The purpose of this paper is to examine the transaction costs involved in managing procurement contracts in the public sector, particularly at the lower and higher level of local governments from the clients’ perspective.
The paper uses new institutional economics, specifically the transaction cost approach. A multiple case study design was used, in which five local government authorities (LGAs) were selected from the Kigoma and Tanga regions of Tanzania. Interviews with heads of procurement management units, focus groups and secondary sources were used to collect information for lower level LGAs.
Very high information, negotiation and monitoring transaction costs were revealed at the post-contractual stage for higher levels of local government in all cases. Transaction costs were associated with institutional problems, lack of financial resources and attitudes towards accountability, transparency and competition. It was also found that lower levels of local government are faced with very high transaction costs for all procurement stages due to a lack of procurement contract management capacity among ward and village procurement project committees, low levels of support from higher level LGAs, a lack of simple Swahili-standardised documents and guidelines for lower level procurement contract management which reflect current legal issues and the lack of a legal framework for procurement at the lower level of local government. These costs are associated with poor accountability and a lack of competition, transparency and efficiency throughout public procurement chains.
There is no estimate for quantitative approaches, because it is was difficult to measure transaction costs associated with accountability, transparency and efficiency.
The paper contributes knowledge on qualitative levels of transaction costs for procurement contract management for both higher and lower levels of LGAs from the clients’ viewpoint.
Rasheli, G.A. (2016), "Procurement contract management in the local government authorities (LGAs) in Tanzania: A transaction cost approach", International Journal of Public Sector Management, Vol. 29 No. 6, pp. 545-564. https://doi.org/10.1108/IJPSM-10-2015-0173Download as .RIS
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