Public sector procurement racket
The public sector system needs to have an in-built system of checks and balances against corruption, presently an institutionalised source of indirect taxation on the people of Pakistan. The intelligentsia and the masses now seem to accept it as a fact of life. Nepotism, favouritism and corruption are a hydra-headed monster fuelling inflation by adding to non-developmental expenditure while feeding on the economic potential for development. The erosion of honest dealing in the processing of tenders becomes commonplace during Martial Law Regimes when the media cannot exercise its natural monitoring. Pervasive all-encompassing secrecy negates the inherent right of the public to curb skullduggery. Public sector tendering has become an elaborate exercise in public deception. In Third World countries like Pakistan where some measure of State Control is necessary, a foolproof mechanism must be put into place to curb the functionaries of the State from manipulating the process for their benefit.
Kenneth Tynan said that “a critic is a man who knows the way but can’t drive the car.” One’s resolve to make unpalatable proposal is stiffened with the knowledge that some arrogant, stuck-up rascals of this world have spent a long, deceit-ridden life using the privileges of public office to fool all concerned while living off the fat of the land and lining their own deep pockets. The tendering system is seriously flawed. Without ruthless intercession to stamp out intercession, the country will continue to be in greater and greater domestic and external debt.
a. Choice of specifications: The specifications of any product to be procured is usually fine-tuned to favour vested interest and is the first stage of manipulation, preceded only by the leaking of details pre-tender to the selected few. If this does not succeed, deviations from specifications is allowed, thus changing the whole price structure to suit a favourite, well within the domain of unfair practices.
b. The delivery period: The delivery period is usually a price related issue, if purchase is from abroad the ultimate price (and fulfilment of contract) is dictated by time and space. If say 50,000 bales of jute goods is to be delivered between 01 Apr and 15 May, a tender announcement in February may sound timely (and innocent) but it serves to restrict serious bids competing from outside the country keeping in mind the logistical exercise involved. If the tenders were to be awarded on 01 Mar, the supplier would normally require 60 days (upto 30 Apr) for delivery, impossible for foreign suppliers unless pre-warned like in procurement of sugar and fertiliser when the chosen few are informed well in time, some even manage to place ships off-port ready to deliver. A flurry of holier-than-thou communications by fax and telexes is built up with the not-so-favourites to ensure that malpractice cannot be suspected, or if suspected, proven. A monopoly of local manufacturers then exploits this ruthlessly by asking for more than DOUBLE the price. In the case of jute bags, unless the Government wants an agriculture catastrophe, it has to bend to this blackmail, the Procurement Agencies are not only accessories and collaborators but perpetrators of this deliberate fraud. Some people have no qualms about handing out Rs 335 million (in the case of Punjab’s 70,000 bales) and Rs 202 million (in the case of PASSCO’s 45,000 bales) of the Government’s money, after all what is an extra Rs 537 million if a “fair” percentage has been earmarked for themselves. An internal audit can easily establish the losses sustained by the Governments, Federal and Provincial, over the past two decades. If jute bags are required every year from April to July, they should be required to be placed by beginning March. Working backwards and allowing 60 days for delivery, the award of tenders should have been on or around 01 Jan. It is reasonable to assume that the tender should have been floated latest by mid-November. Yet year after year the same exercise takes place, the lame excuse being that “quantities” are not known, every year it hardly varies more than 10%. The Ministry of Finance should investigate why tenders are continuously short dated.
c. Tender documents: Except for a specified delivery period or any other special reasons, tenders for commonly used items should be a simple standard document and should not be kept a secret. Deviations from the normal may be necessary and these have to be intimated as a change from the standard conditions and attached as a deviation sheet to the standard Tender documents.
