Procurement: Centralisation of irregularities?

The Ministry of Finance (MoF), reportedly, has floated a proposal to put in place a separate government division that would handle all government procurement. But the planning minister has poured cold water on the MoF enthusiasm as he thought that it would be proper to examine the issue more minutely before taking a final decision on it. He has clearly indicated that he does not support the idea. 

Prior to judging the merit of the proposal, it is important to know the reasons why the MoF has come out with the idea of creating a separate entity at the centre to handle all government procurement of goods and services.

There is no denying that the government spends a lot of money on procurement of goods and services and the volume of both procurement and cost thereof have been increasing steadily. The cost of public sector procurement was estimated at around $6.0 billion a couple of years back. With the start of a few mega development projects during the last couple of financial years, the spending on procurement invariably has gone up further.

However, there is nothing to be surprised about the rise in spending on procurement. But the MoF has a fear that despite the introduction of so-called e-procurement, made under stringent procurement act and rules, a substantial sum is either wasted or misappropriated. The contractors/suppliers with the connivance of an unscrupulous section of officials--- it is not that difficult to locate them---, allegedly, innovated unique ways of bypassing the procurement rules and embezzling a sizeable part of the funds spent on procurement.

Stories about improper spending of funds on development projects and public sector procurement do very often hit the newspapers headlines these days. The e-procurement or enforcement of procurement rules has failed to stop irregularities. Unofficial estimate puts the average misappropriation of procurement funds at around 30 per cent. Many feel that the estimate is a conservative one.

Now the question is: Will the situation improve if one single entity at the central administration is given the responsibility of procuring all goods and services? That is very much unlikely.

Irregularities are now widespread in all the public offices that are involved with procurement activities. In fact, the vice is now decentralised. If the MoF proposal is materialised, it would be centralised. The officials of one particular division or entity would carry out the acts of procurement and the unscrupulous section of them would be, as a natural outcome, involved in financial irregularities.

Experts do feel that creation of one single entity would not help combat corruption in procurement system. Rather it would bring in another factor---inefficiency---in the system. The people now involved in the job in different government offices have developed the expertise in procurement side by side with some otherwise unwanted traits. That, in probability, will be missing, at least, for sometime in the proposed centralised procurement outfit.

The truth is that the act of making procurement clean as far as practicable is not that simple. The quality of overall governance in the country has to do something with the rot that has been prevailing in the public procurement for decades.

Irregularities and procurement are synonymous in this country. However, the scale of the vice varies with the change of guards of the statecraft. Almost all governments have been indulgent to the people involved in the crime. But some have been found to be more indulgent to their own men reaping financial benefits out of public procurement. Unscrupulous officials, however, are always on their toes to extend their hands of cooperation.

So, the solution that the MoF has found to rid the public procurement system of graft and irregularities is of no use. What is important here is the full adherence to public procurement act and rules framed under it. That is not possible without the honest desire on the part of the government. The governments have been rather reluctant to demonstrate such desire since it would hurt the unjustified interests of a section of people who are loyal to them, politically.

But successive governments have been oblivious of the hard truth that they have been allowing a small section of dishonest people to amass wealth through public procurement at the cost of millions of taxpayers every year. The fact remains that taxpayers do get discouraged witnessing the widespread plunder of their money. The government borrows from external sources, which is also repaid with their tax money. There is no reason for the taxpayers to support this kind of development.

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