of the study
The findings of this research may help EIIDE to identify the factors that affect
procurement performance and to fix the problem with remedial action. It is also
expected that from the findings of this study, EIIDE may put in place appropriate
measures to improve procurement performance levels.
This study may serves as a reference for other researchers who are interested in
conducting studies on related issue.
In addition, the study could be of importance to procurement Professionals in various
public or private sectors since it would add a body of knowledge to factors of
procurement performance. The issues which had been addressed in this research may
expect to improve public procurement practices as part of their strategic plan for the
achievement of best value for public money. The decisions given based on the
research may also be important to improve overall public procurement performance.
This research is also expected to add to the current literature. The result of the study
serves various purposes. Mainly public development enterprise would benefit from it
by using the information from the study to work on areas which are important to
improve the performance of procurement process by applying the recommendations,
which would help to save significant amount of public resource that otherwise, would
be wasted. The student researcher has also gain the benefits of being acquainted with
research skills in the endeavor and be honored MBA degree after successful
completion of his study. Finally the study could encourage other researchers to
conduct similar researches on the subjects under investigation.
1.6 Scope of the Study
The scope of the study is delimited to the procurement activities of Ethiopian
industrial inputs development enterprise (EIIDE), specifically on the factors that
affect procurement performance such as procurement plans, staff competency,
contractual management and utilization of ICT. The subject of the study is only the
head office of EIIDE.The respondents were covers directly concerning departments
like procurement, marketing, sales and project departments in different positions, such

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as top level management, middle level management, lower level management and
experts.
1.7 Limitations of the Study
It is obvious that adequate and reliable information is important to undertake any kind
of study. However, the unwillingness and carelessness of some respondents while
filling the questionnaires during data collection is considered as a major constraint to
the study. The outcome of this study is based on sample from a single organization i.e.
Ethiopian industrial inputs development enterprise. Therefore, it may be difficult to
generalize the findings to other similar organizations. Nevertheless the result can shed
some light on the nature of procurement activities among different units of the
enterprise. For the findings to be reliable more similar studies need to be replicated in
similar other organizations. Another limitation of this study might be the descriptive
method it employed for investigation. The other method may use more to pin point or
trace factors having the most devastated effect or could be the most obstacles. Future
research may look into this issue and could narrow the gap.
1.8 Organization of the Study
This study is organized in five consequential chapters. The first chapter deals with the
introduction part of the paper encompassing background of the study and the company
under evaluation, statement of the problem, objectives of the study and other relevant
issues. The second chapter focuses on relevant literature review. In this chapter a review
the relevant literatures in relation to the topic under discussion was made. The third
chapter deals with research Methodology; that is, the research design, approaches used
throughout the data collection and analysis processes are discussed. The fourth chapter
presents the overall findings of the study which prevails about the factors affecting the
performance of procurement activities in EIIDE with emphasis on Ethiopian industrial
inputs development enterprise. Finally, chapter five incorporates summary of major
findings, conclusion and recommendation part of the study. [

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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
The main aim of literature review is to study and acknowledge the input of other
researchers and authors and their contributions to the body of knowledge in order to shed
more light on the topic of discussion.
In this chapter, the researcher has reviewed relevant literatures which are in related with
the title in the study area. The chapter thus includes concepts and ideas, practices of
Procurement and Procurement performance. Conceptual framework of the research and
empirical evidences are also included.
2.2 Theoretical Review of the Related Literatures
A theory is a supposition or system of ideas intended to explain something. Defeeet
al., (2010) asserts that good research should be grounded in theory. There are several
theories and models that explain and describe the way public procurement operates.
These studies do well on three theories namely the agency theory, normative ethical
theory and institutional Theory.
2.2.1 Agency Theory
They introduced agency theory while studying the problems of compensation
contracting. Agency theory is concerned with agency relationships. The two
parties have an agency relationship when they cooperate and engage in an
association wherein one party (the principal) delegates decisions and/or work to
another (an agent) to act on its behalf (Eisenhardt2009 ;). The important
assumptions underlying agency theory is that; potential goal conflicts exist
between principals and agents.
Each party acts in its own self-interest; information asymmetry frequently exists
between principals and agents; agents are more risk averse than the principal; and
efficiency is the effectiveness criterion. Two potential problems stemming from
these assumptions may arise in agency relationships: an agency problem and a
risk sharing problem (Xingxing, 2012). An agency problem appears when agents'
goals differ from the principals' and it is difficult or expensive to verify whether
agents have appropriately performed the delegated work (i.e. moral hazard).

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This problem also arises when it is difficult or expensive to verify that agents have
the expertise to perform the delegated work (i.e. adverse selection) that they claim
to have. A risk-sharing problem arises when principals and agents have different
attitudes towards risk that cause disagreements about actions to be taken
(Xingxing, 2012). The assumptions and prescriptions of agency theory fit
naturally with the issues inherent in effective benchmarking on procurement
performance. In the process of managing procurement performance and quality,
buyers in agency relations are faced with potential problems.
By their nature, buyers expect suppliers to provide good quality and to improve
the quality of supplied products and/or services, but suppliers may be reluctant to
invest substantially in quality, especially if they perceive that buyers are reaping
all the benefits. The difference between buyers and suppliers will result in the two
parties concerning themselves only with their self-interests (Xingxing, 2012).
Agency theory determines how procurement managers execute procurement
performance on behalf of public institutions.
Existence of poor principle agent relationship leads to low level of top
management commitment and this also affects the relationship between
institutions and the suppliers. The criticism of the theory has shown that there is
another explanation as to why people behave the way they do using social power
and that the theory is less powerful than the explanation. The Agency theory is
more of a description and it does not really explain in much more detail than the
definition. As a result, procurement performance is greatly reduced leading to
poor service delivery by suppliers and no value for money invested. Existence of
conflict of interest amongst the agents leads to execution of procurement
performance against the procurement policies and this leads to increased
procurement budget and loss of procurement funds. This essentially leads to
corruption and conflict of interest. This study will use this theory to assess
procurement planning, staff competency and contract management and how they
influence procurement performance.
From this theory it is inferred that when someone is forced to comply, dissonance is
created. Forced public procurement compliance can therefore result in cognitive
dissonance (Tukamuhabwa, 2012). However, proponents of this theory argue for the
need to increase public participation in the procurement process. The argument here is
that increased public participation in the procurement process is likely to strengthen

