Harmonization of public competitive tendering empirical evidence from the ministry of health in VietNam

NGUYEN DUY PHUONG entitled HARMONIZATION OF PUBLIC COMPETITIVE TENDERING: EMPIRICAL EVIDENCE FROM THE MINISTRY OF HEALTH IN VIETNAM Submitted in Partial Fulfilment of the Requirements

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A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

NGUYEN DUY PHUONG

entitled

HARMONIZATION OF PUBLIC COMPETITIVE TENDERING: EMPIRICAL

EVIDENCE FROM THE MINISTRY OF HEALTH IN VIETNAM

Submitted in Partial Fulfilment of the Requirements for the Degree

DOCTOR OF BUSINESS ADMINISTRATION

A program offered by Southern Luzon State University,

Republic of the Philippines in collaboration with

Thai Nguyen University, Socialist Republic of Vietnam

has been approved by Oral Examination Committee

WALBERTO A MACARAAN, EdD CONRADO L ABRAHAM, PhD

MELCHOR MELO O PLACINO, PhD JOANNA PAULA A ELLAGA, DBA

CECILIA N GASCON, PhD

Chairman

ALICE T VALERIO, PhD APOLONIA A ESPINOSA, PhD

Accepted in Partial Fulfilment of the Requirements for the Degree

Doctor of Business Administration

outstanding advisor and excellent professor Her constant encouragement, support, and invaluable suggestions made this work successful She has been everything that one could want in an advisor I would like to thank her for providing me ideas on the research methodology and valuable insights on public procurement system and international bidding implementation issues

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 for helping 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 my thesis and providing valuable feedback I am grateful to Mr Ngo Anh Cuong and Mrs To Ngoc Lan for their help and valuable advice, and for being great friends throughout my program stint

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

Nguyen Duy Phuong

To my Family and Friends

this piece of work is

dedicated

NDP

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGEMENT ……… iv

DEDICATION ……… v

TABLE OF CONTENTS ……… vi

LIST OF TABLES ……… viii

LIST OF FIGURES ……… ix

ABBREVIATIONS ……… x

LIST OF APPENDICES ……… xi

ABSTRACT ……… xii

CHAPTER I INTRODUCTION ……… 1

Background of the Study ……… 1

Statement of the Problem ……… 4

Objectives of the Study ……… 7

Hypothesis of the Study ……… 8

Significance of the Study ……… 8

Scope and Limitations of the Study ……… 10

Definition of Terms ……… 12

II REVIEW OF LITERATURE ……… 16

Conceptual Framework ……….… 29

III METHODOLOGY Locale of the Study ……… 35

Research Design ……… 35

Sampling Procedures ……… ……… … 37

Data Gathering Procedure ……….……… 38

Research Instrument ……….…….… 40

Statistical Analysis ……… …….…… 42

V SUMMARY, CONCLUSION AND RECOMMENDATION

Summary of Findings ……… 60

Conclusions ……… 66

Recommendations ……… 68

REFERENCES ……… ……… 72

APPENDICES ……… 74

CURRICULUM VITAE ……… 94

1 Factors Affecting Harmonizing 41

2 Likert’s Scale Summated Rating for Openness and

8 T-test on the Most Opening Purchase – ICB (UOP) 60

9 Difference Tests on the Most Opening Purchase – ICB

12 Difference Tests on the Non- Standard Purchase (NSP)

1 Conceptual Framework of the Study 32

3 Distribution of Respondents by Position in the MOH 47

5 Distribution of Total Working Years of the Respondents 49

7 Frequency of Submitting Bidding Documents under LCB 52

9 Frequency of Applying the Most Opening Purchase Method 56

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

1 Letter Request for the Conduct of the Survey 75

7 Discrepancy of Two Laws and Regulation Systems 85

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TENDERING: EMPIRICAL EVIDENCE FROM THE MINISTRY OF HEALTH IN VIETNAM

Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION

Name and Address

of Institution

: Southern Luzon State University Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam

Adviser : Dr Alice T Valerio

The research describes 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 ILT 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 administration system

In order to find out best procuring method, the comparative research design was used to study the differences and similarities between international organizations More specifically, it involves the study of the different legal systems in existence in Vietnam, including Commercial Law, Investment Law, and Administration Law The secondary data were obtained from 02 legal regulation system (Vietnam Law and at least 03 International organization’ regulation) which are up to date The primary data were

considerations in the District Health Service Department from 63 provinces The data were collected using questionnaire method

