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Promoting a Competitive Local Business Community in Ghana: The Role of the Legal Framework for Public Procurement

Published online by Cambridge University Press:  03 July 2014

Dominic N Dagbanja
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Abstract

Ghana's Public Procurement Act 2003 was enacted to bring about the judicious, economic and efficient use of state resources, transparency, fairness, and non-discrimination in procurement. The primary objective of the act is best value for money. This article assesses how, beyond being used to achieve its primary objective, the law should be applied to propel the capacity and competitiveness of local businesses in Ghana. It argues that effective implementation of the act can indirectly promote competition and industrial competiveness in Ghana. Therefore, procurement entities must follow the requirements for procurement, both to achieve best value for money and to build and improve upon the capacity of domestic industries. Competition, transparency and restrictions on the application of single-source procurement and restricted tendering can promote and encourage the participation of Ghanaian firms in procurement. This can enhance their capacity and competitiveness in both procurement and other economic activities in Ghana.

Information

Type
Research Article
Information
Journal of African Law , Volume 58 , Issue 2 , October 2014, pp. 350 - 375
Copyright
Copyright © SOAS, University of London 2014 

INTRODUCTION

“In furtherance of its object the Board shall … assist the local business community to become competitive and efficient suppliers to the public sector.”Footnote 1

Governments all over the world perform or are required to perform a number of functions. At a very general level, it is the responsibility of governments to manage their economies in a manner that maximizes the welfare of their peoples. Governments are also responsible for ensuring political stability and that there is order in society. To fulfil some of these responsibilities, governments have to perform a number of specific functions. They must construct roads, bridges, schools, public office buildings, industrial facilities and so on. Governments must also acquire goods and make utilities available for both individual and industrial uses. For the most part, because they may not have the ability, expertise or resources, governments are incapable of performing some of these functions without relying on the support of the private sector. Public procurement law and regulations provide the processes and procedures through which governments engage contractually with the private sector to acquire goods, and construct or utilize other private sector expertise in order to fulfil their public interest obligations. In other words, public procurement is primarily a public sector oriented activity aimed at meeting public needs or the public interest. Professors Geo Quinot and Sue Arrowsmith have defined public procurement as:

“[T]he process through which the state acquires goods, works and services needed to fulfil its public functions … [P]rocurement captures the entire process from the identification of the goods or services needed through the course of identifying a supplier to the maintenance (performance, administration, cancellation) of the contract concluded between the contracting authority and the supplier.Footnote 2 Unlike analogous commercial transacting in the private sector, public procurement is often governed and thus structured by specific detailed rules – the distinct field of law called public procurement law or public procurement regulation. Within this field of law the focus of many regulatory instruments is on the rules governing the process leading up to the conclusion of the contract and in particular the process through which a supplier is identified and a contract awarded to that supplier.”Footnote 3

The effective regulation of public contracting, therefore, has significant implications for the well-being of citizens of every country.Footnote 4 Public procurement accounts for a substantial percentage of gross domestic product (GDP) in both developed and developing countries.Footnote 5 In Ghana for instance, government procurement of goods, works and services constitutes about 14 per cent of the country's GDP and 24 per cent of total imports.Footnote 6 Moreover, procurement typically involves goods, services and works which have particular economic, social and developmental significance, for example: transportation and other physical infrastructure that is vital to the competitiveness of business users and the mobility of citizens; hospitals and other public facilities; schools and universities; and defence and policing.Footnote 7 Public procurement, therefore, affects and is of concern to a wide range of groups and interests including: those who fund the procurement activity; the citizens or consumers who benefit from the products or services acquired; businesses that supply the products or services; and the economy as a whole.Footnote 8 Procurement also contributes to good governance and public accountability by creating rules requiring transparent, fair and equitable government contracting and mechanisms for punishing infringement of these requirements.Footnote 9 Therefore, an efficient procurement system is a functional prerequisite to effective public contracting and management of public funds, poverty alleviation and indeed a country's overall development.Footnote 10

The Public Procurement Act (the PPA) was enacted in 2003. Its genesis traces back to Ghana's financial reforms in the 1990s which were aimed at bringing about improvements in public financial management to assure the effective use of public funds. The aims of the PPA are contained in its section 2 which requires the Public Procurement Authority (the Authority), the implementing and regulatory institution, to “harmonise the processes of public procurement in the public service to secure a judicious, economic and efficient use of state resources in public procurement and ensure that public procurement is carried out in a fair, transparent and non-discriminatory manner”. It can be concluded from this provision that the PPA has two broad objectives: the substantive objective of securing the judicious, economic and efficient use of state resources; and the procedural objective of carrying out procurement in a fair, transparent and non-discriminatory manner. The procedural objective is necessary for the attainment of the substantive objective, but the procedural objective is not an end in itself. Similarly, it can be asserted that two obligations must be met in Ghana's procurement process: the obligation to ensure that each procurement undertaken results in the efficient use of state resources; and the obligation to ensure that, in the process of seeking to achieve the efficient use of state resources, fairness, transparency and non-discrimination are exhibited or seen to be done. This article argues that, in light of section 2 of the PPA and the history of this enactment, best value for money is the primary objective of Ghana's procurement system. Best value for money in this context means that the resources the state expends in procurement must be worth the quality and / or quantity and price of the goods, services or works acquired, and that what is procured must satisfactorily meet the needs of the procurement entity.Footnote 11 The question is therefore: besides implementing procurement law to achieve the objective of best value for money, can procurement law be used to achieve a different objective, such as promoting a competitive local business community in Ghana? If so how may this be done?

This study is very important. As Professor Anne Davies has rightly stated, “[o]ne of the most controversial topics in government contracts is the use of contracts to further government policies not immediately related to the contract in question.”Footnote 12 The range of government policies not related to procurement which government might impose on prospective contractors includes: race and sex equality policies, human rights protection, employment of the local population, environmental protection, protection of domestic businesses, and other social, environmental and developmental concerns.Footnote 13 The focus of this article is specific to the use of procurement law and policy to promote a competitive local industry. Pursuing any of the social and environmental policies alongside seeking to achieve best value for money is controversial because it might, on the one hand, be argued that “contracts can be a powerful tool to enforce or reinforce government policies”Footnote 14 and that governments “wield considerable spending power and this may act as an effective incentive to persuade firms to comply with governments' policies”.Footnote 15 On the other hand:

“[S]ocial and environmental goals in contracting have attracted a great deal of opposition. One concern is that contracts may not be the most efficient way of achieving those goals. For example, it may be cheaper and more effective to pursue a policy of encouraging ‘green’ electricity generation by providing grants for research and development in this field, rather than by attempting to procure ‘green’ electricity for government departments. Another concern is that social or environmental policies may give a considerable degree of discretion to those involved in the contract award process. Assessing firms' equality policies (for example) is a complex task which does not lend itself to objective criteria. Discretion is a problem because it increases the chances of procurement being used for ‘improper’ purposes. International systems of procurement regulation have sought to limit governments' ability to use procurement for protectionist purposes - in other words, where governments favour national firms in their contract award decisions. They have also limited the use of social or environmental goals because increasing the discretion allowed to officials may create opportunities for disguised protectionism. Social or environmental goals have also been criticized for their potential to act as instruments of oppression by restricting firms' freedom of action.”Footnote 16

The challenges for the implementation of efficient procurement systems for the realization of the primary objective of best value for money and other broad values of public procurement in Ghana might, therefore, be said to be vast. These challenges include capacity or expertise, the development of policies and legal frameworks that will result in efficient public contracting, and the lack of sufficiently qualified contractors for works and technology related contracts. Part of the difficulty in developing an efficient legal framework emanates from lack of direction in defining precisely and non-contradictorily the policy objectives that any ensuing legislation should achieve. As procurement regulation in Ghana (and other African countries) is emerging and increasingly gaining attention, it is of paramount importance that Ghana gives due thought to the exact objectives her system of procurement should seek to achieve. In doing so, Ghana needs to consider the role that the legal framework for public procurement could possibly play in promoting social and environmental goals and the competitiveness and image of indigenous business enterprises.

