Saturday, May 14, 2011
Public procurement needs an overarching framework to be fair
Public procurement is a multi-step process of established procedures to acquire goods, works and services by a government entity. It involves the full cycle through need assessments, process design and bid-document preparation to the awarding and execution of contracts and the final accounting and auditing of a completed contract.
Since public procurement forms a core part of a government programme, various international bodies - including the United Nations Commission for International Trade Law (Uncitral), World Bank (WB) and World Trade Organization (WTO) - have drafted laws, guidelines and agreements aimed at promoting the integrity of, and public confidence in, the procurement system.
The objective is to create a system founded on transparency, competition and objective criteria in decision-making that is effective in preventing corruption. They clearly spell out that the cornerstone principles of open, transparent and non-discriminatory procurement based on open competitive bidding are the best tools to achieve value for money and quality benefits as it optimises fair and equal competition.
Constituting a core area of public policy programming and implementation, government procurement and contracting in India forms 13% of the national budgets and over 20% of GDP as highlighted in the World Bank India Country Procurement Assessment Report, 2003. The ministry of finance, in 2005, drafted the General Financial Rules (GFR), wherein it formally established yardsticks of fairness, integrity and transparency through competition, efficiency and economy to achieve the best results in public procurement.
However, there is no national law exclusively governing the public procurement of goods. Public procurement is regulated through a series of executive directives, mainly instructive in nature. Instructions issued by the Central Vigilance Commission (CVC) also supplement the regulations. The practices are administered by government agencies, who may issue more detailed instructions in conformity with the GFR.
Recognising that government procurement constitutes a key area of public policy programming and intervention, the ruling party has flagged the issue of transparency in public procurement and contracts as part of its five-point action plan to tackle corruption.
An overarching framework will provide government agencies with a yardstick to review procurement norms and it would do well to take into consideration the following recommendations.
First, a public procurement law should be promulgated at the Centre and in each state to cover the objectives of government procurement, substantive procedural requirements to achieve them, debriefing of unsuccessful bidders, publication of contract awards, an appeal or challenge mechanism and post-award contract execution such as bid security, performance security, maintenance contract, advance payment, etc.
This should be complemented by a set of national regulations enshrining the five fundamental principles, namely, open tendering through effective advertisement; non-discriminatory tender conditions and technical specifications; public tender opening; bid evaluation based on pre-disclosed criteria and methodology; and selecting the most advantageous bidder without any negotiation on price or any other term.
The existing procedural framework governing procurement should be streamlined and an independent nodal agency or department should be created to deal with the policies, rules, practices and procedures. Also, there should be internal and external control and auditing bodies, the reports of which should be made accessible to the public.
Also, there should be provisions for institutionalising 'integrity pacts' or any other enforceable integrity condition as a legally-binding ethical code of conduct to govern the procurement cycle. This needs to be buttressed by provisions penalising violations of the pact's terms and conditions. The steps of decision-making on public procurement should be available for public scrutiny.
Platforms like public hearings should be provided for discussion of the procurement design, method and bid documents. At the same time, a social audit must be conducted by the procurement authority for large development projects to ensure accountability. Additionally, the procuring authority, as part of the debriefing procedure, should, upon request, communicate to a supplier or contractor the grounds for its rejection.
It is important that information be provided after the award of the contract on matters such as nature and quantity of products or services in the contract, name and address of the winning tender, value of the winning award and the highest and lowest offer taken into account in the awarding of the contract.
Besides, it should be highlighted in law that alternative methods of procurement such as direct contracting, single-source procurement, limited tendering, etc, can be adopted only where justified, fully explained, documented and, thus, available for public review.
If required, the procuring authority should hold negotiations with suppliers provided this is indicated in the initial tender notice or only when it appears from the tender evaluation that no single tender is the most advantageous, subject, of course, to safeguards ensuring that such negotiations do not discriminate between suppliers.
A domestic bid challenge system should be created, giving aggrieved suppliers a right of recourse to an independent quasi-judicial domestic tribunal like a public procurement tribunal, outside government control, to whom bidders can appeal an award decision.
Such an appeal or challenge mechanism must be time-bound and be applicable for contracts above a certain threshold. At the first stage, review may be sought from the procuring entity itself. Further, a review can be conducted by higher administrative organs of the government and, finally, a judicial review of the proceedings by a designated tribunal might be conducted wherein all suppliers or contractors are notified and are allowed to participate.
Lastly, the procuring authority should legalise e-procurement. Since corruption thrives in the absence of transparency, there should be an emphasis on facilitating information accessibility through modern procurement methods.
Government procurement provides a fertile ground for private distribution of largesse and having credible procedures and practices can significantly reduce corruption. Therefore, it is critical that reforms in the procurement regime are fast-tracked to ensure that principles of integrity, transparency, accountability, fairness, economy and efficiency are vigorously applied in all public investments and purchases.
