Volume 17, Number 3, Fall 2017

                                                                             REGULAR ARTICLES
 
Infusing Value for Money (VfM) into the Public Procurement System in Botswana ..............................         281
E. Botlhale
 
Forecasting Foreign Currency Exchange Rates for Department of Defense Budgeting .......................        315
N. R. Gardner, J. D. Ritschel, E. D. White, and A. T. Wallen
 
Explaining SME Participation and Success in Public Procurement Using a Capability-Based
Model of Tendering ........................................................................................................................................      337
A. Flynn and P. Davis
 
Transformative Thinking, Transformative Doing .........................................................................................     373
S. Chua
 
The Practice of Performance-Based Contracting in Developing Countries’ Public Procurement:
The Case of Ethiopia ......................................................................................................................................      402
B. A. Ambaw and J. Telgen 

Performance-Based Contracting (PBC) is widely accepted as a useful tool. It is believed that the use of PBC can assist the efficient utilization of the public resources. The objective of this research is to assess the extent of PBC application and the obstacles to applying it in the public procurement systems of developing countries. Interviews and factual analysis of procurement guidelines and contracts are used to collect data for this research. The analysis results indicate that the majority of public organizations have not yet used PBC even though it is allowed by the law. This is due partly to lack of clarity in the procurement laws and lack of capacity to use PBC.

This paper examines the opportunity cost of applying simple averages in formulating the Department of Defense (DoD) budget for foreign exchange rates. Using out-of-sample validation, we evaluate the status quo of a center-weighted average against a Random Walk model, ARIMA, forward rates, futures contracts, and a private firm’s forecasts over two time periods extending from Fiscal Year (FY) 1991 to FY 2014. The results strongly indicate that four of the alternative methods outperform the status quo over the shorter time period, and three methods for both time periods. Furthermore, a non-parametric comparison of the median error demonstrates statistical similarities between the four alternative methods over the short term. Overall, the paper recommends using the futures option prices to decrease forecast error by 3.23% and avoiding a $34 million opportunity cost.

In recent years, Health Promotion Board (HPB) has made a strategic shift from a traditional health education approach to an eco-systemic approach in health promotion, where the Board engages and harnesses the collective power of the 3 Ps (People, Private, and Public). The procuring of core services is a key enabler to support HPB’s focus areas in tobacco control, mental well-being, health screening, obesity prevention, nutrition, dietetic services, chronic disease education, etc. In tandem with the Board’s strategic shift, the procurement function has taken on strategic importance and is now functioning as an independent department, reporting to HPB’s CEO. Fundamentally, HPB Procurement Department has changed the way it interacts with the business as it stands by the belief that the real procurement value goes beyond compliance (Caldwell & Howard, 2010). “Proper”, “simpler”, “faster”, “closer” and “cheaper” are now its mantra for procurement excellence. The objective of this paper is to highlight the transformation journey that HPB’s Procurement Department undertook to deliver the results, impact and value to the stakeholders.

Public procurement accounts for a big proportion of public budget outlays, hence, it is important that there be demonstrated Value for Money (VfM) in public purchases. To ensure VfM in public procurement, Botswana introduced a modern public procurement system in early 2001. The system is yet to be subjected to VfM analysis. Using document analysis, this paper explores two main research questions: (i) what are key public procurement challenges in Botswana?; and (ii) how can public procurement in Botswana be improved? It is concluded that the public procurement system in Botswana is not constructed on a VfM basis. It is consequently suggested that there is a need for public procurement reforms and the adoption of various private sector continuous improvement tools such as Lean, Kaizen and Six Sigma.

This paper develops and tests a model for explaining small and medium-size enterprise (SME) participation and success in public procurement. The model is informed by a capability-based view of public sector tendering that includes relational and procedural dimensions. To test the model a survey was carried out on firms competing for contracts with Irish public sector organizations (n = 3010). The survey was repeated one year later to demonstrate reliability (n = 3092). Overall, the results lend support to the model. Procedural capability is associated with frequency of tendering and typical value of contract sought. Relational capability is not. Procedural and relational capabilities are each significant in accounting for success rates in contract competitions and commercial orientation towards the public sector.

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