Enhancing transparency in public procurement

A sound public procurement system that prevents corruption through enhanced transparency and accountability, if ever implemented substantively and meaningfully, can bring multifarious benefits. It can remedy the problem of corruption in the public procurement process. It can maximise value for taxpayers' money by ensuring that the government obtains necessary goods and services and the people are benefitted. It can also stimulate the economy and build overall confidence in government. But even after a decade of the introduction of an Electronic Government Procurement (e-GP), the public procurement process remains riddled with corruption.

A recent study of Transparency International Bangladesh (TIB) has shed light on the troubling state of government procurement in the country. It reveals that the sector is held hostage to monopolistic contractors who dominate the system through collusion, political influence, and market capture. The study shows that in the Ministry of Housing and Public Works, the top 5 per cent of contractors control nearly 75 per cent of the total project value. In the Road Transport and Highways sector, a mere 11 per cent of contractors control a staggering 93.55 per cent of the total project value. Such monopolistic practices not only reduce competition but also inflate costs, compromise project quality, and limit opportunities for new contractors.

As part of the ongoing reform initiative of the public procurement system, the government is reportedly contemplating to abolish the 10 per cent bidding cap. This cap, which disqualifies any bid that exceeds or falls below the quoted price by more than 10 per cent, was initially introduced to prevent contractors from submitting abnormally low bids to secure contracts. This measure, however, has created new avenues for corruption. Contractors have exploited this cap by submitting bids exactly 10 per cent below the quoted price, which indicates collusion and potential information leakage. The exact quoted price is supposed to remain confidential, but some officials disclose this information in exchange for bribes, allowing certain contractors to gain an unfair advantage. Furthermore, when multiple contractors submit identical bids, the contract is awarded through a 300-mark metrics, which predominantly favours those who have won previous contracts. Thus the bidding process systematically prevents the entry of new bidders, while certain parties keep getting multiple projects. Abolishment of the 10 per cent bidding cap is, therefore, could be a welcome move to make public tendering process more competitive.

Then again, removal of the 10 per cent cap raises concern about the resurgence of the old problem of contractors colluding to propose abnormally low prices. The authorities will have to devise a strategy to deal with the abnormally low bids as well, because entertaining such bids may lead to substandard work. In this regard, the Korean model, which involves averaging the prices of all submitted bids and awarding the contract to the bidder whose price is closest to the average, may offer a viable solution. This could be a potential way to mitigate the risks of both underbidding and overpricing.

Overall, there is a need for systematic reform and targeted measures at every stage of the supply chain. Corruption in the procurement process often starts with the deliberate inclusion of biased specifications that favour specific suppliers. Biased conditions in the tender document or vague specifications often undermine fair competition. Therefore, it is crucial to ensure that tender specifications are reviewed and validated by independent experts. Additionally, drafting tender conditions and technical specifications in a clear, comprehensible manner and publishing all relevant information on digital platforms can encourage broad participation. However, reforms in selection processes alone will not be enough. Rigorous supervision and monitoring of project execution are crucial to ensuring accountability and adherence to standards.

Bangladesh spends approximately US$30 billion annually on public procurement, constituting around 45 per cent of the national budget and 85 per cent of the Annual Development Programme (ADP). Given the magnitude of this expenditure, a transparent and accountable procurement system is crucial for effective utilisation of government funds. Otherwise, corruption in the procurement process will continue to drain the public exchequer.

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