GRADUATE STUDIES – SIMAD UNIVERSITY

Master of Science in procurement & Logistic Management

Course name: E-procurement

Course title: Proposal

Title: The role of E procurement in reducing corruption and fraud

Group names;

1. Abdifitah Hussein Suleiman

2. Mohamed Hussein Mohamud

3. Sharif Tahlil Hersi

4. Abdulkarim Musse Ali

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 TABLE OF CONTENTS
CHAPTER ON E: INTRODUCTION.........................................................................................3

1. BACKGROUND INFORMATION......................................................................................3

1.1 Brief of Somalia....................................................................................................................3

1.2 DEMOGRAPHY..................................................................................................................4

1.3 ECONOMIC OVERVIEW.................................................................................................5

1.3 POLITICAL SYSTEM........................................................................................................5

1.4 Procurement Challenges......................................................................................................8

1.5 Procurement Reforms..........................................................................................................8

1.6 Problem statement................................................................................................................8

1.7 Objectives of the study.........................................................................................................9

1.8 Research question................................................................................................................9

Chapter two: Literature review.................................................................................................10

2. Introduction.......................................................................................................................10

2.1 Electronic procurement system........................................................................................10

2.2 Anti-corruption..................................................................................................................11

2.3 Anti- Fraud.........................................................................................................................12

2.4 Conceptual framework.................................................................................................12

CHAPTER THREE: RESEARCH METHODOLOGY..........................................................13

3. INTRODUCTION............................................................................................................13

3.1 CONCLUSION...................................................................................................................14

REFERENCES.........................................................................................................................15

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 CHAPTER ONE: INTRODUCTION
1. BACKGROUND INFORMATION

1.1 Brief of Somalia

The government of Somalia was formed on 26 June 1960 from areas of the Horn of Africa that
colonized by Britain and Italy. Between 1960 and 1969 the following three presidents ruled
(including one who was assassinated), the military of Mohamed Siad Barre led socialist
government took power in 1969. The opposition against Barre’s regime grew in the 1980s and
led the Somali Civil War, when Barre was eventually overthrown by rebel forces in 1991. The
conflict has continued since the Islamist terrorist group al-Shabaab ruled the country (linked to
al-Qaida) in 2006 (Australian Government Department of Foreign Affairs and Trade, 2019)

Somalia has borders with Kenya, Ethiopia and Djibouti and also has an Indian Ocean coast to its
east. The country is divided into seven states; Somaliland and Puntland, Jubaland, South-West,
Galmudug, Benadir and HirShabelle that make south-central Somalia except Somaliland and
Puntland. Somaliland and Puntland operate effectively autonomously from the Federal
Government of Somalia (which is based in Mogadishu). This report will focus primarily on
south-central Somalia, although the first paragraph section refers to all states of Somalia,
including Somaliland and Puntland. Al-Shabaab is most active in south-central Somalia and
controls significant amounts of territory in the region.

In addition to decades of sustained and widespread conflict and political instability, Somalia is
also faced drought and floods which has worsened the effects of the long-running humanitarian
situation. Famines cause the death of 220,000 Somalis in 1992 and 260,000 in 2010-12. The risk
of famine is constant, including the current result of the 2017 drought. More than a million
Somalis are internally displaced or have fled the country due to conflict and drought. The
internally displaced population is approximately 1.1 million and over 300,000 Somali refugees
live in the Dadaab refugee camp in neighbouring Kenya (Australian Government Department of
Foreign Affairs and Trade, 2019).

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1.2 DEMOGRAPHY
A statistics has not been conducted in Somalia since 1975 and it is difficult to determine the
population of Somalia’s lifestyle, internal displacement and refugee movements. On July 2016,
the US Government estimates the population of Somalia 10.8 million but the 2014 Population
Estimation Survey conducted by the UN Population Fund (UNFPA) estimated a population of
12.3 million, which 42 per cent resided in urban areas, 26 per cent were nomadic, 23 per cent
were rural and nine per cent are internally displaced. Somalia has the seventh-largest internally
displaced population in the world. Most Somalia population is a very young society, 75 per cent
of the population is below 29 years of age (Australian Government Department of Foreign
Affairs and Trade, 2019)