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the scope of monitoring and enforcement of procurement decisions by public agents
and shift the responsibility from the elected representatives to the taxpayers, who are
the main principals.
Agent theory was therefore relevant and useful in our study in that it assisted the
researcher in explaining the relationship between the government as the principal and
the procuring entities as agents in the implementation of the public procurement
legal framework. The theory shows how the actions and performance of the procuring
entities (as the agent) affect the government (as the principal) and other stakeholders.
In particular, the actual implementation of the public procurement law and regulations
was discussed through this theory.
2.2.2 Normative Ethical Theory
Darwall (2013) says that philosophers use normative ethical theory to refer broadly to
principles, concepts and ideals that can be cited in support of ethical judgments about cases.
As such, the investigation of normative ethical theory is unavoidable if we are to think about
ethical issues with any case. This is because the part of ethics we call morality is modeled on
law, even if other parts are not. What is wrong in a person’s undertaking is what one can
appropriately be held accountable for doing and that it warrants blame where there is no
adequate and justified reason. Thomason (2013) says that managers are often responsible for
making a variety decisions which affect both internal and external stakeholders for an
organization. It is therefore the management’s responsibility when making decisions to act
ethically guided by the ethical or moral principles defined by society. Darwall (2013) says
that a procurement manager held accountable for wrongdoing should be capable of
accepting the judgment in some sense, of being brought to see that it is a reasonable
judgment to have been made.
This can help to foster integrity and a moral dealing among public procurement
personnel. Eyaa et al (2011) argues that the level of professionalism in public
procurement is low or even non-existent. This according to Mosoba (2012) is the reason
why procuring entities brought before the PPARB in Kenya continue ignoring the advice
of the Board and commit the same mistakes while blaming the law instead of their own
deliberate interests. In response, several cases and controversies have characterized
tendering for public projects including those in critical social areas such as the General
Elections, water and human relief services. For instance, Ngirachu (2013) says reports
that procurement of sub-standard BVR poll kits cost the tax payer over KES 7.2 billion

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only to collapse leading to delay of the release of election results by the IEBC who
resorted to controversial manual tallying method.
2.2.3 Institutional Theory
This theory is one of the traditional approaches which are used to examine
components of public procurement (Tukamuhabwa, 2012; Obanda, 2010). The theory
adopts a sociological perspective to explain organizational structures and behavior
(Dunn & Jones, 2010).There are three pillars of institutions namely regulatory,
normative and cultural cognitive. The regulatory pillar focuses on the use of rules,
regulations and procedures as basis for compliance. The normative pillar on the other
hand deals with norms and value with social obligation as the basis of compliance.
The cultural–cognitive pillar rests on shared understanding (common beliefs, symbols
shared understanding). Adopting from this theory, all public entities in Ethiopia are
guided by rules and regulations with the respective laws and the attendant regulations
and guidelines governing the public procurement processes and activities. The theory
therefore supports the first independent variable of this study i.e., legal and regulatory
framework.
Furthermore, the three institutional pillars as identify organizational culture, social
influence, organizational incentives and enforcement as the prerequisites of
compliance with procurement law and regulations. The implication of this is that, in
order to achieve the high level of performance in the procurement functions,
institutions must first be strengthened. This is view is also supported by Hilletofth
(2009) who argued that procurement process in the public sector need a body that is
not only focused but also committed in attaining of the set up goals and objectives.
The strategic role of procurement can only be realized when included in the corporate
strategic planning process and implementation at the same level as other functional
areas. This occurs when the importance of procurement is recognized, accepted and
operationalized by top management (Baily et al., 2015). Top management should
therefore recognize the importance procurement by explicitly involving procurement
staff in the formulation of corporate strategy (Hubbard, 2009). The easiest way to
accomplish this is to make the head of procurement department a member of the top
management committee (PPA, 2011).
Furthermore, procurement performance can be enhanced if training for procurement
staff is emphasized. Failure to consider staff professional qualifications and

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capabilities always result in poor procurement operations and thus prevent the full
potential of strategic procurement being realized. The theory was therefore important
in explaining the institutional arrangements (organizational structures) responsible for
effective implementation of and compliance with the PPA 2011 and PPR 2013.
2.2.4 Procurement Performance
Procurement performance covers a number of quality and quantity-enhancing
benchmarks, which narrows down transaction costs, time spent, and the quality and
quantity of goods delivered.
Procurement performance has to do with the proper management of procurement
activities. The management of procurement activities narrows down to the basic
functions of the HR departments of hiring best procurement management talent,
subjecting this top talent to on-the-job training and development, rewarding and
motivating this top talent through competitive salaries, benefits and career progression
(Bianchi &Guidi, 2010).
Procurement performance can be realized if organizations discard their trademark
paper based procurement systems especially when procuring crucial materials that
have a direct bearing on their overall competitive advantage.
2.2.5 Procurement Performance Indicators
According to the Organization Economic Cooperation Development (OECD) (2014)
experience in working with public procurement shows that a sound procurement
system includes:
 Procurement rules and procedures that are simple, clear and ensure access to
procurement opportunities;
 Effective institutions to conduct procurement procedures and conclude
manage and monitor public contracts;
 Appropriate electronic tools;
 Suitable, in numbers and skills, human resources to plan and carry out
procurement processes; and
 Competent contract management.
However, in February 2013, the Leading Practitioners on Public Procurement asked
the OECD to help developing a set of indicators to measure the performance of public

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procurement systems and their evolution over time. And thus, four areas for the
development of indicators were identified:
o Efficiency of the public procurement cycle
o Openness and transparency of the public procurement cycle
o Professionalism of the public procurement workforce
o Contract performance management
When we see them in detail the first set of key performance indicators for each
involve: Efficiency of the public procurement cycle:
 Use of contracting mechanisms
 Uptake of e-procurement
 Savings using framework agreements with second-stage competition
 Efficiency of the public procurement unit
 Public procurement award time
Openness and transparency of the public procurement cycle:
 Promoting competition: procurement procedure
 Promoting competition: number of bids
 Increasing the supplier base
 Transparency of public procurement information
Professionalism of the public procurement workforce:
 Number of public procurement officials according to the value and number of
contracts and unsuccessful processes
 Level of trained public procurement officials
Contract performance management:
 Are suppliers delivering the right thing?
 Are suppliers delivering at the right moments?
 Are there delays in payment?
And all of these parameters were applied in different circumstances.
2.2.6 Procurement Professionalism on Procurement Performance
Professionalism in procurement can be explained as the practical and visible use of
qualities and competencies covering knowledge, appropriate skills and behaviors. Inside a
general sense, professionalism originates from knowing one has done a great job to the
better of one’s ability.

