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

HARMONIZATION OF PUBLIC COMPETITIVE TENDERING EMPIRICAL EVIDENCE FROM THE MINISTRY OF HEALTH IN VIETNAM tài liệu, giáo á...

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ThAi nguyen University Southern luzon STATE University

Socialist Republic of Vietnam Republic of Philippines

HARMONIZATION OF PUBLIC COMPETITIVE TENDERING :

EMPIRICAL EVIDENCE FROM THE MINISTRY

OF HEALTH IN VIETNAM

Advisor : Dr Alice T Valerio

Name of Student : NGUYEN DUY PHUONG

Date of Birth : 13-12-1974

Hanoi May, 2013

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HARMONIZATION OF PUBLIC COMPETITIVE TENDERING :

EMPIRICAL EVIDENCE FROM THE MINISTRY OF

HEALTH IN VIETNAM

A DissertationPresented to the Faculty of theGraduate School of Southern Luzon State University

in Collaboration With Thai Nguyen University

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ACKNOWLEDGMENT

I would like to express my gratitude to Dr Alice T Valerio for being an outstanding

advisor and excellent professor Her constant encouragement, support, and invaluablesuggestions made this work successful She has been everything that one could want in anadvisor I would like to thank her for providing me ideas on the research methodology andvaluable insights on public procurement system and international bidding implementationissues

I am deeply indebted to my committee member, Dr Lee Kari Ling for her time and

effort in reviewing this work Also, I would like to thank all the lecturers of DBA1 course forhelping me to complete this thesis which I have been their student for three years

I would like to acknowledge my best friends in the DBA 1 class for reviewing mythesis and providing valuable feedback I am grateful to Mr Ngo Anh Cuong and Mrs ToNgoc Lan for their help and valuable advice, and for being great friends throughout myprogram stint

I am deeply and forever indebted to my family for their love, support, andencouragement throughout my entire life I would like to thank my wife, Bui Thi Nga, whohas provided a tremendous amount of love and support throughout this study On a final notewith love are for my children, my five-year old daughter and three-year old son!

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DEED OF DECLARATION

I, Nguyen Duy Phuong (English name: Noah), hereby submit my thesis for oralexamination, entitled “HARMONIZATION OF PUBLIC COMPETITIVE TENDERING: EMPIRICAL EVIDENCE FROM THE MINISTRY OF HEALTH IN VIETNAM”, truthfully declare that the said paper is a product of my original research

investigation

Signed this ……….2013 at Thai Nguyen University

NGUYEN DUY PHUONG

DBA Candidate

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TABLE OF CONTENTS

Page

ACKNOWLEDGMENT iii

DEED OF DECLARATION iv

TABLE OF CONTENTS v

LIST OF TABLES ix

LIST OF FIGURES x

LIST OF ABBREVIATIONS xi

APPROVAL SHEET xii

ABSTRACT xiii

CHAPTER I 1

INTRODUCTION 1

1 Background of the Study 1

2 Statement of the Problem 3

3 Objectives 5

4 Hypotheses of the Study 6

5 Significance of the Study 6

6 Scope and Limitations of the Study 7

7 Definition of Terms 9

CHAPTER II 13

REVIEW OF RELATED LITERATURE 13

1 Systems Theory 13

2 Administrative Theory 14

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3 Procurement Legislation and Studies 15