Somalia is largely an ethnically homogenous society. 85 per cent of the population is Somali.
The remaining 15 per cent of the population are Arab or Bantu (a vast ethnic group that is
scattered across subSaharan Africa). Culturally, Somali society is hugely diverse as it operates
through a clan system, which has more influence than politics and communal relations than
ethnicity. Leadership, security, governance, the justice system and access to credit, jobs and
resources all revolve around clan affiliations. The clan system is constantly changing and
therefore mapping or monitoring the alliances within the clan system is difficult. The main clans
include the ‘noble clans’ who are traditionally nomadic cattle owners: the Hawiye, the Darod,
and the Dir. The Rahanweyn is the collective clan name for the mostly sedentary agropastoralist
clans. These four major clans are further divided into sub-clans and numerous sub-sub-clans.
Different clans dominate different regions of Somalia, based on their control of key resources
and major cities or towns. Since independence in 1960, the Darod and Hawiye have dominated
Somalia’s political leadership.

Somalia’s official language is Somali (Maay and Maxaa-tiri) and Arabic is the second language.

English and Italian are also spoken.

The official religion is Islam (Sunni), based mostly on the Shafi’i school, although there is a
small population that follow Sufism (a mystical form of Islam). There are a small number of Shia

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Muslims, but no data on exact numbers. There are a small number of Christians who practice
secretly and whose numbers include Christians who have converted from Islam (a crime
punishable by death in Somalia). A small population practise traditional or animistic faiths
(Australian Government Department of Foreign Affairs and Trade, 2019) .

1.3 ECONOMIC OVERVIEW

After 25 years of conflict and political instability, Somalia’s economy is fragile. Somalia is the
fifth poorest country in the world, with income per capita estimated at USD435 and a GDP of
around USD5.9 billion. Half the population lives below the poverty line (as defined by the World
Bank; less than USD$1.90 per day).

Key obstacles to economic growth include a high trade deficit (imports make up two-thirds of
Somalia’s GDP), high levels of poverty, high unemployment and a youth bulge. Exports (most of
which is livestock exported to Arab Gulf countries) make up 14 per cent of GDP. Inadequate
levels of domestic revenue mean the government cannot afford to provide services to its
population. The Somali economy is heavily reliant on remittances (estimated to be 1.3 billion
USD per year) and international aid to finance its shortfalls.

Corruption is a major issue in Somalia. Transparency International ranked Somalia last in its
2016 Corruption Perceptions Index, citing a lack of legislation, oversight and enforcement from
the state. The UN Monitoring Group on Somalia reported in September 2015, that the ‘impunity
enjoyed by those who have engaged in misappropriation of public finances perpetuates a culture
of corruption in Somali politics’ (Australian Government Department of Foreign Affairs and
Trade, 2019) .

1.3 POLITICAL SYSTEM

Somalia was without an effective government from 1991 until the Federal Government of
Somalia (FGS) was formed in 2012. During these two decades, Somalia was considered a failed
state by the majority of the international community. The political, security and humanitarian
situation in Somalia remains unstable and complex. State-building continues at the federal level,
but progress is slow and the Government’s capacity to provide basic services or respond to
humanitarian or conflict-related disasters is low.

Key political events since the end of the Barre Government in 1991 to the present-day are:

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 On 18 May 1991, Somaliland, a region in north-western Somalia, declared independence
and has operated as an autonomous region since. Somaliland’s independence is not
recognised by the international community.
 The United Nations Operation in Somalia (UNOSOM), a peacekeeping force, was
established in July 1992 but withdrew in 1995. The African Union Mission in Somalia
(AMISOM) was established in 2007 and its peacekeeping mission remains active. The
United Nations Assistance Mission in Somalia (UNSOM) was established in June 2013
and leads on peace, reconciliation and stability efforts in conjunction with the Federal
Government of Somalia, AMISOM and other UN country teams.
 In August 1998, Puntland, a region within north-eastern Somalia, declared autonomy as
an independent entity within a federal Somalia.
 The Transitional Federal Government (TFG) was established in 2004 but did not exercise
much control beyond the capital, Mogadishu. In June 2006, the Islamic Courts Union
(ICU) took control of Mogadishu. In December 2006, Ethiopia invaded Somalia and
toppled the ICU, removing the only centralised government authority.
 In late 2006, the most radical elements of the former ICU reformed as al-Shabaab and
used conflict and violence to take control of territory in south-central Somalia. In
February 2012, al-Shabaab pledged allegiance to al-Qaida.
 The TFG was replaced by the Federal Government of Somalia (FGS) in September 2012
and the Provisional Constitution was drafted.

