HARMONIZATION OF PUBLIC COMPETITIVE TENDERING : EMPIRICAL EVIDENCE FROM THE MINISTRY OF HEALTH IN VIETNAM

PREFACE This study aimed to describe the common and the unique provisions in the International Law on Tendering ILT and Local Law on Tendering LLT in Vietnam to determine how procurement

ThAi nguyen University Southern luzon STATE University

Socialist Republic of Vietnam Republic of Philippines

DISSERTATION ABSTRACT

HARMONIZATION OF PUBLIC COMPETITIVE TENDERING :

EMPIRICAL EVIDENCE FROM THE MINISTRY

OF HEALTH IN VIETNAM

Hanoi May, 2013

PREFACE This study aimed to describe the common and the unique provisions in the International Law on Tendering (ILT) and Local Law on Tendering (LLT) in Vietnam

to determine how procurement and bidding are being done in the Ministry of Health as measured in terms of openness and transparency; to analyze how can the ILL and the LLT be harmonized in the Ministry of Health using transparency and openness as factors of harmonization; and to formulate some recommendations to have a more effective public procurement system After using statistic tool, the Author defined a efficient model which should be applied in Vietnam Though title “Harmonization of public competitive tendering: Empirical evidence from the Ministry of Health in Vietnam”, preliminary results indicate there is one procuring method that meet both Vietnam Law on tendering and International procuring regulations It is International Competitive Bidding (ICB) in which the sphere of openness as well as of transparency is the best

CHAPTER I INTRODUCTION

1 Background of the Study

Efficiency in procurement has long been recognized as a way to obtaining the desired goods or services at the lowest price or, more generally, at the best “value for capital” The most common practices of procurement involve some forms of tenders and

it is believed that, under these, efficient procurement outcomes can usually be achieved in situations where there are enough firms in the procurement market to sustain reasonable competition In cases with a reduced number of firms, more sophisticated arrangements are necessary to prevent practices such as collusion, fraud and corruption, which hinder the achievement of efficient outcomes

2 Statement of the Problem

1) What are the common and the unique provisions in the International Law

on Tendering (ILT) and Local Law on Tendering (LLT) in Vietnam?

2) How are procurement and bidding being done in the Ministry of Health as measured in terms of openness and transparency?

3) How can the ILL and the LLT be harmonized in the Ministry of Health using transparency and openness as factors of harmonization?

4) What changes on LLT can be recommended to make the procurement system be effective?

3 Objectives

1 To describe the common and the unique provisions in the International

Law on Tendering (ILT) and Local Law on Tendering (LLT) in Vietnam;

2 To determine how procurement and bidding are being done in the Ministry

of Health as measured in terms of openness and transparency;

3 To analyze how can the ILL and the LLT be harmonized in the Ministry

of Health using transparency and openness as factors of harmonization; and

4 To formulate the best method to make the procurement system be more effective

4 Hypotheses of the Study.

- It was assumed that higher transparency and openness is the better preconditions for a good procurement, competition in tendering, and for a better proportion between the lower price and higher quality resulting in the effectiveness of tendering

- It was hypothesized that openness and transparency are significantly affecting harmonization in ILT and LLT in the Ministry of Health

5 Significance of the Study

This study will benefit the government, PMUs, bidders, and other researchers The government can amend the law to remove the gaps of discrepancy between its legislative system and international donor’s regulation related to procurement procedure

As a result, there are more and more financial support for developing programs in Vietnam On the other hand, these donors shall get confidence that their funds are using efficiently Besides that, all available bidders will have equal opportunity to offer their best quality products at lowest price in a competitive market

6 Scope and Limitations of the Study

This study was not able to identify the source of changes in procurement

disciplines It is also worth noticing that the analysis is not a comparison between regulated and non- regulated tenders There may be other intangible benefits related to increases in quality, better tailored services, or innovative solutions which are not recorded in the data and hence are not quantifiable in this study

