Commission and corruption: Monopoly club nibbles at trillion-rupee development budget

Bureaucracy tailors projects in line with the demand of bidders that offer the largest cuts

ISLAMABAD: The companies that win government contracts of work and supplies have made a ‘monopoly club’ in the country.

They take away hefty sum of taxpayer money every financial year by paying cuts to the project-supervising bureaucracy. Over the past about five years, they have been nibbling at the development budget of over a trillion rupees a year – the federal and four provincial development budgets put together.

A mafia of contractors and suppliers has spun its web around a network of top and middle-level project bureaucracy for cuts and commissions.

The members of this mafia compete for contract awards and supply orders that help both sides (bidders and tender-issuing authorities) to take home the second largest amount of black money – after the amount evaded in taxes.

A money-influenced ‘club’ thus forming up has formidable powers to manipulate the politico-economic decision-making.

It is not that the government did not take steps to stop this network from spinning out of control. The Public Accounts Committee (PAC), the Public Procurement Regulatory Authority (PPRA) and the National Accountability Bureau (NAB) have been the three major instruments functioning since long. But to no avail. The truth is that it is impossible to do business with state enterprises and its line departments without paying the relevant officials a cut on the award of project works or supply orders.

The country has no law to protect those who refuse to pay the commission while bidding for a contract or struggling to get money that is withheld by the bureaucracy during mid-project, for not being paid the promised cuts.

Neither PPRA nor NAB, even the Supreme Court of Pakistan has ever taken up a case to determine whether a businessman was lawfully robbed at the hands of the commission mafia.

The web

Let us get into the web of this club and find out how the commission mafia operates with such impunity that no institution can punish its operators. The free-for-all environment (for those who can enter the club) helps the relevant bureaucracy to tailor projects and supplies according to the demand of the bidders that offer the largest cuts.

They offer cuts at the following tiers: the project conception and prioritisation stage, the fund allocation stage, the cost escalation stage, the contract award stage, the performance-monitoring stage and at the stage when the watchdog (media and legal institutions) are to be prevented from getting access to the dark side of this game. Numerous projects and supplies in the annual development plan gobbling up hundreds of billions of public money are ghost and a number of supplies are ordered only to create business for obtaining cuts and commissions from the bidders.

A fresh peep into this network helps to find out that the club members help the heads of government departments (secretaries) dealing with development-budget finance in creating projects and supplies (especially imports) that have two features: either not to be used at all, or to ensure upfront cost escalation. No government institution is equipped with monitoring instruments to detect such ghost projects, supplies and cost escalations. This curse is so frequent and widespread that now it has developed into the biggest national scandal after the menace of terrorism.

In cases the line department officials are refused the cuts, the amounts payable to contractors and suppliers at the end of delivery or on completion of works are withheld indefinitely. Most businessmen cannot afford to undertake such adventure of denying the cuts, as the money stuck in works and supplies happens to be the backbone of their finances.

Over a trillion rupees worth of projects and supplies are on tenders every year. Officials that deal with the pricing, bidding and payment on these deals charge 20-25% of the project and supplies cost. It could be 30% for allowing illegal and unwarranted cost-escalation on works of the government.

In countless number of cases, the cut happens to be even more than that. Even ‘special commission’ is demanded for allowing special escalations in the project cost. These cuts are taken by the secretaries of the line departments. Contractors and suppliers that would pay up so heavily would obviously not make deliveries of standard and would not meet per international benchmarks in project performance.

This club has lately taken into its folds the Chinese companies whose agents gradually edged out most of the local and other foreign companies. These companies, especially in business with OGDC, Wapda, Pakistan Railways, Atomic Energy Commission and a number of provincially operating line departments are notorious for offering substandard materials and outmaneuvering their competitors at the bidding, price-escalation and project-money releasing stages.

They are now also into the business playing agent in imports to Pakistan of the EU and US-origin materials.

The writer has worked with major newspapers and specialises in analysis of public finance and geo-economics of terrorism

Published in The Express Tribune, May 11^th,  2015.

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