4 Procurement Administrative Theories and Studies 20

5 Legislation of Vietnam and International Community for Procurement 23

6 Conceptual and Theoretical framework 24

CHAPTER III 29

RESEARCH METHODOLOGY 29

1 Research Design 29

2 Time and Place of the Study 30

3 Sampling Procedures 31

4 Data Collection 31

5 Research Instrument 34

6 Statistical Treatment 36

7 Methods of Analysis 40

CHAPTER IV 42

RESULTS AND DISCUSSION 42

1 Provisions in ILT and LLT in Vietnam 42

2 Public Procurement Activities in MOH 56

3 Procurement and Bidding Practices in Terms of Transparency and Openness Measures 62

4 Formulation of efficient public procurement 64

CHAPTER V 74

CONCLUSION AND RECOMMENDATIONS 74

1 Summary 74

2 Conclusion 75

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3 Recommendations 76

REFERENCES 98

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APPENDIES

1 LETTER REQUEST FOR THE CONDUCT OF THE SURVEY 80

2 SURVEY QUESTIONNAIRE 82

3 CURRICULUM VITAE 89

4 BUDGET REVENUES AND EXPENDITURES 95

5 TOTAL GOVERNMENT EXPENDITURE , 1990-2010 95

6 CORRUPTION PERCEPTIONS INDEX 96

7 MINISTRY OF HEALTH STRUCTURE 97

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LIST OF TABLES

1 Factors affecting the harmonizing 35

2 Likert scale summated rating for openness and transparency procurement 41

3 Discrepancy in public procurement 43

4 Department of Administrators 58

5 Testing result of reliable of Model 65

6 Description of Mean and Standard Deviation 66

7 Post Hoc Tests openness and transparency procurement 67

8 Model Summary Option 69

9 ANOVA F-Test 69

10 T-test coefficient 70

11 Linear regression for 02 removed variables 72

12 T-test for Coefficient and Multicollinearity 72

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LIST OF FIGURES

1 Conceptual framework of the study 27

2 Data collection procedure 33

3 Distribution of respondents by position in the MOH 56

4 Distribution of age of respondents 57

5 Distribution of total working years of the respondents 58

6 Distribution of the respondents by department 59

7 Frequency of submitting bidding documents under LCB 62

8 Frequency of applying transparency level 63

9 Frequency of applying the most opening purchase method 64

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LIST OF ABBREVIATIONS

ADB Asian Development Bank

GOV Government of Vietnam

ICB International competitive bidding

ILT International Law on Tendering

JICA Japan International Cooperation Agency

LCB Local competitive bidding

LLT Local Law on Tendering LLT

PMU Project Management Unit

PPC Provincial People Committee

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APPROVAL SHEET

This thesis, entitled “HARMONIZATION OF PUBLIC COMPETITIVETENDERING:EMPIRICAL EVIDENCE FROM THE MINISTRY OF HEALTH INVIETNAM”, prepared and submitted by Nguyen Duy Phuong in partial fulfillment of therequirements for the degree of Doctor in Business Administration, has been examined andrecommended for acceptance and approval for FINAL EXAMINATION

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ABSTRACTThis study aimed to describe the common and the unique provisions in theInternational Law on Tendering (ILT) and Local Law on Tendering (LLT) in Vietnam todetermine how procurement and bidding are being done in the Ministry of Health asmeasured in terms of openness and transparency; to analyze how can the ILT and the LLT

be harmonized in the Ministry of Health using transparency and openness as factors ofharmonization; and to formulate some recommendations to have a more effective publicprocurement system

In order to find out best procuring method, the comparative research design isused to study of differences and similarities between of international organization morespecifically, it involves study of the different legal systems in existence in Vietnam,including Commercial Law, Investment Law and Administration Law The secondary datawere obtained from 02 legal regulation system (Vietnam Law and at least 03 Internationalorganization’ regulation) which are up to date The primary data is from respondentsselected using the convenience sampling method where accessibility and cooperation ofadministrators were the major considerations in all 63 provinces through District HealthService Department The research is mainly done by the method of data collection throughquestionnaires and process the data collected

After using statistic tool, the Author defined a efficient model which should

be applied in Vietnam Preliminary results indicate there is one procuring method that meetboth Vietnam Law on tendering and International procuring regulations It is InternationalCompetitive Bidding (ICB) in which the sphere of openness as well as of transparency is the

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best Through ICB procuring method, the public invest is avoid of corruption On otherhand, it is best way to able to by highest quality products at the lowest price Finally theAuthor concluded by indicating the best of procurement method which is harmonizing thetwo procurement system laws and regulations in Vietnam and suggests to GovernmentalAgencies and Project Management Unit major measures of how to procuring efficientlythem

CHAPTER I INTRODUCTION

1 Background of the Study

Public procurement management occupies an important position in the national projectadministration because its importance is evident both in practice and in the theory literature.Above 40 years ago, Phillip Cooper (1980) noted this when he stated that publicadministration should pay attention to the importance of procurement In describing publicprocurement as a critical administrative activity, many other famous scholars acknowledgedits importance, too In fact, Vietnam Government spends a lot of money, despite signs ofmodest declines in recent years Government's collective purchasing still accounts for nearlyone-third of the nation's Gross Domestic Product (Appendix 4) Procurement is the purchase

of goods and services by public and private enterprises Efficiency in procurement has longbeen 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 procurementinvolve some forms of tenders and it is believed that, under these, efficient procurementoutcomes can usually be achieved in situations where there are enough firms in theprocurement market to sustain reasonable competition In cases with a reduced number offirms, more sophisticated arrangements are necessary to prevent practices such as collusion,bid-rigging, fraud and corruption, which hinder the achievement of efficient outcomes Publicprocurers also face the additional challenge of preventing political favoritism where contractsare allocated according to loyalty or support rather than on the grounds of efficiency1

Public investment in Vietnam includes all investments the government and privatebusiness sectors are undertaking which include (a) Investment from the budget (allocated tothe Ministries, and distributed to local); (b) Investing in programs targeted support; (c)

International investment credit (loans of international organizations); and (d) Investment ofthe State Owned Enterprise (SOEs) In a period of 10 years, the State of Vietnam hasimplemented fiscal policy that caused a continued increase in revenues but has resulted also inincrease in public spending Budget revenues have increased from 20.5 percent of GDP in

2000 to over 28 percent from 2006 to 2008 Expenditures also increased respectively from24.7 percent in 2000 to over 31 percent in 2005, and has reached nearly 35 percent in 2007(Appendix 4)

The public procurement accounts for a large percentage of total social investmentbudget and has made positive contribution to the investment of Vietnam Government.However, investment efficiency has been low Investment has been scattered, hence,investment is wasted The causes to this situation include poor management, irrationalinvestment, lack of investment in industries with large impact on economic restructuring, andinsufficient investment in key programs Low investment efficiency is also attributed to localinterests, lack of transparency, and poor coordination among branches and levels Inefficientpublic investment and poor investment management have not only resulted in socialinvestment inefficiency but also rendered bad consequences to the economy of Vietnam,putting pressure on inflation, causing macro-imbalance, and limiting competitiveness andquality of the integrating economy To improve public investment quality, one of theimportant principles should be to strictly implement open broad bidding of public investments

or procurement to all economic sectors and conduct regular monitoring and supervision inpublic procurement2

By international comparison, in 2010, the total spending in Vietnam accounted

to 30.7 percent of the GDP,a higher rate compared to other countries in East Asia andSoutheast Asia This amount, which is being reported in the current financial statistics ofVietnam, does not include government bonds and Official Development Assistance (called as

ODA) funds Thus, the State of Vietnam spends a large proportion of the wealth of society,compared with the rest of the countries in the Region As observed, the share of totalspending to total GDP in Vietnam has been increasing while in many countries, theproportion of expenditure to GDP is relatively stable as shown in Appendix 5.

