DISPOSAL OF PUBLIC ASSETS*

LEARNING OBJECTIVESDefine DisposalHighlight Legal requirements for Disposal PlanningHighlight the Disposal cycleUnderstand key steps in Disposal ProcessHighlight the methods of Disposal

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DEFINITION OF DISPOSALThe PPDA Act 2003 defines disposal as the divestiture of public assets, including intellectual and proprietary rights and goodwill, and any other rights of a PDE by any means, including sale, rental, lease, franchise, auction, or any combination.It is the task of scrapping or selling retired equipment.(Benton & McGraw, 2007)Getting rid of something either by throwing it or destroying it.(Buffington & Flynn, 2004)

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Reasons for Disposal of Public AssetsExcess to the PDEs requirementsObsolescenceProject winding upTied up capitalAssets have become hazardous to the entitys requirementsPart of an assets ongoing asset disposal programme*

PRINCIPLES OF DISPOSAL (Langley, Coyle, Gibson & Bardri (2008)TransparencyAccountabilityFairnessConfidentialityNon - discrimination*

Factors to consider when selecting a disposal methodThe potential market value of the asset;The number and location of potential bidders;The location of the asset;National security and public interest issues;Health and safety issues;

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Factors to consider when selecting a disposal methodLegal or human rights issues;Environmental considerations;Organizational policyThe trade-in value of the asset; andThe possibility of transferring the asset to another procuring and disposing entity.

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DISPOSAL PROCEDURE (Reg. 122)AO to appoint a Board of survey;AO to ensure that the assets of a council/entity are reviewed on an annual basis;Assets to be grouped in contracts or lots in a manner which attracts maximum competition;More than one PDE may pool assets for purposes of common disposal;

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DISPOSAL PROCEDURE (Reg. 122)User dept. is responsible for the management of disposal materials following recommendation of a BOS.PDE to obtain valuation of an asset prior to commencement of any disposal proceedings;A disposal requirement includes a clear indication of the assets to be disposed of and the approval to commence disposal proceedings;*

DISPOSAL PROCEDURE contdApproval to commence disposal proceedings shall be done by CC on written recommendation of the PDU;PDE to maintain records of its disposal proceedings and contract management

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TERMS OF REFERENCE FOR BOARD OF SURVEY Examine the condition of the asset(s)Establish whether the asset is due for disposal;Recommend a reserve price based on the condition of the asset, its net book value and market conditions;*

TORs continuedRecommend the method of disposal to the contracts committee in accordance with the PPDA Act;Prepare a report on the above copying to the Auditor General, Accountant General, PPDA and AO.

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LEGAL REQUIREMENTS FOR DISPOSAL PLANNINGPublic Finance and Accountability Act and Regulations, 2003PPDA Act, 2003;Local Government procurement and disposal Regulations, 2006;Sections of the Act specify key functions of the User Dept some of which are e.g. to initiate disposal requirements*

LEGAL REQUIREMENTS contdThe Procurement and Disposal Unit should plan all procurement and disposal activities (Sections 31(f) of the Act) and aggregate all the individual user dept plans into annual and multi- annual consolidated procurement and disposal plans

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LEGAL REQUIREMENTS FOR DISPOSAL PLANNING- contdSection 58 of the PPDA Act emphasizes that Disposal planning must be rationally planned in such a way as to:Avoid emergency disposalAggregate requirementsAvoid splitting of requirementsIntegrate disposal of all assets in the PDE

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CONTENTS OF A DISPOSAL PLAN Detailed description of asset to be disposed off in order of priorityType/category and lots of assetsThe quantities of assets and the unit of issueLocation of assetsYear of purchaseExpected/Actual life span of assetBrief justification for disposal The estimated valueConfirmed source of funding for the disposal

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CONTENTS OF A DISPOSAL PLAN - continuedProposed method of disposal for each or group of asset(s)Time when each asset will no longer be required by the user departmentTotal time the disposal process will takeRequired level of approval for each or group of asset(s)

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METHODS OF DISPOSALPublic auctionPublic biddingSale to public officers/usersDirect negotiationsTrade-inTransfer to another PDEDonation *

METHODS OF DISPOSAL contdConversion or classification of assets into another form e.g. scrap, spares etc.Destruction of assetsRecycle/Re-useTurn into LandfillRefer to Reg. 123

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PUBLIC AUCTION (Reg. 124)Conditions for use of this methodExistence of a large number of potential bidders or assets to be disposed.A public invitation notice using at least one publication of wide national circulation.Display on PDEs notice board and PPDAs website.Any other appropriate media such as radio.No formal bid documentBids shall be presented orally and bid to be evaluated on the basis of price.

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PUBLIC AUCTION contdNo minimum bidding periodNo negotiationsContract to be orally awarded to the bidder offering the highest price as determined by the auctioneer and shall be announced at the auction.Successfully bidder shall pay at least 50% of contract price immediately after award of contract, balance within 5 working days of award of contract.Local council to appoint Auctioneer through appropriate procurement method for services.

