Public Procurement Woe

Economic Times, September 26, 2011

By Pradeep S Mehta

The railways minister, Dinesh Trivedi, has recently announced two high-level committees to look at safety and modernisation. Both of them are closely linked to each other. But what is perhaps missing is the fact that procurement distortions may just end up thwarting any progress or quality in either the safety systems or even the modernisation of railways. Why are so many accidents taking place in the railways? Because of poor quality of equipment coupled with negligence. Why are so many tracks poorly built? Because of poor quality coupled with carelessness. Corruption is a common denominator.

Very rarely we hear of negligent or corrupt officials being sacked, if at all. Because they are covered under Article 311, an insurance policy that guarantees lifetime job security to public servants. The reform-minded minister Veerappa Moily has suggested administrative reforms again and again, including stopping sinecure appointments to curb corruption, but the ‘stainless’ steel frame has a tight grip over the process supported by laws and practices.

Many things are being done now after the bugle was blown by Anna Hazare and the apex court. For example, the government has announced the sequential drafting of a public procurement policy and a public procurement law. Considering the huge procurement budget of the government of India running into . 11 lakh crore per annum, why we have never thought of such a specialised policy and law beats me. Some estimates say annual losses due to corruption are in the range of 25% — or around a whopping . 27,500 lakh crore. Some of this money does get into circulation, yet most of it goes into the Swiss alps.

These questions were not addressed by a government committee set up under Vinod Dhall’s chairmanship to suggest public procurement reforms. One has never heard of a committee’s report where three-fourth of the members have dissented against the main report, albeit for different reasons! The issue became so controversial that ET carried a front-page article in its August 17, 2011, edition, Now an Unethical Bent in Babudom’s Steely Frame! Dhall had complained to the Cabinet secretary that Haldea had doctored the report. Out of sheer frustration, Haldea had published the report with all the vital dissent notes, which Dhall had ignored, so that the same are taken on record. These included Haldea’s fundamental observations on the constitution of the committee.

Haldea’s main contention was that the committee comprised of representatives of four large procurement organisations: DGS&D, Railways, defence and CPWD. Each one of them also had their own discords. The beauty about their parochial dissent was that they themselves had joined up as a cartel, supporting each others’ dissent reports in writing. There was also no public consultation on the report. The controversy surrounding the report only highlights the incapacity of the chairman. To do justice to the vital purpose, the committee should have been constituted by involving neutral experts and steered by a noted econocrat.

The report carries a big case study of procurement of locomotives by railways, which reads like the Red Queen story in Alice in Wonderland. Simultaneously, case studies of other sectors would have helped the government to see the woods rather than just one tree. Second, just to take one example of an incongruity: in one place, it recommends blacklisting suppliers who have indulged in corrupt practices. There is not a whisper of punishing the guilty officials, that being an important deterrent to corruption. The committee has looked at US and UK practices, among others, but ignored the Lincoln law (False Claims Act) in the US that requires the disgorgement of unjustly-acquired riches by corrupt officials as well as providing protection to whistle-blowers.

The motives of getting into these intrinsic issues are, first, procurement policy reforms are crucial and, if the drafting of the policy will be guided by this report, it would end up producing a suboptimal policy, which would then lead to an ineffective procurement law. Second, procurement policy reforms also require many flanking changes such as governance reforms that directly and indirectly impact all government functioning and, thus, add to the corruption calculus. One small example is on the auctioning of kamdhenu posts.

To arrive at a good public procurement policy, what is needed is a process-driven output with sound interlocutors. Such a process would give clear directions on what the government should do to reform and clean up the public procurement system; and that is an imperative in our war against corruption.

  • Despite a huge procurement budget, we just don’t have a specialised law and policy
  • If the Vinod Dhall committee report guides policy drafting, it’d mean an ineffective law
  • A good procurement policy needs a process-driven output with sound interlocutors

Pradeep S Mehta Secretary General, CUTS International

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