Tender Shenanigans
Any public sector system must have an in-built system of checks and balances. A myriad number of Public Corporations came about because of sweeping nationalisation in 1972. That they were created in good faith and in the general public interest one is more than inclined to accept; that they have since become a source of indirect taxation on the people of Pakistan is also a fact of life. It makes it all the more necessary that a system must be designed to minimise nepotism, favouritism and corruption, that it must not become a hydra-headed monster fuelling not only inflation but also feeding on the economic potential for development by adding to non-developmental expenditure. One reason for rampant inflation is the result of erosion of honest dealing in the confidential processing of tenders for different commodities that need to be imported from time to time. An all-encompassing secrecy negates the inherent right of the public to ensure that no skulduggery takes place and more often than not, barring exceptional cases, the whole exercise of tendering becomes an elaborate exercise in public deception. In countries like Pakistan where some measure of state control is necessary, it becomes important to streamline the process in a manner that functionaries of the state cannot fiddle with it. It must be remembered that the sanctity of the tender remains till the Bids are opened and it is only thereafter that manipulations happen because of the secrecy of further proceedings.
There is no use criticising a system without giving any alternative suggestions to improve the process. As Kenneth Tynan has said, “a critic is a man who knows the way but can’t drive the car.” The solutions proposed may not be entirely palatable to all concerned, particularly narrow vested interests and may even have inherent defects in its complete articulation within the confines of a single article but armed with the knowledge that the rascals of this world have spent a long, deceit-ridden life fooling all concerned while lining their own pockets and stiffened by the unswerving resolve to correct it, whatever may be the personal consequences, an attempt will be made to put a stop to this nefarious practice by exposing it to public cynosure.
We propose to take the readers through a simulated exercise for the import of 100000 MT sugar, taking it through the whole process from choosing of the specifications for sugar to its distribution after arrival in Pakistan.
a. Choosing the specifications of sugar to be imported:
The specifications of sugar to be imported are pretty straightforward and include (1) colour (2) polarisation and (3) size. If any doubts exist then telexed suggestions may be invited from known international commodity dealers like Philip Bros, Cargill, EDF Mann, Sucden, Gill and Dufus, etc and match it with the quality required by the various indentors for sugar in Pakistan. This exercise need not be conducted again and again but can be repeated once in a long while to maintain credibility and improve quality in keeping with international practices. No deviation from specifications without having an addition of a price tag is acceptable as it changes the whole price structure, while allowing it to happen falls under the domain of unfair practices.
b. Determining the delivery period:
As innocent as it may seem, the delivery period becomes a price-related issue of immense importance to the supplier. International trading houses dealing in sugar have vessels standing by or off-port sugar manufacturing countries and the ultimate price is dictated by time and space matched against delivery schedules. At the same time extremely strict enforcement of deliveries without any flexibility tends to increase the price. A regular purchase becomes a spot purchase which is invariably the case in Pakistan. The correct method would be to obtain the delivery period from the indentors and then give block periods with 2-3 weeks in each block for delivery. A very tight schedule tends to be tilted in favour of the favourites shipment schedule. If say 100000 MT sugar has to be imported over a period of 3 months (or 13 weeks) and deliveries have to start at the rate of approximately 30-35000 MT each month starting after 4 weeks, one can safely lay down a schedule as follows:
(1) weeks 4 to 6 – 15/18000 MT + 10% –
(2) weeks 5 to 7 – 15/18000 MT + 10% –
(3) weeks 6 to 8 – 15/18000 MT + 10% –
(4) weeks 7 to 9 – 15/18000 MT + 10% –
(5) weeks 8 to 10 – 15/18000 MT + 10% –
(6) weeks 9 to 11 – 15/18000 MT + 10% –
(7) weeks 10 to 12 – 15/18000 MT + 10% –
A suitable penalty amounting to 10% of the contract value can be laid over the period of 21 days delay in arrival (3 weeks) at the rate of 0.5% per day which should be inbuilt into the letter of credit so as to leave no chance for individual gratis. Any force majeure conditions can be the subject of negotiations later. A 10% Performance Bond can cover non-delivery and except for well defined force majeure conditions no delays should be granted. If anything, TCP should have learnt a lesson in this respect from the UNDOK deal (in which the shipments never materialised) despite the hopscotch of the TCP LC through several continents.
c. Announcing the tender:
Preferably a 2/3 week period should be given but this is better said than done because the request for deliveries are always on an emergent basis and usually short-dated tenders are resorted to. This is not a fault of the Corporation and has to be sorted out at the Ministry concerned, in this case the Ministry of Food & Agriculture in consultation with the Ministry of Finance so that the short-dating of the tender does not add to the price.
d. Date of public tender:
Should invariably be held on Tuesday afternoons. The world commodity markets open on Mondays for the week and Tuesday afternoons would provide the following advantages:
(1) Ample time to international commodity dealers to give prices based on Monday market openings.
(2) Ample time to the representatives of the potential bidders on Tuesday morning to collect Bid Bonds from the Banks in time for the tender.