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Professionalism in procurement can’t be achieved without education and learning
both technical and soft skills however it doesn’t stop there. Managing purchasing and
supply function require a thorough understanding of the procurement process that
takes place within the organization which requires competent staff (Weele, 2010).
Kiplgat (2010) pointed out that lack of requisite skills in employees was one of the
challenges facing communication commissions of Kenya. Many of the challenges and
concerns relate to the fact that the government institutions have not professionalized
their procurement organization, systems and staffs (Weele, 2010).Communications
skills both on paper and verbally are also critical on procurement professionalism.
Allen (2013) argues that firms that have embraced this idea have made better
performance since procurement professionalism guarantees customer satisfaction.
Procurement professionalism on procurement performance and ethics both connect. Ethics
covers the conduct and moral principles acknowledged as appropriate within the profession.
According to Collins (2009), organization that manages procurement appropriately lead to
superior financial performance accrued from avoiding the cost of unethical procurement
practitioners. It should be noted that all the monies given as bribes to corrupt procurement
practitioners by unethical suppliers are siphoned from the buying organization as part of
quoted price of goods, services and works acquired. Training as staffs is also critical as it
improves procurement practitioner’s skills and knowledge thus improved procurement
performance, experience cannot also be ignored as it leads to efficiency and
effectiveness of procurement performance.
2.2.7 Adoption of ICT on Procurement Performance
Government officials and elected leaders have increasingly come to realize that public
agencies must utilize. ICT in order to enhance the procurement process in public sector
faced with tight budgets .Price Waterhouse Coopers (2011) states that an Internal Control
System is a set of procedures, methods and control measures designed by the Board of
Directors and executive management to ensure achievement of the organization’s
objectives. Amudo&Inanga (2009) indicate that Internal Control system is a
contemporary issue after experiencing global fraudulent financial reporting and
accounting scandals. According to Flick (2010), internal control system ensures
proper organizational processes functioning, financial information reliability and
applicable regulation compliance.

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According to Kirungu, (2011) in Kenya manual systems are a source of major
inefficiencies in regulation and operations of the function. ICT need to be adopted to
ensure proper functioning of the procurement system. This system is a product of the
new world order where everybody is going digital with globalization and internal
connectivity, there is needed to upscale the function in Ethiopia. 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.
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 (Hui, W., Othman, R., Omar, N.,
Rahman, A., and Haron, N., 2011). In South Africa, a district health planning and
reporting system was used to improve management control and hold government agents
accountable for their decisions.
Lack of access to appropriate ICT equipment, Lack of time for training, exploration
and preparation, Lack of models of good practice in ICT, Negative attitudes towards
ICTs in education, Technology anxiety and a lack of confidence, Fear of change and a
lack of personal change management skills, Unreliable equipment and Lack of
technical, administrative and institutional support.
2.2.8 Procurement Performance Models
Public procurement has been the focus of successive waves of management reform
worldwide (Arrow smith, 2010; Carol et al., 2014). These reforms have been driven
by an imperative to improve the performance and cost-effectiveness of the public
service (Global Partner and Associates, 2012). These reforms however, have
frequently been confronted by apparent conflict and debate between the basic
qualities of public governance, such as accountability and transparency versus
outcomes and performance (PPRA, 2011).
2.3 Empirical Review of the related literatures
Worldwide, governments are the biggest spenders and the figure varies from country
to country. There is increasing recognition that improving economic governance and
fostering fiscal responsibility in emerging economies requires strengthening

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transparency and accountability in the management of public finances. Thai (2011) in
his study on showed how public procurement is a complicated function of
government. He said public procurement requires interdisciplinary skills and
knowledge (or multiple disciplines), including economics, political science, public
administration, accounting, marketing, law, operations research, engineering, and
architecture, among others. He showed how impossible it is to integrate these
disciplines into the public procurement knowledge (e.g., students/practitioners are not
expected to become experts in engineering, architecture, law, budgeting and
accounting, operations research, and economics through their public procurement
training and education programs).
According to Thai, a very important task of public procurement professionals is to
communicate effectively with those professionals who are involved in procurement
projects. Japheth (2013) in his study looked at four independent variables (planning,
resource allocation, staff competency and contract management) which, according the
study, contribute to 87.5% of the variations in procurement performance at the
Ministry of Energy in Kenya. The researcher recommends further research to
investigate the other factors that affect procurement performance.
Ayaa (2011) explaining non-compliance in public procurement in Uganda focused her
study on the Central Government Entities (CGEs) and left out the Local Government
Entities (LGEs). In Uganda, public and disposing entities are classified into two
groups, the Central Government Entities and the Local Government Entities. The
findings of her study cannot be generalized to the LGEs, implying that there is need
for a study examining compliance with procurement regulations in LGEs given that
they operate in environments that are different from those of CGEs. Secondly, we
note that compliance is a behavior that is acquired over time and in order to examine
its true nature, a longitudinal study is necessary. We therefore recommend a
longitudinal study to examine compliance with public procurement regulations in the
public entities.
Boomsma (2009) researched on sustainable procurement in developing countries. The
countries under study were Sierra Leone, Mali and South Africa. The research found
that lack of technical and management capacity, cultural integration, funding for
investment startups, early inclusion of small producers, transparency and equal
distribution of power were some of the aspects cited as hindering sustainable

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procurement by the author. Boomsma (2009) concluded that sustainable sourcing
needs multi stakeholder process, as well as the primary value chain actors, stakeholder
researchers, government, support agencies, in order to be successfully implemented.
The author further highlighted the need to create synergy among these stakeholders to
manage conflicts and interests as to ensure that all actors gain. Boomsma (2009)
recommended that the three aspects of sustainability (efficiency, high quality and
social responsibility) need to be considered in the structure of an organization and its
supply chain in order to add the highest possible value to the chain. The public sector,
support agencies and donors should actively and responsibly support this process. In
poorly integrated chains, a facilitator may be needed to coordinate and mediate the
process towards a fair chain partnership.
In Ethiopia, the implementation of the procurement reforms commenced in 2000 with
the approval by cabinet. These reforms resulted into the establishment of the PPPA.
This body was given the regulatory and oversight mandate to advise Government on
matters relating to public procurement and disposal. One of its other mandates was to
monitor compliance by central and local government entities to the provisions of the
new legal and institutional procurement frameworks. To this effect, this report
presents results of the compliance checks on 120 procuring and disposing entities
(PDEs) During the 1990s, a number of developing countries including Ethiopia
embarked on procurement reforms with an objective of creating efficient and effective
procurement systems. Procurement remained a big part of the developing countries’
economy; accounting for an estimated 9%–14% of the developing nations GDP and it
is was therefore an area that needed attention since resources were not being used
properly.
2.3.1 Influence of Procurement Planning on Procurement Performance
According to Shiundu and Rotich (2014), evaluation or measurement of
procurement performance has always been a vexing problem for procurement
professionals. They explain two types of goals in the procurement system: non
procurement goals and procurement goals. Procurement goals are primarily
associated with quality, reduction of financial and technical risks, and protection
over competition and integrity in the system. Non procurement goals usually
involve the economic, social, and political goals within the system.