Clarity is needed about the values and objectives of a procurement system, and the prerequisites by which its ends or objectives may be achieved. In the author's view, for the developing world, the focus of the public procurement system is or should be best value for scarce public resources.Footnote 17 The primary aim of this article, nevertheless, is to examine how public procurement law and regulations may indirectly be used to enhance the competitiveness of Ghanaian enterprises. Can or should procurement be used to build local industries' capabilities and expertise so that they can compete better both within and outside the country in the provision of goods, services and works? The indirect benefits of the public procurement system, including the protection of the environment and domestic businesses and other development goals, may be described as collateral policies in procurement.Footnote 18 Indeed, Professor Geo Quinot and Dr Sope Williams described these collateral policies as “secondary criteria” when they stated that procurement “may be subject to secondary criteria where a government employs procurement to achieve non-procurement related goals, such as the development of domestic industries, the advancement of certain groups, or encouraging environmentally friendly manufacturing, by favouring particular groups or industries in contract awards”.Footnote 19 Collateral policies in procurement as Professors Phoebe Bolton and Geo Quinot rightly stated: “are not necessarily directly connected with the functional purposes of the goods, works or services acquired in the procurement”.Footnote 20 The goal of this article is to examine how the procurement law and regulation of Ghana may be used to attain a secondary criterion, such as promoting a competitive local industry.

In this regard, the article examines the role of competition and transparency and related requirements intended to enhance competition and transparency in public procurement regulation as mechanisms for promoting both the competitiveness of Ghanaian business enterprises and attaining best value for money.Footnote 21 It answers the questions: What is competition in the context of government contracting and what role does competition in government contracting play for the promotion of Ghanaian enterprises? It offers similar considerations in respect of transparency. Defining the role of competition and transparency in the system for procurement in Ghana, and indeed the role of the legal framework for public contracts in the development of local companies and business enterprises, is necessary for redefining the coverage of procurement law and for creating the context for the development and harmonization of effective procurement procedures in Africa. The article assesses how such a system may enable Ghanaian enterprises to become competitive so that they can play a more visible and prominent role in municipal and international public procurements. In doing so, it looks at specific measures in public procurement law and regulation which have the effect of helping business enterprises in Ghana to grow and become competitive.

The methodology for the study involves a descriptive analysis and interpretation of relevant laws and literature on the subject. This analysis is necessary in view of the requirement in section 3(t) of the PPA that the Authority shall “assist the local business community to become competitive and efficient suppliers to the public sector” and also because no such study has ever been undertaken on the subject in Ghana. The goal is to point out how advantage may be taken of the public procurement system of Ghana to promote a competitive local industry without compromising its primary goal which, in the author's view, is best value for money. It should be stressed at the outset that assisting the local business community to become competitive is not a primary objective of the PPA. It is a function the Authority is required to perform in furtherance of its objective of securing a judicious, economic and efficient use of state resources. The thesis then is that the public procurement process has the potential to promote a competitive local business community in Ghana, if competition and transparency are effectively implemented.

COMPETITION IN PROCUREMENT AND REQUIREMENTS RELATED TO COMPETITION

It is important to premise the discussion on competition in procurement with competition law generally, since the two may not necessarily be the same. Competition laws primarily seek to control or prohibit restrictive business practices.Footnote 22 In underscoring this point, Professor Peter Muchlinski stated that competition between firms has the effect of enhancing the overall efficiency of the economy. It can encourage price competition, result in lower prices for consumers and force firms to produce more efficiently so they can compete on price with their rivals.Footnote 23

In a sense, the competition requirement in public procurement may be said to play a similar function to that of competition laws generally, namely the promotion of competition through the control of restrictive business practices. For instance, under the PPA, collusive agreements between or among tenderers are prohibited where the prices quoted in tenders, proposals or quotations are or would be higher than would have been the case had there been no collusion.Footnote 24 Beyond this, and perhaps in a few other instances, the competition requirement in public procurement simply seeks to encourage the widest participation in the public procurement process that the circumstances of each procurement process permit. Moreover, in procurement, the burden to open up for competition rests with the government and its procurement entities, not on private sector participants. Among other things, as shown below, competition in procurement has the effect of reducing prices for the government, as competition law generally does for the individual consumer.

Competition in the public procurement context, therefore, means a procurement contract formation procedure by which the government invites tenders from two or more tenderers, compares their tenders and accepts one based on its relative value.Footnote 25 The competition requirement stipulates that responsible prospective contractors be permitted to participate in the procurement process and that they may only be excluded if they lack the requisite capacity to perform. The government will enjoy access to the best contractors, lowest prices, most favourable contract terms and conditions, and the highest quality goods and servicesFootnote 26 when a system for public procurement encourages participation from the widest possible pool of potential competitors. To attain this, competitors must be impartially considered for the award of contracts and must be treated in a manner that balances appropriate risks with meaningful profit incentives and rewards.Footnote 27 By maximizing the effective use of competition, the government will receive best value in terms of price, quality and contract terms.Footnote 28 This article now sets out the various legal requirements by which competition can be promoted under the public procurement system in Ghana.

Specifications and publication of invitations to tender

The requirements for the use of the competitive process in public procurement are variously provided for in Ghana's PPA. The relevant provisions of the PPA, which deal with participation in procurement proceedings and competitive tendering,Footnote 29 stipulate that participation in procurement proceedings must be conducted on a competitive basis subject to certain exceptions.Footnote 30 In order to give effect to the requirement that participation in procurement proceedings be conducted on a competitive basis, the PPA prohibits restrictive specifications, plans, drawings and designs.Footnote 31 It specifically provides that the following are not to be included or used in prequalification documents, invitation documents or other documents for the invitation of proposals, offers or quotations: specifications, plans, drawings and designs; requirements on tests and test methods, packaging, marketing, labelling or conformity certifications; and symbols and terminology descriptions of services that create obstacles to participation, including obstacles based on the nationality of tenderers.Footnote 32 The PPA thus requires that, to avoid being restrictive, drawings, plans and designs, specifications and descriptions of requirements in public procurement must be based on objective technical and quality characteristics of the subject matter to be procured. Therefore, invitation documents must not require or make reference to a particular trade mark, name, patent, design, type, specific origin or producer of the goods, services or works, unless a precise or intelligible way of describing the characteristics of the subject matter to be procured does not exist.Footnote 33

In order to promote broad based specifications and descriptions to encourage participation by the widest pool of potential contractors, the PPA further states that standardized features, requirements, symbols and terminology relating to the technical and quality characteristics of the subject matter to be procured must, where available, be used to formulate specifications, drawings and descriptions.Footnote 34 Also, to ensure that prospective tenderers are aware of procurement proceedings and able to make independent decisions whether or not to participate in procurement proceedings, invitations to tender or to prequalify must be published in the Procurement Bulletin and in at least two newspapers of wide national circulation or in newspapers of wide international circulation.Footnote 35

Restrictive use of certain procurement procedures to enhance competition

The PPA requires the use of various methods of procurement, including restricted tendering and single-source procurement. Restricted tendering is used to save costs and achieve efficiency. It may only be used subject to the Authority's approval, and either if the thing to be procured is available only from a limited number of tenderers or if the time and cost it would take to examine and evaluate a large number of tenders is disproportionate to the value of the item to be procured.Footnote 36 Single-source procurement involves the invitation of only one tenderer to submit a tender. The use of this method is subject to the Authority's approval and may be used where the subject matter to be procured is only available from a particular tenderer or if the need to procure is urgent, due to a catastrophic event for example.Footnote 37 By their nature, these methods are exceptions to competitive tendering and, therefore, are anti-competitive. They naturally limit participation in procurement. Therefore, to enhance participation and thereby achieve the desired competition in procurement, single-source procurement and restricted methods of procurement must be used very sparingly.

