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PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  RSM on Fri Mar 09, 2012 1:29 pm

Dear all

As you may be aware, a new Act 2011 has been enacted under which Section 66 provide for procurement of 'USED' Railways Machinery, Aircraft and Ships

Can we brain storm what provisions ought to be provided in the Regulations to prevent possible abuse of this provision.

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PROCUREMENT OF USED PLANT AND EQUIPMENT

Post  Michael Chilongani on Fri Feb 17, 2012 10:46 pm

Dear All

I remember i intitated this motion way back in May 2010.

As you may be aware, a new Act 2011 has been enacted under which Section 66 provide for procurement of 'USED' Railways Machinery, Aircraft and Ships.

The section shall only be operationalized after issuance of relevant Regulations still under construction.

again there was a hot political debate in the parliament before the approval was granted only confined into Railways, Air Crafts and Ships and scrapped other industries like Electricity Machinery, Construction ETC.

The Regulations shall soon be released.

The challenge is as whether the issue has fully been addressed and whether the provisio of the new Act adequately covers the likely scenario.

i submit

Chilongani


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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  GadielCM on Wed Apr 13, 2011 9:28 pm

RSM,
In your previous submission, I dont agree the example of Air Tanzania that if they want to procure new one plane, simply because we can not justify to allow the used items simply they take lomg time.

It is my concern again that,What is the essence of APP apparently to Internal organization's Corporate Plan?, Because APP can be extracted and prepared after organzational budget has been approved. And that budget is extracted from the targets set up from the Corporate Plan of the organnization to meet let say for three years. So why not Air Tanzania can state in their Corporate plan that in three years to come they would procure new Aero-Plane and that to be a target and the budget to be set?, Can I get that idea again on the application of APP with that of application and quick procurement of items which takes time to be delivered?

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  RSM on Wed Mar 30, 2011 8:47 pm

I want to bring back this topic for I now know that most of forum members have read about it in the papers and the comments of the members of Public and MPs seems to be against the idea.

In many forum that I have attended, the issue is not that there are no situation where the need for used plant and machinery would arise, but rather there will be abuse if allowed to buy. Should we prevent people from buying because of the potential of abuse or should we create conditions that would prevent abuse.

What should we include in the law or Regulations to ensure that the potential for abuse is reduced when buying used plants and machinery? I invite you to contribute.

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  RSM on Mon Jul 05, 2010 12:57 pm

GadielCM,

You seem to be allergic with the word "used heavy plants and equipment" to the extent that you have regarded them as "Mitumba".

The aim of allowing used heavy plants and equipments is neither to allow for poor quality items or because of cumbersome tender procedures to buy a new one.

Let me pose a scenario:

Take Air Tanzania in its current shape. They have only one or two planes. If they want to immediately improve their services by buying new planes, even if they have the money, it may take them not less than one or two years to order and get new planes. If you were a consultant hired to advise them, would you tell them to wait for more than one or two years to wait for the new planes, while it is known and it is a common practice in that industry to buy and operate used planes? During that time their competitor, Precision Air who operated for several years with used planes before they could buy new ones, would be consolidating themselves in the market.

OR

They want a new plane, lets assume they want a Boeing. Here is the price list I obtained from the internet (mark you I was'nt searching for this contribution, I actually want to buy a new one - I think Boeing 777-300ER is more resonably priced for me Shocked )
"Aircraft Manufacturer Boeing recently published a price list for its range of aircraft :

717 $35m
737-800 $57m
757-300 $81m
767-400 $183m
747-400 $186m
777-200LR $186m
777-300ER $201m

These prices were recently published in May edition of Airliner World magazine."
They do not have that amount, but they search in the market and they find used plane which is in good shape and within their budget. Would you still insist that they wait until they have money to buy a new one?

One important criteria that will be used to determine whether or not to buy used heavy plant and equipment is
"(b) the heavy plant or machinery to be procured is of the type that its records of major maintenance are kept and are available for verification."
The above provision would therefore apply to items like planes in which there is stingent rules with regard to maintenance programmes which can be made available for verication by the buyer.


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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  GadielCM on Fri Jul 02, 2010 9:15 pm

All contributors from the hot topic,
For me, I dont think if the Act ammendments has highlited the problem we are discussing.My questions is

  1. What reason behind to allow Mitumba of heavy plant to be procured under procurement Act and its regulations?, where the problem comes?, Is it tendering procedures for brand new one?, we are ammending just to get cheap equipment?
  2. from the ammendment point of view, from which reference (countries) they use the same provisions to allow mitumba in their public procurement Act?.
  3. Are we ready for monitoring for all PE's and Ministry concern if at all the integrity comes aside to opt the mitumba plant/equipment and find that PE's have opted to procure mitumba by using the same provision to defend their decision as they using in emergency procurement?.