7 Definition of Terms

To provide a clear understanding of some of the terms that were used in this study, the following important terms were theoretically and operationally defined:

- Legislation Harmonization refers to the process of creating common standards

across the competitive market aimed to create consistency of laws, regulations, standards and practices, so that the same rules will apply to businesses

- Public procurement is including all Investment and development projects which

are projects financed by the State as to 30 per cent or more

CHAPTER II REVIEW OF RELATED LITERATURE

1 Systems Theory

This section includes studies on the management system of many famous authors directly related to the subject of this dissertation

2 Administrative Theory

This section includes studies on the administrative management of some authors directly related to the administrators of projects There are some administrative theories that have been applied seriously Otherwise, the project could not be performed smoothly

3 Procurement Legislation Studies

A substantially larger quantity of research has been devoted to the structure of procurement processes in order to achieve efficient outcomes under different situations The procurement literature records several tools for its effective procuring implementation

4 Procurement Administrative Studies

The papers offer solutions primarily administrative reforms to public procurement management from the central to local levels Theare are some specific opinions for public procurement administration reforms emphasized on quality and results over cost, and decentralization of procuring

5 Legislation of Vietnam and International Community for Procurement

Vietnam's regulations including legislative documents issued by the National Assembly and the Government The procurement rules of international law is subject to procurement guidelines from donors or international financial organizations

6 Conceptual and Theoretical framework

Figure 1 Conceptual framework of the study

Figure 1 shows how harmonization of two legislative systems that will measure relationship between indicators of transparency and openness Evaluation was based on comparing two legislative systems and practice of applying procuring methods for public project in the Ministry of Health This study also reviewed and updated the new findings and new regulations to see clearly the nature of current procurement Eventually,

Harmonized Laws and Regulations

18 Factors:

Group 1 Openness

- International tender

- Local tender

- Direct purchase

Group2.Transparency

- Public invitation

- Public award

National Law (LLT)

Effective Procurement System

International Regulations (ILT)

Ministry of

Health

(MOH)

Procurement

Practices

specific solutions to harmonize regulations on bidding between the laws of Vietnam and relevant international law are offered

CHAPTER III RESEARCH METHODOLOGY

1 Research Design

This study employed three research designs as descriptive, causal/explanatory and comparative types Descriptive was used to describe the respondents in terms of age, department, position, and working experiences of project administrators Next, comparative research design was used to determine if there was significant difference in two law and regulation systems by referring to procuring articles of local and international laws Finally, causal/explanatory design was used when the Author identified the relationship and effect of legislative harmonization, transparency and openness in public procurement

2 Time and Place of the Study

This study is on procurement administration which is based on latest data of two legislation systems Research is designed to get primary data from all provinces of health care service Departments of Vietnam for the last five

3 Sampling Procedures

Secondary data were obtained from 02 legal regulation system (Vietnam Law and

03 International organization’ regulation) which are up to date Primary data were collected using questionnaire method covering all 63 provincial Project Management Unit (PPMU) of Vietnam

4 Data Collection

Collecting information from researched subjects by Questionnaires is developed and applied according to Figure 2 Research questionnaire was made through different

stages First, survey research was studied or conducted through articles, scientific reports, essays; second, the Author gets officers experts who are experienced in tender by submitting a preliminary questionnaire to amend the questionare set After this pilot stage, the Author sent a formal questionnaire to individuals who are working in the field

of public procurement

5 Research Instrument

A five-point Likert scale was used for the scoring of indicators of legislative harmonizing, transparency tender, and openness tender It includes five scales: always; frequent; sometimes; seldom; and never Each of indicators was identified score based on mean of 4 to 5 variables

6 Statistical Treatment

The secondary data is compared to find out discrepancy from Vietnamese procurement law and procurement regulation of WB, ADB, JIBIC in term of transparency, openness, harmonizing Primary data were processed by Statistical Analysis for Social Sciences (SPSS) software The harmonizing variable is dependent and it is indicated by using the following formula:

