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About
tender tendering
Published:
Financial Express, May 04, 2008
By Ramrao Mundhe
At a point when
the future of the country hinges on the
development of its infrastructure, unfair
bidding can only be an impediment in the way to
development.
Even while mere
bidding does not guarantee a fair outcome of
best quality and price, an unfair one can simply
be disastrous to the public service delivery
system at large.
The Planning
Commission, Government of India expects a
massive investment of $492 billion in the
infrastructure sector over the Eleventh Five
Year plan.
For this the
government is largely banking on support from
the private sector, as nearly a third of this
investment is likely to come through the private
sector with public private partnership (PPP)
mode as one of the preferred routes.
PPPs in our
country are still at a nascent stage compared to
those in other countries. In its efforts to keep
pace with the global scenario across sectors,
the government at all levels is procuring at a
rapid rate and entering into contracts with the
private sector.
However, while it
does so, the government's contractual
interactions with the private sector, and
resistance to adoption of modern procurement
tools due to vested interests, are becoming
increasingly complex.
The country is
desperate to see new capacities come up as fast
as possible and flaws in the bidding process is
the last thing one wants to witness. For that to
happen we need to evolve a sound mechanism in
our tendering process to accelerate an
infrastructure upgrade.
Favouritism,
double standards, illegal are often the terms
used by the losing bidder in the court of law.
For instance, Anil Ambani's RIL Airport
Development was crying foul over the Delhi and
Mumbai airport bidding. It argued that, as
originally the highest financial bidder for the
Delhi airport and the highest technical bidder
for the Mumbai airport modernisation programme,
the company should have been awarded at least
one of the projects. But the bids swung in
favour of the GMR and GVK groups.
Similarly, the Rs
20,000 crore Sasan ultra mega power project to
be set up through tariff-based competitive
bidding got delayed by nearly seven months as
the Lanco-Globeleq consortium, which initially
won the bid in December last year, was
disqualified later for violation of norms.
Another such project at Mundra in Gujarat has
been transferred recently, after delays, to the
Tata Power Company.
Considering the
magnitude and the number of upcoming projects in
the PPP mode in the infrastructure sector, the
bidding or tendering process assumes immense
significance. And for that tendering in the
public sector has to get more transparent so as
to minimise the scope of vested interests at
several levels, making the otherwise not so
complex decision - a complicated and tedious
procedure.
While the goal of
the government is to get the most cost-effective
services at a competitive price, most often the
objective is lost in government-bending rules to
favour one party over the other. More often than
not most tendering disputes relate to
non-pricing factors like quality, which is
usually determined at the prequalification
stage.
Ministerial
conferences have been emphasising on the timely
completion of power projects as a major reform
agenda. But reforms are for the consumption of
bureaucrats only. Distressingly, non-technical
managerial issues and not equipment supplies,
etc. are found to be responsible for holding
back power projects. But the government now must
ensure that such "mishaps" do not happen in
future.
While
incorporating reforms in PSUs tendering is not a
Herculean task - it requires will on the part of
the government. For one the process of
short-listing the competent bidder should rest
in the hands of professionals with expertise in
the particular sector or alternatively with
available cutting edge software.
According to
experts, the Government of India agencies and
all corporations should also consider using
Request for Proposal (RFP) evaluation software
like eRFP from a procurement management
standpoint. The eRFP software permits purchasing
organisations to track the progress of each
evaluator, capture the evaluator's comments for
use at review meetings, identify strengths and
weaknesses of each proposal, score proposals in
a more objective and less subjective manner, and
produce detailed reports that assist in the
decision-making process.
The use of
technology makes it simpler to identify the
"best qualified" firm or proposal objectively.
By ensuring the selection of the most qualified
firms, the agencies anticipate that it will
realise cost savings by having projects
completed on time and within budget.
From the
evaluator's point of view, the eRFP software
gives them the ability to enter their evaluation
online.
The software
guides each evaluator through an organised set
of on-line forms with pre-defined evaluation
criteria and standards. Evaluators have access
to the relevant sections of the RFP that was
issued for the project without having to revert
to a paper copy of the RFP. Using the software,
evaluators can record strengths, weaknesses,
deficiencies, and statements regarding their
rating of each evaluation criteria.
While UP and
Punjab governments have announced e-tendering
for greater transparency and accountability in
the bidding process, other states have yet to
come up with such steps to improve the bidding
process. We do have the technology - but it
needs stronger political will to implement?
The Author is
an Economist
with CUTS Centre for Competition, Investment and
Economic Regulation and
can be reached at
rm6@cuts.org
Desperate
measures!
Published:
The Economic Times, May 03, 2008
By Pradeep S
Mehta
The current
inflation scenario is a global phenomenon, being
spurred by a host of factors, such as escalating
commodity price
and buoyant
demand amidst slowdown in some countries.