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  Michael Chilongani on Thu Jul 01, 2010 9:28 pm

RJM
My opinion is that a good law should be capable of covering all likely possible scenarios or scenarios which though previously occurred but are not sufficiently addressed by the Act.

As remarked in my recent contribution, the direction of the motion seems to suggest that currently the issue is not sufficiently covered, hence a need to for amendments of the Act as highlighted by RSM.

Like wise your previous contribution is also inclined to support some scenario under which procurement of used goods may under certain circumstances be allowed by the World Bank as quoted below: -

RJM wrote:
GadielCM,

21.5 Procurement of Secondhand Goods - World Bank Procurement Manual Draft 2001

The Bank’s general Policy is to finance the procurement of new goods. However, under special circumstances which must be evaluated on a case by case basis, secondhand goods, e.g. equipment and vessels, may provide the most economic and efficient means of satisfying the projects objectives. The Bank may finance a Borrower’s procurement of secondhand goods subject to the following conditions:
• There is a surplus (in suitable quantity and quality) of the type of goods required from enough sources to ensure competitive bidding; and
• Insistence on the procurement of new goods can result in prohibitive costs where the Borrower’s budget is limited.
Suitable bidding documents should be prepared, including special criteria and methodology for evaluating and comparing bids, acceptable to the Bank. The specifications should establish performance requirements of the goods, and minimum standards for age, residual economic life, and quality of materials. The procurement procedures should include provisions acceptable to the Bank for inspection, survey and or certification by internationally recognized specialist agencies.

The above provisions should be interpreted as requirements for the Borrower to exercise particular care to obtain best value for money, and to avoid abuses such as dumping of obsolete units and fraudulent invoicing based on unserviceable equipment.

I think the above highlights should be accomodated in the regulations.

Such provisions could be applied by a PEs like Power Utility Company to procure dispute free Heavy Plants such as those of Aggreko which could help alleviate power shortage. The Aggreko upon completion of project period dismantled the Heavy Plants which could under special arrangement be procured. Some Heavy Plants used in Road Constructions by Foreign Companies may be procured after such project completion. The transfer of title of DFP registerec Motor vehicles can be construed as acquisition of used machinery!

The above is such a typical example and it should be under exceptional circumtances!



Last edited by M.Chilongani on Fri Jul 02, 2010 5:36 pm; edited 2 times in total (Reason for editing : some additions/corrections)

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  RJM on Thu Jul 01, 2010 6:49 pm

Dear forum members, before I give my view on this, I have concerns below.

Can someone please light the shed
[1] why should we procure secondhand equipment/plants and typical situation where this can become applicable in the first place?
[2] The proposal of the NEW ACT, does it entail also importing secondhand equipment/plants from abroad or those which are in Tanzania?
[3] Will this follow the same tendering procedures or not as outlined in the legislations??

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  Michael Chilongani on Thu Jul 01, 2010 6:15 pm

The direction of the motion seems to suggest that currently there is ambiguity which needs to be addressed in the proposed Act amendments as highlighted by RSM.

To my opinion, a clear provision should be added in the sections of the Act with the above recommended amendments.

I suggest that a new section should be added just before section 30 with a subtitle ‘Procurement of motor vehicles, Heavy Plants and Spare Parts.

The section as proposed by RSM (Quoted) should be as follows: -

Section X

(1) Except otherwise provided, Motor Vehicles Heavy Plants and Spare Parts to
be procured shall be brand new.

(2) A Procuring Entity, subject to obtain approval from responsible Minister,
may procure used heavy plants or Machinery under the following
circumstances: -
a) The plant or machinery is required for continuation of the
provision of services or performance of works to the public and
the lead time for manufacturing new plant or machinery will result
into failure to provide the relevant service or performance of the
relevant works; and
b) The heavy plant or machinery to be procured is of the type that
its records of major maintenance are kept and are available for
verification; and
c) The appropriate method of procurement is used and the price
offered is reasonably fair and there is Value for money from
engaging in the alternative by a Procurement Entity .

(3) A procuring entity shall, before proceeding to procure used heavy plant or
machinery:
a) Obtain an approval from the Ministry responsible for plants and
machinery; and
b) Ensure heavy plant or machinery sought to be procured conforms
to the type of items specified by the Minister in the regulations.

As you can deduce from the above proposal, Procurement of new plants or machinery must be a default requirement clearly stipulated in the principal legislation. Procurement of used Plants should remain an option that is subject to circumstances and the procedures of which must clearly be indicated in details by the Regulations.
[list=1][*]


Last edited by M.Chilongani on Thu Jul 01, 2010 8:49 pm; edited 1 time in total (Reason for editing : minor corrections)

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  RSM on Thu Jul 01, 2010 12:15 pm

Forum Members,

I am bringing back the issue of used plants and equipment for solid discussions because it is one of the proposed items under the revision of the Public Procurement Act.

