India is one of the few countries that does not have a law for public
procurement—and in the context of the scams that have occurred over
the past 12 months, this cannot go unnoticed
It is great to have the debate on Lokpal and to be able to get a
strong Lokpal to tackle corruption. What Annaji and his colleagues
have done in terms of trying to get a strong Lokpal is unparalleled.
However, let us remember that having a strong Lokpal is just one part
of the solution and many other changes would have to be made as I have
already elaborated in a previous Moneylife article. (Read: 'Tackling
multi-faceted corruption in India: Here are a few critical issues in
establishing the Lokpal and Lokayuktas')
Apart from a strong and independent Lokpal, a range of aspects would
have to be addressed to eradicate corruption in India. These include:
(a) Sound corruption-retarding policies relating to the use of natural
resources such as land (and its acquisition), mining, underwater
exploration, spectrum, and the like, for a variety of purposes. All of
these sectors have been prone to scams.
(b) An appropriate public procurement Act relating to the sale/lease
of natural (public) resources which have again seen the largest and
biggest scams.
(c) Political reforms with transparent (state) funding of elections.
(d) Regulation of critical sectors like financial services, to prevent
fraud and corruption in public/private enterprises so as to safeguard
people's money (savings), avoid over-indebtedness and the like.
(e) Rationalisation of various taxes to incentivise tax payments and
facilitate better tax collections.
(f) Creation of a citizen's grievance-redressal system that ensures
all citizens gain access to all basic services at an appropriate cost
and when in need of the same.
(g) And advocacy and awareness campaigns that ensure that citizens
commit themselves to not engaging in corrupt practices such as payment
of bribes, evasion of taxes, commission of frauds, and the like.
I start with public procurement as it is a very huge issue and yet, it
has not been subject to sufficient regulation. In fact, India is one
of the few countries that does not have a law for public procurement
and in the context of the multi-faceted scams that have occurred over
the past 12 months, this cannot go unnoticed. Let us remember that
many of the scams that were unearthed during the past 12 months have
centered on public procurement related to natural resources like land,
water, mining, exploration, spectrum, and the like. This issue assumes
greater importance when one considers the statement of the prime
minister on 25th August in which he emphasised the need for a public
procurement law to end corruption. He mentioned this in June 2011i
and he has said it now again—a very valid point indeed. Given this, it
would not be naïve to assume that such a law would soon become a
reality in India.
While a Public Procurement Act in India is something that is overdue,
what should such a law containii in order to be effective in checking
corruption on the ground? I outline some fundamental issues that
should be considered while drafting such a public procurement law. I
will discuss these in detail later, in a three-part article.
The first deals with transparency in public procurement. The law must
ensure that there is an adequate degree of transparency in the whole
(public) procurement cycle so as to facilitate fair and equitable
treatment for all potential suppliers. Transparency must be maximised
in competitive tendering and precautionary measures must be in place
to enhance integrity, for (any) exceptions made to competitive
tendering (in case of urgency and/or national security).
Among other things, the law would also have to ensure the following aspects.
1. All potential suppliers/contractors must have clear and consistent
information with regard to the whole procurement process and
understand it well.
2. Where required, the degree of transparency may be adapted according
to the recipient of information and the stage of the cycle. In other
words, confidential information (trade secrets) would need to be
protected to ensure a level playing field for potential suppliers, and
also prevent possible collusion among stakeholders.
3. The public procurement process is applied equitably/fairly across
the entire cycle by all stakeholders and is perceived to be fair and
equitable.
4. The drive for transparency does not create unnecessary 'red tape'
and inefficiency in the public procurement system, thereby causing
unnecessary and huge delays.
5. Key decisions made on public procurement are well-documented and
easily accessible for examination by various stakeholders, as
appropriate.
6. Relevant stakeholders (including auditors) are able to check and
determine whether specifications are unbiased and/or award decisions
based on fair grounds.
7. Clear rules and concrete guidance must exist with regard to the
choice of the procurement method and on exceptions to competitive
tendering (if any).
All of this suggests that good procurement regulation and systems must
not be unnecessarily complex, costly and/or time-consuming, as they
could then cause huge delays (in the procurement) and discourage
participation, especially by micro, small and medium enterprises
(MSMEs).
In fact, excessive red tape in such public procurement regulation may
create significant opportunities for (fresh) corruption and this would
surely result in the whole purpose of enacting the legislation
becoming counter-productive.
Therefore, ensuring an adequate level of transparency that enhances
corruption control, while not impeding the efficiency and the
effectiveness of the public procurement process, is a challenge that
needs to be met by using the mantra of 'balanced enabling regulation'.