Governments around the world are doing many
things to rein it in.
The measures
include using trade policies, fiscal actions and
what not. India too is struggling to tame the
beast, with looming elections guiding some of
the pronouncements and short-term actions. But
what is lacking is a long-term view of an
effective regulatory framework, which can curb
anti-competitive practices, hoarding and black
marketing.
The rise in prices has been observed across
almost all sectors. Increase in the prices of
food items, manufacturing goods, fuel items,
cement and steel are largely responsible for
the rise in the overall inflation rate at the
wholesale level.
These
factors, when pooled together, have contributed
around 75% of the total rise in the inflation
rate. And it is feared that the increase in
public expenditure announced in the last budget,
the Sixth Pay Commission fall outs, coupled with
rising
metal and crude oil prices, might take
inflation to new heights.
The inflationary situation is getting worse with
every week. The latest figure, shows inflation
in wholesale prices to be at a peak of 7.57%,
the highest in recent times, and likely to
travel north. This trend is certainly a blow to
the government’s efforts to control the
situation.
The rise in food prices, which have contributed
to the jump in inflation rate, is the most
spoken about because it affects the aam admi.
Adding fuel to fire,
traders will indulge in hoarding and black
marketing to make a quick buck. The central
government can hardly do anything about it,
because it is the state governments’
responsibility. If one examines the record of
action and convictions under the blackmarketing
law in states, the figures are dismal. What the
central government can do is to create an
innovative incentive scheme for states to crack
down on hoarders. Reward the states who perform
the best.
But, the multiplier industries such as fuel,
cement and steel are mainly under the direct
control of the central government and hence the
cause of much of the inflation. This is where
the government has to take both short-term and
long-term measures, bearing in mind that growth
is not adversely affected. Otherwise, we may end
up with another problem.
In the fuel
sector, are the factors beyond our control?
There is a ‘legitimate’ international cartel,
the Opec, which has pushed the price of the oil
barrel to over $100. The prices will continue
rising. It can only be countered by creating a
consumers cartel. This idea was advocated by the
former petroleum minister, Mani Shankar Aiyer
and reiterated by the
finance minister, P Chidambaram recently at
Singapore. The government has to stop uttering
homilies and start taking action.
Closer at home, the government has not been
successful in regulating the cement cartel in
spite of two recent actions by the MRTPC. But
these actions have had no effect on the
industry. To show its disappointment at the
tactics of cement industries to keep prices
high, the Tamil Nadu government went to the
extent of threatening cement manufactures by
proposing nationalisation of the cement
industry. Given the government’s inability to
run such industries at large, taking over the
cement industry would be as bad as cartelisation
itself.
Similarly, the
government, which is one of the major steel
players itself, has been threatening price
controls. Steel prices too are soaring, and as
the industry claims, it is on account of an
increase in input prices. In most cases, the
increase in prices of steel cannot be justified
by the increase in the prices of inputs.
Another problem
with the steel industry is price distortion
mainly due to local manufacturers trying to
match their prices to that of imported steel.
This has widely affected real estate,
construction and other related industries.
It will hardly be a surprise if the already
worried government decides to come up with some
stringent actions against steel manufactures.
Some relief is
being seen particularly in the construction
sector, but that will not be able to deal with
the industrial consumers which are crying hoarse
over the artificial price increases.
Ideally the government should be concentrating
on long-term measures to control inflation
coupled with sensible short-term measures.
Supply-side measures such as expansion of the
domestic commodity base by encouraging the
manufacturing industry to expand its capacity
over time, bringing reforms into the farm
sector.
Nevertheless, it is equally important to improve
competition and the economic regulatory
environment in the country.
One good thing is that the Competition
Commission of India (CCI) is in the process of
establishing itself after the new born 2002 Act
was amended in 2007. But the manner in which
things are progressing, it will take another 1-2
years for CCI to become operational in the real
sense. Its effectiveness will depend upon the
type of people who will man it, something which
this writer has often argued on this page in the
past.
In practice, the government is adopting
short-term measures, many of which are out of
desperation. Since elections are approaching, it
is not only an economic but also a political
challenge for the government. Many of the
short-term measures that the government is
following will affect the investment environment
in the country, e.g. restrictions on the exports
of many commodities which will hurt business and
farmers. The government has also decided to
reduce import duties on many commodities
including food items. This would hurt domestic
farmers at large.
Therefore, it is important that policymakers
should weigh the cost of controlling inflation
against that of offsetting economic growth and
then adopt an appropriate strategy.
Citizens will appreciate the government more if
it behaves sensibly in controlling inflation,
than in just concentrating on short-term
measures which may lead to a further
complication of a situation that is already
serious.
The Author is
Secretary General, CUTS International, a leading
research, advocacy and networking group and can be
reached at psm@cuts.org
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