This study relating to public procurement practices has developed along the organizing

of procurement processes and the effects of different procurement methods or practices Thisrecognizes several tools and strategies for its effective implementation Several aspects havebeen investigated such as the type of tendering, usefulness of open procedures, the impact oftransparency purchases which is considered including a quality component or mechanismsfor preventing corruption These aspects have been incorporated into the laws and regulationsand this study has estimated the effects of such procurement practices in its models

2 Statement of the Problem

Public procurement is a very important instrument used for allocation of a major part

of public expenditures of a State Because of its importance, guarantees of a transparent, open,and specified system of public procurement should exist in every country However, thereality in the Asian countries is different A number of purchases are not open and thereforefunding allocation is not transparent and possibly also not effective

As a developing country and as a member of ASEAN, Vietnam has been investing somuch on economic infrastructure, social human resource development, and environmentalprotection3 The government has been borrowing a significant amount from the foreignsources as well as receiving aids outside of official development assistance (ODA) to focus oninvestment projects that have been committed with the donors including procurementregulations such as the World Bank (WB), Asian Development Bank (ADB), and The JapanInternational Cooperation Agency (JICA) The effectiveness of these projects depends in no

small measure on the skills and qualifications of those who administer them In Vietnam, up tonow, project administrators wishing to improve their understanding of and skills inadministration could find little of direct relevance to their field in the administrative literature.Beside, the corruption is a serious problem which can be attributed to lack of procurementadministration (Appendix 6) The core relates to perceptions of the degree of corruption asseen by business people and country analysts, ranging from 10 (highly clean) to 0 (highlycorrupt) The Appendix No 6 shows that public investment of the Vietnam Government is athigh rate with ranking 120/180 economies (in 2009) and 116/178 economies (in 2010).

Administers get illegal benefit from the gaps and differences between Vietnam Lawand international regulation related to project management, especially in procurementprocedure management, because Project Management Units (PMUs) do not know what lawsystem should be applied in a specified case of procurement All the tenders are placed andimplemented in Vietnam so if PMUs applied Vietnamese law, the procurements are notfunded by the international donors Otherwise, these tenders will not be able to get approvalfrom centralized agencies (ex the Ministry of Plan and Investment – MPI) when the PMUssubmitted tendering plans resulting in the choice of contractor

Most handbooks or guidelines of WB, ADB, and JICA are written in English, hence,many officers in the provincial PMUs find difficulty to understand the guidelines More oftenthan not, it made confusions to the PMUs, Executing Agency, Ministries and other relevantagencies, especially on the donors’ guidelines and rules procurement Beside that there isdifference between regulation of the donors and Vietnamese regulations on ODA management(WB, IMF, EC, JICA, ADB, SIDA…), it makes administers and PMUs face difficulties andconfusions in organizing and implementing procurement procedures The PMUs do notunderstand which is better if they applied one of two laws and regulation systems

In general, all investors wish transparency and openness procurement However, it isjust fair or consistent with this donor’s regulation but it is not accepted in other law system.Lack of awareness or insufficient understanding of the donors’ procurement guidelines byPMUs and Executing Agencies shall cause the inefficient investment This study, therefore,shall seek answers to the following questions:

1 What are the common and the unique provisions in the International Law onTendering (ILT) and Local Law on Tendering (LLT) in Vietnam?

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

3 How can the ILT and the LLT be harmonized in the Ministry of Health usingtransparency and openness as factors of harmonization?

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

be effective?

3 Objectives

In general, this study assessed the transparency and openness in procuring management

in Vietnam Specifically, this study aimed to compare the Vietnamese Laws and InternationalRegulations in Procurement The thesis shall focus on following objectives:

1 To describe the common and the unique provisions in the InternationalLaw on Tendering (ILT) and Local Law on Tendering (LLT) in Vietnam;

2 To determine how procurement and bidding are being done in theMinistry of Health as measured in terms of openness and transparency;

3 To analyze how can the ILT 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

4 Hypotheses of the Study.

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

It was hypothesized that openness and transparency are significantly affectingharmonization in ILT and LLT in the Ministry of Health The harmonizing indicator is related

to transparency level and openness level in public procurement The openness andtransparency are the tools which support control of the public procurement by the public, andthus they possibly decrease possibilities for corruption activities Openness is regarded as apossibility of individual stakeholders to participate in the public procurement process.Transparency means both active and passive publishing of information The passivepublishing of information by purchasers upon request is made under Vietnam Law andInternational regulation An active publishing of information occurs when the properpurchaser publishes selected information, whether in an official international journal, ownwebsites, or official announcements The higher the transparency and openness is the moreeffective the procurement and the bidding competition4

5 Significance of the Study

In general, a good procurement practice has a beneficial effect on procurementoutcomes In terms of transparency, procuring via international competitive bidding is mostbeneficial as it is associated with openness procurement On the other hand, it is the best way

to harmonize between two legislation systems of Vietnam and International organizations

The openness procedure is the most effective in attracting more bidders throughpublishing of Tender Invitation, Planning Price, Valuating Criteria and Award Price Theresults of this study will show the positive and significant effects of procurement disciplines

on openness and transparency In practice, there is a best way of procurement for harmonizingbetween two different law systems It is international competitive bidding which is appraised

in terms of its effect on the procurement market especially at the Ministry of Health ofVietnam