The PPA also gives procurement entities the option of taking tender security.Footnote 38 Tender security discourages tenderers from withdrawing abruptly from the procurement process after the government has incurred costs in initiating the process; if they withdraw, the government will retain the security amount. Performance securities may also be required from a successful tenderer to secure the performance of a contract.Footnote 39 The procurement entity has complete discretion to demand tender and performance securities and determine their terms. Depending on what the terms of tender and performance securities are, firms may be excluded from participating in the procurement process if they cannot meet those terms. Therefore, the terms of the tender and performance securities must be flexible. For example, a requirement that tender and performance securities may only be secured from banks would limit the scope of the sources from which the securities may be obtained. Such a practice could exclude tenderers which are not able to obtain tender securities from banks but could obtain them from non-banking financial institutions. To avoid this situation, procurement entities could specify more than one reliable source from which a tenderer may obtain security. The tenderer may then obtain the security from the source available to it, provided the source can provide the necessary surety. Similarly, requiring tenderers to produce audited accounts for a specified number of years, say three or five, limits the competitive process by excluding infant and newly established businesses which are not able to produce the audited accounts for the specified period. Audited accounts are not conclusive about the current financial situation of a firm. Therefore, in addition to such audited accounts as may be reasonably necessary, procurement entities should be interested in whatever current evidence tenderers can provide to substantiate their financial position.

National and international competitive tendering techniques

The PPA provides various procedures for making invitations to tender which, if effectively employed, could engender participation in the procurement process. These include national competitive tendering and international competitive tendering techniques. The national competitive tendering procedure in particular can serve as an important tool for promoting the competitiveness of enterprises. Where this tendering technique is used, only domestic suppliers or contractors may submit tenders.Footnote 40 By its very nature, national competitive tendering limits competition to national firms only. If national competitive tendering procedure is used, it is therefore of primary importance that the widest participation of national firms is encouraged as the procurement circumstances permit.

Another way to increase the chances of promoting the competitiveness of Ghanaian enterprises is to open the procurement process in Ghana to participation by foreign firms where feasible and necessary. As Professor Ozawa has acknowledged, although outward orientation towards trade is not a sufficient condition for development, it creates a climate favourable for the transfer, and absorption by local enterprises, of modern managerial, production and marketing technologies which are pre-requisites for industrial modernization.Footnote 41 Moreover, countries may gain from trade and may maximize economic welfare when they export comparatively advantaged goods and import comparatively disadvantaged goods.Footnote 42 It may, therefore, be of benefit to Ghana and her businesses for the country to open access to her procurement process, particularly in technology related areas where the country's capacity and know-how are limited. In discussing the importance of opening the procurement process to the international community, Professors Christopher R Yukins and Steven L Schooner rightly held the view that:

“By necessity, market-opening agreements typically are reciprocal. Thus, a nation's decision to open its domestic market will almost always increase that nation's firms' access to the vast international public procurement market. More robust opportunities in industrialized nations' procurement markets suggest that developing nations have more to gain from reciprocal access to procurement markets in industrialized nations. The alternative – leaving a domestic market closed – may impose significant costs on the protectionist nation, both in terms of paying higher prices to less efficient domestic firms or, more often, foreclosing access to superior goods and services. Moreover, protectionist policies ignore the realities of the global marketplace, particularly in the context of commercial items, where firms unavoidably depend upon a global supply chain. While the topic remains unsettled and controversial, past studies have identified welfare losses in those countries with high barriers to procurement trade.”Footnote 43

It may have been in recognition of the benefits associated with opening up the domestic procurement market that the PPA made provision for the use of international competitive tendering, which requires the involvement of foreign firms in procurement proceedings, as appropriate.Footnote 44 The involvement of foreign firms in procurement when local firms are not in the position to provide the required goods, services or works serves as a challenge to local enterprises to revitalize themselves so that they can better compete with foreign firms. Moreover, local firms which compete with foreign firms when international competitive tendering is used stand the chance of learning from these foreign enterprises and may therefore enhance their competitiveness. In order, however, to enhance the capacity of national enterprises in Ghana to compete with foreign firms in procurement, national competitive tendering must be used consciously and wisely, not only to attain best value for money, but also to promote the competitiveness of these Ghanaian enterprises. This can be achieved by encouraging the widest possible participation of local firms in procurement proceedings in Ghana and making awards of procurements to local firms that prove capable of performing contracts even if they have no experience.Footnote 45

Contractor qualification criteria

In order to achieve best value for money, it is important that procurement entities only engage tenderers which have the desired qualifications to perform the required job. This means firms should only be excluded from participating in a procurement process on the basis of a lack of qualifications.Footnote 46 Excluding tenderers from participating in procurement, unless on the basis of qualifications, may arbitrarily limit competition and result in inefficient procurement and higher prices,Footnote 47 as well as stifling the growth of local industries because excluded local business enterprises will be denied the opportunity to learn, develop and build upon their expertise. The requirement for participation in procurement proceedings based on qualification also means that prospective tenderers that meet requisite qualification criteria to perform contracts ought to be awarded contracts even where they do not possess experience.Footnote 48 Under the PPA, the qualification criteria required to participate in procurement proceedings include possession by the tenderer of: the necessary professional and technical qualifications and competence; financial resources; equipment and other physical facilities; managerial capability, reliability, experience in the procurement object and reputation; and personnel to perform the contract.Footnote 49 Where a tenderer demonstrates that it has the requisite capacity to perform the contract and meets all other criteria for the award of a contract, that tenderer must not be denied an award because it does not have experience. It is only by giving the contractor the opportunity to perform for the first time that the contractor can gain and develop its experience, reputation and goodwill and compete in subsequent procurement proceedings both at national and international levels. Without a conscious effort to encourage and promote the image of Ghanaian industry through the procurement process in Ghana, Ghanaian enterprises that are in a position to compete with foreign firms will remain underutilized and uncompetitive.

Thus, it can be said that the promotion of competition in procurement is very much cherished in Ghana as reflected in these legal requirements under the PPA. It is also clear that the primary focus of competition in procurement is to open procurement opportunities so that best value can be attained, to ensure that the subject matter to be procured is of the quality or quantity desired by the government and delivered at a reasonable and acceptable price and time. Therefore, competition in procurement is a procedural objective rather than an ultimate or substantive objective.

In addition to promoting best value for money, the competitive procurement process required by procurement law has the secondary effect of promoting the capacity building and competitiveness of Ghanaian enterprises. Competition in procurement is a prerequisite for industrial growth and development in Ghana. This is so because competition is the lifeblood of commerce. It brings about efficiency and innovation. When a Ghanaian enterprise with the requisite qualifications, with or without experience, participates in procurement proceedings and is successfully awarded a contract, it will develop the necessary capacities and experience needed to compete in both Ghanaian and international procurement proceedings.

