How transparency and competitive bidding could have averted VFS visa fiasco

The recent outrage over the outsourcing of Sri Lanka›s visa issuance to VFS Global stemmed from two controversies: 1) the secretive selection process of VFS Global without broader consultation and 2) neglecting value for money by not considering alternatives.

Addressing two key gaps in Sri Lanka›s public procurement system could have prevented the uproar: 1) lack of transparency and 2) excessive reliance on cabinet discretion over competitive bidding.

Transparency  could have facilitated public consultation

The first point of contention is the secrecy and lack of consultation surrounding the decision to grant VFS Global the contract. The public, and even the Parliament, learned crucial details about the terms and conditions of the handover—such as service fees, investment and contract duration—only through ad-hoc statements by the authorities after VFS Global began operations. This, too, was in response to the backlash following a viral video criticising VFS Global›s management.

By the time the details emerged, a 12-year contract had been signed with the company, making any stakeholder intervention difficult without risking legal repercussions. Some details, such as the incentives provided to VFS Global and the KPIs set out in the contract, are yet to be disclosed. This lack of transparency has undermined public trust and hindered stakeholders› ability to scrutinise the deal effectively.

Proactively disclosing this information before VFS Global began operations could have facilitated public consultation and eased the outcry. In fact, such transparency requirements are already mandated in Sri Lanka›s procurement guidelines and the Right to Information (RTI) Act. For instance, Regulation 20 of the RTI Act mandates the proactive disclosure of signed contracts, while Section 9 mandates the disclosure of project justifications, status of bid evaluations, feasibility studies, bidder details, and complaints mechanisms three months before project initiation.

However, in the case of VFS Global, the only official statement on the matter was a brief mention on the cabinet office›s website of the cabinet approval of the project in December 2023. In lieu of the lack of proactive disclosure of information, Verité Research has officially filed an RTI request with the Public Security Ministry, requesting for the cabinet memoranda submitted by the Ministry to the Cabinet as well as the report by the Cabinet-appointed evaluation committee justifying the selection of VFS Global. In fact, compliance with proactive disclosure requirements of the RTI Act is generally low in Sri Lanka. A study by Verité Research on adherence to Section 9›s requirements in sixty large public infrastructure projects revealed that only 25% of the required information was publicly available as of 2023.

Competitive bidding could have assured value for money

The second controversy is that VFS Global, which, according to the minister of public security, made an unsolicited proposal (USP) to the ministry to operate the visa issuance process, was selected without going through a competitive bidding process and, as such, considering alternatives. Instead, the cabinet approved the contract on 11 December 2023 based on recommendations from a committee appointed by the cabinet three months prior. The Public Security Minister justified the absence of a tender process by claiming they «believed» no competitors would likely challenge VFS Global due to its market dominance, and noting that many other procurement contracts are awarded without tender.

While Guideline 3.5 of Sri Lanka›s Procurement Guidelines (2006) allows for such cabinet discretion and deviations from competitive bidding in the case of a single-source supplier, this is permitted only after exhausting all other options and establishing that no benefit can be gained from competition. The minister›s claim that no competitors could challenge VFS Global does not justify bypassing competitive bidding.

Furthermore, the Cabinet›s decision was based on recommendations from a committee whose composition and expertise remain unclear, and allegedly without a detailed technical evaluation or feasibility study. Moreover, the cabinet›s expertise in scrutinising and evaluating procurement decisions is questionable. This lack of oversight is particularly concerning as VFS Global was granted a virtual monopoly, giving it discretion on setting service fees for visa issuance to all foreigners visiting Sri Lanka for 12 years.

Adverse consequences

The financial stakes of the contract, combined with the lack of consideration of alternatives, have fuelled allegations of potential corruption. For example, there is still no clear justification for VFS Global›s USD 25 visa fee and the 12-year contract term, which the Public Security Minister claims is to recoup a USD 200 million investment. In fact, opposition MPs have questioned the necessity of such a substantial investment for a visa issuance operation. Allegations of failing to consider other viable options, such as updating the current system operated by Mobitel, which could have been accommodated for USD 1 per visa, have intensified scrutiny.

Additionally, tourism industry stakeholders have expressed concerns about the high fees and the complexity of the website currently operated by VFS Global for visa issuance compared to the system that existed prior, stating that these factors have made obtaining a tourist visa to Sri Lanka more difficult, expensive, and uncompetitive than to other countries in the region. Consequently, they warn Sri Lanka may not meet the 2024 tourism target of 2.3 million visitors.

A transparent, competitive bidding process considering all options would have addressed these concerns, preventing the backlash and potential harm to the tourism industry. This approach would have cultivated greater trust and confidence in the government›s decision, even if VFS Global was ultimately deemed the best option.

In fact, this controversy highlights a pervasive issue in Sri Lanka: the frequent bypassing of competitive bidding in public procurement in favour of cabinet-approved unsolicited proposals (USPs). Globally, competitive bidding is considered the best practice for public sector procurement. It enhances transparency, reduces corruption by limiting favouritism and vested interests, and ensures the best value for money. By contrast, projects initiated as USPs often lack transparency and are prone to corruption, fraud, and cost escalations unless tightly regulated. However, the Sri Lankan government often approves high-profile projects through the cabinet with the recommendations of ad-hoc evaluation committees, even when viable competitors are available.

Between 2010 and 2015, Verité Research identified 18 unsolicited public infrastructure projects worth USD 3,416 million, approved by the cabinet based on the recommendations of the now-defunct Standing Cabinet Appointed Review Committee (SCARC). These projects, including the Southern Expressway extension, Mattala Airport, and the Gampaha Attanagalla Water Supply project, have frequently been plagued by controversies related to questionable feasibility, cost overruns, and corruption. In fact, this issue extends across various sectors, exemplified by the recent case against former Health Minister Keheliya Rambukwella, who was accused of using the economic crisis to bypass standard tender processes in medicine procurement to purchase substandard medicine, allegedly causing much harm to patients as a result.

The way forward

To address this issue, it is essential to establish an oversight mechanism to regulate and limit the incidence of USPs and deviations from competitive bidding in public procurement. Additionally, cabinet discretion should be eliminated from decision-making related to procurement, and competitive bidding should be mandated at all times when competition is possible and alternatives are available.

In conclusion, adhering to critical public procurement principles like transparency and competitive bidding could have prevented the initial backlash over the VFS Global controversy. These practices build confidence in the government›s commitment to due process in procurement and could help avoid similar controversies in the future.

(Mathisha Arangala is a lead economist at Verité Research and Sankhitha Gunaratne is head of governance and anti-corruption at Verité Research.)