Using statistic tool, an efficient model was identified which should be applied in Vietnam Preliminary results indicate that there is one procuring method that complies to 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 Through ICB procuring method, the public investment is avoiding corruption On the other hand, it is the best way to buy highest quality products at the lowest price

It was concluded that the best procurement method is harmonizing the two procurement system laws and regulations in Vietnam and it is suggested that the government agencies and Project Management Unit should implement major measures of how to efficiently procure products efficiently

Chapter I INTRODUCTION

Public investment is an important activity in the development strategy

of each country or state If not to mention the use of operational works, equipment investment is an important issue that contributes to the efficient investment is the purchase of equipment and supplies The management of public procurement needs to be studied further in order to find solutions, measures or how procurement efficiently Because it is normally facing situation of corruption in procurement To avoid it, procurement activities must

be persuaded to related Law or regulation In fact, it always consist two law system as Local Laws and International Laws It is very serious for international procurement and the source of capital is from the international financial organization or international banks In order to guarantee their investment is on right objects or the capital is used efficiently, the international financial organizations usually publish "Procurement guideline" or “Handbook for procurement" on projects which they are sponsor While local Government

is also have its owned Laws on procurement management The conflicts or differences are big problem between two above law systems on bidding or tendering This research is thrust and priority on harmonizing the two law systems in public procurement

Background of the Study

Public procurement management occupies an important position in the national project administration because its importance is evident both in

practice and in the theory literature Above 40 years ago, Cooper (1980) noted this when he stated that public administration should pay attention to the importance of procurement In describing public procurement as a critical administrative activity, many other famous scholars acknowledged its importance, too In fact, Vietnam government spends a lot of money, despite signs of modest declines in recent years Government's collective purchasing still accounts for nearly one-third of the nation's Gross Domestic Product (Appendix 3) Procurement is the purchase of goods and services by public and private enterprises 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, bid-rigging, fraud and corruption, which hinder the achievement of efficient outcomes Public procurers also face the additional challenge of preventing political favoritism where contracts are allocated according to loyalty or support rather than on the grounds of efficiency (Europe Economics Chancery House, 2011)

Public investment in Vietnam includes all investments the government and private business sectors are undertaking which include (a) Investment from the budget (allocated to the Ministries, and distributed to local); (b) Investment in program supported by the State; (c) International investment

credit(loans of international organizations); and (d) Investment of the owned Enterprises (SOEs) In a period of 10 years, the State of Vietnam has implemented fiscal policy that caused a continued increase in revenues but has resulted also in increase in public spending Budget revenues have increased from 20.5 percent of GDP in 2000 to over 28 percent from2006 to 2008.Expendituresalso increased respectively from24.7 percent in 2000 to over 31 percent in 2005, and had reached nearly 35 percent in 2007 (Appendix 4)

State-The public procurement accounts for a large percentage of total social investment budget 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, irrational investment, lack of investment in industries with large impact on economic restructuring, and insufficient investment in key programs Low investment efficiency is also attributed to local interests, lack of transparency, and poor coordination among branches and levels Inefficient public investment and poor investment management have not only resulted in social investment inefficiency but also rendered bad consequences to the economy of Vietnam, putting pressure on inflation, causing macro-imbalance, and limiting competitiveness and quality

of the integrating economy To improve public investment quality, one of the important principles should be to strictly implement open broad bidding of public investments or procurement to all economic sectors and conduct regular monitoring and supervision in public procurement (Economic

Committee of National Assembly of Vietnam and UNDP- Macro-Economy Report, 2012)

By international comparison, in 2010, the total spending in Vietnam accounted to30.7 percent of the GDP, a higher rate compared to other countries in East Asia and Southeast Asia This amount, which is being reported in the current financial statistics of Vietnam, 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 total spending to total GDP in Vietnam has been increasing while in many countries, the proportion of expenditure to GDP is relatively stable as shown in Appendix 4

This study relating to public procurement practices has developed along the organizing of procurement processes and the effects of different procurement methods or practices This recognizes several tools and strategies for its effective implementation Several aspects have been investigated such as the type of tendering, usefulness of open procedures, the impact of transparency purchases which is considered including a quality component or mechanisms for preventing corruption These aspects have been incorporated into the laws and regulations and this study has estimated the effects of such procurement practices in its models