TRANSPARENCY IN PROCUREMENT AND REQUIREMENTS RELATED TO TRANSPARENCY

In order to give effect to the requirements for competition in procurement, procurement entities must adhere to transparency requirements in carrying out public procurement. Put differently, transparency is very important for the promotion of competition in procurement which, as discussed, has an important role to play in enhancing the chances of business entities which participate in procurement becoming competitive. However, it is important to state that transparency is itself a procedural objective, independent from its role in promoting competition. Transparency in procurement requires the employment of procedures by which government business is conducted even-handedly, impartially and openly.Footnote 50 In a transparent procurement system, all parties and stakeholders know the laws, rules and regulations affecting procurement, as well as information on specific procurement opportunities as is readily made available.Footnote 51

Transparency in public procurement is maintained in many ways, including: publication of all statutes, regulations and rules that define the procurement process; announcement of what the government intends to purchase, the criteria for participation and how tenders will be evaluated; notification to all participants in procurement proceedings about the decisions reached at the end of tender evaluations; debriefing unsuccessful tenderers; and the provision of a mechanism for settling procurement disputes.Footnote 52 In short, government should provide potential contractors with clear and consistent information so that the public procurement process is well understood and applied as clearly and openly as possible. Transparency and the equal and fair treatment of participants in the procurement process are important to instil integrity, confidence and trust in the procurement system. All of these are important to promote a sound competitive process in government procurement. Therefore, it is important for the Ghanaian government, its procurement entities and the Authority to attach considerable importance to transparency if the goal is to encourage local participation in procurement, thus contributing to a competitive local industry in Ghana.

The Authority has made available on its website,Footnote 53 the PPA, tender documents, decisions on procurement disputes and so on. There are, however, sometimes complaints about the unavailability of tender documents when certain procurements are to be undertaken. This unhealthy practice can affect the need for transparency, can suffocate or kill the competitive spirit in procurement and risks reducing efficiency. Transparency in procurement can encourage local firms to participate in procurement knowing that they will be given an open and fair chance to compete with others; once they participate they have the opportunity to learn and to improve upon their ability to perform on the next occasion.

SPECIFIC PROCUREMENT MEASURES TO ASSIST DOMESTIC INDUSTRIES

Competition, transparency and the other measures discussed above are not in fact provided for in procurement law and regulation to provide local industries with a competitive advantage per se. The point being made about these requirements is that, if these mechanisms are effectively reflected in procurement laws and regulations and are effectively implemented, they can promote the growth of competitive local industries in Ghana. Beyond these, there are other measures specifically intended to assist Ghanaian businesses, as discussed below.

Local content

In addition to the mechanisms noted above, there are other measures under the PPA that can be used to promote the participation of Ghanaian businesses in procurement if judiciously and consciously applied. These include the requirements that: in ascertaining the lowest evaluated tender, regard be had not only to the price, but also to the extent of local content, including manufacture, labour and materials in goods, works or services offered by the supplier or contractor; the economic development potential offered by tenders including domestic investment; the encouragement of employment and the reservation of certain production for domestic suppliers; the transfer of technology; and the development of managerial, scientific and operational skills.Footnote 54

This article argues though that, unless guidelines are developed as to how to apply these requirements, their application will frustrate the objective underlying the particular procurement. This is particularly so because the local content provision gives too much discretion to procurement entities in the determination of the content or constituents of an element of local content. The local content requirement needs to be applied with tact because each particular procurement has its own objective to achieve. Although a tenderer may meet relevant criteria relating to local content, the local content component of a tender may really have nothing directly to do with the reason for which the procurement entity is embarking on a particular procurement. Local content has the potential to dilute the quality of a tender and increase prices for lower quality deliverables. The local content procedure must, therefore, be applied only where the local content component of a tender is directly and particularly relevant and necessary in relation to the needs of the procurement entity. If this is not done and the local content procedure is applied out of context, best value for money and efficiency will be compromised, because the needs of the procurement entity will not be met. Moreover, the local content may serve to restrict competition for a particular procurement since it involves an exception to competitive tendering which is the default method for procurement under the PPA. The local content procedure may lead to additional costs for procurement entities. Therefore, the application of the local content provision and the objective sought to be achieved by it should be carefully and reasonably measured against the overall procurement costs. The application of the local content provision also has the potential to compromise the objective application of other contractor qualification criteria and may defeat non-discrimination provisions. Care must be taken to ensure that a prospective contractor meets all relevant performance qualification criteria before local content is applied, if there is the need to apply local content at all.

Margin of preference

Margins of preference may also serve as effective mechanisms for promoting domestic firms' participation in public procurement. The PPA stipulates that procurement entities “may grant a margin of preference for the benefit of tenders for work by domestic contractors or for the benefit of tenders for domestically produced goods or for the benefit of domestic suppliers of services”.Footnote 55 Under this provision, in the case of works contracts, margins of preference may be granted for the benefit of tenders for work by domestic contractors. The focus here is on the party submitting the tender. Once the party submitting the tender is Ghanaian and the contract deals with works, then the domestic tenderer may be granted a margin of preference. Again, in the case of service contracts, such as consultant services, the supplier must be domestic to be entitled to a margin of preference. In the case of contracts for goods, a margin of preference may only be granted for the benefit of domestically produced goods, the key requirement being that the goods are produced in Ghana. Therefore, in the case of procurements involving goods, the nationality of the tenderer is of no relevance.Footnote 56

Thus, where margin of preference is applied, certain points may be awarded to such tenderers as the case may be to give them a competitive advantage depending on nationality or whether the goods are domestically produced. The policy objective governing the provision for the use of margin of preference is clearly stated in the guidelines put in place by the Authority pursuant to section 60(2) of the PPA. The guidelines stipulate that the broad objective for applying a margin of preference “is to assist the local business community to become competitive and efficient suppliers to the public sector”.Footnote 57 Margins of preference have the effect of increasing the chances of the beneficiary tender or tenderer being successful. The margin of preference could be a preferable means of “fostering the competitiveness of local suppliers and contractors, not only as effective and economic providers for the procurement needs of the procuring entity, but also as a source of competitive exports”.Footnote 58

The guidelines provide that, to qualify for margin of preference in the procurement of goods, the local labour, raw materials and components from Ghana must account for not less than 15 per cent of the ex-worksFootnote 59 price of the product offered. Where the goods provided meet this requirement, a margin of preference of 20 per cent is applicable.Footnote 60 Similarly, a margin of preference of 15 per cent is applicable where imported materials or components constitute the bulk of the inputs and the proportion of domestic value in terms of labour and additional components, if any, is equal to 10 per cent or more of the ex-works price of the product offered.Footnote 61

In the procurement of works, the margin of preference may be applied for the benefit of domestic contractors if: they are incorporated or registered under the laws of Ghana; Ghanaians constitute the majority shareholders in any such company and in the particular procurement; and any sub-contracting of the total value or works to foreign contractors does not exceed 50 per cent. Where these criteria are met, the contractors are entitled to a 10 per cent margin of preference. Foreign firms may also be eligible for a margin of preference in the procurement of works if they sub-contract 30 per cent or more of the value of the works to a domestic contractor.Footnote 62

