Transparency: What to Expect in Public Procurement

Public Procurement spend in India has been in the range of 20-30% in recent years (WTO and OECD estimates). According to Ministry of Finance, the spend during 2012-2017 grew from INR 11,973 billion to INR 16,637 billion.  In the same year i.e. 2017, Ministry of Finance issued the new General Financial Rules 2017. These were introduced post comprehensive review of the earlier GFRs 2005.  The GFRs 2017 expected to ‘enable an improved, efficient and effective framework of fiscal management while providing the necessary flexibility to facilitate timely delivery of services.’.  The GFRs 2017 has a dedicated chapter 6 on Procurement of Goods and Services.

The Ministry also introduced two manuals to complement the GFRs 2017 and to a certain degree elaborate procurement processes further.  These are (i) Manual for Procurement of Goods 2017; and (ii) Procurement of Consultancy & Other Services 2017.

These manuals explain in detail the various aspects of procurement such as the procurement aims, concepts of value and cost – Value for Money (VfM), principles of procurement and procurement cycle stages and related guidance. 

The GFRs speak about the ‘Transparency’ principle across various rules (144, 173, 175, etc.), however, the Manual for Procurement of Goods 2017 explains it in a bit more detail.  The excerpt is provided in the box.

Some other bi-lateral and multilateral organisations in India also provide similar definition of Transparency.  According to the World Bank, Transparency requires (i) that relevant procurement information be made publicly available to all interested parties, consistently and in a timely manner, through readily accessible and widely available sources at reasonable or no cost; (ii) appropriate reporting of procurement activities; and (iii) the use of confidentiality provisions in contracts only where justified.  UNDP advocates that Transparency ensures that competitive processes are fair, open, and rules-based. All potential vendors should be treated equally, and the process should feature clear evaluation criteria, unambiguous solicitation instructions, realistic requirements, and rules and procedures that are easy to understand.

In simple terms, Transparency principle in procurement is about not hiding or withholding any information related to public procurement and making it available to public in an easily accessible manner. Transparency also covers the ‘process’ as much as the ‘outcomes’, therefore the policy and procedures such as GFR and the Manuals I referred to above, add to the transparency of how Government of India and its departments, etc. would carry out procurement. It is encouraging to see that Government of India is taking the principle of Transparency seriously and is picking up best practices available globally.  A lot of Government departments are engaging specialist Procurement Management Agencies to manage their procurement in an open, fair and transparent manner. 

Government of India’s flagship Government eMarket Place (GeM) is a good example of how there is commitment and will to be transparent.  The GFR mandates purchases of goods and services that are available on GeM.  The Government Departments need to either procure directly for goods and service that are available based on Least Cost till a certain threshold. Post this threshold one has to select the most competitive bid.  There is no human interface.  The goods or services are delivered and payments made online within a stipulated time.  As of March 2019, there are over 33,000 buyer organisations registered, over 8 lakh goods and over 5 thousand services available.  There are also around 30,000 MSE sellers who have a share of 40% of order value.  Though there are challenges on GeM as would be in any such systems (for example, sometimes the comparison is carried out between boxes alongside single stationery item), the Government is trying to make constant improvements.

It may also be helpful to understand that Transparency principle does not require disclosure of all kinds and aspects of procurement.  For example, information related to defence related procurement cannot be made public in the interest of national security.  Similarly, one cannot disclose confidential, IPR related and commercial information of one bidder to another.  These may be only be made available to the respective legal and regulatory authority such as Audit Controller and Audit General of India (CAG) or Vigilance Commission for example.

Having said that, in view of better governance, one should remember that all Policy, procedures and processes mandate ‘minimum’ standards.  If there is commitment and will to be more transparent, no policy of procedures would restrict such disclosures as long as they do not violate strict confidentiality parameters as shared above.

For example, European procurement procedures mandate sharing of individual scores against each criterion with key strength and weaknesses evaluated by the committee alongside the score that the winning bidder scored for the same criterion.  The procedures also mandate a ‘cooling off’ period where unsuccessful bidders can complain if they feel they have been treated in an unfair manner.  The World Bank under its new framework also mandates such period.

So it remains to be seen how far we will go towards the best possible ‘Transparent’ public procurement in India – keep watching this space.

Author: Felix Anton