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Achieving efficiency in public procurement is an ambitious task, as procurement
faces numerous challenges, especially due to the market structure, the legal
framework and the political environment that procurers face. Procurement
performance should be based on total cost, quality, and enhancement of
competitiveness of suppliers using best procurement practice. Kiage (2013)
explored the determinants affecting procurement performance with a case of
Ministry of Energy. The study posits that public procurement has increasingly
become prominent, thus the public entities need to plan on how to handle the
entire process. The findings show that procurement planning has a substantial
impact on procurement performance. Planning, resource allocation, staff
competency and contract management impact on the variations in procurement
performance.
Procurement planning is one of the primary functions of procurement with a
potential to contribute to the success of public institution’s operations and
improved service delivery. Similarly, Mamiro (2010) in his findings underscores
these facts and concludes that one of the major setbacks in public procurement is
poor procurement planning and management of the procurement process which
include needs that are not well identified and estimated, unrealistic budgets and
inadequacy of skills of procurement staff responsible for procurement. Likewise,
procurement performance is not usually measured in most public entities as
compared with the human resource and finance functions.
Failure to establish performance of the procurement function can lead to irregular
and biased decisions that have costly consequences to any public procuring entity.
A procurement plan describes and documents all of the purchases from outside
suppliers that will be needed to support the needs of a particular department
(Kiage, 2013).
Wile (2010) describes it as the process used by companies or institutions to plan
purchasing activity for a specific period of time which is usually completed during
the budgeting process; each department is required to request a budget for staff,
expenses and purchases. Procurement plans serve as a road map and the goal
should be to enable efficient use of available resources.
According to Kiage (2013), a procurement plan is used to implement the budget;
it should be prepared by user departments so as to minimize excess votes in an

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entities budget and to ensure there are funds to make payments before
procurement is done. Resource confirmation and resource allocation helps make
procurement effective when carried out appropriately (Kiage, 2013). The ultimate
goal of any public procurement is to satisfy the public interest as entrusted in the
public procurement Act (Ouma&Kilonzo, 2014). In their study, Ouma and Kilonzi
(2014) find that resource planning is significant and contributes to public entity
procurement and it is an important aspect in determining how effective the
procurement process will be.
Therefore public entities should balance resource allocation and even allocate
more funds to procurement departments. According to Arrow smith (2010),
conflicts may sometimes arise between the objective of preventing corruption and
ensuring efficiency in the administration of the procurement process. Measures to
prevent corruption may add to the cost of procurement, therefore the prevention of
corruption is so important.
2.3.2 Influence of Staff Competency on Procurement Performance
According to Banda (2009), many procuring organizations have staffs that do not
have the right competence needed for good procurement management Barsemoi et
al. (2014) found that most of the personnel carrying out procurement functions in
the local authorities in Kenya have not been sensitized on procurement
regulations. The Public Procurement law requires that each procuring entity
establishes a procurement unit with procurement professionals. The lack of
professionalism has been explained as a cause of non-compliance to procurement
laws.
Professionalism in public procurement relates to the levels of education and
qualifications of the workforce as well as the professional approach to the conduct
of business.
Another cause of non-compliance is the lack of staff training. The PPOA Audit
Report (2008 as cited in (Ndumbi&Okello, 2015)shows that inadequate training is
high amongst public procurement officers in Kenya, although this may be
attributed to the profession still being relatively young in Kenya.
According to Sultana (2012), technological developments and organizational
change have led employers to the realization that their success relies on the skills
and abilities of their employees, which means that they have to continuously

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invest in training and development. Employees begin to realize that learning and
continuous training is as big as job itself.
Training one another, or “train the trainer”, is another important aspect of
continuous learning. It allows employees to develop new applications and
techniques and share them with their peers or supervisors. Moreover, Smith
(2009) contends that lack of professional training on procurement functions and
lack of continuous training on implementation of best procurement performance
hinders the procurement staff in public sector organizations to effectively execute
procurement procedures. According to Hall (2009), efficiency and the
effectiveness of procurement procedures are hindered by absence of effective
continuous employees training programs that help in equipping the employees
with competitive procurement management skills.
Ebrahim (2010) contends that from management viewpoint, training is associated
with higher organizational productivity, it can improve the adaptability and
flexibility of their employees and their responsiveness to innovation, it can be
regarded as a means of engaging the commitment of employees to the
organization and training programs specific to the organization are of paramount
importance not least because they bind the employee and cannot be used by rival
organizations.
2.3.3 Influence of Contractual Management on Procurement Performance
Deva raj, Vaidya Nathan and Mishra (2012) concluded in their study that the presence
of poor contract management that is characterized by payments delays to suppliers
obstructs greatly their ability to offer timely service delivery leading to delays that
derails organizational procurement timelines and schedules. The presence of a high
frequency of procurement plans formulation and evaluation contributes to
organizational procurement performance. According to SIGMA (2011), contracts are
frequently complex, they may involve multiple actors, last a long time and may
consume many resources. It is therefore vital that they are properly managed.
According to Kiage (2013), resource allocation, procurement planning, contract
management and staff competency positively affect procurement performance.
Planning ensures that available resources are utilized in order to achieve overall
procurement objectives. The presence of procurement planning ensures that sound
purchasing plans are adopted so as to enhance both efficiency and effectiveness in

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achieving projected purchasing outcomes. In so doing, it addresses deficiencies in
current practice relating to procurement, contract management, inventory and asset
control and obsolescence planning (Nyaboke et al., 2013).According to Onyango
(2012), procurement; a function that was traditionally viewed as a clerical and
reactive task has since positioned itself among core organizational functions, and its
management is becoming increasingly critical for the well-functioning of any
organization. In addition, Kibogo (2014) reported that the Kenya government had
been losing hundreds of millions of taxpayer's money through cancelled contracts,
unfinished projects, poor service or product delivery, corruption and extended
contract periods in the previous eight years without major improvement. The study
further stated that of the 10% – 30% of GDP spent by the government of Kenya on
procurement alone, 5% is wasted due to lack of proper management of the contracts.
As a result, the World Bank and the International Monetary Fund (IMF) had to
intervene by putting in place stringent conditions for lending funds to the government
which slowed down economic development by 2.1%. The PPDA second integrity
survey (2011) reported that up to 69.8% of service providers surveyed agreed that
corruption influenced procurement and that acknowledgement of the presence of
corruption was assented to by up to 81.1% of the service providers. Integrity Baseline
2011 survey indicated that the majority of the service provider respondents had
offered a bribe of between 10 to 20% of the contract value (33.3%) with a further
6.3% saying they paid over 20% for the contract awarded. Key informants also
confirmed instances of procurement officers in key government agencies as allocating
works to their relatives or cronies.
2.3.4 Influence of Information Communication Technology on
Procurement Performance
The provision of adequate professional support by management through training and
educational has a positive impact on procurement performance (Nzau&Njeru, 2014).
Wanyonyi and Muturi (2015) concluded that staff competency, information
technology and ethics positively affect procurement function performance.
Organizations should therefore strive to adopt modern technologies, promote
employees competence and enhance the implementation of good organizational moral
code of conduct so as to attain improvements in their procurement departments.

