How to Bring Accountability and Transparency in Indian Public Procurement System? Other Services

There are couple of institutes/watch dogs for this purpose. But all said and done, we are far away from achieving the overall objective. We need to work hard as we are far behind the developed nations in tracking government spend. It will take years (if not decades) and strong will power from both Central and state governments to reach to that level.

Unless and until government has the information in a structured format and in real time, no MIS can be conducted. In-spite of CVC guidelines asking all the government entities to publish the contract award information on their respective website, nothing is happening. And I think CVC first circulated the notice in 2010–13 and they are still frequently issuing notices to all government entities but still only few are publishing this information. What is the use of contract award information which was awarded two years back? This is again a question of accountability.

I admire European Union which is maintaining a single portal for decades (in the name of TED: Tender Electronic Daily) for all 28 Countries. Please mind all 28 Countries and not few states of a country. Similarly, you go to FPDS (Federal Procurement Data System) where you can trace even a single cent spent by government organizations. Each procurement is having such vast information that in today’s context you will say no no it’s not required. The point is they have developed such a forward looking and foolproof system that is beyond our imagination.

I suggest it is high time to take Public Procurement seriously. And if we start today, it will take at-least 5 years to get a functional and efficiently working system. I wonder when we can develop very complex software for advance countries, why can’t we develop this software for our self. You should know that governments across the globe spend, on an average 15% to 20% of their GDP on public procurement. Indian government entities spend approximately 470 Billion USD through Public Procurement (18% of India's Total GDP of 2.6 Trillion as per IMF 2017 Figs).

470 Billion USD at 70 Rs/USD translates to whopping 32, 90,000 Crores Rupees which is about 33 Lacs Crores Rupees. No surprise, they way Indian economy is growing vis-a vis government’s thrust on infrastructure development, this figure can touch Rupees 50 Lacs Crores in next 5 years. Even if we spend 5000 Crores rupees (which is 0.1% of our annual spend) in getting this system developed, the nation will have long term benefits not only in terms of financial gains but also in terms of bringing transparency and accountability in public procurement function. After all its tax payers hard earned money. So even if we get 3–5% saving in public procurement, it can fund our universal education program.

So, why we have not implemented it so far? who will take this responsibility? What are the challenges? Is the money an issue? Is technology is an issue? Is Changing the constitution is an issue? The answer is NO. Any government which has majority in both the houses and have strong will power can do this. You will remember that after independence there were so many governments which were in majority but none has thought about this. The answer lies in 2 things:

Ability to think and visualize the benefits.
Have a strong will power to implement it.

I am confident this change will bring similar benefits as GST has brought. India is a huge country and it has many challenges. But a strong leadership can convert these challenges in to opportunities.

Now let me touch upon the basic points of this project:

1. If required, amend the constitution so that all entities which are running on tax payer’s money should come under this law. Entities which are even receiving a donation of 1 Rupee from government should also be brought under this system. For example all entities like: Central Government org, state government org/departments, ministries, PSUs, Banks, Educational inst, research institutes, Defense, Railway, Boards, SPV, NGOs, Municipal corporations etc will come under system.
2. Call a national debate, setup expert committee and call for the International tender to submit the specifications of the ideal system.
3. Float the International Tender to develop and operate the system.

In my opinion below IMPORTANT points should be kept in mind while developing a system:

1. MOST Important is follow a logical, hierarchical and standard system for classifying Goods/Products, Services and Works. Similarly for Industry. There are only 3 most popular system (though they are also not perfect). CPV followed by European Union; SIC/NAIC by USA/Canada and UNSPSC developed by united Nations. India can have its desi version. But no shortcut please. As this is going to be most critical part in the whole system. Let me tell you why it is so critical? To answer that let me ask you one question and you will understand the gravity of the subject. In which industry you will classify Tyre of bus/truck? Answers may be: Transport, Chemical, Rubber, Fabricated Products and what not. Similarly in which category you will classify a ball bearing: Bearing itself, fabricated products, steel items, machinery parts, engineering items, mechanical item etc?
   Achieving efficiency (which is the most important objective of Public Procurement function) can only be achieved when “Relevant” opportunities are circulated to is prospective suppliers in timely manner. So what is the pint if a Tyre supplier who has registered in rubber item category and the clerk from purchaser's office has classified it in fabricated item or vice versa.
2. All Public Entities should be given a unique registration code and they should be classified in multiple ways like: Type of org (depending on industry type): Bank/Education Inst/R&D Inst/Oil and Gas/Rly etc. Then type of structure of the entity like: Listed co/NGO/SPV/Ministry/Central Govt Dept/Corporation/Board/Municipal Corp etc.
3. Set specific threshold for 3 different type of procurement, nationwide.
4. Set standard for publishing, tendering/bidding, evaluation, contract award and audit. For example standards of tables, address format, description, length, field type etc.
5. Set standard guidelines for each and every activity like time to respond, evaluation, award etc.
6. Provision for building a strong directory of suppliers.
7. Notification system.
8. Set different threshold for MIS and intelligence. Provision to take immediate action against the responsible person whether from Purchaser side or from supplier side.
9. Publish the data online and let tax payers fire the query and do their own due diligence. This will not only bring transparency but will also bring corruption to almost zero level. And by the way Public Procurement is susceptible to corruption around the World.
10. Set process for continuous improvement and training of stake holders.