This study will benefit the government, PMUs, bidders, and other researchers Thegovernment can amend the law to remove the gaps of discrepancy between its legislativesystem 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 otherhand, these donors shall get confidence that their funds are using efficiently Besides that, allavailable bidders will have equal opportunity to offer their best quality products at lowestprice in a competitive market Consequently, the Vietnamese people shall have chance toincrease their living standard through using high quality service or goods which were procured

by their government It can be an interesting instrument to investigate, characterize andmonitor the procurement practices across other Ministries of whole Vietnam Government'public investment It provides a model which can be used to investigate the currentprocurement practices in Vietnam, the compliance with two Law and regulation systems Thepublic procurement market is taking great ratio in Vietnam and all these issues are worthinvestigating in order to appraise the effect of competition in procurement in theinternational market

6 Scope and Limitations of the Study

The conceptual framework of procurement regulation identifies a relationship betweenimproving procurement legislative regulation and procurement method chosen In doing so, itimplicitly recognizes that markets are not perfectly competitive and that there is opportunityfor improving procurement outcomes This study was not able to identify the source ofchanges in procurement disciplines This will become important in interpreting the results

because, although we can see the effects of different procurement tools, the author cannotdisentangle the effects strictly derived from the compliance with the domestic laws andinternational regulation, as some of the measures envisaged are voluntary.

It is also worth noticing that the analysis is not a comparison between regulated andnon- regulated tenders As by definition, all the records included in the analysis are covered bythe present laws The practice is therefore useful to compare different degrees of openness, all

of which are envisaged under the domestic laws and international regulation In doing so, andbecause of limitations of the data, this study focused on the benefits which are quantifiable,and this implies looking at the differences in two legislation systems (domestic andinternational) There may be other intangible benefits related to increases in quality, bettertailored services, or innovative solutions which are not recorded in the data and hence are notquantifiable in this study

Despite the many books devoted to the art of administration, generally, there have beenfew descriptions of administrative concepts related to public procurement administrationspecifically to health projects through International Competitive Bidding (ICB) method Sothis study has not been able to identify the source of changes in procurement regulation andlaws The analysis is not a comparison between regulated and non-regulated tenders Because

of limitations of the data, this study was focused only on the benefits which are qualitative andthis implies looking at the differences in international procurement regulation and Vietnamprocurement law There may be other intangible benefits related to increases in quality, bettertailored services, or innovative solutions which are not recorded in the data and, hence, are notmade in this study

Research shall be designed to get data from all provinces of Vietnam for latest fiveyears which is normal period of implementing a project This period of time is suitable to timeschedule of almost public investment projects in Vietnam It is a period of time which the

Vietnam Assembly approves new law codes or amending out of date law codes.

Thesis is including but not limited to procurement policy, procurement strategicplanning and scheduling, contract formation, contract administration, evaluation, andprocurement methods and techniques; substantive areas such as government procurement lawsand regulations The principles outlined in this thesis study in competitive procurement ofgoods financed in whole of in part from the proceeds of an Official Development Assistance(ODA) loans from International organizations, Governments or Special Funds

7 Definition of Terms

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

Effective Procurement refers to offering a high level of transparency, accountability and

value for money in the application of a procurement budget

Legislation Harmonization refers to the process of creating common standards across the

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

Harmonizing procurement law is aggregated procurement in which some procuring

methods could harmonize at least two law systems

International competitive bidding means the process of selection of a contractor who

satisfies the requirements of the party calling for tenders, in which both foreignand domestic bidder participate

International law on Tendering refers to all international regulations of international

donors under their guidelines or handbooks for tendering activities in order toselect contractors for provision of consultancy services, for procurement ofgoods, and for construction and installation for tender packages

International regulations are guidelines of international organizations which are used to

inform those carrying out a project that is financed in whole or in part by a loanfrom them (These International organizations financed grant, or theseInternational organizations administered funds of the policies that govern theprocurement of goods, works, and services (other than consultant services)required for the project The financing agreement governs the legalrelationships between the Vietnam’s Government and this Organization, andthe Guidelines are made applicable to procurement of goods and works for theproject, as provided in the agreement The rights and obligations of Vietnam’sGovernment and the providers of goods and works for the project are governed

by the bidding documents, and by the contracts signed by the borrower with theproviders of goods and works, and not by these Guidelines or the financingagreements No party other than the parties to the financing agreement shallderive any rights there from or have any claim to the proceeds of the financing)

Local competitive bidding refers to the process of selection of a contractor who satisfies

the requirements of the party calling for tenders, in which domestic tenderersparticipate

Local Law on tendering is a law that regulates tendering activities in order to select

contractors for provision of consultancy services, for procurement of goods, andfor construction and installation for tender packages belonging to the followingprojects This includes all Vietnamese legal documents issued by the Assemblyand Government Pursuant to the 1992 Constitution of the Socialist Republic ofVietnam as amended by Resolution 51-2001-QH10 passed by Legislature X ofthe National Assembly at its 10th Session on 25 December 200 This Law

Openness procurement means that, given the use of public funds, public procurement

opportunities should be open to all international qualified bidders and thepublic should have access to information pertaining to public procurement.There are also some procurement methods, such as direct/ selecting purchase,that limit the availability of the solicitation document to bidders meeting certainqualifications The request for price quotations (or shopping) and directcontracting (sole source) also present certain limitations on competition

Public procurement is including all Investment and development projects which are

projects financed by the State as to 30 per cent or more These projects arerequired using public procurement which are implemented by a ProjectManagement Unit (call as PMU) At the Ministry of Health, each province is aseparated provincial PMU to perform all stages of procurement

Procurement means the process of selecting a contractor who satisfies the requirements

set by the party calling for tenders in order to implement a tender packagebelonging to a project stipulated in article 1 of Vietnamese Law on Tendering,

on the basis of ensuring competitiveness, fairness, transparency and economicefficiency

Project refers to a set of proposals for implementing a part or the whole of works aimed

at achieving an objective or requirement within a specified period of time andbased on a specified financing source

Transparency procurement refers to both active and passive publishing of information

which includes a Prior Information Notice and Publish target (lowest-highest)price of bidding package in bidding document together with Publish EvaluatingBidding method to classify bidder in bidding document It contains records

ranking each bidderunder their commercial terms, experience terms and legalterms offered in bidding documents.

