Working Paper for the 7th International Public Procurement Conference to be held in Bali,

Indonesia, August 3-5, 2016

THE VALUE FOR MONEY (VfM) ILLUSION:

AN ELUSIVE PRINCIPLE IN THE PUBLIC PROCUREMENT SYSTEM
IN UGANDA
Godfrey Mugurusi, John Paul Ssettumba & Peter Adoko Obicci

ABSTRACT
The present paper is concerned that the rhetoric and fuzziness surrounding the VfM
concept limits its practical applicability in within public procurement system in
Uganda. Therefore this paper sets out to explore how the principle of value for money
(VfM) is conceptualized within the Ugandan public procurement system, and if so,
what are the key impediments to the attainment of the VfM objectives in the public
procurement system in Uganda.
So, to answer these questions, the paper draws empirical evidence from the audit
findings by Ugandas Public Procurement and Disposal of Public Assets Authority
(PPDA) of the Financial Year 2012/2013, which covered procurements/contracts of 90
Procuring and Disposing Entities in both Central and Local Governments in the
Financial Year 2011/2012. In total the reports sample covers 12,797 contracts worth
over 415 billion Uganda shillings.
Our preliminary results suggest that although VfM is not a well understood concept,
hence the difficulty of measuring it within the public procurement system in Uganda,
it is physically discernible within the actual contracting for goods, services and works.
Yet still not all components of the VfM framework are clearly measured and
considered in the public procurement system in Uganda. There is a strong
orientation towards economy, efficiency, and effectiveness, and very little on equity.

1. INTRODUCTION
Increasingly, public procurement organizations worldwide, and particularly in
Uganda continue to be dogged by inefficiency and ineffectiveness in sourcing for
public goods, services and works (McCrudden, 2004; Schapper, Malta & Gilbert,
2006). Incidentally, efficiency and effectiveness together with economy and
ethics/equity are four coordinates of the value for money (VfM) tetragon that are
increasingly used to measure the success or failure of public procurement projects.
VfM in public procurement to broadly refers to the optimum combination of whole-life
cost and quality (or fitness for purpose) to meet the users requirement (Jackson,
2012:1). The general thinking behind VfM suggests that achieving a balance among
the previous three and now four components of the VfM principle is a essential in
supporting the optimum use of budgetary resources in the public sector. Yet to attain
that balance, procurement entities must watch over the entire sourcing and
contracting process. Sadly, the Ugandan public procurement system is too

complicated as a result of complex institutional systems, low accountability, political

gerrymandering, little professionalism, and so on. Although many have argued that
the Ugandan procurement system is adapting better reforms (Agaba and Shipman,

Godfrey Mugurusi MBA is a Procurement Consultant at Uganda Management Institute, Kampala Uganda. His
research interests are within public procurement innovation, Agro-supply chains, Commodity supply chains, and
Global Sourcing: John Paul Ssettumba, Msc, MCIPS, is a Consultant at the Department of Procurement, Logistics and
Marketing, Uganda Management Institute, Kampala Uganda: Peter Adoko Obicci BA, is a Master Student at the
Department of Political and Administrative Science, Uganda Management Institute, Kampala Uganda. Corresponding
author: gmugurusi@hotmail.com: (+256) 755 555 888

2007), the picture is still rather grim. The new reforms have done little to achieve the
balance expected within the VfM perspective. This leads to us to conceptualize that,
first, the concept VfM is not well understood within the Ugandan public procurement
context; second, a disconnect exists between the four elements of VfM especially in
the context of Ugandas public procurement machinery or environment, and and
thirdly, the boundaries of the public procurement process are too narrow to attain
the VfM in Uganda.
We conclude that in such an environment, a balance in the four elements of the VfM
tetragon is not possible however synergizes across the four elements can be
sought, and could go a long way to addressing the current deficiencies in the public
procurement system in Uganda.
Following the introduction, the paper is organized as follows. First, the research
questions are presented alongside a brief state of the art on the VfM concept.
Thereafter the methodology section is presented. The last section before references,
combines the results and discussion of the results in on section.