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At the public sector level, technology enhances infinite and non-restricted access to
government information and increases market transparency and economic
incorporation based on complementarities. Wanyonyi and Muturi (2015) explored the
determinants impacting performance of procurement function in reference to public
technical training institutions in Kisumu County, Kenya. The study concludes that
ICT, staff competency and ethics have a direct impact on performance of the
procurement function among technical training institutions. Thus recommends the use
of ICT in technical institutions in an effort to improve the performance of
procurement functions.
According to Mumo et al (2013), ten years after the e-government directorate was set
to manage ICT in the government, most ordinary Kenya citizens are still using the
manual system to access government services making it difficult for the private sector
to engage profitably with the government. This particular platform has made the
government entities prone to exploitation resulting to poor service delivery and
dismal performance in procurement system. Government officials and elected leaders
have constantly insisted that public entities should automate their procurement
processes and must utilize ICT in order to enhance the procurement processes in the
public sector.
The key elements in implementing an organization’s wide strategic quality planning are
seen as identifying customers and their needs, establishing optimal quality goals, creating
measurements of quality, planning processes capable of meeting quality goals under
operating conditions and producing continuing results in improved market share,
premium prices and a reduction of error rates in the office (Patrick, 2010).
Evidences from the reviewed empirical literature show that most of the studies
conducted on performance of the public procurement focused on compliance with the
existing legal and regulatory procedures. Despite this, there is no specific study that
has demonstrated the effect of legal and regulatory framework on performance of the
procurement function. Studies by Ntayi (2009); Eyaa and Oluka (2011); Gaigo
(2011); Mwangi and Kairuki (2013); Gesuka and Namusonge (2013); Mugo (2013);
Onyinkwa (2013) and Eyitopeet al. (2014) studied on factors influencing compliance
with the procurement law and regulations, but did not explain the effect of the same
on performance of the procurement function or department. For example, a study by
Gesuka and Namusonge (2013) on factors affecting compliance in public procurement

23 | P a g e
regulations in Kenya found that complying with the procurement law and regulations
is far from being satisfactory, most of procurement proceedings in the procuring
entities don’t comply with the legal framework requirements fully. Nevertheless, the
study did not demonstrate the effect of such non- compliance on performance of the
procurement function in terms of its ability to achieve the departmental objectives.
Eyitopeet al. (2014) investigated reasons for non- compliance in the procurement
proceedings of procurement of works in Nigeria. They found that institutional and
political reasons are the major reasons for non- compliance with procurement
proceedings in procurement of works in Nigeria. However, the study failed to explain
how such institutional and political interferences affect the performance of the
procurement function in terms of quality, cost and on time completion of the works
projects in Nigeria.
Studies by Juma (2012); Kechibi (2012); Kiage (2013); Amayi and Ngugi (2013);
Kioko and were (2014); by Guccioet al. (2014) investigated on factors influencing
performance of the procurement function in public organisations. In these studies and
others, there was no specific independent variable addressing on the effect of Private
Sector Participation or the effect of Integrity in the performance of public
procurement was discussed. A study by Wahu, Namusonge, Mungai and Chilioni
(2015) determined factors affecting performance of the procurement function in
Kenyan public secondary schools: a case of Gatundu District. The performance of the
procurement function was measured in terms of efficiency and effectiveness. Of the
three independent variables under consideration, ‘competitive bidding’ was found to
affect procurement performance of the procurement function to the greatest extent.
However, the study did not explain how the ‘competitive bidding’ contributes to
efficiency and effectiveness of the procurement function in terms of on time delivery,
right quality and price/cost of the procured items. Moreover, the concepts ‘efficiency’
and ‘effectiveness’ were not clearly defined and linked in the context of public
procurement. More specifically, there is no known study on public procurement that
measured performance (as a dependent variable) in terms of its process (compliance)
and outcome (objectives). It is this study that bridges that existing gap.
The reviewed literature envisaged above obviously has left a research gap that must
be filled. The main gap that exists is two-fold, first how performance of the
procurement function can best be assessed, whether in terms of compliance with rules
and regulations or achievement of its departmental objectives, and secondly, is the

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relationship as proposed in the conceptual framework, it is not known as to what is the
contribution of each of the proposed independent variables on the performance of the
procurement departments. Previous and reviewed studies have not come to the
consensus on the effect of the proposed independent variables on performance of
procurement departments measured in terms of both Compliance with the rules and
regulations and Achievement of the procurement objectives. This study therefore
intended to fill the observed gaps that shall suffice to answer the research questions in
an attempt to assess the contribution of procurement function in attainment of
institutional and national goals.
2.4 Conceptual Framework
Colin Fisher (2010) defines a conceptual framework as a set of broad ideas and
principles taken from relevant fields of inquiry and used to structure a subsequent
presentation. It is formed of patterns of concepts and their interconnections. A
conceptual framework, according to Chakraborty (2009), is a scheme of concepts (or
variables) which the research operationalizes in order to achieve set objectives.
Mugenda and Mugenda (2012) define a conceptual framework as the main structure
that gives the research its form and shape and holds together all the elements in the
logical configuration.
From the conceptual framework, procurement performance was the dependent
variable and procurement planning, staff competency; contractual management and
ICT were the independent variables.
Figure 2. 1: Conceptual framework
Procurement planning
o Adherence to plans
o Budgeting
o Resource allocation
o Goal setting
Staff competency
o Employee experience
o Employee skills
o Professional qualifications
o Employee Training procurement
performance
-efficiency
-effectiveness
- Transparency

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Contract Management -Service delivery
oInternal controls
oNegotiation
oPeople and skills
Dependent variables
Information communication
Technology
o E-tendering
o Communication
o Variety of capable suppliers
Independent Variables
2.5 Summary
The central focus of this study was on factors that determine performance of the
procurement in public entities. As required by the best practice and indeed in
academic research, related literatures were reviewed to shade light on theoretical and
empirical evidences of the study topic under investigation. Specifically, the topic
drew attention on what literature to be considered; what content and context of
theories and models to be considered and what empirical evidences are needed for
justification of the research framework (conceptual model) under consideration.
The study is grounded by three theories. The theories adopted, were agency theory,
normative ethical theory and Institutional Theory. These theories are of great value as
they provide a framework upon which those involved in the procurement process and
decisions can rely on and later being accountable for their actions.
From the theories and empirical evidences the conceptual framework consisting of
independent and dependent variables is developed. Four independent variables,
namely procurement planning, staff competency; contractual management and ICT
were discussed. The dependent variable discussed in the study was Performance of
Procurement assessed in terms of level of Compliance with the procurement law and
regulations and Achievement of the procurement objectives (that is, timeliness,
quality and cost).
From the reviewed theoretical and empirical literature, it is evident that a number of
studies on public procurement have been conducted both in developed as well as in
developing countries. Most of the studies however, concentrated on legal and
regulatory compliance and little on attainment of the procurement performance. Even