The internationally-recognised Transitional Federal Government (TFG) was established in

2004 with the aim to restore effective governance. The TFG’s mandate ended in 2012 and the
Federal Government of Somalia (FGS) was formed in September 2012. Federalism is new to
Somalia and the composition of federal member states was not agreed upon until 2016, ahead
of the federal parliamentary elections held in late into early 2017. Somalia’s political system
operates on the basis of clan representation and while there are some political parties, there is
not a majority party or an opposition party. In 2016 a bill was signed requiring all politicians
to register with a political party by October 2018 in preparation for elections in 2020. The
intention of the bill is to lessen the influence of the clan system on the political system but

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DFAT understands that these political parties are likely to be closely related to clan
affiliations (Australian Government Department of Foreign Affairs and Trade, 2019) .

The Federal Parliament is divided into a lower house, the House of the People, and the Upper
House. The House of the People has 275 seats which are distributed between the federal
member states, in line with the 4.5 power-sharing formula, whereby representation is divided
proportionally amongst the four majority clans; the Hawiye, Dir, Darod and Rahanweyn and
the .5 collectively represents the minority clans (including the Bantu). The Upper House has
54 seats. In the 2016-17 elections a quota system was to allocate 30 per cent of the Lower
and Upper House seats to women but this figure was not reached.

Universal elections have not been possible in Somalia for various practical reasons (lack of
identity documentation and voter registration processes, logistical barriers and budget
constraints). The 2016/2017 lower house elections were conducted through 14,025 delegates
organised into 275 electoral colleges, one for each of the lower house seats. The 54 seats of
the Upper House were elected by the state assemblies of each federal member state. The
Federal Indirect Electoral Implementation Team administered the electoral process. An
Independent Electoral Dispute Resolution Mechanism was also established; the mechanism
verified cases of electoral malpractice and re-ran voting for five seats in the lower house.

According to the January 2017 UN Secretary-General’s report on Somalia, the elections were
not entirely free and fair with reports of delays, bribery, vote-buying, intimidation and
manipulation but overall, the process was more peaceful and inclusive than in 2012. There
was no widespread violence, other than some disruptions by al-Shabaab (see ‘Security
Situation’ below). Both houses of parliament were inaugurated on 27 December 2016.

Mohamed Abdullahi Mohamed “Farmajo” was elected President (Head of State) in elections
held on 8 February 2017. Farmajo is from a large sub-clan of the Darod. The Head of
Government is the Prime Minister, Hassan Ali Khaire, who was appointed by the President
and has been in the position since 2017. He is from the Hawiye clan.

There is a parallel political system in Somaliland, which runs its own Presidential and
Parliamentary elections. Elections set for March 2017 have been delayed. The current
President of Somaliland is Ahmed Mohamed Mohamoud. No countries have formally

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 recognised Somaliland’s independence (Australian Government Department of Foreign
Affairs and Trade, 2019) .

1.4 Procurement Challenges

The major challenges with Somalia’s strategy procurement are:

 insecurity;
 limited number of procurement staff
 restricted movements in Somalia
 weak capacity of bidders and limited service providers
 incomplete public procurement regulation and
 Weak legal and financial institutions and subsequent regulatory framework. For these
reasons, procurement capacity in all projects have been given a “High” risk rating (world
Bank , 2017) .

1.5 Procurement Reforms

The PFM Capacity Strengthening Project is supported Procurement Reform in Somalia by World
Bank. The main goal is to establish legal and regulatory frameworks of Public Procurement and
Concessions, building institutional, management capacity and develop monitoring and oversees
capacity for FGS, Somaliland and Puntland. Some individual consultants were hired to perform
the Procurement Law, the development of Procurement Regulations, Standard Bidding
Documents (SBDs), Manual and other procurement documents. The bank also provide similar
support in Puntland and Somaliland (world Bank , 2017) .