2. RESEARCH QUESTIONS
Against this background, this paper proposes to answer, and more importantly create
a better understanding to the question, why is VfM such an elusive principle within
public procurement system in Uganda. In order to do that, we propose to specifically
answer the following research questions:
RQ1: How is the principle of value for money (VfM) conceptualized within the
Ugandan public procurement system?
RQ2: What are the key impediments to the attainment of the VfM objectives
in the public procurement system in Uganda?
The VfM concept: some twists and turns
Value for money (VfM) has been significantly used as a major principle in public
procurement to focus on proper utilization of public funds. As a concept, the
definition of VfM has been elusive as it has instinctively been understood by most
people in terms of the way it conditions the majority of everyday purchases, and
purchase outcomes, hence the confusion in literature and in practice (Heald, 2003).
According to Barr and Christie (2015), it is a way of thinking about, and assessing how
well public funds are used. Kalubanga & Kakwezi, (2014) consider VfM as something
that is well worth the money spent on it denoting a commitment to ensuring the best
results possible are obtained from the money spent. Grimsey & Lewis, (2005) broadly
define it as the optimum combination of whole-of-life costs and quality (for fitness of
purpose) of the good or service to meet the users requirements. Heald, (2003; 345)
considers VfM as related to concepts of efficiency and effectiveness. Emmi,
Ozlem, Maja, Ilan, & Florian, (2011; 14) cite the director of UKs DFID who defines VfM
is the determination to get the most impact for money we have.
As a point of coherence, these definitions conceptualize VfM as performance related
construct; one in which value is monetized. But more importantly, they also agree
that VfM is measurable basing on the four components that constitute it efficiency,
effectiveness, equity and economy (Emmi et al., 2011; Heald, 2003). In the public
procurement environment, especially in Uganda, similar sentiments are shared, yet
VfM focuses more on economy, given that the cost elements of any purchase are

quick to ascertain, compared to the other Es (Barr & Christie, 2014). Typically the
predominant argument is that the choice of suppliers for goods or a service is based
on the lowest bid price (Eyaa & Oluka, 2011). Now, there is an increasing emphasis
towards choice based on the whole life costs of the good or service. It is in this
process were money resources are converted into input resources (Barr & Christie,
2015). This, according to Emmi et al., (2011) and Barr & Christie, (2015) puts in place
the right mix of inputs to achieve optimal outputs which in turn is ultimately projected
to achieve the desired outcomes, for the beneficiaries (described impact) hence the
VfM.

The public procurement system in Uganda is still undergoing reform, and because
these reforms are supported by international development agencies, their interests
in a politically charged system, is reducing economic costs of procurement
transactions in order to increase social benefits (Schapper et al., 2006; Agaba &
Shipman, 2007). And by characterization of reforms in developing countries according
Hunja (2003), what motivates them are changing profiles of what they purchase
and the increasing emphasis on information communication technologies, which from
the purchasing and supply management literature, are cost (economy) based
measures. This cost based orientation of the entire public procurement system
which emphasizes more the economy component, and has little emphasis on
efficiency, effectiveness and equity, is a characteristic of reforms towards reducing
public expenditure, at the expense of the other Es as shown in Table 1.
VfM components

Orientation
Some evidence or lack of
in
X
the literature
Economy
Thai (2008); Basheka (2009); Basheka & Mugabira,
(2008).
Efficiency
Thai (2008); Eyaa & Oluka, (2011).
Effectiveness
Thai (2008); Basheka (2008); Basheka & Mugabira,
(2008). & Mugabira, (2008); Kalubanga & Kakwezi,
Equity
Basheka
(2013).
Table 1: Extent of VfM orientations
in Ugandas public procurement system
VfM and Public Procurement Challenges in implementation of the VfM concept in
Uganda
In public procurement, the central theme of VfM is that public funds should be put to
the best possible use. As a result, all goods, services, and works procured using
public funds must be the right ones, of the right quality, in the right quantity, at the
right time, at the right place, and delivered to the right place. This is premised on
that fact that there are limited resources available to government which requires
optimum utilization of scarce budgetary resources. Apart from making it possible to
focus on spending wisely to achieve local priorities, VfM promotes accountability in
terms of economical, efficient and effective resources management. It also reflects a
measure of transparency in justifying the continued funding or otherwise, of a
programme with taxpayers money. Further still, Morallos & Amehudzi (2008) reveals
that VfM aids public agencies to decide whether to implement a project through
public procurement or not.
VfM is the very heart of public procurement as it is primarily tied to the competitive
process. Its only in situation where there is a strong competition from a vibrant
market that VfM outcomes can be fully generated. Jackson (2012) postulates that
the primary aim of VfM should be based on the consideration of the optimal
combination of whole life cost (i.e. acquisition cost, cost of maintenance and
running costs, disposal cost) of a purchase and its fitness for purpose (i.e. quality
and ability to meet the contracting authoritys requirements). Meanwhile, according
to Nditi (2014), this necessitates compilation of procurement specifications that
include social, economic and environmental policy objectives within the procurement
process. This calls for critical thinking about each decision within the complexity of
the procurement cycle.
Achievement of VfM in a procurement process is tied to strict observance of some
key principles. According to Glavee-Geo (2008), competition among suppliers brings

