Contracting, transaction costs, behavioural practices and procurement performance of public entities: The case of state owned enterprises in Uganda.

Abstract

The purpose of this study was to establish the relationship between contracting, transaction costs, behavioural practices and procurement performance of the state owned enterprises (SOEs) in Uganda. SOEs are the private arm of government that must make profit and must therefore compete favorably with other private enterprises. One key issue that must be addressed is procurement performance. Procurement performance of these SOEs is greatly influenced by contracting, transaction costs and behavioural practices. If the contracting processes of the SOEs are not well managed, transaction costs are likely to increase. This coupled with the mal-practices like opportunistic behaviour and absence of trust, puts the SOEs in more vulnerable position as opposed to the private entities. This was a cross-sectional study and a correlation survey design was applied. From a population of 36 SOEs, 20 SOEs that were listed in the PPDA compliance Audit report of 2009 were selected. Data was collected using structured questionnaires administered to the respondents. Validity and reliability tests were performed to ensure consistence of the questionnaire. Data was analyzed using the Statistical Package for Social Scientists to establish relationships between the variables. Findings revealed that there exists a positive relationship between contracting, transaction costs, behavioural practices and procurement performance of the SOEs. For example it emerged that as transaction costs increased, procurement performance of SOEs dropped. It was also revealed that the existence mal practices in procurement practices negatively affected procurement of the SOEs. The study recommends that SOEs should clearly set contract objectives that will guide all those involved in the contracting process. It also recommends that mal behaviour should be avoided by those who are involved in procurement related activities; this will in turn reduce transaction costs which later improve procurement performance.