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, the reality in the Asian countries is different A number of purchases are not open and therefore funding allocation is not transparent and possibly also not effective

As a developing country and as a member of ASEAN, Vietnam has been investing so much on economic infrastructure, social human resource development, and environmental protection (Asian Development Bank, 2011) The government has been borrowing a significant amount from the foreign sources as well as receiving aids outside of official development assistance(ODA) to focus on investment projects that have been committed with the donors including procurement regulations such as the World Bank (WB), Asian Development Bank (ADB), and The Japan International 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 to now, project administrators wishing to improve their understanding of and skills in administration could find little of direct relevance

to their field in the administrative literature Besides, the corruption is a serious problem which can be attributed to lack of procurement administration(Appendix 5).The core relates to perceptions of the degree of corruption as seen by business people and country analysts, ranging from 10 (highly clean) to 0 (highly corrupt) The Appendix No 5 shows that public investment of the Vietnam Government is at high 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 Law and international regulation related to project management,

especially in procurement procedure management, because Project Management Units (PMUs)do not know what law system should be applied in

a specified case of procurement All the tenders are placed and implemented

in Vietnam so if PMUs applied Vietnamese law, the procurements are not funded by the international donors Otherwise, these tenders will not be able

to get approval from centralized agencies (ex the Ministry of Plan and Investment – MPI) when the PMUs submitted 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 often than not, it made confusions to the PMUs, Executing Agency, Ministries and other relevant agencies, especially

on the donors’ guidelines and rules procurement Beside that there is difference between regulation of the donors and Vietnamese regulations on ODA management (WB, IMF, EC, JICA, ADB, SIDA…), it makes administers and PMUs face difficulties and confusions in organizing and implementing procurement procedures The PMUs do not understand which is better if they applied one of two laws and regulation systems

In general, all investors wish transparency and openness procurement However, it is just 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 by PMUs and Executing Agencies shall cause the inefficient investment This study, therefore, sought answers to the following questions:

1) What are the characteristics of the respondents?

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

3) How are procurement and bidding being done in the Ministry of Health as measured in terms of openness and transparency? 4) How can the ILT and the LLT be harmonized in the Ministry of Health using transparency and openness as factors of harmonization?

Objectives of the Study

In general, this study assessed the transparency and openness in procuring management in Vietnam Specifically, this study aimed to compare the Vietnamese Laws and International Regulations in Procurement The thesis focused on following objectives:

1 To describe the characteristics of the respondents;

2 To describe common and the unique provisions in the ILT and LLT

in Vietnam;

3 To determine how procurement and bidding are being done in the Ministry of Health as measured in terms of openness and transparency; and

4 To analyze how can the ILT and the LLT be harmonized in the Ministry of Health using transparency and openness as factors of harmonization

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 then hypothesized that openness and transparency are significantly affecting harmonization 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 and transparency are the tools which support control of the public procurement by the public, and thus they possibly decrease possibilities for corruption activities Openness is regarded as a possibility of individual stakeholders to participate

in the public procurement process Transparency means both active and passive publishing of information The passive publishing of information by purchasers upon request is made under Vietnam Law and International regulation An active publishing of information occurs when the proper purchaser publishes selected information, whether in an official international journal, own websites, or official announcements The higher the transparency and openness, the more effective the procurement and the bidding competition (Pavel, 2005)

Significance of the Study

In general, a good procurement practices as a beneficial effect on procurement outcomes In terms of transparency, procuring via international competitive bidding is the most beneficial 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 through publishing of Tender Invitation, Planning Price, Valuating Criteria, and Award Price The results 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 harmonizing between 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 of Vietnam

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 being used efficiently Besides that, all available bidders will have equal opportunity to offer their best quality products at lowest price in a competitive market Consequently, the Vietnamese people shall have chance to increase 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, and monitor the procurement practices across other ministries of whole Vietnam government's public investment It provides a model which can be used to investigate the current procurement practices in

Vietnam, the compliance with two Law and regulation systems The public procurement market is taking great ratio in Vietnam and all these issues are worth investigating in order to appraise the effect of competition in procurement in the international market

