How do we manage the effects of late budget releases on procurement implementation

One of the common refrain when you ask officials involved in public procurement of their challenges is “ late or no budget release”.  The gap between appropriation and actual expenditure in main line ministries continue to widen. In view of oil prizes, funding the short fall is a huge challenge at both Local Government, State and Federal levels. There is no doubt this will result in further late budget releases in 2015. The  question therefore  is how do main line MDAs  deal with the issue of late releases, to avoid the hog wash December rush to spend whatever is released late, less it is mopped up for the next year.  One  way appears to be to begin procurement implementation early, undertake all the steps and stop short of awarding contract, until you confirm availability of funds to meet maturing obligations. Can anyone think of another way to meet this challenge?

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6 thoughts on “How do we manage the effects of late budget releases on procurement implementation

  1. Apart from early implementation, what about effective planning? If the MDA’s individually look at their needs, prioritize in order of most essential or the most cost effective etc. and then decide which will be implemented first, I think that when an MDA actually receive the funds it will be easy to implement a procurement process in line with what has been said earlier under early implementation of the procurement process. Further if the funds received are less than what was budgeted for, it does not take much to implement the project that costs the least because that has already been included in the plan for the year

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  2. As rightly observed,one recurring answer for failures in procurement is either non release,no release or shortfall in funds released for a particular project.However,in the face of declining revenue,one way out of this issue could be carrying out all the preliminary implementation steps short of awarding well ahead of budget passage and assent.Afterwards,prior to award ,there should be confirmation of funds availability to meet maturing obligations.This is where the challenge lies.In most states,no authority or official is assigned the task of ensuring that there are funds,and as such hardly does any official take responsibility for failure of non-release of funds to meet maturing obligations.In my view,the clearance prior to award should clarify that there is sufficient fund released for these obligations to the contractor,as captured in the budget.A specific Office/unit ,preferably within the Ministry of Finance should be assigned the role of issuing these clearances,only after ascertaining that there are sufficient funds released and domiciled within the Ministry,and tied to specific procurement exercises.In the event that contracts are awarded and there are no funds,then the Office within the Ministry should take responsibility.
    Further,quarterly allocation of funds to MDAs should be considered.The challenge of debt backlog to contractors may be minimized if votes are released on a quarterly basis.It will also give contractors the nerve to complete projects when they are certain that at most within three months,they will realize their entitlements.Also,there should be a certain predictable mechanism for release of funds,once projects are captured in the budget and given the necessary clearance by the Executive President, Governor or Executive Council,where such systems are extant.
    Then there should be a mechanism internally, within all MDAs and externally,amongst MDAs to ensure that there are no duplication of projects.A proper streamlining of procurement activities should be undertaken with a view to ensuring the optimum utilization of scare government resources for the utmost good of citizens majority.

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  3. I have a question based on your argument that clearance can be given probably by an office in the Ministry of Finance before the award. Since the main concern/challenge with public procurement is the late release of budget and I presume the proposed office will not be responsible for determining how and when funds will be made available, not responsible for allocating funds or releasing such funds to the ministry but will issue a clearance after it has ascertained that sufficient funds have been released for implementation. So I grapple to understand the relevance of such an office or how such an office exert any influence on ensuring that government releases funds early enough for project implementation which is the main challenge. It appears that the office will more or less act as a mediator between the government and parties involved in the procurement exercise. Unless I do not understand its functions properly, therefore can you kindly clarify further on what such an office will do and its importance please ?

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  4. There are five or more major challenges here . One is the re-occurrence of over inflated revenue projections. Rarely does any state i know have the variance between its projected revenue as in the budget and actual revenue over the year fall within such acceptable range as 5%, it beats my mind how these projections continue to be made when previous year records and current economic indices indicate reality. Second is the fact that there is poor budget discipline, often the differences between approved budget estimates and actual expenditure is often higher than ought to be acceptable, projects not budgeted are sometimes funded whilst budgeted projects are not funded, and no ascertainable criteria exists to justify why one is funded as against another . Thirdly is the fact that the Commissioners and Ministry’s of Finance no longer have the power they usually had in the time past over the treasury. These powers appear to have been captured by the Chief Executives of the States,and in some cases their exercise is now more often determined by politics than economics of public financial management principles. Four is that since the decisions are now taken by the Executive Governors. There is no one left within the Executive Arm to check the exercise of this power, in the light of very week legislatures across states, the issues are left at the whims and caprices of the Executive Governor. Here lies the biggest problem, and finally elated to this is that MDAs are no longer funded to implement projects. Most projects are ” funded Centrally” an arrangement that concentrates treasury matters in the apex political leader in the State. The truth is that today at the State level, most Ministries of Finance may not have the autonomy to on their own creditably certify that there will be funds for any project without political approval.

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  5. The core issue here is the centralization of treasury matters in the apex political leadership.It now boils down to,who takes the responsibility to ensure that there are funds to meet maturing obligation?,I believe that the political leadership should only lay down the criteria for fund releases.But in reality,they actually order the releases.Hence,the issue of responsibility should be such that MDAs should seek fund availability clearance from the apex political leadership,prior to award through a designated official,preferably within the Ministry of Finance,being the custodian of Government’s finances.It is not about a unit or department taking the role,it is about assigning the responsibility to ensure that at any stage of a procurement ,there are funds to meet the maturing obligations.This is imperative as the the Law of most states require that funds be available prior to award.So the central issue is being able to confirm from a particular authority,who takes responsibility to respond to inquiries from MDAs regarding availability of funds tied to specific procurement activities,before award.

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