Spending public funds effectively: how to free up funds to make ‘Ghana beyond Aid’ a reality?

Tween Talk with Eugenia Tachie Menson: Ghana’s Month

Ghana ranked 73rd out of 180 countries in the 2021 Corruption Perception Index (CPI) released earlier this year by Transparency International. Ghana’s score is unchanged from the 2020 index, suggesting that little has changed over the past year. In light of this lack of progress, any indication that government is looking to intensify scrutiny of public procurement contracts should be welcomed.

So, we were pleased to see the dailies reporting, back in December, that the Office of the Special Prosecutor (OSP) intends to conduct risk assessments of all major public contracts from January this year “as one of the key strategies to deal with and prevent corruption in the country”. (While this raises questions about jurisdictional overlaps with the Public Procurement Authority (PPA), any such issues can be ironed by the two statutory bodies.)

That the OSP is focusing on ‘major public contracts’ should come as no surprise. It is well-documented, across the world, that public procurement is frequently ridden with mismanagement, and even corruption. According to a recent World Bank blog titled: ‘The hidden US$1 trillion: Halting waste in public procurement’, US$ 1 trillion is wasted each year globally in inefficient and shortsighted procurement practices. Ghana has been no exception. The passing of the Public Procurement Act, Act 663 of 2003 (as amended), was intended to promote transparency and value for money by providing an effective and efficient institutional framework for the country’s public procurement goals.

An example of the sort of critical interventions that can protect the public purse is the use of Value For Money (VFM) audits to assess single-sourced civil works contracts before the government signs them. Such audits aim to identify potential financial savings and improve the contract terms and conditions for the government.

A good VFM audit should offer 4 key benefits to government. First, it will provide the government with clarity on the capability (financial and human) and experience of the contractor, as well as make recommendations to mitigate risks associated with the conditions and commercial terms of the contract. Second, it will also advise government on how well the contractor’s proposal meets government’s requirements. Third, it will make recommendations around risk mitigation, both in relation to any gaps identified in the contractor’s proposal, and in the conditions and commercial terms of the contract. Finally, it will advise on whether the contract price, factoring in the whole life cost where applicable, is in line with fair market pricing.

For over 20 years, Crown Agents Ghana Ltd. has been supporting the Government of Ghana with this type of quality VFM auditing service. In that period, we have assessed over 150 public infrastructure procurement contracts on behalf of government, helping Ghana realise savings of over US$ 350million. We are therefore privileged to have a unique view of the public procurement process in Ghana, seeing significant opportunities of yet unrealised potential.

While Act 663 has arguably been largely successful in providing some of the necessary institutional framework for public procurement in Ghana, media reports in the recent past have indicated that loopholes still exist. One area that could generate even greater savings is contract administration for high-value public sector capital contracts; some of the country’s public procurement contracts still generate tens of millions of dollars in penalties and other unbudgeted costs.

These costs to government may arise when there are post-contract variations such as changes to the design or scope of works, poor pre-contract stakeholder consultations, changes to the location or site of a project or even delayed payments to the contractor. This is a waste of public resources.

The recent debates about the e-levy on mobile money transactions highlight the challenge in raising revenue, but the other side of the equation is that public expenditure needs to be well-managed, a fact acknowledged in the government’s recently announced mitigation measures. Beyond the measures announced, however, any wastage also needs to be controlled, because public money is scarce and the demands on it are significant: every cedi counts.

From our past involvement in the Ghana Complementary Basic Education programme, we know what the US$ 350 million we have helped the government to save can do – it is a sum equivalent to providing quality education for over 2.1 million out-of-school children in Ghana for a year. It is also a sum that will finance the purchase of over 1,750 new ambulances; it is a sum that will cover the cost of training over 7,000 new doctors. It is a sum that Ghana cannot afford to lose.

It is for this reason that a more intense focus on Ghana’s public procurement process, particularly on the management of infrastructure contracts, is the right step forward, given its potential to generate substantive savings for the public purse. These can then be redirected toward other areas of public service delivery, ultimately ensuring the best quality of life possible for the citizens of Ghana.

About The Author:

The author is the Country Director for Crown Agents in Ghana where he leads the company’s activities in the country. Crown Agents is an international development company that helps governments deliver services more efficiently to their citizens.

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