What is wrong with public procurement?

Published: September 4, 2018
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The writer is a public policy expert and an honorary Fellow of Consortium for Development Policy Research 
He tweets @hasaankhawar

The writer is a public policy expert and an honorary Fellow of Consortium for Development Policy Research He tweets @hasaankhawar

Prior to the elections, a policy analyst from the PTI reached out to me, asking for my opinion on public procurement in Pakistan and what needs to be improved. She also referred to a few controversial public tenders that attracted media spotlight.

Some believe that the tenders involved massive corruption, while others argue that these irregularities were trivial anomalies blown out of proportion. The truth perhaps lies somewhere in between.

But do we really have such an archaic public procurement system that civil servants have to embrace irregularities, if they want to deliver?

Public procurement in Pakistan is governed by federal and provincial public procurement regulatory authority acts and rules. Most of these have been introduced or updated in the last 10 years and almost all of them are structured on similar lines, laying out detailed procurement procedures to ensure transparent and competitive bidding processes.

These regulations are not always implemented in letter and in spirit. Reasonable timelines and controls, prescribed to encourage healthy competition, often seem unreasonable to impatient politicians leading to innovative means to bypass them.

But despite having an elaborate framework, the procurement authorities remain toothless regulators. They do not proactively assess quality of public procurement or the value for money that it delivers and their objections are rarely taken seriously by line departments.

There is no denying that these regulations do have some glaring gaps. For instance, the regulations cover procurement of goods, services or consulting services. But most of the complex projects like mass transit have been undertaken in the EPC (engineering, procurement and construction) mode, where the same contractor takes responsibility for design, procurement and construction, essentially combining procurement of goods and consulting services. Interestingly, the procurement regulations remain silent on such contracts.

Furthermore, sophisticated engineering techniques used in mega projects are often not covered by cost benchmarks of the government and therefore need approval by the chief executive of the provinces through summaries to create exceptions.

In some cases, there is a need to break the contracts into packets, and award them to multiple contractors to ensure speed and hedge the performance risk. The PPRA regulations also remain quiet on this front.

Much of the project details are covered in specific contracts, which in many cases pre-date the PPRA regulations and are not aligned with international best practices.

Other gaps in these regulations include no mention of cooperative procurement to allow agencies to aggregate their orders and enjoy a better rate, unclear view on negotiations and no provisions for delayed payment compensation or performance-based procurement.

Ironically however, these gaps do not depict the real problem as many of these can be addressed merely by amending these regulations. The biggest impediment instead is the absence of qualified people who are well-versed in procurement regulations.

Neither the Civil Services Academy nor the National School of Public Policy offers any certifications or courses in public procurement. The technical staff also mostly learns on the job, making mistakes on the way that could cost the government billions. Most government departments end up hiring consultants to advise them on complex procurements but ironically they find it challenging even to procure such consultants who could advise on procurement.

Unless and until such capacity is created within government ranks, no policy reform can fix the public procurement system and we are likely to see many such scandals, where public officials will bypass these rules on the pretext of inefficiencies in the system to hide their own incompetence, meet undue deadlines by political masters or seek personalised gains.

Published in The Express Tribune, September 4th, 2018.

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