out the best offer that gives VfM. As a principle, competition has the potential of
saving for the economy, increasing in the seller base, and the development of the
local industries within the economy, thereby leading to economic development and
poverty reduction. Gershon (2004) articulates that the principle of effectiveness and
efficiency in VfM is about the amount of money that is spent in getting the needed
goods and services. The purpose of this principle is to obtain maximum benefit
using the same amount of resources for improved service delivery. It requires
expanding the number, variety and accessibility of services and goods (Carayannis
& Popescu, 2005). The principle of fairness and non-discrimination achieve VfM is
based on the understanding that the procurement process should remain unbiased
and consistent. It

should be clear and everybody should be treated equally which will lead to more and
better offers for sellers to choose from. The principle of objectivity/integrity/honesty
requires procurement officials to declare conflict of interest that affects or appears
to affect their judgment. They should reject gifts, hospitality and benefits of any kind
from the sellers whether real or potential which might be reasonable seen to
compromise their objectivity, honesty or integrity.
Armstrong (2005) asserts that the transparency principle in VfM is the availability of
information on decisions and performance of a procurement process. The available
information must be reliable and accessed by everybody on time. Evenett and
Hoekman (2005) contend that making procurement procedures more transparent
will not only improves the options for suppliers to participate in the process but
also make prices go down. Every public official is required to report on the usage of
public resources and answer for failing to meet stated performance objectives
(Armstrong, 2005). This is the basis of the principle of accountability in achieving
VfM in which the procurement procedures and protocols should explain why certain
products were bought and the steps undertaken to arrive at such a decision. Public
procurement officials are also required to abide by the principle of confidentiality while
striving to achieve VfM in a procurement process. The principle urges them to
respect the secrecy of information acquired in the course of performing their duties
and not to disclose any such information without having proper and legitimate
authority to do so. Another important principle in achieving VfM is conformity to the
laws, as well as to other requirements and commitments regarding public
procurement. This helps to prevent fraud and corruption which are bound to lower
VfM. Since procurement officials are critical to the procurement process, to achieve
VfM there is need for them to be professionals in their dealings. This principle
requires procurement officials to be well educated, experienced and responsible so
that they can make informed decisions regarding procurement functions. Lastly, the
principle of green procurement requires procurement officials to purchase
environmentally preferable goods, services or works in order to achieve VfM. This is
especially critical in the long run as the cost of the useful life of the procured item will
be significantly lower, and the product may be reusable, more durable and energy
efficient.
Apart from the principles, the achievement of VfM requires having the right
policies (given specific needs), choosing the most cost-effective interventions, and
implementing the interventions efficiently, fairly and with moral considerations. As
a consequence, therefore, VfM should be concerned with obtaining the best
possible combination of services from the least resources. In fulfillment of such
concern, Shah (2005) associates VfM with efficiency, effectiveness and economy.
Bandy (2014) adds two other aspects for VfM which are ethics and equity though
often times combined together. Efficiency means maximizing the ratio of outputs
delivered from the inputs. It is about spending well. It is the ability to avoid wasting
materials, energy, money, time and efforts in doing something or in producing a
desired result. Achievement of VfM therefore, requires an efficient procurement
process one which should respond to the needs of the beneficiaries (Carayannis &
Popescu, 2005). Under the efficiency criterion, VfM is compared to drive and
improve decision making such that the unit cost of outputs become its basis of
measurement.

Effectiveness means achieving the intended results of the service, project or

programme. It is about spending wisely. It is concerned with whether an intended
objective achieves its purpose by the use of quantitative and qualitative measures. It
examines the relationship between outputs and outcomes. Economy means
minimizing the cost of inputs. It is about spending less. It looks at the cost incurred for
producing a service aimed at minimization of the costs of inputs with due regard to
the quality of the product to be produced. In essence, VfM under economy reflects
demonstration of good management practices in terms of effective procurement
practices, good financial system and functional monitoring and evaluation. Ethics
means ensuring public services reach their intended recipients. It is about
spending fairly. Any VfM equation must therefore be considered in the context of
the organizational values and mission. This means the consideration of process
elements such as participation,

sustainability, or gender equity or even the intensive nature of staff support. Equity
means managing services and programmes with integrity. It is about spending
properly. It ensures that VfM analysis accounts for the importance of reaching
different groups.
The impetus to turn to VfM in public procurement process has been growing interest
over the past few decades. It has been argued that the principle of VfM is an
essential factor in supporting the optimum use of budgetary resources in the public
sector. VfM is essentially intended to streamline the sourcing and contracting process
of public procurement. There is however, little evidence on how such a key
principle can be used to alleviate the many problems that occur in sourcing for public
goods, services and works in Uganda.