Tender refers to all the documents prepared by a bidder in accordance with the

requirements of the tender invitation documents and submitted to the partycalling for tenders in accordance with the provisions in the tender invitationdocuments

Tender invitation documents refers to all the documents used for open or limited

tendering stipulating the requirements for any one tender package andproviding the legal basis for tenderers to prepare their tenders and for the partycalling for tenders to assess tenders aimed at selection of a winning tenderer;and also providing the basis for negotiation, finalization and signing of acontract This is also called bidding documents in the questionnaire

CHAPTER II REVIEW OF RELATED LITERATURE

Public procurement importance is evident both in practice and in the scholarlyliterature Cooper (1980) noted this condition when he called public administration’s attention

to the importance of procurement MacManus and Watson (1990) called for procurement to beincluded explicitly in public budgeting and financing courses Twelve years ago, Thai (2001)noted that, despite its importance, procurement content was not evident in publicadministration programs

Systems theory introduces concepts like input and output, constraints and controls,processors and feedback, interdependence and boundaries On the other hand, systems theorypresents in a number of ways a different view of administration and organization, how work isdivided and coordinated When working on problems, organizations are not closed systemswithout dependence on their environment (such as legal regulation, etc) External constraintsand the interactions between organizations and their environment set limits to the scope oftheir activities, present them with expectations, providing purposes, and suggest goals It istherefore essential for project planners and managers to analyze not only factors internal to theformal organization but also factors in its environment, so as to understand the systems ofwhich it is a part

Systems, including the elements within formal organizations, have needs and functions

in addition to those related to the achievement of project goals These are strong needs andimportant functions that neither the analyst nor the administrator can afford to ignore, for theydetermine to a considerable degree the effectiveness of the administrative system and itspotential for survival

If the restructuring of government is to be successful, it should be understood how thecurrent system affects how managers actually manage Based on a comprehensive studyincluding interviews with over 100 public managers with “How Do Public ManagersManage?” is a richly detailed analysis of the effect of organizational culture on managers'behavior, Ban (1995) offered a practical understanding of how government managers solveproblems, manage personnel, and plan in the face of bureaucratic constraints She analyzedwhat managers can do to work more effectively within existing systems, and evaluated thepotential of success of the reform efforts designed to efficient managers from the system ofbureaucracy She delivered critical information on how managers from government agencies(that vary in mission, size, structure, resources, and leadership) cope with bureaucraticlimitations and constraints In addition, she revealed how organizational differences directlyaffect such considerations as the management selection process, the quality of managementtraining, and the managers' career path Carolyn Ban also analyzes how the role of managercan vary within and between organizations as exemplified by first line "working" manager-supervisors and supervisors who have the title but perform very few of the functions of asupervisor Focusing on how coping strategies differ across agencies, the she author probed onhow managers react to the constraints imposed by the civil service system and the budgetprocess and outlines the strategies they use when dealing with the lengthy and complexprocess of hiring and firing

2 Administrative Theory

The administrators of projects, who are dealing with major and complex problems that

involve multiple causes and require multi-pronged project actions for solution, systemsanalysis provides a more flexible methodology for manipulating administrative So how todeal and control all is big question for them There are some administrative theories that havebeen applied seriously Otherwise, the project could not be performed smoothly.

The degree of centralization of procurement has also been the subject of someresearches Dimitri and Piga (2006)5reviewed the relevant literature and concluded thatcentralization offers net benefits “when procurement involves standardized, strategic,urgent or very essential products.” Further, centralization facilitates coordination in thedevelopment of networks and increases bargaining power of the purchasing authority.However, other circumstances can lead to centralization being inefficient, such as hightransport costs, local knowledge of dynamic market conditions and high costs of informationsharing

Systems theory does not reject the basic goals of classical administrative theory,rationality, and coordination, but rather provides a number of supplements and substitutes It isnot incompatible (Ex with recognizing formal organizations as core elements of projectsystems but stresses that the actual interactions in such organizations be analyzed anddemonstrated rather than merely assumed to exist) Project administrators can look to systemsanalysis to help them deal with combinations of legal and social factors involved in projectplanning, execution, and evaluation Systems analysis methods for dealing with social systemsare more primitive than the methods available for analyzing physical systems But evenwithout precise measurements, a systems approach can identify the existence of relationshipsand indicate the direction in which they tend This can help to avoid many errors and harnessresources for the achievement of project objectives

3 Procurement Legislation and Studies

The most common practices of procurement involve some form of tender or bidding,

and it is believed that, under these, efficient procurement outcomes can usually be achieved incircumstances where there are enough firms in the procurement market to sustain reasonablecompetition In cases with a limited number of enterprises, more sophisticated arrangementsare necessary to prevent practices such as collusion, bid-rigging, fraud and corruption, whichhinder the achievement of efficient outcomes Public purchasers also face the additionalchallenge of preventing political favoritism where contracts are allocated according to feed-back commission or support rather than on the grounds of efficiency of a certain project.

