Towards transparency in public procurement

Govt's ability to deliver on promises must remain central to reform process

In her pre-Independence Day address, the President of India advocated the need for enhanced transparency and accountability in government, stressing the need for the adoption of rational and practical approaches in addressing these challenges. Her choice of qualifiers is significant, since the need for reform is especially being felt in government contracts, with recent government initiatives such as enacting a formal public procurement law for India, and for laying down principles and practices for improved government purchases.

Public procurement is somewhat different from other rights-based approaches, in that the government needs to procure not only to function internally, but also to discharge its constitutional obligations to public constituencies. The ability of the government to deliver on its promises and obligations must therefore remain central to the reform process, and aspects such as transparency and accountability must supplement, rather than contradict, the core aspects of efficiency and user satisfaction.

As we scan international best practices for formulating an appropriate policy response, it may also be important to assess the corresponding legal environments in those jurisdictions. For instance, the government in the United States cannot be sued without its consent; and consistent with this unique situation, the US Congress has creatively crafted its public procurement laws, making it difficult for government contracts to be stayed, while award of damages remains an easily available legal remedy to dissatisfied bidders.

Similarly, government actions cannot be stayed in the US for alleged breaches of IPRs, and affected parties can only claim compensation and damages. This insistence on "efficiency" as the core objective of public contracting has been supplemented by long-standing US legal traditions for a high degree of deference in its courts for executive decision-making, ensuring that government contracts remain generally on course, and the government's ability to deliver developmental promises remains relatively unaffected by increased oversight.

The international environment is thus significantly different from that in India, where executive actions are generally perceived to be “guilty until proved innocent”. It is important to be reminded that affected bidders in India already have firm access to legal remedies through Article 14 protection on “right to equality” for ensuring transparency and competition in government contracts. In view of these peculiarities, it may be important to narrowly craft the Indian response so as to ensure that it does not provide too many additional fora for legal recourse, for challenging too many individual government actions, by too many actors in the contracting process, which can potentially bring important government contracts to a complete and grinding halt.

In this process, it may also be important for policy makers to recognise the twin factors that adversely affect good contracting experiences: one, that a “real-time” oversight system is virtually absent, leaving dissatisfied bidders with no reliable forum for resolution of their grievances; and two, that once a contract is entered into, the system of inspections, payments, allegations and counter-allegations is one that leaves contractors, at the very minimum, with significant risk of uncertainty even after contract performance.

It is therefore important that the public procurement system is drafted from a practitioner's perspective: it must provide honest and committed contracting officers with efficient procurement vehicles, while ensuring that those not willing to conform to the requirements of transparency and accountability face the prospect of having their actions challenged before an oversight body that has adequate domain knowledge, and the real-time authority, to steer contract outcomes in desired directions.

Extending the important theme of efficiency in public procurement, it may be important to expand the existing rate contract system in India for greater coverage and range of products and services that are repeatedly procured by government agencies, or that are anyway available as COTS items in the commercial marketplace. Such Indefinite Delivery Indefinite Quantity contracts (IDIQs), together with variants like Federal Supply Schedules (FSSs) and Blanket Purchase Agreements (BPAs) now contribute an overwhelming 40-50 per cent of estimated federal procurement dollars in the US, while also being increasingly favoured in the EU in the shape of Framework Agreements. In fact, the new UNCITRAL Model Law on public procurement, adopted this year on 1 July, has an entire chapter devoted to framework agreements covering IDIQs and other contracting vehicles.

A collateral aspect is the coverage of PSU procurements under public procurement laws. The Central government's ability to direct its contracts comes from Articles 298 and 299, and it may be a stretch to extend this limited constitutional authority so as to cover PSU procurement actions. Interestingly, the international norm, even among GPA member-states, is to exclude such procurement from the application of national procurement laws, given that PSUs are increasingly competing in commercial marketplaces where other players may be exempt from such added requirements, or with foreign private companies supported by their national governments through substantial R&D funding or cost-reimbursement contracts.

Enhancing transparency and accountability in government contracts is of vital public interest, and translation of these imperatives into practice must therefore necessarily follow a rational and a realistic approach in the interest of maintaining efficiency in government contracts.

The author is an IAS officer. The views expressed here are personal