26 | P a g e
those which focused on performance failed to explain the relationship among the
variables so as to show the share of each independent variable on procurement
performance. The reviewed theories, practices and evidences from East Africa and
beyond therefore, provided the rationale for the research that will be undertaken to
show the interface of the variables in responding to the research questions. However,
further researches on public procurement are necessary in order to explain on what
actually influence performance of procurement in the public sector and how best can
the same be assessed.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter covers the methodology and techniques underlying the execution of this
particular study. Specifically, it consists of research design, target population,
sampling frame, determination of sample size and sampling techniques; data
collection procedures and instrument reliability. Furthermore, the chapter describes
how the collected data were processed and analyzed. Finally, the statistical model
applied in analyzing and testing the research hypotheses have also been described in
this chapter.
3.2 Research Design
This study adopted a descriptive research design in which data was collected for the
objectives of the study. The choice of this research design was motivated by its
suitability for the instrument to collect a large amount of data. The design also
provided a practical framework for collecting a large sample of groups and strong
data reliability (Oso&Onen, 2005).The study further adopted a quantitative approach
by using a structured questionnaire to collect primary data from the respondents.
Quantitative research approach was preferred because it allowed the researcher to
measure and analyze data in detail to establish the relationship between the
independent and dependent variables. Quantitative research was used to test the

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research hypotheses because of its ability to measure data using statistics. This was
advantageous because it allowed for objective analysis of the study findings.
3.3 Target Population
Population according to Kothari, (2013) is the universe of interest. It is the total
number of subjects or the total environment of interest to the researcher. This study
targeted 465 participants from the head office of Ethiopian industrial inputs
development enterprise who comprised of top level manager , middle level manager,
lower level managers and experts in different departments that is concerning to
procurement performance directly or indirectly.
3.4 Sample Design
According to Silverman (2005), the sampling frame should be large to allow the
researcher to make inferences of the entire population. The sample frame for this
study was comprised of 465 participants.
Table 3.1 Target Population Distribution Table
Participant Target population Percentage
Top level Managers 5 1
Middle level manager 25 5.4
Lower level manager 40 8.6
Expert 395 85
Total 465 100
Source: Ethiopian industrial inputs development enterprise HR. department.
3.5 Sample Size and Sampling Technique
This section described the determination of sample size and sampling
technique this study employed.
3.5.1 Determination of Sample Size
The term sample refers to a segment of the population selected for research to
represent the population as a whole (Kotler and Armstrong, 2006).

28 | P a g e
The sample was calculated using the mathematical approach developed by Miller and Brewer
(2003). Given a population of 465 and precision level of 0.05 the sample size was
calculated as;
n = N
1+N (e) 2
Where; n is the sample size; N is the population size and e is the level of precision (0.05)
n= 465
1+465(0.05)2
n= 215
The sampling frame of the study constituted of 465 participants while the sample size
comprised of 215 participants.
Table 3.2 Sample Size Distribution
3.5.2 Sampling Technique
The choice of a sample size is vital so as to avoid wastage by not being too
large and to give confidence to the results of the study by not being too small
(Kothari, 2004). Stratified random sampling was used to select 215
respondents from the EIIDE. According to Bryman and Bell (2007), stratified
sampling ensures that the resulting sample is distributed in the same way as
the population in terms of the stratifying criterion. In addition, stratified
sampling is a good approach and method when there is a good statistical
database available. It gives flexibility to the researcher to make a decision on
identification and allocation of the units for the strata. It also gives possibilities
to use and make more than just one stratifying criterion. Simple random
Participant Target population Sample Size
Top level Managers 5 5
Middle level manager 25 25
Lower level manager 40 35
Expert 395 150
Total 465 215

29 | P a g e
sampling was also used to select the sample size of participants from each
stratum.
3.6 Data Collection Instrument
The study employed a structured questionnaire to collect data from the
participants. Questionnaires are research instruments used to collect
information geared towards addressing specific objectives (Kombo& Tromp,
2006). The questionnaire items are scaled on a five point likert scale. The
close-ended Likert rating scaled the items on (5, 4, 3, 2 and 1) where 5-
strongly agree, 4-agree, 3-undecided/neutral 2-disagrees and 1-strongly
disagree.
3.7 Instrument Reliability
Reliability is a measure of the degree to which a research instrument yields
consistent results after several trials (Mugenda & Mugenda, 2003). According
to Kombo and Tromp (2006), reliability is the extent to which results are
consistent overtime. Reliability of the research instrument will be calculated
using Chronbachs Alpha coefficient for either even or uneven items based on
the order of the number of arrangement of the questionnaire items. Test re-test
method was used to pilot the questionnaires. A Cronbach correlation
coefficient greater or equal to 0.7 is acceptable (George &Mallery, 2003).
3.8 Data Collection Procedure
Data collection as defined by Kombo and Tromp (2006) is the process of
gathering specific information aimed at proving or refuting some facts. The
primary data will be collected through a self-administered structured
questionnaire on a drop and pick later basis to allow participants enough time
to fill the questionnaires. Moreover secondary data from EIIDE reports,
magazines and other related documents will also be consulted to triangulate
the data collected through primary data collection method. The importance of
data collection is to promote decision making and response allocation that is
based on solid evidence rather than on isolated occurrences, assumption and
emotions.
3.9 Data Analysis and Presentation

30 | P a g e
The data collected was coded and analyzed using the Statistical Package for
Social Sciences (SPSS version 24) tool. Descriptive statistics will be used as a
measure of central tendencies and measures of dispersion (mean and standard
deviation). Correlation and Regression analysis was conducted to test whether
the strength of the relationship between the independent variables and the
dependent variable are statistically significant. A t-test will be conducted to
test the significance of the results at the 5% level of significance. The
regression analysis was guided by the following model:
y= + 1X1+ 2X2+ 3X3+ 4X4+ ……………………………Equation
Where,
Y Represents procurement performance
X1 Represents procurement planning
X2 Represents staff competency
X3 Represents contractual management
X4Represents ICT
ℇ represents error term
Α represents Y intercept
β1, β2, β3… are the net changes in Y
Assumptions of the model
i. There is a linear relationship between procurement performance and the four
variables (X1,X2,X3,and X4)
ii. There is a statistically significant relationship between procurement
performance and the four variables (X1,X2,X3,and X4)
iii.Taking all factors into account constant, procurement performance will be =