(3) At least a 3-day period, Wednesday, Thursday and Friday for the finalisation of the tender within the week. There is no reason why the offices cannot be opened after Friday prayers to make sure that tenders are awarded before the Saturday/Sunday weekend and LCs are opened accordingly before the international markets open on Monday.
e. Tender documents:
Except for delivery period or any special instructions, sugar tenders should be a standard document. If any changes from the ordinary have to be intimated this should be so notified as a change from the ordinary in the tender notice and as a deviation sheet attached to the Tender documents.
With few minor differences, uptil now the general practice has been as per paras a to e. No revolutionary change has been suggested as yet, but we now propose significant changes in the opening of the tenders and the process thereafter:-
f. Entry into the Committee Room:
(1) After the Bidders have deposited their Bids, the tender box is then sealed at the given time while Bid Bonds are simultaneously handed over separately. These must be checked at least two hours before the tender opening time by a senior official of a nationalised Bank. He must ensure that the Bid Bonds are in order as per the requirement and there is no discrepancy in the format and the document is authentic. If the Bank official verifies that the Bid Bond is correct then he will issue a Pass for entry into the Committee Room for two persons. They should have been named in the Bid Bond and so authorised to represent the Bidders, negotiate on their behalf and accept the award of tender. In case there is a dispute about the authenticity or correctness about the Bid Bond, there is enough time to solve the issue before the tender opening in consultation with the Bank issuing the Bid Bond, if need be.
g. Opening of the Bids:
The tender committee must include businessmen representatives belonging to the Managing Committee of the major Chamber of Commerce and Industry of each of the four provinces as observers. By the drawing of lots, six commercial reporters, three each belonging to major Urdu and English newspapers must also attend as observers. Their report of the meetings may be the media check on any wrongdoing. One wall of the Committee Room must have a blackboard to permit the Bids to be written down as they are called out, including the deviations. Each deviation must have a price tag on it given by the Bidder so as to correctly evaluate the price given by such a bidder who has given no deviation. The Tender Committee must consult with each other at the end of calling out of all the BIDS and either accept the price tag given by the Bidder (to be added to the price) or give their own ruling for a price tag. The participant Bidders who can remain in the Committee Room are only those who are within 5% of the lowest price. This is to encourage genuine competitive offers to start with otherwise it will become a farcical affair with a high potential for wrongdoing at the very outset. Once all the Bids are in and deviations have been sorted out, lower Bids may 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 passes to enter the Committee Room and those who have not been knocked out in the first round. As each bid is made it must be written on the blackboard and the authorised person bidding made to sign the lesser bid as authentication of his bid. No one is allowed to leave the Committee Room till the bidding is complete.
h. Award of the Tender: At the end of the Bidding if the Committee is satisfied with the price, the tender would be tentatively awarded to the successful bidders, who must be given 48 hours to produce adequate Performance Bonds. During the first 24 hours of the 48 hour period, no fresh bid will be entertained unless there is a price difference in decrease by 5% or more. If such a bid is received, then the original tentative awardee will be immediately notified and given a chance to come up with a competitive bid before the Committee meets again at the end of the 48 hour bid (a) to resolve the fresh bidding and once that is resolved to (b) check the veracity of the Performance Bonds and if found correct to (c) sign the cyclostyled contracts with the figures inserted and deviations if any clearly marked as “deviations”. If found necessary, this meeting may be extended to Friday afternoons but that should be FINAL. In case the Tender Committee feels the price is too high it can scrap the whole tender but it must provide cogent reasons with adequate proof for doing so. By Saturday morning or latest by Sunday the LCs must be opened.
i. Inspections:
Other than the pre-shipment inspections carried out by internationally recognized surveyors, post-shipment 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 must be excessive and besides monetary sanctions, blacklisting must be imposed for a period of time. In case deviations in quality are noted after the pre-shipment inspection, appropriate sanctions must also be made against the pre-shipment inspectors. At no stage must a member of the Corporations be in a position to affect the verdict of the inspectors in any manner. Once post-shipment inspection is done the commodity is now ready for distribution.
We can be more than sure that this is not entirely a foolproof arrangement and can be improved upon a great deal. The idea is to provide food for thought as to why publicity should be lacking in the processing of the tender and since it is the TCP who will be effected most by commodities such as sugar, fertiliser, palm oil and what have you, it behoves the management of TCP to take notice. Before one retires it is incumbent to leave a lasting legacy and what better legacy can the present Chairman TCP, Mr. S. Habeeb Hussain, leave for posterity than a tender system which cannot be called into question? According to rumours and reports, Mr. S. Habeeb Hussain is due to retire on May 11, 1988 which is less than 3 months away, hardly 90 days even. Henry Greber says that “only a person who can live with himself can enjoy the gift of leisure.” If the TCP can really hold down the benchmark of prices, can you imagine the effect on Pakistan’s economy as not only the prices of commodities become more competitive but we are spared UNDOK-trination by vested interests and/or their mentors? We have a right on Mr. S. Habeeb Hussain born out of his long service as a public servant and that right calls on his 39 years of earning the salary paid for by tax-payers to do something constructive and lasting for the economy of Pakistan. If all goes well and an extension is given to the Chairman TCP then he will have a further period to leave an honest mark. His experience and maturity should be tapped in the twilight of his government service to give us a system free of relative prejudice towards favourites and (and favourite enemies) only genuinely concerned with what is good for the Corporation and the country.
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”.
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