METHODOLOGY
To answer these questions, this paper draws empirical evidence from the audit
findings by Ugandas Public Procurement and Disposal of Public Assets Authority
(PPDA) produced in the report of the Financial Year 2012/2013. The findings cover
procurements/contracts conducted by 90 Procuring and Disposing Entities in both
Central and Local Governments in the Financial Year 2011/2012.
Of these 90 entities, 24 were Central Government entities whose 5,246 contracts
worth UGX 192,431,932,713, were considered. 60 were Local Government entities
with 7,425 contracts worth UGX 148,914,327,548 and 6 contract audits with 126
contracts worth UGX 75,735,058,461 were sampled.
According to the PPDA report (2014) the audits covered the procurement activities
within the standard procurement process that included planning to initiation, bidding,
evaluation, contract award, signing, execution, delivery and payments management.
The central government audits considered entities in nine sectors namely;
Accountability, Parastatals, Agriculture, Education, Health, Information and
Communication Technology, Justice, Law and Order, Tourism, Trade and Industry and
Works and Transport) while the audits in the 60 Local Government Entities covered 41
districts and 19 Municipal Councils.
RESULTS & DISCUSSION
The report addresses 9 categories of findings that cut across the 90 entities.
First and foremost, there was a general failure to fully establish procurement
structures: the report faults 11 Entities, where Contracts Committees were not fully
constituted while Procurement and Disposal Units lacked all the required staff which
led to delays in the procurement processes. Second, 32 entities were faulted for Poor
procurement planning and poor execution of the procurement plan resulting to
procurements worth UGX 8,844,048,674 not being executed or being conducted
outside the procurement plan. As a result of this failure most of these entities
suffered
budget
overruns,
created domestic arrears and unimplemented
procurements, which affected service delivery. Third, 16 entities were faulted for poor
budget estimates, which as a result, cuased variances of UGX 2,513,345,082 which
were noted between the estimated cost at initiation of the procurements of UGX
3,886,481,770 and the actual contract values of UGX 6,513,345,082. This created

budget re- allocations and domestic arrears. Fourth, several entities (24) used wrong
procurement methods, and never made proper justification against the recommended
thresholds in the law. This led to use of less competitive procurement methods in
procurements thus affecting value for money. Fifth, 20 entities were faulted for
failure to adhere to the evaluation methodology and criteria stated in the solicitation
documents. This was cited in procurements worth UGX 754,671,391. Sixth, 28
entities had failed to appoint contract managers/supervisors, hence effective
implementation of contracts worth UGX 3,837,051,762 resulted into poor
supervision/monitoring of contracts that led to delayed completion of

projects. Seventh, 17 entities delayed execution of works hence poor workmanship.

In other cases, contractors abandoned sites by before contract completion which
affected service delivery to the intended beneficiaries of the procurements. The total
value of these contracts was worth UGX 7,396,892,365. Eighth, 27 entities were
faulted for Poor record keeping. Procurement action files lacked key records
especially contract management records like delivery notes, payment documents
and progress reports. This affected the audit trail and affected accountability of
allocated resources. Lastly, the failure to dispose obsolete items on time was evident
in 9 entities. As result, of the failure to dispose of items, VfM was affected since value
was never recaptured back into the system.
These findings are analyzed and discussed in the context of the four VfM
components Economy, Efficiency, Effectives and Equity. Table 2, upon which our
subsequent discussion is based, presents how these finds play out along the four VfMs
components.

Table 2: The findings versus the VfM

framework
Components of the Value for Money tetragon
Findings

Economy

Efficiency

Effectivenes Equity
s

1.

Failure to fully establish procurement structures

2.

Poor procurement planning and poor execution of the procurement plan

3.

Poor budget estimates

4.

Use of wrong procurement methods

Delayed execution of works, poor workmanship and abandoned sites by

contractors before
completion
8. contract
Poor record
keeping

9.

5.

Failure to adhere to the evaluation methodology and criteria stated in the

solicitation
documents
6. Failure to appoint contract managers/supervisors
7.

Failure to dispose obsolete items

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