1.6 Problem statement

Corruption is one of the common issue in the world that is recognized by many government
institutions and international organizations including the World Bank, UN, ADB, Organization
for Economic Co-operation and Development (OECD) and is a threat to economic and human
development for all countries. It is important to note that public procurement is a major function
of the government and corruption is the most common problem in the public procurement
process (Thai 2001). In public procurement process, different actors are involving who take
decision based on their own interests rather than a public benefits. Some of key actors involved
in procurement process include public officials (who are responsible for procurement and public
contract management), politicians (who are influence the decisions at planning, policy, and

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contracting stages), bidders (who are involved in competing for and delivering on contracts), and
others parties such as financial institutions that facilitate corruption by processing the illicitly
acquired funds (Neupane, 2014) .

To overcome this serious problem of corruption in public procurement in Somalia and other
countries, ICT can be used as one of the anti-corruption strategies by promoting good
governance, enhancing relationships between government employee and citizens tracking of
activities, monitoring and controlling the government employee and reducing potential aspects of
corrupt behaviors.

1.7 Objectives of the study

The main objective of this study is to explore the potential of e-procurement to reduce corruption
in public procurement.

1.8 Research question

 To evaluate the bidder’s willingness to participate in public e-procurement system
 To evaluate the government officer’s willingness to participate in public E procurement
system

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 Chapter two: Literature review
2. Introduction

The literature review of this study highlights a lot of advantages of e-procurement that comprises
these benefits such as improvements in market access and competition, promotion of integrity,
reduction of costs of information, easy access to information, and increased transparency and
accountability, among others

As many scholars think that e procurement enhances competition which helps reduce the amount
of personal decisions taken in relation to rewarding government contract. Therefore e-
Procurement is an important tool to reduce the risk of fraud and corruption in public offices.
After establishing a solid e procurement system it is necessary to integrate three main
complementary goals: competition, transparency and integrity which is required to achieve these
goals.
2.1 Electronic procurement system
E procurement has been defined as an inter-organizational information system, which
automatizes any part of the procurement process in order to improve efficiency, quality, and
transparency in government procurement (Vaidya, 2007). Currently there are different types of
E-procurement systems available in the market such as e-market, e-MRO, e-sourcing, e-
tendering, e-ordering and e-exchange each type of system is built for special purpose and has its
own specific functionality and characteristics.

E-procurement can play a significant role for minimizing the risk of corruption in public
procurement process and also improves the transparency and integrity in public service such as
tendering, sourcing, ordering, and auctioning.

Many scholars believe that e-procurement has been recognized internationally as an important
instrument for checking and reducing corruption activities and in misuse of power. (Azmi &
Rahman, 2015)
E-procurement performance can assist to reduce bribery in public institution work and services.

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It is believed that the implementation of e-procurement system may improve opportunities for
citizens, the media, civil society and even bidders themselves to monitor procurement processes

The main basis of the e-procurement system is to give the government more openness,
availability and accessibility of procurement information to the public that enhances the flow of
public information, increase trust and satisfaction, and better accountability in the procurement
process.
Types of e-procurement system

E- Informing which can be called as a Gathering and distributing purchasing information both
from and to internal and external parties using internet technology.

E-Sourcing is method of identifying new bidders for specific types of procuring requirements by
means of internet technology.
E-Tendering is the process of sending requests for information and prices to suppliers and
receiving the response by internet technology.

E-Reverse auctioning Internet based reverse auction technology which focuses on the price of
the goods and services auctioned.
E-MRO and Web based ERP the process of creating and approving purchasing requisition,
placing purchase orders and receiving the goods or services ordered via a software system based
on internet technology, e-MRO deals with indirect items (MRO) , web-based ERP deals with
product-related items (Andvig, 2011).

2.2 Anti-corruption
Public e-procurement can play an important role for minimizing the risk of corruption in public
procurement process, it also improves the transparency and integrity in public service such as
tendering, sourcing, ordering, and auctioning, it is the only important instrument that can reduce
and minimize corruption activities in the public services.
Many scholars pointed out that public e-procurement helps to fight against corruption as a result
of reducing face-to-face relations where most requests for bribes take place.