In evaluating technical proposals for service and consultant contracts, the use of local expertise may be given a margin of preference ranging from 10 to 15 percentage points. A minimum of ten points will be awarded where 40 per cent of the key personnel are Ghanaians. The primary goal for these incentives is to promote the development of Ghanaian technical and professional capabilities, thereby contributing to national growth and development.Footnote 63

It needs to be stressed that, in spite of the importance of domestic preferences in procurement to local industry, excessive price preferences or other concessions for domestic tenderers have the effect of deterring effective competition and reducing the chances of obtaining best value for money. Therefore, any preferences in favour of domestic companies must take into consideration their likely effect on the attainment of the objective for embarking on a particular procurement. The application of these preferences is recommended only if their use or application does not detract the procurement entity from attaining the objective of the intended procurement contract. Perhaps it is for this reason that section 60(1) of the PPA provides that a procurement entity “may” grant a margin of preference, making the grant of margins of preference optional and not mandatory. To fulfil the requirement for the exercise of discretion as to when to apply a margin of preference, a procurement entity must not only comply with the relevant guidelines for the use of margin of preference, but must also ensure that the application of the margin of preference will not compromise the goal sought to be achieved in a particular procurement. In other words, the procurement entity must, in deciding whether or not to apply a margin of preference, comply with the requirements imposed by the applicable law, in this case the guidelines for margin of preference, and also exercise its discretion fairly and reasonably in the circumstances of each procurement calling for the application of a margin of preference.Footnote 64

The PPA was modelled after the UN Conference on International Trade Law Model Law on ProcurementFootnote 65 which provided in articles 34(4)(d) and 39(2) for the use of margins of preference. The Guide to Enactment of UNCITRAL Model Law Footnote 66 explains the rationale behind the margin of preference technique. It states that, by this technique, the model law provided the enacting state with a mechanism to balance the objectives of international participation through international competitive tendering in procurement proceedings, to foster national industrial capacity but without resorting to purely domestic procurement.Footnote 67 The margin of preference permits a procurement entity to select the lowest priced tender or the proposal of a local tenderer when the difference in price between that tender or proposal and the overall lowest priced tender or proposal falls within the range of the margin of preference.Footnote 68 The margin of preference allows a procurement entity to favour local tenderers capable of providing internationally competitive prices without excluding foreign competition.Footnote 69

However, margin of preference (like its counterpart, local content) can restrict competition or result in discrimination by limiting participation in procurement; this may result in an increase in the ultimate price to be paid by the procurement entity. Moreover, there may be additional costs resulting from implementing and monitoring policies relating to margin of preference which can ultimately affect procurement efficiency and the attainment of best value for money. It is the Authority's vision to harmonize, interpret or apply the processes of public procurement in public service to secure a judicious and efficient use of public resources in Ghana. In the performance of its functions, the Authority must not compromise on the need to attain best value for money. At the same time, the Authority, where efficiency and best value for money in procurement will not be compromised, ought to use or promote the use of the procurement process as a mechanism to promote the competitiveness of Ghanaian enterprises.

THE BALANCE BETWEEN PRIMARY OBJECTIVES AND SECONDARY OBJECTIVES IN PROCUREMENT

The PPA states that “[i]n furtherance of its object [the Authority] shall … assist the local business community to become competitive and efficient suppliers to the public sector”.Footnote 70 The Authority's object, as stated above, is to harmonize the processes and procedures of public procurement to “secure a judicious, economic and efficient use of state resources in public procurement and ensure that public procurement is carried out in a fair, transparent and non-discriminatory manner”.Footnote 71 This can be interpreted as meaning that best value for money, fairness, transparency and non-discrimination are the primary objectives of the PPA, although some of these are described as “process-oriented or procedural objectives”.Footnote 72 Since the PPA requires promoting a competitive local business community to be pursued “in furtherance” of the Authority's foregoing objectives, the author argues that helping Ghanaian business to grow competitively is a secondary objective under Ghana's public procurement system. In other words, promoting a competitive local business community can only be pursued when the Authority and procurement entities are employing procurement processes and procedures to achieve the primary objective of best value for money. Promoting a competitive local business community cannot then be pursued independently and at the expense of the primary objective of securing a judicious, economic and efficient use of state resources. In fact, the fact that the PPA requires Ghanaian businesses to be assisted to become “competitive and efficient suppliers to the public sector”Footnote 73 suggests that helping local businesses is required only for the advancement of the primary objective of best value. Nevertheless, since the PPA also states that the Authority “shall” assist Ghanaian businesses to become competitive and efficient suppliers, it could be argued that it is mandatory that this secondary objective be pursued alongside the primary objective.

There are other provisions of the PPA that seem to support the idea of promoting local business interests through procurement. For instance, in determining the lowest evaluated tender, factors to be taken into consideration include the reservation of certain production for domestic suppliers.Footnote 74 Although the law of public procurement in Ghana has not expressly been designed to address social, environmental or industrial policies, the processes and procedures for procurement could nevertheless help Ghanaian businesses to become competitive if the procurement procedures relating to competition and transparency are efficiently and rightly employed.

SOCIO-ECONOMIC POLICIES IN PROCUREMENT IN SOUTH AFRICA AND THE UNITED STATES OF AMERICA: IMPLICATIONS FOR GHANA

The position of the law in Ghana on promoting socio-economic objectives through procurement contrasts with the situation in a country such as South Africa where procurement has been used expressly to promote broader social and economic objectives, including assisting small businesses to have access to government procurement opportunities. The literature on the subject in South Africa suggests that, before 1994 when the country gained political independence, government procurement was primarily targeted at large and established contractors. That practice was seen as discriminatory and unfair as it prevented a number of groups and entities, particularly new contractors in South Africa, from participating in government procurement.Footnote 75 Moreover, due to the general history of “discrimination, unfair practices and marginalization of people, various groups in society were denied the privilege of being economically active within the procurement system”.Footnote 76 In 1994, government procurement was granted constitutional status; procurement then became a policy tool to address past discriminatory policies and practices.Footnote 77 Two constitutional principles in particular have been identified as directly impacting on the use of procurement as a policy tool in South Africa: best value for money and the right to equality.Footnote 78 The Constitution of South Africa has in particular been interpreted as encouraging procurement entities to implement a procurement policy to provide for categories of preference in the allocation of contracts, and to protect the advancement of persons disadvantaged by unfair discrimination.Footnote 79 Therefore, the use of procurement to attain social and economic objectives besides best value for money in South Africa was intended to “correct South Africa's history of unfair discriminatory policies and practices”.Footnote 80 In the case of South Africa then, the question was not whether the country could afford to use procurement as a policy tool “but rather, whether it can afford not to”.Footnote 81 The policy has been used to address skewed business ownership, employment and direct capital flows into underdeveloped and disadvantaged rural communities on construction projects.Footnote 82 The author interprets the historical background to the use of procurement as a policy tool to achieve secondary objectives in South Africa as meaning that the policy was not borne out of the recognition of procurement as necessarily the right and most reliable policy to achieve secondary objectives, but as one of the policy tools to address imbalances arising from the history of racial discrimination prior to the establishment of democracy.