Scope and Limitations of the Study

The conceptual framework of procurement regulation identifies a relationship between improving procurement legislative regulation and procurement method chosen In doing so, it implicitly recognizes that markets are not perfectly competitive and that there is opportunity for improving procurement outcomes This study was not able to identify the source of changes in procurement disciplines This will become important in interpreting the results because, although the effects of different procurement tools can be seen, the effects strictly derived from the compliance with the domestic laws and international regulation cannot be disentangled, as some

of the measures envisaged are voluntary

It is also worth noting that the analysis is not a comparison between regulated and non- regulated tenders As by definition, all the records included in the analysis are covered by the 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, and because 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 and international) 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

Despite the many books devoted to the art of administration, generally, there have been few descriptions of administrative concepts related to public procurement administration specifically to health projects through International Competitive Bidding (ICB) method So this study has not been able to identify the source of changes in procurement regulation and laws 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 and this implies looking at the differences in international procurement regulation and Vietnam procurement law 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 made in this study

Research shall be designed to get data from all provinces of Vietnam for the last five years which is the normal period of implementing a project This period of time is suitable to time schedule of almost public investment projects in Vietnam It is a period of time in which the Vietnam Assembly approves new law codes or amending out of date law codes

This study included but not limited to procurement policy, procurement strategic planning and scheduling, contract formation, contract administration, evaluation, and procurement methods and techniques; substantive areas such as government procurement laws and regulations The principles

outlined in this study are competitive procurement of goods financed in whole

or in part from the proceeds of an Official Development Assistance (ODA) loans from International organizations, governments, or special funds

Definition of Terms

To provide a clear understanding of some of the terms that were used

in this study, the following 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, standards and 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 foreign and 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 to select contractors for provision of consultancy services, for procurement of goods, 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 loan from them (These International organizations financed grant, or these International organizations administered funds

of the policies that govern the procurement of goods, works, and services (other than consultant services) required for the project The financing agreement governs the legal relationships between the Vietnam’s government and this organization, and the guidelines are made applicable to procurement of goods and works for the project, as provided in the agreement The rights and obligations of Vietnam’s government 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 the providers of goods and works, and not by these guidelines or the financing agreements No party other than the parties

to the financing agreement shall derive 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 tenderers participate

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, and for construction and installation for tender packages belonging to the following projects This includes all Vietnamese legal documents issued by the assembly and Government Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam

as amended by Resolution 51-2001-QH10 passed by Legislature X of the 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 the public 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 certain qualifications The request for price quotations (or shopping) and direct contracting (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 are required using public procurement which are implemented by a Project Management Unit (call as PMU) At the Ministry of Health, each province is a separated 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 package belonging to a project stipulated in article 1 of Vietnamese Law on Tendering, on the basis of ensuring competitiveness, fairness, transparency and economic efficiency

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 and based 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 Evaluating Bidding method to classify bidder in bidding document It contains records ranking each bidder under their commercial terms, experience terms and legal terms 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 party calling for tenders in accordance with the provisions in the tender invitation documents

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

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

Chapter II REVIEW OF LITERATURE

This chapter presents discussion of facts and principles to which the present study is related public procurement

Systems Theory

There has been a growing literature relating to public procurement practices A procurement processes in order to achieve efficient outcomes under different circumstances Another strand of literature has recently been developing around the empirical quantification of procurement outcomes under different type of practices substantially larger bulk of research has been devoted to the design of Public procurement importance is evident both in practice and in the scholarly literature 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 be included explicitly in public budgeting and financing courses Twelve years ago, Thai (2001) noted that, despite its importance, procurement content was not evident in public administration programs

Systems theory introduces concepts like input and output, constraints and controls, processors and feedback, interdependence and boundaries On the other hand, systems theory presents in a number of ways a different view of administration and organization, how work is divided and coordinated When working on problems, organizations are not closed systems without dependence on their environment (such as legal regulation, etc.) External constraints and the interactions between organizations and their environment

set limits to the scope of their activities, present them with expectations, providing purposes, and suggest goals It is, therefore, essential for project planners and managers to analyze not only factors internal to the formal organization but also factors in its environment, so as to understand the systems of which 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 and important functions that neither the analyst nor the administrator can afford to ignore, for they determine to a considerable degree the effectiveness of the administrative system and its potential for survival