Legislative harmonization = Transparency Procurement + Openness Procurement

7 Methods of Analysis

The results of the survey were analyzed in two parts The first part was the profiling of the respondents in terms of individual and profile The second part was the assessment of the procuring procedure applied of the respondents

CHAPTER IV RESULTS AND DISCUSSION

1 Provisions in ILT and LLT in Vietnam

It is the summary of discrepancies raised by the World Bank, ADB and JBIC/JICA against the contents of the current Vietnamese Laws on tendering referring to transparency and opening of tendering Basing on practice of managing projects and principles of applying Laws and regulations, some significant methods are used to harmonize these legislative differences efficiently

2 Public Procurement Activities in

MOH

This research shows that if PMUs apply LCB procuring method, they also are sometimes required to submitted higher government administrative Authorities It means these PMUs are more freely legal regulation on project management determination They are allowed to determine tendering schedule It is not to much regulation to submit bidding documents to Executing Agencies, Project Owner/Investor and Controlling Agencies It means these PMUs shall choose LCB procuring method instead of ICB because LCB method is very simple and easy in submitting procedure of bidding documents

3 Procurement and Bidding Practices in Terms

Transparency and Openness Measures

Almost PMUs apply publishing tender document and use the most competitive bidding method of ICB- International competitive Bidding However, there are still PMUs using non-standard purchase such as Direct Purchase for small value contract

This proves that the PMU will gradually trend commonly applied method ICB bidding instead of LCB to shopping However, in the transition period LCB method still applied, but with low frequency

4 Formulation of efficient public procurement

According assumed regression model and researched data, all independent

variables are β coefficient relationship It means all PMUs are applying regulations and

methods of procuring in generally However the ICB- International Competitive Bidding

is applied with the highest β value which are the strongest affection to harmonization In

competitive regards, it is more bidder participating the tender and resulting PMUs could buy better quality goods at low price The four independent variables are coefficient and the Model is made again as follow:

Harmonizing two law systems = -1.204 + 0.182 (Transparency) + 0.520 (International competitive Bidding) + 0.227 (Local Competitive Bidding) + 0.197 (Non standard purchase) or it is brief as follow:

APM(y) = -1.204 + 0.182 PTI + 0.520UOP +0.227 URP + 0.197 NSP

The second, the Author will use SPSS for importing step by step independent

variables into the Model (by method of Stepwise in the SPSS sorfware) to remove

variable automatically if there is multicollinearity The best model is selected with R-square at 0.79 It is reflecting 79% of the variables in the model are explained

In order test the coefficient of the Models, using ANOVA statistic showing the Sig value of Models are 0.000 < 0.05 by the F-test reflects a consistent Model On other hand, T-test of the appropriateness of the independent variables in the models show VIF

is the standard criteria used to measure the phenomenon of multicollinearity If the VIF>

10 reflects the phenomenon of multicollinearity between the independent variables in the model In this case, the result shows the VIF values of the independent variables are less than 10 showed that is not multicollinearity phenomenon in the Models

The coefficient of model ( R-square is at 0.624) indicated that the variables in mode is interpreted as 62.4% So the model is coefficient According to above result, there is 01 variable being highest coefficient It is ICB- International Competitive Bidding This quantitative analysis is also meet resulting from the qualitative analysis that ICB bidding method is the best one which is compliant with both Vietnamese Laws and International Laws The model is made again as follow:

Harmonizing two law systems = -0.658 + 0.688 (International competitive

Bidding) + 0.333(Local Competitive Bidding)

or it is brief as follow:

APM(y) = -0.658 + 0.688UOP + 0.333URP

This model have tested by SPSS software and show the effects of the independent variables on public procurement practices are estimated using ordinary least squares The result is the R- square of 0.624 indicates that the Linear regression model accounts for well nearly four-fifth of the variance in the scale of public procurement practices However, it is important to recall that the current research is focused on examining hypothesized relationships, not on providing a comprehensive representation (model) of public procurement practices