In this article, Raghav Ajmeria of Shri Navalmal Firodia Law College, Pune CVC guidelines with respect to government contracts.
Public Procurement is a part of government operations for the smooth functioning of a country, but it doesn’t create a situation of corruption less procurements because we know that businessmen today can go to any extent to make profits in his/her business. Procurement is one such area which is vulnerable to fraud and corruption. No one knows here who can initiate the fraud it can be a contracting public officer or a goods supplier. According to the World Bank, it has estimated that roughly $1.5 trillion in public contract awards are influenced by corruption.
To be a developed nation, the country has to overcome the problem of corruption. Corruption reduces the quality of the goods and services rendered, so the CVC in this matter works and regulates so that the businessmen can’t just gain unnecessary profits. The commission has always ensured regarding the fair play of all procurements. The CVC’s main feature is taking into account the practices and procedures, being followed by various organisations are effective for the economy or not.
What is CVC?
The Central Vigilance Commission (CVC) is the agency that is endorsed with the responsibility to oversee the promotion of good governance. The CVC has examined public procurements and works accordingly to improve the practices. According to a study of the Central Vigilance Commission, the Indian Railways adopts well-defined procedures governing the open tender and limited tender systems.
What is public procurement?
Public procurement of goods, services and constructions on behalf of public by government agencies. The government procurements comprise about 25 to 30 % of its gross domestic production(GDP). To achieve economic strengthening the government has adopted the method of procurement.
Why CVC has made guidelines regarding public procurement?
School, colleges, houses, hospital, roads, dams, and bridges these are the kind of public projects which is a great opportunity to corruption as it takes lots of money. Public procurement isn’t just about corruption, it is more than that because public procurement reduces the quality of the products which can cost lives of any individual. According to a research corruption can add as much as 50 percent to a project’s costs.
Good procurement system works with transparency and clear regulations of the commissions that work above them. To meet the definition of a good procurement the government has introduced an apex body to bound the bidders by certain guidelines which can prevent corruption and give us a better quality of goods and services.
In this matter the Central Vigilance Commission has issued guidelines to increase transparency and objectivity in public procurement.
Review of regulatory framework for public procurement in India
The constitution of India does not have any properly stated article on public procurement in India but however, the article no.299 states that all contracts made in the exercise of executive power of the union or state shall be supposed to be made by the President or by the Governor. There is no national legislation regarding the public procurement in India. Certain states like Karnataka and Tamil Nadu have framed legislation regarding public procurement. Public procurement today in India is a major activity to develop the nation’s security, economy, better infrastructure, defence.
Key Issues in Regulatory and Legal framework
There is no single body defining the regulations regarding the policies and rules of public procurement in India. There are many loopholes and gaps regarding procurement as the there are various guidelines and models issued by the CVC regarding public procurement. In addition, not all these guidelines are available at a single source.
Absence of Standard procedures, contracts, and tender documents
Just because of the absence of an act with respect to public procurement allows the government to tweak the guidelines intentionally or unintentionally to benefit the stakes.
Present monitoring system – A weakness
CAG audits the tendering process. However, these audits are carried out after the damage is done. External audits fail in their effectiveness as the findings often do not attract the requisite attention of the Parliamentary Accounts Committee. The external audits usually fails in their effectiveness as the findings often do not attract the attention of parliamentary accounts committee.
Need for a public procurement law
Till today there has not been a single law or act regarding the public procurement. The CVC sometimes issues notifications regarding the procurement for the clarification process but there is not central department for the same. Accordingly, basic rules and regulations regarding the public procurement should be introduced for the better work.
Barriers to entry in public procurement in India
There is a tendency among the procurers to not to choose the big firms and this is done to ensure the quality of supply and reduce the cost of bids. However, this may lead to the entrance of new entities and which may result in an inefficient outcome.
Bureaucratic Hassles and complex procedures
A very dull process for participation sometimes creates severe barriers to the procurement. New firms are usually dependent on the approving authority but approval is not that easy as it seems. The approval takes a lot time and lot of corruption as the new firms have to go through a lengthy administrative procedure. The procedure is that’s why a complex one.
Identification and listing of anti-competitive provisions and practices
In India, the major laws and regulations belong to the pre-independence era and various amendments has to be made in regarding that. There has not been a proper policy regarding the procurement in India. The competition regulation may appear different in India because of the coming of Competition act, 2002 first and its policy after. The rules regarding the procurement have been proven weak from the competition angle. If we see according to the competition angle the concerned law has gone against the spirit of competition in the given area.
Guidelines on Tenders
- The first and foremost feature of a consultant is that he/she should draw attention towards the guidelines of CVC, GFR issued by ministry of finance, relevant and extant instructions of government of India. Any consultant before giving any consult or advice to the department/organisation, the consultant should have knowledge about every little detail.