Although there is an indication that progress is being made in the implementation of affirmative procurement in South Africa,Footnote 83 there is also concern that a lack of data and records prevents the effective monitoring of targeted procurement. The lack of data on the implementation of the policy not only prevents an assessment of the degree to which targeted businesses are actually being protected, but also “negatively impacts on the transparency of the tendering process”.Footnote 84 The South African experience, therefore, suggests that the use of procurement to advance secondary objectives may not have measurable targets (it may be difficult to estimate the costs of an intended policy as against the benefits) and that the process for using the policy tool may not be verifiable, auditable, transparent and competitive.Footnote 85 In fact, it has been suggested that the aim of using procurement as a policy to achieve socio-economic objectives is to address past discriminatory policies and practices, and accordingly the use of procurement for this purpose is an interim measure.Footnote 86 Furthermore any country, including Ghana, intending to use procurement as a policy tool for objectives other than its primary objective would be better off if the subject matter of the policy is precisely determinable and measurable and if the processes and procedures for the implementation of the policy are verifiable, quantifiable and transparent.Footnote 87 The South African experience also suggests that the use of procurement as a socio-economic policy tool may be an interim measure, in the sense that it may be used to achieve a specific time-bound socio-economic objective.

The United States of America has a long history of an entrenched policy of using procurement to promote socio-economic goals. There are policies, for example, for assisting small businesses. The policies to assist small businesses are under the general supervision of the Small Businesses Administration (SBA) by virtue of the Small Business Act.Footnote 88 Under this act, the SBA establishes small business size standards and rules on size determination appeals. Federal policy requires that a fair proportion of government contracts and sub-contracts should be placed with small businesses;Footnote 89 to ensure that small businesses do indeed receive federal procurements, it is mandatory that small businesses receive smaller dollar contracts than they would obtain in full and open competition with large businesses. Major systems contracts are said to require greater funds and capability than small businesses possess, so the policy allows the interests of small businesses to be taken into consideration in procurement. A form of preference given to small businesses in the award of federal procurement contracts is through “set-asides” which refers to the reservation of contracts for award only to a specified group. Small businesses are defined to include businesses owned and controlled by socially and economically disadvantaged persons, also known as minority-owned businesses, including women-owned enterprises. The socio-economic policies of the federal procurement system in the United States also extend to domestic preferences favouring the procurement of articles of domestic origin or procurement from domestic sources, similar to the local content requirement in Ghana.

It has been argued that implementing these collateral policies through public procurement sometimes conflicts with full and open competition in federal procurement, which may increase the total costs of procurement. However, the general view in the United States is that the negative impacts of the policies are offset by the benefits that flow from the participation of many contractors that would otherwise be excluded from the process.Footnote 90 There exists no reliable data to show how the pursuit of socio-economic policies through procurement efficiently addresses the policy goals underlying their introduction and it is not clear how effective their implementation has been. What is very clear is that the implementation of socio-economic policies complicates the procurement process and raises transparency, competition and best value for money issues for the entire federal procurement system.Footnote 91 Therefore, the use of procurement to promote socio-economic goals, such as assisting small businesses, is required to be done with great circumspection. Thus, the Supreme Court of the United States held in Adarand Construction, Inc v Pena Footnote 92 that federal affirmative action programmes that use racial classifications are subject to a high level of judicial scrutiny and that they must serve compelling government interests and be narrowly adapted to serve those interests.

These issues arising from the use of procurement as a policy tool suggests that countries like Ghana should approach the pursuit of socio-economic policies through procurement with extreme caution and circumspection, both in terms of the goals such policies should seek to achieve and the timeframe within which they might be implemented. Professor Bolton suggests that government use of procurement as a policy tool has been restrained due to free trade agreements.Footnote 93 Therefore, caution is needed in the application of the local content and margin of preference procedures because they might conflict with Ghana's investment treaty commitments which require both the national treatment (NT) and most favoured nation treatment (MFNT) of foreign investors.Footnote 94 The NT and MFNT obligations generally mean that foreign investors should be treated the same way as domestic or third state investors. Therefore, where both domestic and foreign tenderers are involved in procurement, any preferential treatment of domestic tenderers might raise the issue as to their compatibility with the NT and MFNT obligations, especially if the foreign investor comes from a country that has an investment treaty with Ghana.

CONCLUSION

In sum, public procurement is important at both the domestic and international levels. It accounts for a large percentage of national GDP. At the national level, public procurement provides the needed inputs that enable governments to deliver public services and fulfil other public obligations. Procurement also has a positive impact on the efficient management of public expenditure, good governance, the elimination of corruption, poverty reduction and ultimately the attainment of best value for money.

The public procurement system in Ghana was designed to stem the waste, or less than optimal use, of public funds against a backdrop of uncoordinated institutional and legal frameworks for government contracting. The goal was, therefore, to harmonize the processes of public procurement in the public service to secure the efficient use of public resources. This ought to be the primary focus of public procurement law and regulation. Competition and transparency are also important procedural objectives for government contract law in Ghana. So this article has argued that, beyond the procedural values attached to competition and transparency, these mechanisms also have important secondary effects on industry; they have a role to play in enhancing the image and competitiveness of the firm. Therefore, compliance with the requirements for transparency and competition is necessary for both the attainment of best value for money and promoting industrial growth.

This article has argued that, in addition to regulating government contracting to promote best value for money, the public procurement system in Ghana as designed can also be used indirectly as a tool to promote the competitiveness of local business enterprises in Ghana. In doing so, it is clear that the public procurement system in Ghana was not designed and should not be seen as designed to promote industrial policy per se. The argument is that the various mechanisms and requirements in public procurement law and regulation, such as the requirements for competition (in the form of national competitive tendering and international competitive tendering) and transparency, among others, if properly applied will not only promote the primary objective of best value for money, but will also have the indirect effect of engendering healthy competition among Ghanaian enterprises. Competition in this sense is an important mechanism to challenge local businesses to judge whether they can compete in both the local and international procurement markets. Helping businesses to improve their capacity and expertise will enable them to become “competitive and efficient suppliers to the public sector” in Ghana, as envisaged under section 3(t) of the PPA.

Further, specific procurement measures, such as the requirements relating to local content and margin of preference which are meant to provide domestic industries with a competitive advantage, may well play a significant role in helping local industries win procurement contracts, thereby helping them to develop their capacities. The author cautions, nevertheless, that these mechanisms must not be used in such a manner as to defeat the primary objective of public procurement law and regulations, namely the attainment of best value for money. Procurement has the indirect role of promoting development and the growth of local businesses if the system is effectively implemented to achieve this primary objective. An attempt to use the procurement system directly as a development tool and for local industries, when the system is not designed with this as a primary objective, can complicate the procurement process and frustrate the attainment of the system's primary objective as well as any perceived development benefits. Experience in South Africa and the United States of America suggests that the pursuit of socio-economic objectives through public procurement comes with costs and with concrete benefits that are difficult to measure. Therefore, the costs and likelihood of effectively attaining the objective for pursuing any socio-economic policy, such as promoting the competiveness of local businesses, must be assessed in relation to the anticipated benefits, especially if procurement is being used directly to achieve this objective. If the focus of any such policy is solely the benefits without an assessment of the associated direct and indirect costs, the implementation of the policy may not achieve its intended objectives.

Footnotes

1 The Public Procurement Act 2003 (Act 663), sec 3(t).

2 See generally Arrowsmith, SThe Law of Public and Utilities Procurement (2nd ed, 2005, Sweet & Maxwell) at 1; Arrowsmith, S, Linarelli, J and Wallace, DRegulating Public Procurement: National and International Perspectives (2000, Kluwer Law International) at 1–2.

3 Quinot, G and Arrowsmith, S “Introduction” in Quinot, G and Arrowsmith, S (eds) Public Procurement Regulation in Africa (2013, Cambridge University Press) at 1.

4 RD Anderson “International procurement: Developments in 2008 and the road ahead” in West Government Contracts Year in Review Conference (2009) 1–1.

