BUBU: From talking to action

Policy brief (SC/o1/19)

1. Issue

IN A BID TO GROW THE LOCAL content and empower local service providers, the Government of Uganda developed the Buy Uganda, Build Uganda (BUBU) Policy. This policy encourages all organizations operating in Uganda to prioritize local service providers.

However, many Ministries, Directorates, and Agencies (MDAs) source and pay for services directly to foreign companies. This practice not only leads to loss of the much needed foreign exchange without any benefit to the local economy, but it also exposes GOU to national security risks specifically cyber risks. The current approach to ‘Open International Bidding’ procurements is strategically unsustainable, exploitative and risky.

1.2 How other countries support local content

We are living in everchanging times known as the VUCA (volatile, uncertain, complex and ambiguous) age. The fast pace of change is driven by new technologies like the Internet of Things (IoT) and Robotics which have given rise to Big Data, which drive Artificial Intelligence, Robotics, and Machine Learning. Taken together, the world is interconnected than before. These developments have given rise to cybersecurity risks.

Today, countries are prioritizing cyber weaponry and warfare capabilities to develop both offensive and defensive weapons to protect their countries.

To this end, governments use public procurement as a strategic tool for national cyberwarfare capacity building.

Unfortunately, Uganda is lagging behind this race and therefore the country could be exposed to risks of cyber attacks, intellectual property theft, and therefore losing national competitiveness in this critical national agenda arena. There is a need to change the policy over national procurements by various MDAs beyond mere due diligence.

1.3 Public procurement as a tool for National Defense

Countries now implement deliberate policies to develop locally registered companies. The strategy deployedencourages global companies to open local branches, reduces contract management costs over the project lifecycle and above all facilitates skills transfer to nationals.

The policy implemented is SIMPLE, yet effective.

PDEs are encouraged to make all procurements ‘open’ to local and international bidders. As a result, international bidders are encouraged to apply. For example in Kenya, many government tenders are available, https://www.tenders.go.ke/website, the national procurement portal. A quick check on any listed tender shows that the majority are “open tender”, indicating that they are open to all. See Figure 1.

Figure 1: Tender details

But there is a catch.

When you download the bid document to try your luck, you find that as an International Vendor, you cannot bid directly. See Figure 2.

Figure 2: Minimum requirements for bidding in Kenya

As you can see in Figure 2, you must be a locally registered company to fulfill requirements MR 2, MR 3, MR 4, MR 9 and MR 10. Similar requirements apply to recently published tender, TENDER NO. CBK/011/2019-2020 is available at https://www.tenders.go.ke/website/tender/Details/VLMIOF.

Figure 3: Bidding requirements

The catch is that whether Tender is open to International Bidders or not, you must be a locally registered company to meet the mandatory requirements. How else can a company obtain a Certificate of Tax Compliance unless it is registered in Kenya? Other countries do the same. I am aware that Uganda too requires companies to submit such documents when bidding. Unfortunately for Uganda, this requirement seems to apply only for local contracts.

Our Experience

Since 2010, our firm has undertaken several projects in different African countries, Asia and UAE. In all these countries, we must offer a competitive service that no local firm can offer competitively like us. Even then, we are required to have a Trading License, VAT registration in our company names, Anti-corruption self-declaration form, and National ID for Team Leader!

Taken together, only locally registered vendors can meet such requirements. The policy has thus forced international companies to open local branches. For this reason, in Kenya, top global companies have regional offices which house local subsidiaries. And now Rwanda is sharing the spoils. Same story in Tanzania.

For my company, we have to identify a locally registered company to partnership in order to fulfill the bidding requirements. In the end, we find sharing over 40% to 50% of the net revenue from the project with the local partner, thereby spending the money in the country. Even more, we must train the local partner in the services we offer so that they can provide customer support after project setup. The contracts we sign – whether with government agencies or private companies, do not allow external consultants providing support for more than three to six months after implementation. This means we must do total knowledge transfer.

In the end, we identify a local partner. Sign a Memorandum of Understanding that compels us to train their local staff in our technologies and tools. Aware that the government spends a lot of money in project support – whereby in case of a small glitch after project setup, the Procurement and Disposal Entity (PDE) spends a lot of money in ait ticket, hotel accommodation for an external consultant. This is usually a hidden cost in contracts.

Recommended policy changes
1. Change the PPDA law to require ALL international vendors to supply to the government through local companies. This will improve knowledge transfer and or compell large companies to establish local branches in Uganda which will provide employment opportunities
2. Avoid signing government contracts with foreign-registered companies. Recommend that they find local partners to work with, which government can then sign contracts with. That way, the government has local people to enforce contract fulfillment. For example, the ‘big 4’ firms operate under this kind of arrangement. This has provided the muchneeded skills transfer, capacity building and exposure of local professionals to best practices. imagine if all government consultancies were made without local partners?
3. Prohibit PDEs from paying directly to an International vendor’s bank account in a foreign bank. This makes the government lose much-needed tax revenue. Let the local vendor transfer the money.

By Mustapha B Mugisa, Mr, Strategy. Email: strategy@summitcl.com.

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