The sealed envelope bidding format has traditionally been the preferred form ofprocurement, although recently some variants have been introduced Drawing on the auctiontheory literature, Albano et al (2006b) concluded that sealed bids are preferred when biddersface some certainty and high knowledge on the goods or services provided In othercircumstances where the conditions of provision of the contract are uncertain, adynamic auction performs better because it allows participants to learn along the process Atwo-stage sealed bid format is also preferred in cases where there are risks of participants

to exaggerated bids which make the fulfillment of the contract impossible or below certainstandards

Organisation for Economic Co-operation and Development- OECD (1999)

“Competition Policy and Procurement Markets”: Efficiency in procurement has long beenrecognized as a way to obtaining the desired goods or services at the lowest price or, moregenerally, at the best “value for money” Many authors also described the advantages anddisadvantages of negotiated versus open bidding in relation to the complexity of the tenders

In cases where projects are simple and well specified Bajari and Tadelis (2006) argued thatcompetitive tendering is efficient On the contrary, where projects are complex,specifications are incomplete, accurate monitoring is not possible and / or the expertise of thesupplier is required at the initial preparing bidding documents may be more efficient due to

the increased scope for information exchange It has also been shown that in cases withincomplete contracts and moral hazard issues scoring-based auctions perform better thanbargaining (Asker & Cantillon, 2010).

The states’ procurement practices possess varying levels of reform characteristics, thatinterest group diversity, legislative professionalism, results-oriented management, andregional effects each have significant relationships to state procurement practices, and thatseveral "classic" explanations of state policy are not significantly related to state procurementpractices One implication is that procurement, like other forms of state administrative policy,may not be readily explained by widely utilized theories of state policy (Coggburn, 2003)

Albano et al (2006c) and Kovacic et al (2006) studied different ways to dissuadecollusion in procurement settings As a result, they came up with differentrecommendations for procurement design, including delaying information disclosure, using

an aggressive reserve price, avoiding second- lowest price competitive tendering,simultaneous as opposed to sequential procurement, allow for certain precautions in the case

of dynamic tender and certain rules about the permissibility of bidding agencies

Public procurement legislation in Vietnam is aimed at creating a common market byensuring free movement of goods, services and capital, and promoting effective competition inthe International and local market Harmonized rules are thought to lead to greatertransparency, participation, objectivity and non-discrimination in procurement markets It isbelieved that this increases competition and cross-border trading, resulting in a betterprice/quality ratio for public authorities (i.e a more efficient use of public funds, the Stateloans), while it increases the productivity in the industry and improves the participation andaccess to such markets by enterprises Vietnamese Commercial Law- 2005(Article 214)defines tendering of goods and services meaning commercial activity whereby one partypurchases goods or services via an invitation to tender (referred to as the party calling for

tenders) aimed at selecting from a number of business entities participating in the tendering(referred to as the tenderers) the business entity which best satisfies the requirementsstipulated by the party calling for tenders and which is selected to enter into and to perform acontract (referred to as the successful tenderer) Vietnamese Tendering Law in 2005: (Article

1 and 4): Tendering means the process of selecting a contractor who satisfies the requirementsset by the party calling for tenders in order to implement a tender package belonging to aproject which Investment and development projects financed by the State as to thirty (30) percent or more, on the basis of ensuring competitiveness, fairness, transparency and economicefficiency

The World Bank defined procurement as “the formal process of acquisition of goods,works, or services” (Guidelines-2011) But the United Nations Commission on InternationalTrade Law (UNCITRAL) Model Law on Public Procurement (2011) procurement or publicprocurement means the acquisition of goods, construction or services by a procuring entity.Domestic procurement means procurement limited to domestic suppliers or contractorspursuant to article 8 of the Law International regulation (WB, IMF, EC, JIBIC, ADB,SIDA ) defined international tendering as the process of selection of a contractor whosatisfies the requirements of the party calling for tenders, in which both foreign and domestictenderers participate

There has been a increasing literature related to public procurement practices Asubstantially larger quantity of research has been devoted to the structure of procurementprocesses in order to achieve efficient outcomes under different situations The procurementliterature records several tools for its effective procuring implementation Several aspects havebeen researched such as the type of auction and tenders, usefulness of open procurementprocedures, the impact of centralized purchases via a State agency or a independent firms,preventing corruption It is will review briefly some recent contributions in this field

According to Albano et al (2006), the sealed envelope bid format has traditionallybeen the preferred form of procurement, although recently some variants have beenintroduced Drawing on the auction theory, literature concludes that sealed envelope bids arepreferred when bidders take part complex bidding package A two-stage sealed envelope bidformat is also preferred in cases where there are risks of bidders exaggerated their experience

or their goods' specification bids which make the fulfillment of the contract impossible orbelow certain quality standards-Albano, Gian Luigi, Dimitri, Nicola, Pacini, Riccardo andSpagnolo, Giancarlo ‘Information and competitive tendering’ in Dimitri, Nicola, Piga,Gustavo and Spagnolo, Giancarlo (eds) (2006)