31 | P a g e
CHAPTER FOUR
RESEARCH FINDINGS AND DISCUSSION
4.1 Introduction
The purpose of the study was to assess factors affecting procurement performance in
Ethiopian industrial inputs development Enterprise. This chapter presents and
discusses the research findings of the demographic characteristics followed by both
the descriptive, inferential and regression analyses of the study objectives
respectively.
4.2 Reliability Test Results
The Chronbachs Alpha Test was conducted on all the study variables and gave
Chronbachs Alpha values greater than 0.7 as shown in Table 4.1. A Chronbachs
correlation coefficient greater or equal to 0.7 is acceptable (George &Mallery,
2003).
Table 4.1 Reliability Test Results
Chronbachs Alpha N of items(number of items)
0.027 29

32 | P a g e
4.2 Response Rate
The study targeted a sample size of 215 participants out of which 198 questionnaires
were completely filled and returned for analysis giving a response rate of 92%. The
higher response rate was occasioned by the frequent follow up and clarification of the
questions by the researcher. According to Mugenda and Mugenda (2003), Rogelberg
and Stanton (2007) and Saunders et al., (2007), a response rate of 50% is adequate, a
rate of 60% is good, and a response rate of 70% and over is very good.
Table 4.2 Response Rate
No. of Questionnaires Questionnaires Filled and Percentage
age
Participants Administered Returned
215 215 198 92%
Based on this awareness, the response rate in this study was considered to be very
good for the study.
4.4 Demographic Characteristics of the Participants
The study analyzed the demographic characteristics of the participants based on
gender distribution, age categories, highest level of education, Positions held and
working experiences of the participants.
4.4.1: Gender Distribution of the Participants
The study sought to establish the gender distribution of the participants in the
Ethiopian industrial inputs development enterprise. From the findings illustrated in
Table 4.3, the males were the majority 11 8(59.6%) followed by the females 80
(40.4%).
Table 4.3 Gender Distribution of the Participants
Gender Frequency Percent (%)
Male 118 59.6
Female 80 40.4
Total 198 100.00
4.4.2 Age of the Participants

33 | P a g e
In addition, the study sought to investigate the age categories of the participants in the
Ethiopian industrial inputs development enterprise. From the findings shown in Table
4.4, majority of the participants were aged between 31-35 years 106 (53.5%) and
above 35 years 52 (26.3%) respectively. Those aged between 20-25 years were 5
(2.5%) while those aged between 26-30 years were 35 (17.7%). The findings imply
that majority of the participants were young in age because they were aged below 35
years. This age range was consistent with what is often used in national policies in
Sub-Saharan Africa countries (Blum, 2007).
Table 4. 4 Ages of the Participants
Age Categories Frequency Percent (%)
20-25 years 5 2.5
26-30 years 35 17.7
31-35 years 106 53.5
35 years and above 52 26.3
TOTAL 198 100.00
4.4.3 Positions Held by Participants
The study further sought to establish the positions held by the participants in
Ethiopian industrial inputs development enterprise. The results illustrated in Table
4.5 shows that majority of the participants were experts 140 (70.7%). Further, 4
(2%) were top managers, 22 (11.1%) were middle level manager while 32
(16.2%) were lower level manager.
Table 4.5: Positions Held by Participants
Position Frequency Percent (%)
Top level manager 4 2
Middle level manager 22 11.1
Lower level manager 32 16.2
Expert 140 70.70
Total 198 100.00
4.4.4 Participants Highest Level of Education

34 | P a g e
Additionally, the study sought to find out the highest education levels of the
participants. The findings in Table 4.6 indicates that majority of the participants 159
(80.3%) had attained degree level of education followed by those who had degree
level of education followed by those who had master degree and above 31 (15.7%).
Moreover, 8 (7%) of the participants attained diploma level.
Table 4.6 Participants Highest Level of Education
Level Of Education Frequency Percent (%)
Diploma 8 4
Degree 159 80.3
Master and above 31 15.7
Total 198 100.00
4.4.5 Working Experience of the Participants
The study also sought to find out the working experience of the participants in
Ethiopian industrial inputs development enterprise. The findings illustrated in
Table 4.7 shows that majority of the participants 94 (47.5%) had worked for
between 6-10 years, followed by those who had worked for above years 54
(27.3%). As well, 46 (2%) of the participants had worked for less than one year
while 46 (23.2%) had worked between 1-5 years. The findings imply that the
participants had adequate experience and therefore were able to provide the
required information sought by the study.
Table 4.7 Working Experience of the Participants
Experience in years Frequency Percent (%)
Less than one year 4 2
1-5 years 46 23.2
6-10 years 94 47.5
10 years and above 54 27.3
Total 198 100.00
4.5 Descriptive Statistics
Descriptive analysis focuses on describing the basic feature of the data in a given
study (Cooper & Schindler, 2013). In this section, descriptive analysis was used to

35 | P a g e
summarize findings on the influence of procurement planning, staff competency,
Contractual management and information communication technology on procurement
Performance.
4.5.1 Influence of Procurement Planning on Procurement Performance
Table 4.8 Influence of Procurement Planning on Procurement Performance
N/
S
Procurement planning n SA A N D SD Mean S.D
1 Procurement plan at EIIDE
enables efficient use of
available resources
198 4.5% 39.4% 6.6% 41.9% 7.6% 2.91 1.139
2 Proper procurement
planning contributes to the
success of service delivery
198 31.8% 44.9% 8.6% 7.6% 7.1% 3.87 1.155
3 Poor procurement planning
is a major setback in cost
estimation for services and
works
198 51.5% 32.3% 6.1% 5.6% 4.5% 4.21 1.082
4 Failure to adhere to
procurement plans leads to
irregular and biased
decisions
198 62.1% 27.1% 9.1% 4% 3% 4.36 1.011
5 procurement plan prepared
through involvement and
participation of
management and all staff
members
198 13.1% 9.6% 3% 20.2% 54% 2.08 1.463
6
End user are raised their
procurement need on time
with clear specification
198 3% 10.6% 10.1% 55.6% 20.7% 2.20 0.985
In order to determine the influence of procurement planning on procurement
performance at the Ethiopian industrial inputs development enterprise, the
participants were asked to respond to a set of statements on a five point scale. The
first statement asked the participants whether Procurement plan at EIIDE enables
efficient use of available resources. From the results shown in Table 4.7, the mean
score for responses was 2.91 indicating that a majority of the participants (41.9%)
were in disagreed with this statement. The standard deviation indicates that a majority
of responses did not vary from the mean by less than 1.139. The second statement
sought to determine whether proper procurement planning contributes to the success

