Citizens' Issues
How the country can ensure transparency in public procurement through an appropriate law

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.

  iiThis article draws on several resources including information from various civil society organisations, multi-lateral and bi-lateral agencies, international organisations like the Organisation for Economic Co-operation and Development (OECD) and other stakeholders. They are gratefully acknowledged.

(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments).


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