Based on the recommendation of Grimm et al., (2006) and Dimitri et al., (2006), one

of the main methods to increase procurement efficiency has been the division of the contractinto specific lots to awards However, in cases where lots have related complementarities, ithas been shown that these lots should be bundled into one particular lot group According toBajari and Tadelis (2006), in some cases where projects are simple and well specified,competitive bidding is efficient It is similar to the result of Dimitri, Dini and Piga (2006)which concluded that centralization procurement method is standardized, strategic, urgent orvery essential and special products On the other hand, centralization facilitates coordination inthe development of networks of contractor and increases bargaining power of the procurementauthority However, other cases can lead to centralization being inefficient, such as hightransport costs to project site and high costs of information connecting and sharing

Some studies have looked at the effects of different bidding formats which had beendetermined by number of bidders participants The literature on procurement recommendsapplying some methods of tender or bidding which is informed publicly to the potentialbidders as many as possible It also recommends the division of contracts into lots, using openprocedures (depending on the situation) to have more and more number participants of

bidders On other hand, it is great benefits of centralizing procurement A number of studieshave also looked at the effects of different procurement practices on the transparency andopenness or in encouraging participation or competition, and have finally found evidence ofefficient outcomes1.

The literature on procurement recommends using some form of tender which isadvertised publicly to the potential bidders In fact, all these aspects have been incorporatedinto the domestic law system and international regulation concerning to procurement and it is

at the core of this research to investigate the effect on the final value of openness or increasingthe participation of bidders in procurement bids, the relevance of open versus procuringprocedures and the impact of centralized purchases while separating the effects forcontracts which include a quality component

4 Procurement Administrative Theories and Studies

Traditionally, procurement has been a centralized, highly-regulated function, like manyadministrative systems in the public sector Public purchasing has been perceived as theintermediate step between the determination of a need (service delivery managers) and thesatisfaction of that need (suppliers) (McCue & Pitzer, 2000; National Association of StateInformation Resource Executives, 1996)

Traditional procurement is full and open competition to get lowers prices -thuspromoting economy - universal access to procurement opportunities, making bribery andcorruption more difficult (Kelman, 1990) Public procurement laws in the EU is aimed atcreating a competitive market by ensuring free movement of goods and services andincreasing effective competition in the EU Market The major principles include equaltreatment of all economic operators; transparent behavior; and no discrimination based onnationality The EU procurement legislation emphasized the harmonizing of national

procedures in order to guarantee that these principles are achieved The harmonized regulation

is regarding publishing procedures, planning price, and valuation criteria and stating biddingaward results in greater transparency, participation, objectivity and non-discrimination inprocurement markets Almost authors believed this would increase competition and cross-border trading, resulting in a better publish procurement administration Using more efficientpublic funds by competitive procurement would have obvious economic benefits for theeconomy

Generally speaking, most proposed reforms seek to deregulate and decentralizeprocurement, with the goal being more flexibility on the part of agencies and managers tomeet their respective service demands (Gianakis & Wang, 2000; Thai & Grimm, 2000) Someother studies have looked at the effects different auctions format had on participants.Albano et al (2006a) showed that sealed bid procedures are better at encouragingparticipation when participants are heterogeneous in their costs of fulfilling the contract orthe certainty they face about characteristics of the goods or services required

As used in many studies, the term public procurement includes a variety of means bywhich public organizations acquire supplies and services from outside sources in which

“procurement” encompasses acquisition, contracting, buying, renting, leasing, and purchasing,

to include functions such as requirements determination and all phases of contractadministration (International Public Procurement Conference, 2011) In the public sector,procurement and contracting are commonly used: procurement in the broad sense as theprocess of acquiring property or services, beginning with determination of a requirement andending with contract completion (Nash, Schooner, O’Brien-DeBakey, & Edwards, 2007)

In Procurement Guidelines (Asian Development Bank, 2010) regulatesInternational Bidding (ICB) is openness competition that is the basis for efficient publicprocurement Borrowers shall select the most appropriate method for the specific procurement

In most cases, properly administered international competitive bidding (ICB) with theallowance for preferences for domestically manufactured goods and, where appropriate, fordomestic contractors for works under prescribed conditions, is the most appropriate method.Therefore, ADB requires its borrowers to obtain goods, works and services through ICB open

to eligible suppliers and contractors

The World Bank (2011) also asserted that open competition is the basis for efficientpublic procurement Borrowers shall select the most appropriate method for the specificprocurement In most cases, International Competitive Bidding (ICB), properly administered,and with the allowance for preferences for domestically manufactured goods and, whereappropriate, for domestic contractors for works under prescribed conditions is the mostappropriate method In most cases, therefore, the Bank requires its Borrowers to obtain goods,works, and non-consulting services through ICB open to eligible suppliers, service providers,and contractors

Some specific opinions for procurement administration reforms emphasized on qualityand results over cost (e.g., create clear incentives for quality work and penalties for poorwork) Process is streamlined enough to keep pace with new technology, legal regulation andprocedures (e.g., competitive bidding, allow managers the flexibility to make faster decisions);minimum of paperwork (e.g., reduce multiple reviews and justifications); single door or/andsignature policy on small purchases (e.g., give employees flexibility to make small purchaseswithout clearances, eliminate requirements for centralized purchasing of common officesupplies); and improving administrative performance by reducing personnel costs associatedwith procurement (e.g., fewer centralized procurement employees)6

In Vietnam, there have been many studies on international bidding regulations forprocurement of goods However, most studies focused on theoretical without offeringsolutions to specific situations to improve procurement law goods in international relations

between the provisions of Vietnam and other international organizations For example, N.DPhuong family name only (2008) study on“International Procurement for Goods throughInternational Competitive Bidding” have accessed to a small aspect in the bidding throughinternational regulations and in the international bidding for procurement of goods by usingsecondary data In addition, there are now many changes in the policies of both Vietnam andinternational organizations related to the regulations on procurement of international goods.

