States take lead in framing public procurement policy

In almost every development work, acquisition is inevitable in one way or other by purchasing, renting, leasing, licencing, or otherwise acquiring any information, goods or materials, services which are called public procurement in simple terms.

Public procurement works on the principles of integrity, transparency, accountability, fairness and efficiency to all decision making on public investments and purchases so as to minimise corruption and maxim­ise the economic, financial, social, environm­ental and political benefits of public procurement. It  also promotes competition and ease of doing business with public sector.

Approximately 30% of India’s GDP gets converted into public procurement contracts. It carries the burden of the hopes of millions of people, who expect the public servants to perform their duties as trustees. According to World Bank’s estimate, the average bribe to obtain a public contract is 15% of contract value.

As procurement is prone to corrupt practices, it has many effects: it distorts the market mechanism, represents a high cost to the procurer, results in poor quality of goods and services and ultimately erodes public faith.

Corrupt or bad public procurement, increases poverty and inequality, by diverting funds away from the social needs. It engenders bad choices, encouraging competition in bribery rather than in quality or price and provides an unfair, unstable and risky competitive advantage which creates a sort of market-entry cost or non-tariff barrier, at least for those companies who do not wish, or cannot afford to bribe their way in.

Presently, public procurement has been governed by myriad of laws, rules and authorities such as General Financial Rules (GFR), 2005, Delegation of Financial Power Rules (DFPR), 1978 and relevant guidelines of the Chief Vigilance Commissioner (CVC), high court rulings and such diverse authorities have brought out directives on public procurement. Though the Central government brought Public Procurement Bill 2012, it got lapsed without getting the Parliament nod.

So, the matter is very muddled and procuring entities have their own interpretations of various guidelines and practices, leading to distortion of competition, lack of transparency and probity, which have in the past given rise to major incidents of diversion of public funds. Moreover, some of the procurement deals and controversies on time to time have brought in open the major failures in transparency, accountability, efficiency, competition and professionalism. It is therefore of utmost importance that the procurement processes overcome the impediments of collusion, bid rigging, fraud and corruption.

States have been the laboratories of law and policy-making and some states are pioneers as compared to Government of India for passing revolutionary legislations. Enacting Transparency in Public Procurement Act and rules by various states was one of them. Tamil Nadu was the first state to enact such a law -  Tamil Nadu Transparency in Tenders Act, 1998. The Tamil Nadu Transparency in Tenders Rules, 2000 and Tamil Nadu Transparency in Tenders (Public Private Partnership or PPP Procurement) Rules, 2012. Secondly, Karnataka passed the Karnataka Transparency in Public Procurement Act, 1999. Kerala passed Kerala Transparency in Public Purchase (KTPP) Bill, 2002.

Rajasthan is one of the states which not only passed the Rajasthan Transparency in Public Procurement Act, 2012 and framed Rajasthan Public Procurement Rules, 2013 but has its PPP Policy, 2008 and legislated the Swish Challenge System as well in 2015, similarly like erstwhile Andhra Pradesh.

One of the main challenges in public financial management has been obtaining commensurate outputs and societal outcomes from budgetary allocations. One of the ways of meeting this challenge is a more efficient and effective public procurement system based on a modern legislation. Though procurement legislations were passed by some of the states, on passing of time of a decade and half, in cases like Karnataka, lots of challenges have emerged out in the way of its effective implementation. 

More and more information about whole of the procurement cycle like bids publication, bidder’s participation level or competition, award of contract, Time taken in final award, contract variations, and cancellation of bids etc, need to be proactively disclosed.

As per the KTPP Act, state level procurement management information system has to be developed and put in public domain. Along with strengthening the grievance redressal mechanism, the mechanism to fix the supply side issues which emerges in the form of cartels, that is, bid rigging and collusive bidding need to be dealt with strongly.

Bid rigging

Since integrity of the procuring staff and competition between suppliers are two sides of the same coin, yet so far the focus has largely remained on tackling departmental corruption. Excepting for blacklisting/holiday listing etc, against suppliers for a few years, there is hardly any effective policy in Karnataka to report bid rigging by suppliers or to detect and punish cartels of suppliers.

As per the findings of various recent surveys, there is a greater need of involvement of citizens in the procurement processes so that civic watch component can be strong. It would be useful to build a space for public participation, putting information regarding contract management in the public domain, ensuring access to records for stakeholders, civil society and the public.

There is good e-procurement system in Karnataka which has enhanced transparency. However, this portal has to be more interactive and informative in nature so that common citizens can get solutions for queries or concerns.

Designing and implementing a strong procurement policy and legislation is a long overdue step at the national level to ensure better public financial management, and it has large potential fiscal and governance benefits.

However, time has come for the states to learn successful experiences and reform initiatives from each other, to enhan­ce the effective implementation of the legal and institutional mechanism of procurement. Also, adopt the learnings from the path-br­eaking pilots done on civic monitoring and engagement in states like Rajasthan, UP, Assam and Chhattisgarh, MP and Kerala.

(Cheriyan is Director and Sharma is Senior Project Coordinator, CUTS International, Jaipur)

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