The proposed text is as follows:
(3) "a procuring entity may undertake procurement of used heavy plants or machinery under the following circumstances: (a) the plant or machinery is required for continuation of the provision of services or performance of works to the public and the lead time for manufacturing new plant or machinery will result into failure to provide the relevant service or performance of the relevant works; and (b) the heavy plant or machinery to be procured is of the type that its records of major maintenance are kept and are available for verification.
(4) A procuring entity shall, before proceeding to procure used heavy plant or machinery: (a) obtain an approval from the Ministry responsible for plants and machinery; and (b) ensure heavy plant or machinery sought to be procured conforms with the type of items specified by the Minister in the regulations.

What is your views?

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  Michael Chilongani on Tue Jun 01, 2010 10:08 pm

Mr RJM

At least the World Bank Procurement Guidlines has the provision as you have mentioned.

What about PPA/Regulations and Guidelines/tender documents issued by PPRA with due regard to the bulleted issues above. Lets assume there is no donor funding thus the world bank guidelines are not applied.

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Re: PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  RJM on Tue Jun 01, 2010 7:23 pm

GadielCM, I think this can stir further this motion.

21.5 Procurement of Secondhand Goods - World Bank Procurement Manual Draft 2001

The Bank’s general Policy is to finance the procurement of new goods. However, under special circumstances which must be evaluated on a case by case basis, secondhand goods, e.g. equipment and vessels, may provide the most economic and efficient means of satisfying the projects objectives. The Bank may finance a Borrower’s procurement of secondhand goods subject to the following conditions:
• There is a surplus (in suitable quantity and quality) of the type of goods required from enough sources to ensure competitive bidding; and
• Insistence on the procurement of new goods can result in prohibitive costs where the Borrower’s budget is limited.
Suitable bidding documents should be prepared, including special criteria and methodology for evaluating and comparing bids, acceptable to the Bank. The specifications should establish performance requirements of the goods, and minimum standards for age, residual economic life, and quality of materials. The procurement procedures should include provisions acceptable to the Bank for inspection, survey and or certification by internationally recognized specialist agencies.

The above provisions should be interpreted as requirements for the Borrower to exercise particular care to obtain best value for money, and to avoid abuses such as dumping of obsolete units and fraudulent invoicing based on unserviceable equipment.

RJM

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PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  GadielCM on Mon May 31, 2010 4:17 pm

Chilongani,
Big up for your good submission. Members and non members could we swim on this hot topic?. It could be better for this post to be IN TPJ Supplement so as different stakeholders may discuss and contribute their views in any form.

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PROCUREMENT OF 'USED' PLANTS AND EQUIPMENT

Post  Michael Chilongani on Mon May 31, 2010 2:41 pm

Dear Forum Members.

Last year there was a hot political debate as to whether procurement of used items such as 'Motor Vehicle' or a ‘Heavy Plants’ is allowed or prohibited by the Procurement Act 2004.

The arguments for said prohibition were based Regulation 58 (3)/GN97 that prescribes as follows: - ‘Motor vehicles, Heavy Plants and Spare parts to be purchased SHALL BE NEW’.

Those who advocated for procurement of ‘Used Heavy Plant (‘among other issues’), had opinions that in the Procurement Act, there is no such a prohibition. The Regulation so referred doesn’t overrule the Act and in fact the Regulation are made by the responsible Minister for the purpose of further translating the Act and elaborating the procedures of how the Act is to be implemented. Thus one is not breaking any written Law by effecting procurement of used item because there is no any provision of the Act that has such a prohibition.

While scrutinizing the ‘if’ and ‘if not’ of the subject, I was further left in quagmire ending up with some more unanswered questions including the following: -
• Is the referred regulation going too far by issuing an extra prohibition that
is ‘not in the Act’?

• Is the Act too silent on the issue and thus the Regulation provides a ‘good
practice’ that is desirable?

• Are PEs sufficiently protected by the standard bidding document from being
supplied with used items in place of new ones?

• Are there any written guidelines and procedures (including standard
documents) for procurement of (Mitumbas) used Plants and Equipment?

• If a New Plant was previously installed and owned by a Private Company
and the Government wants to transfer ownership to be a Public one, can’t it
be transferred through PPP arrangement as prescribed under Regulation 74?

• Pursuant to Regulation 74(1)/GN97 under Public Private Partnership and
with Build Own Operate and Transfer (BOOT) if the plant was new
during ‘Building’ time, will it still be new at the time of Transfer? If not (and
surely it shall not be new) is this ‘transfer’ arrangement not the same as
procurement of ‘used’ Equipment amounting to contravening regulation
58 (3) GN97?

Without referring to any specific past scenario, what is your ‘Professional opinion?’

Submitted for professional discussions

Michael Chilongani

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