Since public procurement forms a core part of a government programme, various international bodies - including the United Nations Commission for International Trade Law (Uncitral), World Bank (WB) and World Trade Organization (WTO) - have drafted laws, guidelines and agreements aimed at promoting the integrity of, and public confidence in, the procurement system.
The objective is to create a system founded on transparency, competition and objective criteria in decision-making that is effective in preventing corruption. They clearly spell out that the cornerstone principles of open, transparent and non-discriminatory procurement based on open competitive bidding are the best tools to achieve value for money and quality benefits as it optimises fair and equal competition.
Constituting a core area of public policy programming and implementation, government procurement and contracting in India forms 13% of the national budgets and over 20% of GDP as highlighted in the World Bank India Country Procurement Assessment Report, 2003. The ministry of finance, in 2005, drafted the General Financial Rules (GFR), wherein it formally established yardsticks of fairness, integrity and transparency through competition, efficiency and economy to achieve the best results in public procurement.
However, there is no national law exclusively governing the public procurement of goods. Public procurement is regulated through a series of executive directives, mainly instructive in nature. Instructions issued by the Central Vigilance Commission (CVC) also supplement the regulations. The practices are administered by government agencies, who may issue more detailed instructions in conformity with the GFR.
Recognising that government procurement constitutes a key area of public policy programming and intervention, the ruling party has flagged the issue of transparency in public procurement and contracts as part of its five-point action plan to tackle corruption.
An overarching framework will provide government agencies with a yardstick to review procurement norms and it would do well to take into consideration the following recommendations.
First, a public procurement law should be promulgated at the Centre and in each state to cover the objectives of government procurement, substantive procedural requirements to achieve them, debriefing of unsuccessful bidders, publication of contract awards, an appeal or challenge mechanism and post-award contract execution such as bid security, performance security, maintenance contract, advance payment, etc.
This should be complemented by a set of national regulations enshrining the five fundamental principles, namely, open tendering through effective advertisement; non-discriminatory tender conditions and technical specifications; public tender opening; bid evaluation based on pre-disclosed criteria and methodology; and selecting the most advantageous bidder without any negotiation on price or any other term.
The existing procedural framework governing procurement should be streamlined and an independent nodal agency or department should be created to deal with the policies, rules, practices and procedures. Also, there should be internal and external control and auditing bodies, the reports of which should be made accessible to the public.
Also, there should be provisions for institutionalising 'integrity pacts' or any other enforceable integrity condition as a legally-binding ethical code of conduct to govern the procurement cycle. This needs to be buttressed by provisions penalising violations of the pact's terms and conditions. The steps of decision-making on public procurement should be available for public scrutiny.
Platforms like public hearings should be provided for discussion of the procurement design, method and bid documents. At the same time, a social audit must be conducted by the procurement authority for large development projects to ensure accountability. Additionally, the procuring authority, as part of the debriefing procedure, should, upon request, communicate to a supplier or contractor the grounds for its rejection.
It is important that information be provided after the award of the contract on matters such as nature and quantity of products or services in the contract, name and address of the winning tender, value of the winning award and the highest and lowest offer taken into account in the awarding of the contract.
Besides, it should be highlighted in law that alternative methods of procurement such as direct contracting, single-source procurement, limited tendering, etc, can be adopted only where justified, fully explained, documented and, thus, available for public review.
If required, the procuring authority should hold negotiations with suppliers provided this is indicated in the initial tender notice or only when it appears from the tender evaluation that no single tender is the most advantageous, subject, of course, to safeguards ensuring that such negotiations do not discriminate between suppliers.
A domestic bid challenge system should be created, giving aggrieved suppliers a right of recourse to an independent quasi-judicial domestic tribunal like a public procurement tribunal, outside government control, to whom bidders can appeal an award decision.
Such an appeal or challenge mechanism must be time-bound and be applicable for contracts above a certain threshold. At the first stage, review may be sought from the procuring entity itself. Further, a review can be conducted by higher administrative organs of the government and, finally, a judicial review of the proceedings by a designated tribunal might be conducted wherein all suppliers or contractors are notified and are allowed to participate.
Lastly, the procuring authority should legalise e-procurement. Since corruption thrives in the absence of transparency, there should be an emphasis on facilitating information accessibility through modern procurement methods.
Government procurement provides a fertile ground for private distribution of largesse and having credible procedures and practices can significantly reduce corruption. Therefore, it is critical that reforms in the procurement regime are fast-tracked to ensure that principles of integrity, transparency, accountability, fairness, economy and efficiency are vigorously applied in all public investments and purchases.
(The authors are with Public Interest Foundation)
Courtesy: Economic times
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