- The issue of role and professional liability of consultants in government contracts has been under consideration in the commission for quite sometime
- There should be an advisory to the consultants to keep in view the transparency and to provide equal opportunity to all the bidders and tenders.
- The consultants shall avoid any kind of conflicts while discharging the contractual obligations and bring beforehand any possible instance of conflict of interest to the knowledge of the employer.
Before reaching the conclusions an employer must be fully consulted so that accordingly he would be accepting the advice and rendering the services.
Notice inviting offers
- The tender applications regarding the notice invitation could be rejected without assigning any reason.
- This clause is apparently incorporated in tender enquiries to safeguard the interest of the organisation in exceptional circumstance and to avoid any legal dispute, in such cases.
Shortcomings in the bidding process
- Before the time of bidding, everyone should be aware of the evaluation criteria which the organisation is adopting should be made explicit at the time of inviting the offers so that the basic concept of transparency and equality is satisfied.
- The acceptance and rejection of the proposal must be on justified grounds according to laid down prescriptions, leaving no rooms for complaints.
Requirements for e-procurement systems
- The commission has been advocating regarding use of the technology for activities prone to corruption in 2006 and one of the remarkable initiative was adopting the e-procurement for goods, services, and works by all ministry/organisations commissions/departments advised all the organisation for the security of e-procurement systems and to get their system certified by Department of information technology (DIT).
- The e-procurement system was basically introduced to reduce corruption and the organisations more effective and fast.
Consideration of Indian agents
- The commission throughout the years have been stressing on the need to observe transparency and determination of fair prices while dealing with the tender services.
- There has been number of references received in the commission citing certain situations and difficulties being faced in dealing with traders.
- After the references received the commission has decided that in all cases of procurement, the following guidelines may be followed:
- In a tender, either the Indian agent on behalf of the principal/OEM or principal/OEM itself can bid but both cannot bid simultaneously for the same item or product in the same tender.
- If an agent submits bid on behalf of one principal/OEM, he cannot submit bid on behalf of another principal/OEM, in the same tender or same project.
- The tender conditions must be carefully prepared keeping in view the above guidelines.
Projects funded by the world bank and other international agencies
- It is clarified that the commission’s guidelines would not be applicable to projects funded by the World bank, IMF, etc. as part 2 of the commission’s circular.
- The mobilisations advance should not be paid in advance of more than 2 months.
- To keep check on the contractor mis using the advance when the work is delayed.
As per circular the post tender negotiation could be a source of corruption. According to the commission, there cannot be any post tender negotiations except under certain circumstances.
- It is clarified that while ensuring fair play, transparency, and open tendering procedure for e-tendering solutions, the organisations must take due care to see that effective security provisions are made in the system to prevent any misuse.
The Integrity Pact
- The pact is basically between the bidders and the buyers committing the persons/officials of the both side to not to commit any sort of illegal practice or corrupt practice at any stage of the contract .
- The Commission has, through its Office recommended adoption of Integrity Pact and provided basic guidelines for its implementation in respect of major procurements in the Government Organizations.
Time-bound processing of procurement
- The Commission has observed that at times the processing of tenders is inordinately delayed which may result in time and cost overruns and also invite criticism from the Trade Sector. It is, therefore, essential that tenders are finalized and contracts are awarded in a time bound manner within original validity of the tender, without seeking further extension of validity
Details regarding tender on notice board or websites
- The commission has directed the organisations to adopt the practice regarding the publications that they’ll publish as soon as the details of all such cases regarding tenders or out of turn allotments or discretion exercised in favour of an employee/party.
- All organisations must post a one month summary regarding their tender.
- The Commission has received complaints regarding discriminatory pre qualification criteria incorporated in the tender documents by various Deptts./Organisations. It has also been observed during intensive examination of various works/contracts by CTEO that the prequalification criteria is either not clearly specified or made very stringent/very lax to restrict/facilitate the entry of bidders.
Tender Sample Clause
- The Commission has received complaints that some organizations. The offers are rejected on the basis of tender samples not conforming to the requirements of feel, finish and workmanship as per the ‘master sample’ though the bidders confirm in their bids that supply shall be made as per the tender specifications, stipulated in the bid documents.
The context of corruption in public sector is very wide. Corruption is the key to public losses because the money created through the corruption is that amount of ineffectiveness or inefficiency used in the projects that is projected outcomes are of inferior quality. Proper checks on methods and regulations by the government authorities will create a situation and environment for a corruption-free procurement.
Good public procurement is a method that will boost the economic strength and it will also reduce the problems of unemployment, low education rate, sex ratio.