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There are many case studies in developing and developed countries of the exercise of public e-
procurement system for reducing the risk of corruption. E.g. E-procurement systems
implemented in Korea, Singapore, New Zealand, Denmark and India.
It is believed that Korea is seen as a leader with the implementation of a fully integrated e-
procurement solution that is integrated with all other electronic government operations, including
financial management systems, company registrations and tax systems
2.3 Anti- Fraud
This study tries to find out the phenomenon of fraud in the context of public procurement
activities. Increasingly procurement fraud has moved from the borders of procurement process to
become a widespread type of behavior throughout the process of government procurement

Procurement fraud is a planned deception intended to influence any stage of the procure-to-pay
lifecycle so as to make a financial private gain or cause a loss. It can be perpetrated by
contractors or sub-contractors external to the organization, as well as staff within the
organization. Haftom Gebremedhin Gebre, (2016)

There are many definitions of fraud “Fraud is any intentional act or omission designed to
deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain

It is believed that the risk of fraud and corruption is an integral part of procurement risk in the
procurement process of acquiring goods, services and work/ complex projects like construction
and installation software.

2.4 Conceptual framework

 E procurement
 Reduce corruption
 Reduce fraud

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CHAPTER THREE: RESEARCH METHODOLOGY
3. INTRODUCTION

This study outlines how the research was conducted. It contains the research design, target
population, sampling technique- illustrate understanding of the technique, Data collection
procedure and data analysis. The investigation approach will be adopted for this research. Below
are presented selection of measures, sampling designs, and data collection procedure and data
analysis technique. When answering questions about E procurement in reducing corruption and
fraud respondents might be suspicious and secretive and may be unwilling to respond fully and
honestly.

In order to create a more trusting relationship, this research, therefore, conducted personal face
to-face interviews in the respondent’s choice of communication. This methodology appeared to
be more appropriate than an email questionnaire or a telephone interview. The questionnaire that
contained five parts for the research was developed taking cognizance of research that had been
conducted earlier. This study used pilot test as regarded to follow with two phases. First, the
questionnaire was pretested by seven academic colleagues. No major problems were detected
and only minor comments in relation to the style and language barrier of the questionnaire were
received. These comments were taken into account and the questionnaire was amended
accordingly.

The data collection method employed in this research was by distributing questionnaires through
email and handouts. Every effort was made to ensure to meet effective response rate of 100
respondents; with the use of personal interview visits, phone calls, emails, covering letters and
reminders were made. Respondents were willing to participate and all questionnaires were
answered anonymously.

Instrument of this study, the researchers used questionnaires developed by the researchers as the
instrument to collect data from the respondents, according to Oso and Onen (2008p.85)
questionnaires are a collection of items to which respondents are expected to react as writing.
And its purpose is to collect a lot of information over a short period of time. And it is suitable if:

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the population is literate and business oriented, the population is large and the time is limited, so
that information needed can be easily described in writing.

3.1 CONCLUSION
Based on the findings of this study, the following conclusions were written down. Results reveal
the The role of E procurement in reducing corruption and fraud Standard multiple lead-time
analysis was conducted for hypotheses testing (Cooper, 2013) in order to establish the best
combination of independent (predictor) variables would be to predict the dependent (predicted)
variable and to establish the best model of the study (Schindler, 2013).

E procurement is too important for helping and ensuring the success of the organizations both
public and private that allows them to facilitate their fulfillment needs. Successful
implementation of E procurement will improve the entire the performance of the organization.

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REFERENCES

Azmi, K. S. A., & Rahman, A. (2015). E-Procurement: A tool to mitigate public procurement
fraud in Malaysia? Proceedings of the European Conference on E-Government, ECEG,
2015-Janua(2), 361–368.

Andvig, J. (2011). Anti-corruption in public procurement.

Debere, T. (2014). By : Addis Ababa University School of Graduate Studies.

Australian Government Department of Foreign Affairs and Trade. (2019). DFAT Country
Information Report Indonesia. June.

Neupane, A. (2014). The Potential of Public E-Procurement Technology To Reduce Corruption

in Public Procurement. July, 1–197.

Riddell, H. (2017). Contact Information. July.

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