If the restructuring of government is to be successful, it should be understood how the current system affects how managers actually manage Based on a comprehensive study including interviews with over 100 public

managers with “How Do Public Managers Manage?” is a richly detailed

analysis of the effect of organizational culture on managers' behavior, Ban (1995) offered a practical understanding of how government managers solve problems, manage personnel, and plan in the face of bureaucratic constraints The author analyzed what managers can do to work more effectively within existing systems, and evaluated the potential of success of the reform efforts designed to efficient managers from the system of bureaucracy The author delivered critical information on how managers from government agencies (that vary in mission, size, structure, resources, and leadership) cope with bureaucratic limitations and constraints In addition, the author revealed how

organizational differences directly affect such considerations as the management selection process, the quality of management training, and the managers' career path Ban also analyzed how the role of manager can 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 a supervisor Focusing on how coping strategies differ across agencies, the author probed on how managers react to the constraints imposed by the civil service system and the budget process and outlines the strategies they use when dealing with the lengthy and complex process of hiring and firing

Administrative Theory

The administrators of projects, who are dealing with major and complex problems that involve multiple causes and require multipronged project actions for solution, systems analysis provides a more flexible methodology for manipulating administrative cases So how to deal and control all is big question for them There are some administrative theories that have been applied seriously Otherwise, the project could not be performed smoothly

The degree of centralization of procurement has also been the subject

of some researches Dimitri and Piga (2006) reviewed the relevant literature and concluded that centralization offers net benefits “when procurement involves standardized, strategic, urgent or very essential products.” Further, centralization facilitates coordination in the development

of networks and increases bargaining power of the purchasing authority However, other circumstances can lead to centralization being inefficient,

such as high transport costs, local knowledge of dynamic market conditions, and high costs of information sharing

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 is not incompatible (e.g with recognizing formal organizations as core elements of project systems but stresses that the actual interactions in such organizations be analyzed and demonstrated rather than merely assumed to exist) Project administrators can look to systems analysis to help them deal with combinations of legal and social factors involved in project planning, execution, and evaluation Systems analysis methods for dealing with social systems are more primitive than the methods available for analyzing physical systems But even without precise measurements, a systems approach can identify the existence of relationships and indicate the direction in which they tend This can help to avoid many errors and harness resources for the achievement of project objectives

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 in circumstances where there are enough firms in the procurement market to sustain reasonable competition In cases with a limited number of enterprises, more sophisticated arrangements are necessary to prevent practices such as collusion, bid-rigging, fraud and corruption, which hinder the achievement of efficient outcomes Public

purchasers also face the additional challenge of preventing political favoritism where contracts are allocated according to feedback 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 of procurement, although recently some variants have been introduced Drawing on the auction theory literature, Albano et al (2006b) concluded that sealed bids are preferred when bidders face some certainty and high knowledge on the goods or services provided In other circumstances where the conditions of provision of the contract are uncertain, a dynamic auction performs better because it allows participants

to learn along the process A two-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 certain standards

According to Organization for Economic Co-operation and Development- OECD (1999), 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 money” Many authors also described the advantages and disadvantages 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 that competitive tendering is efficient On the contrary, where projects are complex, specifications are incomplete, accurate monitoring is not possible and/ or the expertise of the supplier 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 with incomplete contracts and moral hazard issues scoring-based auctions perform better than bargaining (Asker & Cantillon, 2010)

The states’ procurement practices possess varying levels of reform characteristics that interest group diversity, legislative professionalism, results-oriented management, and regional effects each have significant relationships to state procurement practices, and that several "classic" explanations of state policy are not significantly related to state procurement practices 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 dissuade collusion in procurement settings As a result, they came up with different recommendations 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 by ensuring free movement of goods, services and capital, and promoting effective competition in the International and local market Harmonized rules are thought to lead to greater transparency, participation, objectivity and non-discrimination in procurement markets It is believed that this increases competition and cross-border trading, resulting in a better

price/quality ratio for public authorities (i.e a more efficient use of public funds, the state loans), while it increases the productivity in the industry and improves the participation and access to such markets by enterprises Vietnamese Commercial Law- 2005(Article 214) defines tendering of goods and services meaning commercial activity whereby one party purchases 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 requirements stipulated by the party calling for tenders and which

is selected to enter into and to perform a contract (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 requirements set by the party calling for tenders in order to implement a tender package belonging to a project in which investment and development projects are financed by the State as to 30 per cent or more, on the basis of ensuring competitiveness, fairness, transparency, and economic efficiency