5 In the United Kingdom, it is said that local government “spends more than £40 billion each year undertaking capital projects and buying in goods and services”: Councillor Paul Bettison, chairman of the Local Government Association Environment Board in “Local government sustainable procurement strategy”, available at: <http://www.idea.gov.uk/idk/aio/7643299> (last accessed 28 April 2014). The Federal Government of the United States spends approximately $530 billion annually on a wide range of goods and services to meet mission needs. See Office of Federal Procurement Policy at: <http://www.whitehouse.gov/omb/procurement_default/> (last accessed 18 June 2012). Anderson in “International procurement”, above at note 4 at 1-1, has also observed: “Public procurement accounts for a substantial proportion of gross domestic product – 15–20 percent on average in developed economies … In developing and transition economies with thinly-developed private sectors, the proportion of gross domestic product accounted for by public procurement can be substantially greater in the range of 30–40 percent by some estimates.”

6 Dagbanja, DNThe Law of Public Procurement in Ghana: Law, Policy and Practice (2011, Lambert Academic Publishing) at 45.

7 Anderson “International procurement”, above at note 4.

8 Arrowsmith The Law of Public and Utilities Procurement, above at note 2 at 2–3.

9 Under sec 92 of the Public Procurement Act 2003, contravention of any provision of that act is an offence attracting penalties including a fine not exceeding 1,000 penalty units, a term of imprisonment not exceeding five years or both.

10 The importance of a system for public procurement has been appropriately stressed thus: “Government procurement is of considerable economic significance at both the domestic and international levels, accounting for a significant proportion of national GDP. At the domestic level, the procurement of goods and services by government agencies provides needed inputs that enable governments to deliver public services and fulfill other tasks. It has a significant impact on the efficiency of public expenditure management and good governance. The attainment of value for money, public access to information on government contracts, and fair opportunities for suppliers to compete for government contracts are all essential requirements of an efficient procurement system, in particular as they impact on public finances and the delivery of public services. A well regulated government procurement system, embodying the principles of transparency and fair and effective competition, is thus essential to attaining the goals of government procurement, and is often the object of domestic reforms”: World Trade Organization “General overview of WTO work on government procurement”, available at: <http://www.wto.org/english/tratop_E/gproc_e/overview_e.htm> (last accessed 18 June 2012).

11 For a full view of the history of the public procurement system in Ghana, the objectives of the procurement system and the meaning of the concept of best value for money, see Dagbanja The Law of Public Procurement in Ghana, above at note 6 at 42–48 and 22–30. Also see id “The regulatory framework for public procurement in Ghana” in Quinot and Arrowsmith Procurement Regulation in Africa, above at note 3, 77, which sets out a full interpretation of the objectives of the PPA.

12 Davies, AThe Public Law of Government Contracts (2008, University Press) at 260.

13 Footnote Ibid. Prof Peter Trepte classifies the uses of government procurement into three categories. The first category is “strategic” policies where procurement is used to boost the national economy. The second category is “protective” policies where procurement is used as a tool to protect local business entities. The third category is “proactive” policies where procurement is used to protect government objectives which have no immediate relation to the objective for embarking on a particular procurement, including human rights, labour and employment rights and environmental protection: Trepte, PRegulating Procurement: Understanding the Ends and Means of Public Procurement Regulation (2004, University Press), chap 3 generally. It should be noted that whether procurement regulation is actually used to achieve any of these policies depends on the particular jurisdiction and its law, since local peculiarities might not allow a neat application or operationalization of these policies as outlined by Trepte.

14 Id at 261.

15 Footnote Ibid.

16 Id at 260–62.

17 see Dagbanja The Law of Public Procurement in Ghana, above at note 6 at 31–42.

18 There is a useful chapter on collateral policies in procurement in Cibinic, J Jr and Nash, R JrFormation of Government Contracts (3rd ed, 1998, Kluwer Law), chap 11.

19 Williams, S and Quinot, G “Public procurement and corruption: The South African response” (2007) 124(2) South African Law Journal 339 at 339.

20 Bolton, P and Quinot, G “Social policies in procurement and the government procurement agreement: A perspective from South Africa” in Arrowsmith, S and Anderson, RD (eds) The WTO Regime on Government Procurement: Recent Developments and Challenges Ahead (2011, Cambridge University Press) 459 at 459 (emphasis added). Profs Bolton and Quinot noted the “horizontal policies” concept was adopted by Arrowsmith and Kunzlik in preference to these other terms, in part because the label “horizontal policies” does not imply that these policies are in any way of lesser importance than other objectives of procurement: id at footnote 2. See also Arrowsmith, S and Kunzlik, P (eds) Social and Environmental Policies in EC Procurement Law: New Directives and New Directions (2009, Cambridge University Press), chap I. The author's view is that no procurement system can be implemented effectively if its objectives are ill-defined; to this extent, not all goals can reasonably be primary in a procurement system. Some must necessarily be primary and others must necessarily be secondary. Therefore, it is appropriate to describe as “collateral” policy goals or implementation goals which, though important in the procurement system, are not primary to the purpose which the system is designed to achieve.

21 Badcoe, P “Best value – A new approach in the UK” in Arrowsmith, S and Trybus, M (eds) Public Procurement: The Continuing Revolution (2003, Kluwer Law International) 198 at 198 defines best value for money in the procurement context as: “the provision of economic, efficient and effective services [works and supplies], of a quality that is fit for purpose, which are valued by their customers, and are delivered at a price acceptable to the taxpayers who fund them”.

22 Muchlinski, PTMultinational Enterprises and the Law (2nd ed, 2007, Oxford University Press) at 385.

23 Id at 385–86. There are three broad varieties of ways business enterprises may engage in anti-competitive practices. First, there may be arrangements or concerted practices between independent competitors that serve to reduce competition between them. Where these arrangements arise between competitors at the same level of business practice, such as between rival producers in the same market, the arrangements are known as horizontal arrangements. Such arrangements may also be concluded between enterprises at different levels of the productive process such as a distribution agreement between a producer and a reseller. This form of arrangement is called vertical integration. Anti-competitive practices may also take the form of price fixing cartels. Secondly, anti-competitive practices may also stem from the acquisition by an enterprise of a dominant position in a market. The risk in such dominance is that the enterprise can create scarcity through lowering output, thereby forcing consumers to pay higher prices for a commodity when there are no alternatives. A third category of anti-competitive conduct relates to mergers and acquisitions. It can be said that these are the broad categories of anti-competitive practices that competition laws generally seek to regulate: id at 384–427.

24 The PPA, sec 92(2)(a).

25 Nash, R Jr, Schooner, SL and O'Brien, KRThe Government Contracts Reference Book: A Comprehensive Guide to the Language of Procurement (2nd ed, 1998, CCH) at 109–10.

26 Schooner, SL “Desiderata: Objectives for a system of government contract law” (2002) 11 Public Procurement Law Review 103, available at: <http://scholarship.law.gwu.edu/cgi/viewcontent.cgi?article=1101&context=faculty_publications> (last accessed 6 May 2014).

27 Footnote Ibid.

28 Footnote Ibid. Writing on the subject of “Enhancing competition in federal acquisition”, PA Denett of the Office of Federal Procurement Policy rightly observed that: “Competition is the cornerstone of our acquisition system. The benefits of competition are well established. Competition saves money for the taxpayer, improves contractor performance, curbs fraud, and promotes accountability for results”: “Memorandum for chief acquisition officers, senior procurement executives: Enhancing competition in federal acquisition” (31 May 2007), available at: <http://www.whitehouse.gov/omb/procurement/comp_contracting/competition_memo_053107.pdf> (last accessed 2 May 2014).

