Council: There is a need to enact a Public Procurement Act, states the “review report on the public procurement system” by the good governance committee of the National Council (NC).
Presenting the report in the House yesterday, the committee’s chairperson Tempa Dorji said public procurement is a crucial pillar of service delivery for any government. He said a well governed public procurement system is imperative for fostering public sector efficiency and establishing citizens’ trust.
“The existing public procurement system is governed by the provisions of the Public Procurement Rules (PPR) 2009, which bears no legal teeth if contested before the court of law,” the committee reported.
The report states that given the ever growing size of public expenditure on procurement of works, goods and services, it may be necessary to have legislation in place to ensure a robust public procurement system that will withstand all forms of unwarranted manipulations.
In addition, the powers and functions of various stakeholders need to be clearly defined in the law that will further ensure quality of works, goods and services procured. “Therefore, there is a need to have a separate Public Procurement Act.”
Citing Transparency International (TI), the committee reported that countries spend 15-30 percent of their GDP on public procurement. Bhutan may be spending around 17.6 percent of GDP on procurement annually, the report added.
This, however, excludes national level budget allocation for mega projects such as hydropower and widening of the northern-east-west highway. Inclusion of this may push procurement spending well beyond the 30 percent limit of many countries, according to the committee.
In some of the dzongkhags, expenditure on procurement constitutes around 40-45 percent of their annual budgets.
Despite the rules in place, the committee reported that public procurements continue to face the challenge of inferior quality of works, goods and services. This had lead to inefficient utilisation of public resources.
The committee’s chairman said awarding of tenders to the lowest quoted price is one of the main causes of poor quality work. As per the PRR 2009, the tender committee is required to award the tender to the “lowest evaluated” bid.
The lowest evaluated bid is defined as “the bid which offers the best value for money, evaluated on the basis of various objective criteria set out in the bidding document. It does not necessarily mean the ‘lowest quoted price’”.
However, tenders are awarded to the bidder with the lowest quoted price.
Such gaps between the intent and actual awarding of contract has arisen because of fundamental flaws with the bid evaluation system.
The software “E-tool” is employed to generate scoring for the technical capacities of the bidders. Whoever scores a minimum of 65 percent is deemed qualified to be evaluated for the financial bid. While the use of the E-tool is claimed to have enhanced the efficiency of the bidding processes and provided a level playing field for all contractors under large and medium categories to participate in the bid, the technical capacity scorings are not added to the final scoring.
This has resulted in the selection of a bidder based on the lowest quoted price and not on the level of technical capacity, according to the committee’s findings. Such an approach has often led to tenders being awarded to a bidder other than the one who has better experience and technical capacity. As a result, most contracts have landed up compromising on the quality and timely completion of works.
Currently, there are 3,739 licensed contractors with more than 3,000 under the small category, 349 under medium, and 184 under large.
Lack of adequate skills to do a contract business could also be a reason for quoting unreasonably low prices. Before submitting the bid, a contractor is expected to carry out a thorough assessment of the work required to be executed including a visit to the site and accordingly work out the budget estimate.
To a great extent, the committee reported, quoting unreasonably low prices is an indication that such expected due diligence is not exercised by the concerned contractor thus, reflecting poorly on his/her level of professionalism. “It can also be assumed that when a contract is won at an unreasonably low price, the said project has to be executed at a huge loss, which will eventually have an impact on the long term sustainability of the business. This is another indication of lack of professionalism of a concerned contractor.”
The primary mandate of the Bhutan Standards Bureau (BSB) is to develop, promote and oversee implementation of national standards to ensure quality of works, goods and services. The committee observed that other than focusing on setting national standards, and testing and certification services, the BSB has not played an active role in overseeing the implementation of national standards to ensure quality of works, goods and services. “Therefore, there is a clear gap between the mandate assigned to the BSB and its actual involvement in overall quality assurance.”
Another issue concerning the quality of works is setting of unrealistic project timelines by the procuring agencies. The procuring agencies’ project timelines are determined by the financial year of the government.
“In the haste of completing the works before that particular financial year ends, seasonality aspect of the project timeline is often disregarded,” the report stated. In addition, Section 44.4 of Standard Bidding Document stipulates that rain and snowfall will not be considered as forced majeure.
However, blacktopping of roads and concreting of structures are technically not supposed to be carried out during monsoons and winters as that will adversely affect the quality.
The committee studied the price difference between direct purchase and the one routed through the tendering process on the recent procurement of flight tickets for a delegation travelling to Geneva. It was found that the price of the flight ticket purchased through tendering process for business class is higher by Nu 70,946 per person, and for the economy class by Nu 15,510 per person.
“This shows that there is definitely a scope for the government to rethink on procurement of certain goods and services to ensure efficient utilisation of limited financial resources.”
As highlighted in the earlier section of the report, there is a lack of effective quality control mechanism both on internal as well as external fronts. Despite specification laid down in the Standard Bidding Document requiring a contractor to develop quality assurance plan and the project manager from the procuring agency to conduct regular quality supervision, it is observed that this provision is not enforced uniformly across procuring agencies.
The committee recommended that there is a need to strengthen the quality control roles of both the procuring agencies and the BSB.
Lack of transparency with the management of the E-tool system, and bid evaluation reports not being shared openly with the bidders have raised questions amongst contractors on the credibility of the procurement system. The issue of credibility pertains to potential manipulation of the information fed into the E-tool system, and collusion between the concerned official of the procuring agency and the contractor/supplier that result in unfair award of a contract, according to the report.
The committee recommended that transparency of E-tool management be strengthened and the evaluation reports be shared with all the bidders while dispensing the Letter of Intent.