The World Bank defined procurement as “the formal process of acquisition of goods, works, or services” (Guidelines-2011) But the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Public Procurement (2011) procurement or public procurement means the acquisition of goods, construction or services by a procuring entity Domestic procurement means procurement limited to domestic suppliers or contractors pursuant 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 who satisfies the requirements of the party calling for tenders, in

which both foreign and domestic tenderers participate

There has been an increasing literature related to public procurement practices 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 Several aspects have been researched such as the type of auction and tenders, usefulness of open procurement procedures, the impact of centralized purchases via a State agency or 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 traditionally been the preferred form of procurement, although recently some variants have been introduced Drawing on the auction theory, literature concludes that sealed envelope bids are preferred when bidders take part complex bidding package A two-stage sealed envelope bid format 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 or below certain quality standards-Albano, Gian Luigi, Dimitri, Nicola, Pacini, Riccardo and Spagnolo, 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 contract into specific lots to awards However, in cases

where lots have related complementarities, it has been shown that these lots should be bundled into one particular lot group According to Bajari 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 or very essential and special products On the other hand, centralization facilitates coordination in the development of networks of contractor and increases bargaining power of the procurement authority However, other cases can lead to centralization being inefficient, such as high transport 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 been determined by number of bidder-of bidder-participants The literature on procurement recommends applying some methods of tender or bidding which is informed publicly to the potential bidders as many as possible It also recommends the division of contracts into lots, using open procedures (depending on the situation) to have more and more number of bidder-participants On other hand, it is great benefits of centralizing procurement A number of studies have also looked at the effects of different procurement practices on the transparency and openness or in encouraging participation or competition, and have finally found evidence of efficient outcomes

The literature on procurement recommends using some form of tender which is advertised publicly to the potential bidders In fact, all these aspects

have been incorporated into 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 increasing the participation of bidders in procurement bids, the relevance of open versus procuring procedures and the impact of centralized purchases while separating the effects for contracts which include a quality component

Procurement Administrative Theories and Studies

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

Traditional procurement is full and open competition to get lower prices, thus promoting economy - universal access to procurement opportunities, making bribery and corruption more difficult (Kelman, 1990) Public procurement laws in the EU is aimed at creating a competitive market

by ensuring free movement of goods and services and increasing effective competition in the EU Market The major principles include equal treatment of all economic operators; transparent behavior; and no discrimination based on nationality 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 bidding award results in greater

transparency, participation, objectivity, and non-discrimination in procurement markets Almost authors believed this would increase competition and cross-border trading, resulting in a better publish procurement administration Using more efficient public funds by competitive procurement would have obvious economic benefits for the economy

Generally speaking, most proposed reforms seek to deregulate and decentralize procurement, with the goal being more flexibility on the part of agencies and managers to meet their respective service demands (Gianakis

& Wang, 2000; Thai & Grimm, 2000) Some other studies have looked at the effects different auctions format had on participants Albano et al (2006a) showed that sealed bid procedures are better at encouraging participation when participants are heterogeneous in their costs of fulfilling the contract or the 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 by which 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 contract administration (International Public Procurement Conference, 2011).In the public sector, procurement and contracting are commonly used: procurement in the broad sense as the process of acquiring property or services, beginning with determination of a requirement and ending with contract completion (Nash, Schooner, O’Brien-De Bakey, & Edwards, 2007)

The World Bank (2011) also asserted that open competition is the basis for efficient public procurement Borrowers shall select the most appropriate method for the specific procurement In most cases, ICB, properly administered, and with the allowance for preferences for domestically manufactured goods and, where appropriate, for domestic contractors for works under prescribed conditions is the most appropriate 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 quality and results over cost (e.g., create clear incentives for quality work and penalties for poor work) Process is streamlined enough to keep pace with new technology, legal regulation and procedures (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/and signature policy on small purchases (e.g., give employees flexibility to make small purchases without clearances, eliminate requirements for centralized purchasing of common office supplies); and improving administrative performance by reducing personnel costs associated with procurement (e.g., fewer centralized procurement employees) (OECD, 2000)

In Vietnam, there have been many studies on international bidding regulations for procurement of goods However, most studies focused on theoretical without offering solutions to specific situations to improve procurement law goods in international relations between the provisions of