Reservation schemes and local firm participation in road construction in Uganda: a case of selected road construction firms in Kampala

Abstract

Reservation schemes in public procurement are seen as crucial initiatives that most of the governments can use to promote economic growth, protect domestic firms against foreign competition and improve the capacity and competitiveness of specific sectors. This study therefore examines the effect of reservation schemes on local firm participation in road construction projects by specifically focusing on the impact of reservation thresholds and contractual conditions on local firm participation. The study adopted a cross sectional survey design and data was gathered from directors and project managers or legal officers of 37 sampled local construction firms in Kampala using both qualitative and quantitative approaches. Regression analysis was used to examine the effect of reservation schemes on local firm participation. Findings revealed that reservation schemes have a statistically significant effect on local firm participation in road construction projects. It was revealed that both reservation thresholds and contractual conditions have a positive contribution on local firm participation. According to the study's findings, an enhancement in contractual requirements and reservation thresholds promotes local firms to secure more bids and participation in subcontracted road construction projects by 38.5%. As a result, the study recommended that, the PPDA should conduct regular monitoring of the procuring and disposing entities to ensure that the guidelines on reservation schemes are respected whenever there is a high value contract for the construction project. In addition, we recommend that the PPDA should continue to run sensitization programs for all local contractors so that they acquire knowledge concerning the application of reservation schemes. Sub-contracting arrangements should be guided by the nature of firm, geographical setting and size of the firm. Lastly, the study recommends that an effort be taken to address the most challenging factors that hinder local firm participation for instance, there should be timely payments for local firms to enable them meet their internal demands for effective contract execution. Key terms: Reservation schemes, reservation threshold, contractual conditions and local firm participation