d. Opening of Tenders: Bid Bonds should be handed over separately when submitting the Bid documents, at least four hours before the tender opening time. The Bid Bonds must be checked by a senior official of any recognised commercial Bank that (1) the format is in order as per the requirement (2) the documents are authentic. On verification the Bank official should then issue VISAS for entry into the Committee Room for upto two persons named in the Bid Bond of each qualified Bidder. These persons would be assumed to be authorised to represent the Bidders, carry out negotiations and accept the award of tender. Disputes about the authenticity or correctness about the Bid Bond can be resolved before the tender opening in consultation with the Bank which has issued the Bid Bond, if need be. Tender Bids which do not qualify because of lack of Bid Bonds should not be entertained and must be removed without opening from the Tender Box on the opening of tenders. However, if there is any benefit of doubt it must be given to the supplier.
e. Opening of the Bids: The Tender Committee must include businessmen representatives belonging to the relevant (and nearest) Chamber of Commerce and Industry as observers. By the drawing of lots, at least 3-6 journalists (chosen also by drawing lots if more in number), must also attend as observers, media check almost always precludes wrongdoing. The Bids must be written on a Board as they are called out, including the deviations. Once all the BIDS have been opened the Tender Committee should put a price tag for the deviations (if any) given by the Bidder. After this process only those Bidders who are within 5% of the lowest price (or a specified number maybe 3-5 others, in order of priority) should be allowed to remain in the Committee Room. This will encourage Bidders to make genuine competitive offers instead of hedging in the first stage, otherwise it becomes a farcical affair with a high potential for wrongdoing. Lower Bids may thus be invited publicly from the remaining participant Bidders by the Tender Committee. This in fact becomes a public auction confined to those who have been given VISAS to enter the Committee Room. Bids must be written on the Board as they are called and the Bidder made to authenticate his bid. No one must be allowed to leave the Committee Room till the bidding is complete.
e. Award of the Tender : If the Committee is satisfied with the price, the tender would be tentatively awarded to the successful Bidder/s, who must be given 48-72 hours to produce adequate Performance Bonds. In case the Tender Committee feels the price is too high it can scrap the whole tender but this must not be resorted to frequently and they must provide cogent reasons with adequate proof for doing so. LCs must be opened for imports or local LCs for local purchases by the next morning or the next working day, mistakes made by the Finance Departments should carry punitive measures. The Bidder must not be left to the mercy of the Finance Department for getting the contract finalised or getting the LC opened. A local LC specifying all conditions of the contract is the correct payment method otherwise the Bidder will run from pillar to post to get his dues, available after “deductions”.
f. Inspections : Other than the pre-shipment inspections carried out by internationally recognized surveyors, post-shipment inspection must be carried out by an Inspection Board in Pakistan consisting of two internationally recognized surveyors from an approved panel and a senior member of the business community. Penalties for inferior quality should be punitive and besides monetary sanctions, blacklisting must be imposed for a period of time. In case deviations in quality are noted after the pre-shipment or post-shipment inspection, appropriate sanctions must also be made against the inspectors. It is common in Pakistan to get an award on the basis of a low bid and then bribe the government inspectors to verify an inferior quality as the correct specifications. The recognized jute bag for foodgrains in the world is the Standard B Twill which weighs 2.25 lbs, but now “Binaula” has been coined in Pakistan as the accepted jargon for a 2.0 lbs jute bag, a shortage of 9% in weight with a commensurate difference in price. Members of the Procurement Agency must not be in a position to affect the verdict of the inspectors in any manner except to cross-verify. The inspection agency must be held financially liable for wrong inspections. Once post-shipment inspection is complete, the item and/or commodity is now ready for distribution.
Not entirely a foolproof arrangement, the aforementioned can be improved upon a great deal. In the words of Voltaire, “whoever serves his country well has no need of ancestors”. Better that than be saddled with the Don Marquis saying that, “we pay for the mistakes of our ancestors, and it seems only fair that they should leave us the money to pay with”. That Pakistan is down by more than US$ 16 billion should more than capture the Government’s attention that our procurement system for major contracts needs to be rectified.
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