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Procurement Commission in the 19th Amendment: Will it slow Government to a crawl?

Tuesday, 24 March 2015 00:04 -     - {{hitsCtrl.values.hits}}

Many believe that procurement of goods and services by Government is pervaded by corruption. One proposed remedy is to regulate it through a Constitutional body known as the National Procurement Commission (NPC). Though a relatively uninteresting topic in the context of the high-profile changes included in the 19th Amendment, it could have significant impact on the working of Government and deserves attention.                       The proposed remedy The NPC is to have five members, of whom three should have experience in procurement, accountancy, law or public administration. The appointment and removal procedures involve the Constitutional Council. The NPC has powers to summon witnesses and documents. It shares many characteristics with independent commissions. The function of the Commission is set out in Article 156C(1) as being that of “formulat[ing] fair, equitable, transparent, competitive and cost effective procedures and guidelines, for the procurement of goods and services by all government institutions.” It is noteworthy that “efficient” and “timely” are not included among the adjectives.   The functions are spelled out in Article 156C(2): (a) Monitor and report to the appropriate authorities, on whether all procurement of goods and services by government institutions are based on procurement plans prepared in accordance with previously approved action plans; (b) Monitor and report to the appropriate authorities on whether all qualified bidders for the provision of goods and services to government institutions are afforded an equal opportunity to participate in the bidding process for the provision of those goods and services; (c) Monitor and report to the appropriate authorities on whether the procedures for the selection of contractors, and the awarding of contracts for the provision of goods and services to government institutions, are fair and transparent; (d) Report on whether members of procurement Committees and Technical Evaluation Committees Relating to high value procurements by government institutions are suitably qualified; and (e) Investigate reports of procurements made by government institutions outside established procedures and guidelines, and to report the officers responsible for such procurements to the relevant authorities for necessary action.     How would it work? It appears that every “government institution” is required to (a) prepare an action plan; (b) get it approved (by an unspecified entity, possibly the NPC); (c) prepare a procurement plan in accordance with the above approved action plan; and (d) procure goods or services based on above procurement plan. I asked myself what if the above four-step procedure been in place when I worked in Government. Sri Lanka’s economy had contracted for the first time since independence in 2001. Having decided to fast-track several infrastructure reforms, in 2002 May, the new Government assigned me several tasks including the establishment of the Public Utility Commission and managing the expiration of the five-year international telecommunications exclusivity that had been granted to Sri Lanka Telecom in August 1998. The Initial Public Offering of Sri Lanka Telecom was scheduled for November 2002, following two abortive attempts. For the success of the IPO, the Government’s intentions regarding the international exclusivity had to be credibly communicated well in advance so the markets could factor them into valuations. Investment momentum had to be restored following a turbulent period in which every telecom operator was entangled in multiple court cases. Efficient telecom services had to be leveraged to create jobs and exports.      

"Government procurement procedures need to be improved. But the biggest problem has not been the lack of a dedicated regulatory authority; it has been Cabinet action to exempt big transactions from normal procurement rules. Another problem has been lack of capacity to fully understand and implement the existing rules. This results not only in non-adherence to the rules but also to delays. I recall a procurement support cell being created within Treasury to address this problem"

  Working as a small team we completed this and other tasks by mobilising international consultants through the use of a World Bank credit that was activated in August 2002. The Government’s intention to liberalise international telecom services was communicated in August 2002; consultants were mobilised in accordance with our Government’s and the World Bank’s procurement procedures to study the experience of other countries and develop the licenses and other documents necessary for the international gateway liberalisation. The IPO was successful. The reform was completed five months after the expiry of the exclusivity and the World Bank funds becoming available. Could this have been done if the NPC existed at that time? No. As a bespoke unit set up to implement urgent reforms, I did not have the time or resources to (a) prepare an action plan; (b) get it approved; (c) prepare a procurement plan in accordance with the action plan; and (d) then prepare terms of references for consultants and complete the competitive procurement. Instead of clearly signalling that the Government was serious about the liberalisation by having consultants on the ground in Colombo before the IPO, I would have been drafting action plans and procurement plans and running from pillar to post to get them approved.   One could say that the above is an extreme example, and that the rules are intended for conventional Government departments and not for specialised implementation units set up under projects. But there are no exceptions in the proposed Constitutional language. Article 156H states that a “‘government institution’ includes a government department, a public corporation, a local authority, any business or other undertaking vested in the government and a Company registered or deemed to be registered under the Companies Act, No. 7 of 2007, in which the government, a public corporation or any local authority holds more than forty per centum of the shares.” There are no exceptions for projects, disaster situations or other exceptional circumstances. Prima facie, it appears that the Commission will conduct its review ex post. But in practice, it is likely to be ex ante. No government official will take the risk of being found fault with on matters such as the qualifications of the members of technical evaluation committees. The World Bank procedures were ex post, but in practice we always obtained prior approval. Even if the procurement plans are already in place, seeking these kinds of prior concurrences are likely to add weeks if not months to procurement timelines and thereby slow down government.     What can be done? Government procurement procedures need to be improved. But the biggest problem has not been the lack of a dedicated regulatory authority; it has been Cabinet action to exempt big transactions from normal procurement rules. Another problem has been lack of capacity to fully understand and implement the existing rules. This results not only in non-adherence to the rules but also to delays. I recall a procurement support cell being created within Treasury to address this problem. Fewer, or no, exemptions and greater support for procurement appear to be needed more than a Procurement Commission with inadequately thought-out procedures embedded in the Constitution. Constitutional provisions are very difficult to amend if they are flawed. So they have to be very carefully designed.   Government should withdraw Chapter XIXB creating the NPC from the 19th Amendment. If, after due consideration by officials and experts, a specialised regulatory body is considered a necessary component of the solution, it can be established through a normal statute. The independence of the Members of the Commission can be assured through provisions for their appointment and removal by the Constitutional Council. There is precedent in the Public Utilities Act, No. 35 of 2002, among others. Procurement must be clean. But it must also be timely and efficient. Both these objectives must be achieved through any solution that is adopted. If these multi-step procedures had been in place back in 2002, it would not have been possible to complete the telecom-sector reforms within the policy window that had opened up. In fact, we ran out of time on several other reforms. Had we failed to implement the telecom reforms, the ensuing investments and industry expansion may have been delayed or dampened. Extending the unenforceable and ambiguous international exclusivity would have misdirected the energies of the operators into litigation instead of build out. And we would still be debating why Sri Lanka missed the BPO bus.

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