5 Legislation of Vietnam and International Community for Procurement

In Vietnam, the Commercial Law- 2005 does not apply to tendering for procurement

of goods for public works However, Government procurement is regulated by the Law onTendering in 2005 and Decree No 85/2009/ND-CP dated October 15, 2009, providingguidelines for the implementation of the Law on Tendering and the selection of constructioncontractors Government procurement funded by ODA loans and grants is normally governed

by regulations on tendering of relevant donors in accordance with loan agreements betweenthe Vietnamese government and donors Government procurement practices can becharacterized as a multilayered decision-making process The ministries and agencies havedifferent rules on minimum values for the purchase of material or equipment, which must besubject to International competitive bidding (ICB) High value or important contracts, such asinfrastructure, require bid evaluation and selection and are awarded by the Prime Minister’soffice or other competent body, except for World Bank, Asian Development Bank, UNDP, orbilateral official development assistance (ODA) projects (Law on Tendering Act- 2005)

Projects that are funded by the World Bank, Asian Development Bank, UNDP, orbilateral official development assistance (ODA) must be subjected to procurement instructions

of these organizations’ regulations and Vietnamese Law Some solicitations are announced

officially in the Vietnamese language newspapers such as “Dau Thau”, “Nhan Dan”, “LaoDong”…, and in the English language newspapers Vietnam News and Vietnam Investment orGovernment (Law on Tendering Act- 2005).

The regulation of procurement in the world has a long history For example, legislation

of procurement based on Directives 66/683/EEC and 70/32/EEC which disallowed rulesgiving preferential treatment to national products/ supplies, or prohibiting the procurement offoreign products/supplies These were followed by Directives 77/62/EEC, 80/767/EEC and71/305/EEC which aimed at coordinating procedures for supply, utilities and works contracts,respectively; following the European Commission’s 1985 White Paper on the completion ofthe Internal Market and the Single European Act of 1986 The legislation were introduced forsetting the rules for award procedures, requiring prior publication of notices and details ofawards, making national technical standards mutually recognizable and clarifying exemptedsectors, and removing international barriers in the utilities sector while harmonizing the rulesrelating to services

6 Conceptual and Theoretical framework

The transparency, flexibility, and accountability are keys to an effective procurementsystem (Schooner, 2009) The transparency factor is a means to other important goals of theprocurement system, especially, competition and integrity It is the key to market access, helpsfight corruption and helps increase public trust in the public procurement system Heconcluded that a transparent, competition-oriented approach to government procurementgenerates benefits in terms of economic efficiency, the public treasury, and good governancethat outweigh the costs Pavel (2005) has assumed that the higher is the transparency andopenness, the better preconditions there are for a good procurement, competition in biddingand thus also for a better proportion between the price and quality and, in the end, also for theeffectiveness

In public procurement legislation harmonized rules are thought to lead to greatertransparency, participation, objectivity and competition in procurement markets It is believedthat this increases competition and international trading, resulting in a better price and higherquality ratio for a Government (i.e a more efficient use of governmental investment) Manyresearches found that the positive and significant effects of procurement disciplines related toincreasing openness and transparency Accordingly, the author shall study two theoriesconcern to science of administration, public procurement management to combine withpractice of International bidding which is applied in the Ministry of Health (MOH) ofVietnam.

The underlying factors affecting the increase in openness and transparency can

be interpreted as coming from two different source laws An improvement in procurementdisciplines could stem from political action and regulation aimed at opening the procurementmarkets (the Laws of Government) This thesis is also focus harmonizing between 02legislation system which could meet request of transparency and openness internationalcompetitive bidding form

The conceptual framework of procurement regulation identifies the relationshipbetween legislative harmonization and efficient procurement In doing so, it implicitlyrecognizes that there is a gap between two law and regulation system because every State has

to set up its own law and regulation system to preserve its benefit However, each law systemmust be made under standard provisions which are recognized by international community

So, there is unity between the two different legal systems If it is possible in applying of theprovisions it shall create harmonization in the implementation of public procurementprocedures

The key factors affecting the harmonization can be openness and transparency whichcome from two different law systems On the other hand, political measures could affect the

harmonization which are independent (although they may be related in some indirect way), butthey are not researched in this thesis In fact there is difference between regulation of thedonors (WB, IMF, EC, JIBIC, ADB, SIDA…) and Vietnamese regulations on ODAprocurement management concerning (a) Market Environment in Vietnam; (b) LegalEnvironment in Vietnam which refers to a broad legal framework that governs all businessactivities including procurement; and (c) Political Environment in Vietnam.

Various pressures on the public procurement system are not changing constantly, butthey interact with each other and become conflicting forces that public procurementadministrators have to deal with There are tradeoffs between the legal and other environmentforces, and the administrators have to seek an optimum solution This study includesconceptual scope of (a) System theories; (b) Administration theories; (c) ProjectAdministration; (d) Procurement Management; and (e) Competitive bidding method

Figure 1 shows how harmonization of two legislative systems that will measurerelationship between indicators of transparency and openness Evaluation was based oncomparing two legislative systems and practice of applying procuring methods for publicproject in the Ministry of Health This study also reviewed and updated the new findings andnew regulations to see clearly the nature of current procurement Eventually, specificsolutions to harmonize regulations on bidding between the laws of Vietnam and relevantinternational law are offered