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PUBLIC BIDDING (Reg.125)Conditions for use of this methodHigh-value or unusual assetsAssets located in remote areasWhere conditions need to be attached to the sale of the assetWhere post-bid negotiations may be required.Public invitation notice. Advertisement for at least 4 working days.*

PUBLIC BIDDING contdMinimum bidding period shall be 10 working days.PDE to request for a written sealed bid.Evaluation based on price only shall be the preferred evaluation methodology.Contract placement shall be by issue of a contract to a successful bidder.

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SALE TO PUBLIC OFFICERS (Reg. 126)Conditions and rules for use of this methodWhere there is no likely benefit or financial advantage to a PDE, in using any other method.Where assets for disposal are a small number of low value items which are unlikely to attract public interest.Where the personal use of disposal assets would directly benefit the performance of a public officer in the execution of his or her duties within a PDE.In remote location

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SALE TO PUBLIC OFFICERS contdPublic officer initiating disposal process, valuations or managing the disposal process shall not participate as a bidder.Bids shall be solicited by the publication of a non-public invitation.Advertising period shall be at least 4 working days and bidding period shall be 10 working days.Written sealed bids

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SALE TO PUBLIC OFFICERS contdEvaluation based on price only.Contract award shall be by a decision of a CC in response to a recommendation from the evaluation committee through the Accounting officerInternal audit department of the LG shall maintain a register of all sales to public officers

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DIRECT NEGOTIATIONS (Reg. 127)Conditions and rules for use of this methodThe market is limited and a single buyer is willing to pay reserved priceNational security, public interest, legal, environmental considerations or human rights issues are served by selling to a particular company, group or individual.*

DIRECT NEGOTIATIONS contdA potential buyer is a tenant, occupier or user of an asset at the time of the decision to dispose.An asset is located on a potential buyers premises on hire or free-use basis and it is reasonable to give that person first option to buy the asset at a market rate.

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DIRECT NEGOTIATIONS contdBidders to submit written sealed bidsEvaluation based on price onlyEvaluation based on price and other factors may also be used.Notice of award of contract shall be displayed on the public notice board.

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TRADE-IN (Reg.128)Conditions and rules for use of this methodWhere the trade-in of surplus assets to offset the purchase price of new items provides a convenient, economic and efficient way of upgrading equipment.The disposal process shall be an integral part of the procurement process.

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TRADE-IN contdA solicitation document and a bid notice shall clearly state that the procurement involves a trade-in arrangement.Advertisement of the trade-in, issue of solicitation documents, bidding period and receipt and opening of bids shall be in accordance with the relevant procurement rules.

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TRANSFER TO ANOTHER PDE (Reg. 129)Conditions and rules for use of this methodWhere another PDE can make further use of an asset.Cost to be agreed by the two PDEs.Transfer may be at no cost, if it is uneconomic to charge for the asset.A recipient PDE shall issue an authorized receipt for the asset to the originating PDE.

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CONVERSION OF ASSETS INTO ANOTHER FORM. (Reg. 130)Conditions and rules for use of this methodOn grounds of national security or public interest, legal or human rights issues or environment considerationsWhere asset has no residual value in its current form, but where some sale value can be obtained through conversion or classification into any other form.*

CONVERSION ContdPDE to identify a competent authority or an appropriate provider to undertake the conversion or classification.Example; Converting a tractor engine into a maize mail engine

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DESTRUCTION (Reg. 131)Conditions and rules for the use of this methodLeast favored method.Used on grounds of national security or public interest, health and safety, legal or human rights issues or environment considerationsWhere the asset has no residual value, cant be transferred to another PDE or converted into another form.Destruction can be done by the PDE or a competent authority or provider.

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DONATION Reg.132Application is submitted to AO, CC approvesDonation should not be for personal benefitsBenefits to the council should be statedBenefits to the recipient should be statedAO communicates the CC decision to applicantAO arranges for handover in presence of an IA and the public; 14 days after displaying public notice.*

EVALUATION OF BIDS FOR DISPOSALBased on price Other factors include;Nationality under reservation schemeEnvironmental impactRisks to health, legalPerformance conditions*

NEGOTIATIONSUnder public bidding, negotiations may relate to the conditions of sale, where evaluation is based on factors other than price, and shall not relate to the price of the bid.Under direct negotiations, negotiations may relate to the conditions of sale, where evaluation is based on factors other than price.Refer to Reg. 134*

RECORD OF DISPOSAL ACTIVITIESPDE shall maintain a record of its proceedings and contract management for a period of seven (7) years from the date of a decision to terminate a disposal activity or the date of completion of a disposal activity, whichever comes first.

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ChallengesConflict of interestCorruption/BriberyValuation/Determining reserve priceCollusionRigid government policy No used itemsVandalizing assetsLack of confidentialityPoor records/Inventory managementLack of commitmentLimited skillsTurning down offers/Reverse logistics*

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THANK YOU FOR YOUR ATTENTION*