29 The PPA, secs 25 and 35 respectively.

30 Id, sec 25. Requiring the use of competition procedures in procurement recognizes that, in some cases, requirements for the use of national and international competitive tendering procedures may be restricted and subjects the competitive requirement to these procedures, as provided for in id, secs 44, 45 and 46.

31 Id, sec 33.

32 Id, sec 33(1)(a)(b) and (c).

33 Id, sec 33(2).

34 Id, sec 33(3).

35 Id, sec 47.

36 Id, sec 38.

37 Id, sec 40.

38 Id, sec 55.

39 Id, secs 55(4), 66(7) and 65(9)(b).

40 Id, sec 44(1).

41 Ozawa, T “Foreign direct investment and economic development” (1992) 1(1) Transnational Corporations 27 at 28.

42 Footnote Ibid.

43 Yukins, CR and Schooner, SL “Incrementalism: Eroding the impediments to a global public procurement market” (2007) 38 Georgetown Journal of International Law 529 at 534–35.

44 The PPA, sec 45(1). See a similar requirement in id, sec 46.

45 Note though the comments on the limitations of the requirements for the use of international competitive tendering in Dagbanja The Law of Public Procurement in Ghana, above at note 6.

46 Organisation for Economic Cooperation and Development “Methodology for assessment of national procurement systems” (version 4, 17 July 2006) at 11.

47 Footnote Ibid.

48 In Pyne & Associates v Department of Urban Roads the complainant was disqualified by the Tender Evaluation Panel during post-qualification evaluation, based on poor work quality and unjustifiable delays on previous contracts awarded. The issue was whether the respondent, the Department of Feeder Roads, dissatisfied with the complainant's previous performance in a tender awarded, could use this as a basis for disqualification from another project. In deciding against the complainant, the Authority noted that the disqualification of the complainant had been duly decided based on published post-qualification evaluation criteria. It is significant to note that arguments were made to the effect that, ordinarily, a contractor could not be barred from a subsequent project based on previous performance, as disqualification is specific to a project. If this were not the case, most contractors would be out of business. It was also noted that, under the Authority manuals (2003), history of poor performance may be considered sufficient justification for failing post-qualification evaluation if the tenderer is unable to demonstrate that steps have been taken to resolve previous problems. Post-qualification evaluation was a published requirement in this tender process. In this case, it is not clear whether past performance should have been a relevant factor in deciding not to make an award to the complainant. It should be stressed that, if the complainant demonstrates in all certainty that it is capable of performing a contract if an award is made and the procurement entity is satisfied as to the evidence produced by the complainant supporting its claim, then an award should not be refused because of a previous failure to perform. Past performance particularly becomes irrelevant if the previous project on which the tenderer failed to perform has no similarity with the current project. The decision on Pyne & Associates v Department of Urban Roads is available at: <http://www.ppaghana.org/documents/APPEALSandCOMPLAINTSCASES.pdf> (last accessed 28 April 2014).

49 See Dagbanja, DN “The nature and scope of contractor qualification systems: A cross-jurisprudential inquiry” (2009) 7 Journal of Contract Management 65.

50 Schooner “Desiderata”, above at note 26.

51 Footnote Ibid. See also Arrowsmith, S “Towards a multilateral agreement on transparency in government procurement” (1998) 47 International and Comparative Law Quarterly 793 at 796.

52 Schooner “Desiderata”, above at note 26.

53 <www.ppaghana.org> (last accessed 28 April 2014).

54 The PPA, sec 59(c).

55 Id, sec 60(1).

56 The Authority in its “Guidelines for margin of preference to local suppliers, contractors and consultants” (2006) at 7 (Guidelines for margin of preference) has rightly observed that, in procurement for goods: “Eligibility for preference for goods is determined by the sources of the domestic goods and not by the nationality of the Tenderer. The Nationality of the Tenderer or Supplier is irrelevant, making it clear that preference is given to the GOODS and not to the Tenderer.” In the case of goods contracts, the guidelines are not for domestic suppliers or contractors or consultants, but also for foreign firms as well. In that sense, the title of the guidelines is quite inaccurate, since it creates the impression that the guidelines are for local suppliers, contractors and consultants.

57 Footnote Ibid.

58 UN Conference on International Trade Law (UNCITRAL) Guide to Enactment of UNCITRAL Model Law on Procurement of Goods, Construction and Services (A/CN.9/403, 1994), art 26, available at: <http://www.uncitral.org/pdf/english/texts/procurem/ml-procurement/ml-procure.pdf> (last accessed 3 May 2014).

59 Where “ex-works” applies in a transaction, the seller's responsibility is to make the goods available to the purchaser at the seller's premises. The purchaser bears the cost and risk of transporting the goods.

60 “Guidelines for margin of preference”, above at note 56 at 7.

61 Footnote Ibid.

62 Id at 7 and 8.

63 Id at 8.

64 Art 296 of the Constitution of Ghana defines the basis for exercising discretion in Ghana.

65 UNCITRAL Model Law on Procurement of Goods, Construction and Services with Guide to Enactment (1994).

66 Above at note 58.

67 Id, art 26.

68 Footnote Ibid.

69 Footnote Ibid.

70 The PPA, sec 3(3) (emphasis added).

71 Id, sec 2.

72 Dagbanja “The regulatory framework”, above at note 11 at 80.

73 The PPA, sec 3(t) (emphasis added).

74 Id, sec 59(4)(c)(v).

75 Bolton, P “Government procurement as a policy tool in South Africa” (2006) 6/3Journal of Public Procurement 193 at 193 and 194.

76 Id at 198.

77 Id at 194.

78 Id at 197.

79 Id at 203.

80 Id at 202.

81 Id at 201.

82 Watermeyer, R “The use of targeted procurement as an instrument of poverty alleviation and job creation in infrastructure projects” (2000) 9/5Public Procurement Law Review 226.

83 Watermeyer suggests that affirmative procurement policy has resulted in increased participation by the target group, the formalization of the small businesses sector, more structured relationships within the industry and an increase in the government's tax base: ibid.

84 Bolton “Government procurement as a policy tool”, above at note 75 at 200.

85 Id at 195.

86 Id at 203–04.

87 For further reading on this subject see: Bolton, P “The use of government procurement as an instrument of policy” (2004) 121/3South African Law Journal 619; Bolton, P “The regulation of preferential procurement in state-owned enterprises” (2010) 1 Journal of South African Law 101; Bolton, P “Incorporating environmental considerations into government procurement in South Africa” (2008) Journal of South African Law 3; Bolton, P “Protecting the environment through public procurement: The case of South Africa” (2008) 32 Natural Resources Forum 1; Bolton, P “An analysis of the preferential procurement legislation in South Africa” (2007) 16/1Public Procurement Law Review 36; and Arrowsmith, S “Public procurement as an instrument the impact of market liberalization” (1995) 11 Law Quarterly Review 235.

88 15 USC 631.

89 15 USC 631(a).

90 A fuller reading on collateral policies in procurement can be found in Cibinic and Nash Formation of Government Contracts, above at note 18, from which this summary was sourced.

91 Footnote Ibid.

92 515 US 200.

93 Bolton “Government procurement as a policy tool”, above at note 75 at 195.

94 See for example the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Ghana for the Promotion and Protection of Investments, signed on 22 March 1989, which entered into force on 25 October 1991.

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