36 | P a g e
of service delivery. A mean of 3.87 imply that a majority of the participants (44.9%)
were agreement with the statement. The standard deviation indicates that the
responses did not vary from the mean score by more than 1.155. This finding is
congruent to that of Kiage (2013) who indicated that procurement planning has a
substantial impact on procurement performance.
The third statement asked respondents whether poor procurement planning is a
major setback in cost estimation for services and works. A mean score of 4.21
implies that majority of the participants were strongly agreed (51.5%). The
standard deviation was more than 1 at 1.082 implying that the participants were
cohesive in their responses to the statement. This finding supports those of Ouma
and Kilonzi (2014) who posited that resource planning is significant and
contributes to public entity procurement and it is an important aspect in
determining effectiveness of the procurement process.
The fourth statement sought to establish whether failure to adhere to procurement
plans leads to irregular and biased decisions. Majority of the participants were
strongly agreed (62.1%) with a mean score of 4.36 and standard deviation of 1.011
implying that the participants had congruent opinions in their responses to the
statement. The fifth statement sought to determine whether procurement plans at
EIIDE enables procurement plan prepared through involvement and participation
of management and all staff members. The majority of the participants were
strongly disagreed (54%) with a mean score of 2.08 and standard deviation of
1.463. The study further sought to establish whether End users are raised their
procurement need on time with clear specification. The mean score of 2.20 and
standard deviation of 0.985imply that majority of the participants were in
divergent with the statement.
4.5.2 Influence of Staff Competency on Procurement Performance
The study further sought to find out the influence of staff competency on
procurement performance. The first statement asked the participants whether there
is regular staff training programs on procurement procedures. From the results in
Table 4.9, the mean score was 1.87 implying that the participants were strongly
disagreed (40.9%) with the statement. The standard deviation of 0.954 implies the
participants had divergent opinions on the responses to the statement. Further, the

37 | P a g e
study sought to find out whether The EIIDE department employees competent and
qualified procurement staff. The mean score of 2.93 imply that the participants
were disagreed (28.8%) with the statement.
The standard deviation of 1.173 indicates that the participants were not cohesive
in their responses to the statement. The third statement sought to establish whether
Lack of continuous professional training on procurement hinders procurement
performance. The majority of the participants (55.1%) were in agreement with a
mean score of 4.12 and standard deviation of 1.203. Moreover, the study asked the
participants whether EIIDE procurement staff have the necessary skills and
competency to handle complex and strategic procurement items. The findings
indicate that majority of the participants were disagreed (26.3%) with a mean of
3.23 and standard deviation of 1.220 implying not cohesive in responses to the
statement.
These findings are congruent to those of Barsemoi et al., (2014) who posited that
most of the personnel carrying out procurement functions in the local authorities
in Kenya have not been sensitized on procurement regulations. The fifth statement
asked participants whether Procurement staff have ability to apply public
procurement principles and evaluate bidding document. The mean score of 3.83
and standard deviation of 1.073 imply that majority of the participants (28.3%)
were in agreement with the statement though with divergent views as indicated by
the standard deviation. This finding supports that of Christianne (2008) that
employees must begin to realize that learning and continuous training is as big as
job itself. Furthermore, the study asked the participants whether Procurement
staffs have the ability to negotiate with users and suppliers. A mean score of 3.22
and standard deviation of 1.152 indicates that majority of the participants were in
divergent with the statement.
Table 4.9 Influence of Staff Competency on Procurement Performance
n/s Staff competency n SA A N D SD Mean S.D
1 There are regular staff
training programs on
procurement procedures
198 2.5% 4% 12.1% 39.9% 40.9% 1.87 0.954
2 The EIIDE department
employees competent and
qualified procurement staff
198 8.6% 27.8% 23.2% 28.8% 11.6% 2.93 1.173

38 | P a g e
3 Lack of continuous
professional training on
procurement hinders
procurement performance
198 55.1% 21.2% 9.1% 10.1% 4.5% 4.12 1.203
4 EIIDE procurement staff
have the necessary skills
and competency to handle
complex and strategic
procurement items
198 19.2% 24.2% 23.7% 26.3% 6.6% 3.23 1.220
5 Procurement staff have
ability to apply public
procurement principles and
evaluate bidding document
198 18.7% 27.3% 28.3% 25.3% 0.5% 3.38 1.073
6
Procurement staffs have the
ability to negotiate with
users and suppliers
198 15.2% 29.8% 20.7% 30.3% 4% 3.22 1.152
4.5.3 Influence of Contractual Management on Procurement Performance
Additionally, the study sought to analyze the influence of contractual management on
procurement performance. The participants were asked whether there were no delays
in service delivery by suppliers as spelled in contract timelines. The findings are as
illustrated in Table 4.10. The responses mean score 2.26 and standard deviation of
1.033 imply that majority of the participants (55.1%) were agree with the statement.
These findings are congruent to those of Deva raj, Vaidya Nathan and Mishra (2012)
who concluded that the presence of poor contract management that is characterized
by payments delays to suppliers obstructs greatly their ability to offer timely service
delivery leading to delays that derails organizational procurement timelines and
schedules.
Further, the study sought to determine whether there are minimal contract
cancellations, unfinished procurement and extended contract periods. The mean score
of 3.25 indicate that the Majority of the participants (36.9%) were in agreement with
the statement.
The standard deviation of 1.232 implies that the participants were cohesive in their
responses to the statement. The participants were also asked whether there is proper
management of procurement contracts. A mean of 2.69 and standard deviation of
1.155 indicates that majority of the participants were disagreed (46%). The findings

39 | P a g e
support those of SIGMA (2011) that contracts are frequently complex, may involve
multiple actors, last a long time and may consume many resources. It is therefore vital
that they are properly managed. The fourth statement asked participants whether there
is poor contract monitoring and control in EIIDE. The mean response score of 3.68
indicates that majority of the participants were strongly agreed (34.3%) with the
statement. The standard deviation of 1.281 indicates that majority of the participants
had divergent opinions in their responses.
The study further asked the participants whether Contract management is conducted
according to the bidding and contract document terms and conditions. A mean score
of 3.20 and standard deviation of 1.129 imply that majority of the participants
(35.4%) were disagreed with the statement.
Table 4. 10 Influence of Contractual Management on Procurement Performance
n/
s
Contractual management n SA A N D SD Mean S.D
1 There are no delays in service
delivery by suppliers as spelled
in contract timelines
198 6.1% 6.6% 13.6% 55.1% 18.7% 2.26 1.033
2 There are minimal contract
cancellations, unfinished
procurement and extended
contract periods
198 14.6% 36.9% 17.2% 21.2% 10.1% 3.25 1.232
3 There is proper management of
procurement contracts
198 6.1% 25.8% 10.6% 46% 11.6% 2.69 1.155
4 There is poor contract
monitoring and control in EIIDE
198 34.3% 28.3% 15.2% 15.2% 7.1% 3.68 1.281
5 Contract management is
conducted according to the
bidding and contract document
terms and conditions
198 12.6% 34.8% 14.6% 35.4% 2.5% 3.20 1.129

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