I hope that the powers-that-be keep these aspects in mind while
drafting the much-needed Public Procurement Act in India.
procurement—and in the context of the scams that have occurred over
the past 12 months, this cannot go unnoticed
It is great to have the debate on Lokpal and to be able to get a
strong Lokpal to tackle corruption. What Annaji and his colleagues
have done in terms of trying to get a strong Lokpal is unparalleled.
However, let us remember that having a strong Lokpal is just one part
of the solution and many other changes would have to be made as I have
already elaborated in a previous Moneylife article. (Read: 'Tackling
multi-faceted corruption in India: Here are a few critical issues in
establishing the Lokpal and Lokayuktas')
Apart from a strong and independent Lokpal, a range of aspects would
have to be addressed to eradicate corruption in India. These include:
(a) Sound corruption-retarding policies relating to the use of natural
resources such as land (and its acquisition), mining, underwater
exploration, spectrum, and the like, for a variety of purposes. All of
these sectors have been prone to scams.
(b) An appropriate public procurement Act relating to the sale/lease
of natural (public) resources which have again seen the largest and
biggest scams.
(c) Political reforms with transparent (state) funding of elections.
(d) Regulation of critical sectors like financial services, to prevent
fraud and corruption in public/private enterprises so as to safeguard
people's money (savings), avoid over-indebtedness and the like.
(e) Rationalisation of various taxes to incentivise tax payments and
facilitate better tax collections.
(f) Creation of a citizen's grievance-redressal system that ensures
all citizens gain access to all basic services at an appropriate cost
and when in need of the same.
(g) And advocacy and awareness campaigns that ensure that citizens
commit themselves to not engaging in corrupt practices such as payment
of bribes, evasion of taxes, commission of frauds, and the like.
I start with public procurement as it is a very huge issue and yet, it
has not been subject to sufficient regulation. In fact, India is one
of the few countries that does not have a law for public procurement
and in the context of the multi-faceted scams that have occurred over
the past 12 months, this cannot go unnoticed. Let us remember that
many of the scams that were unearthed during the past 12 months have
centered on public procurement related to natural resources like land,
water, mining, exploration, spectrum, and the like. This issue assumes
greater importance when one considers the statement of the prime
minister on 25th August in which he emphasised the need for a public
procurement law to end corruption. He mentioned this in June 2011i
and he has said it now again—a very valid point indeed. Given this, it
would not be naïve to assume that such a law would soon become a
reality in India.
While a Public Procurement Act in India is something that is overdue,
what should such a law containii in order to be effective in checking
corruption on the ground? I outline some fundamental issues that
should be considered while drafting such a public procurement law. I
will discuss these in detail later, in a three-part article.
The first deals with transparency in public procurement. The law must
ensure that there is an adequate degree of transparency in the whole
(public) procurement cycle so as to facilitate fair and equitable
treatment for all potential suppliers. Transparency must be maximised
in competitive tendering and precautionary measures must be in place
to enhance integrity, for (any) exceptions made to competitive
tendering (in case of urgency and/or national security).
Among other things, the law would also have to ensure the following aspects.
1. All potential suppliers/contractors must have clear and consistent
information with regard to the whole procurement process and
understand it well.
2. Where required, the degree of transparency may be adapted according
to the recipient of information and the stage of the cycle. In other
words, confidential information (trade secrets) would need to be
protected to ensure a level playing field for potential suppliers, and
also prevent possible collusion among stakeholders.
3. The public procurement process is applied equitably/fairly across
the entire cycle by all stakeholders and is perceived to be fair and
equitable.
4. The drive for transparency does not create unnecessary 'red tape'
and inefficiency in the public procurement system, thereby causing
unnecessary and huge delays.
5. Key decisions made on public procurement are well-documented and
easily accessible for examination by various stakeholders, as
appropriate.
6. Relevant stakeholders (including auditors) are able to check and
determine whether specifications are unbiased and/or award decisions
based on fair grounds.
7. Clear rules and concrete guidance must exist with regard to the
choice of the procurement method and on exceptions to competitive
tendering (if any).
All of this suggests that good procurement regulation and systems must
not be unnecessarily complex, costly and/or time-consuming, as they
could then cause huge delays (in the procurement) and discourage
participation, especially by micro, small and medium enterprises
(MSMEs).
In fact, excessive red tape in such public procurement regulation may
create significant opportunities for (fresh) corruption and this would
surely result in the whole purpose of enacting the legislation
becoming counter-productive.
Therefore, ensuring an adequate level of transparency that enhances
corruption control, while not impeding the efficiency and the
effectiveness of the public procurement process, is a challenge that
needs to be met by using the mantra of 'balanced enabling regulation'.
I hope that the powers-that-be keep these aspects in mind while
drafting the much-needed Public Procurement Act in India.
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