Boards must not approve suppliers
Just recently, Malawi President Peter Mutharika appointed people into boards of the country’s various statutory corporations. These board of directors have a pivotal role to play in stirring the wheels of our parastatals in the right direction that ensures provision of the public amenities.
The board of directors have clearly defined roles and responsibilities within public enterprises. In essence, one of the overarching principles of corporate governance in the public sector for the board of directors is to hire chief executive officers (CEOs) of parastatals and gauge the overall direction and strategy of the business. In actual sense, these directors determine the company’s vision, mission, values to be promoted, review company goals and determine company policies.
It is one of the tenets of principal-agent theory that there should be a convivial relationship between the board of directors and chief executive officer plus executive management. Inevitably, problems usually crop up where the set guidelines are never adhered to. Conflicts mostly arise when the board of directors begin to meddle in the day-to-day operations of the public enterprise. Conversely, management is never expected to determine the public enterprises’ overall policy direction.
It is a fact that the principal-agency conflict depicted above must be the order of the day in the country’s statutory corporations where some board of directors are not ready to relinquish the policy implementation function to executive management and employees.
It is necessary, at this juncture, to make reference, as a case in point, to an article that appeared in the Nation on Sunday newspaper titled ‘NFRA flouts procedures’ in which it is alleged that the National Food Reserve Agency (NFRA) risks annulment or further scrutiny of its newly awarded maize contracts worth K3 billion to 293 companies because it contravened procedures. It further states that the contracts were awarded by management for the supply of 50 000 metric tonnes of maize without consulting the NFRA board as per set procedure.
In light of the foregoing, it is imperative to remind everyone that the procurement function in all the statutory corporations, ministries and all the public organisations on the land is heavily regulated by the Public Procurement Act No. 8 of 2003. In fact, the Act under Section 8(1) gives powers to Controlling Officers and executive managements of the procuring entities to execute procurements. It stipulates that ‘Procuring Entities are responsible and Controlling Officers and other officials concerned are accountable for procurement under this Act.’
In this regard, the public procurement procedure is crystal clear: open tendering is the default method of procurement that is required to be used in all public procurement activities. Procuring entities invite all interested suppliers irrespective of colour, religion, tribe and political affiliation to participate in the procurement activity. This implies that any supplier or contractor is eligible to participate in all public procurement activities.
After bids are received and publicly opened, they are reviewed by an ad hoc evaluation committee which then makes recommendations to the Internal Procurement Committee (IPC) that are provided for in Section 8(1) of the Act to oversee procurement activities in the public sector. Upon being nodded to by IPC, recommendations are then passed on to controlling officers for approval. If an activity is above the threshold, a submission is made to the Office of the Director of Public Procurement (ODPP) which is established under Section4 of the Act to regulate and monitor public procurement in Malawi. Upon seeking a ‘no objection’ from ODPP, procuring entities can legally proceed to award contracts to successful suppliers or contractors.
From the above, it can be clearly noted that there is no mention of board of directors in approval circuit of public procurement activities. In fact, the country’s public procurement legal framework does not mention board of directors to approve suppliers or contractors before contracts award.
—The Author works for the University of Malawi; The Polytechnic but writes in his personal capacity.
