The Financial Express

Streamlining Public Procurement

| Updated: September 10, 2020 20:53:31

Streamlining Public Procurement

A sound public procurement system contributes directly to the proper utilisation of invested resources and thereby wields a positive influence on economic development of a country. Optimising the utilisation of public resources through a good procurement system is also critical for improving investment climate and alleviating poverty alongside expediting growth. The Government of Bangladesh (GoB) has therefore been striving for around two decades to bring about systemic improvements in the country's public procurement system. The country's spending in public procurement was estimated to be USD 24 billion during 2018-19 fiscal year, which accounted for 45.2 percent of annual budget and 8 percent of GDP.

An elaborate public procurement system has been established in the country by now through implementation of two reform projects, with a third one currently in progress. The system includes a procurement act or primary legislation, secondary legislation or rules, as well as a set of standard bidding documents. The Central Procurement Technical Unit (CPTU) under the Implementation, Monitoring and Evaluation Division of the Ministry of Planning acts as the nodal agency in the system. An extensive capacity development program has already been institutionalised alongside bringing the entire procurement process online through a comprehensive electronic government procurement (e-GP) portal. Besides, 1,325 public sector organizations in Bangladesh out of a total 1,362 as well as 65,559 bidders have registered with the e-GP system by 2018-19 fiscal year. 

However, the GoB has made a series of amendments to the legal framework of public procurement since 2009, and further amendments also appear to be under consideration or in the pipeline. In this backdrop, the World Bank undertook a comprehensive assessment of the public procurement system (PPS) in Bangladesh, the findings of which have been presented in a report released in June this year. The following is a gist of the report's observations.   

The major strengths of PPS in Bangladesh include: existence of a single legal framework comprising the Public Procurement Act 2006 (PPA-2006) and the Public Procurement Rules 2008 (PPR-2008), which covers a nodal policy unit in the shape of CPTU, standard procurement documents, and a functional complaint redress system having independent appeal mechanism. There also exists a centralised national e-GP system that caters to the whole cycle of procurement beginning with procurement planning, preparation and submission of bid documents online, bid evaluation and approval, to payment processing. It is governed by a comprehensive guideline that clearly establishes security aspects of the system and availability of a range of procurement methods including multistage procedures for large and complex procurements, with open tendering method (OTM) being the preferred mode that accounted for 80 percent of contracts processed in 2018-19.

The World Bank report has also pointed out numerous weaknesses in the PPS as well as their possible solutions. For example the use of price cap (rejecting bids over or below 10 percent of estimated cost) in national OTM for works has resulted in market distortion like decrease in average number of participants from 4.2 to 2 per procurement package; increase in single tenders in OTM packages from 20 percent to 50 percent; and small bidders getting marginalised while large bidders monopolising the system. Possible solutions include the removal of 10% cap from the OTM for works and adopting alternative pathways for tackling the issue of abnormally low bids. 

The Limited Tendering Method (LTM) for works procurement has provisions like price cap, lottery for deciding on winners in case of tied bids, and non-requirement of past experience, which were added to the PPA in 2009 through amendments. But this is not consistent with international good practices and has often resulted in failed constructions, delays and cost-overruns. It has also been found that most of the small and new bidders are not getting the intended advantage, as large bidders can also participate in the tendering process. Possible solutions to this problem include: removal of ±5% cap and lottery provisions from LTM; assessing how LTM can be used for according preferential treatment to small and medium bidders; and amending PPA/PPR to incorporate provisions for promoting SMEs in LTM. 

The sanction and debarment process in the PPS suffers from lack of independent review except through judicial appeal, as decision by the head of procuring entity is final. Besides, the stipulation of debarment is being applied inconsistently by the entities with regard to duration and extent of debarment. Possible solutions to this include introduction of independent debarment process with provision for temporary suspension by entity heads, and issuance of detailed guidelines on the debarment procedure.

The CPTU has limited capacity because of its legal structure, dearth of autonomy in decision-making, inadequate staffing cum analytical or research capacity, and substantial outsourcing to external experts and firms. This state of affairs is quite unsatisfactory for regulating and monitoring procurement by over 1,300 organizations and meeting the increasing demand for e-GP services. Converting the CPTU into proposed Bangladesh Public Procurement Authority (BPPA) by increasing its authority and autonomy is therefore under active consideration of GoB. However, it should be fast-tracked by prioritising in-house institutional cum technical capacity and gradual reduction in dependence on external support.

The implementation of development projects is often delayed as approval of bid evaluation reports at levels higher than the procuring entities require 45 to 60 days. This can be rectified by increasing procurement approval thresholds at the agency level alongside strengthening accountability mechanism, enhancing the use of framework agreements, and creating provisions for electronic catalogues or e-marketplaces.

Unfortunately, about 70 percent of the contracts are not completed on time, causing delays and cost overruns and compromising the value-for-money. Besides, lack of strategic procurement planning and analysis often leads to higher procurement cost, lower performance, and failure of the bidding process. Possible remedies include rolling out new electronic contract management (e-CMS) module of e-GP and its proper monitoring, and scaling up citizens' monitoring of contract implementation. Besides, initiating capacity development program on contract management, as well as strategic procurement analysis cum planning at the organizational and sector levels would also help.

The writer is a retired Additional Secretary and former Editor of Bangladesh Quarterly.

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