Jul 16

The average Sri Lankan has no means of knowing even very roughly how much of the income tax, VAT, customs duties, excise duties, cesses etc that are collected from him and his fellow-citizens is spent efficiently by the government, and how much is siphoned away fraudulently. One area of special interest is the corruption that accompanies the award of high-value contracts of various kinds. A brief introduction to this subject is considered to be a timely need.

Good project planning and implementation by the State – whether it be on a national, provincial, municipal, corporation or other scale – would require open decision-making and full disclosure of all material information that concerned citizens may wish to have in order to safeguard the public interest. But this seldom happens now.

There used to be a time when the guidelines that were followed in the awarding of government contracts were clear and unequivocal. The contracts may have been for securing consulting services for planning, designing, awarding and project administration. Or the contracts may have been for constructing infrastructure or for the purchase of rice, flour, sugar, oil, school furniture, hospital equipment, drugs or any item to be supplied by foreign or local organizations. When something was required to be “procured” (this is the favoured term), a small Technical Committee (TC) consisting of qualified and experienced personnel in the employ of the government was appointed by the head of the institution concerned to specify what was required, the quantity needed, the quality specifications to be met, the time allowed for completion, and so on.

In addition, for the larger procurement contracts, the Attorney-General had the documentation examined so that there would be no loopholes through which unforeseen claims could be sprung against the State by the successful tenderer. The report of the TC was also reviewed by a Ministry or Cabinet appointed body.

Once these steps were completed, advertisements were placed in the government gazette and selected newspapers calling for interested parties to purchase the “tender documents” from the issuing authority and make their sealed offers. The tenders submitted were opened at a specified time and place, and all tenderers were entitled to be present. The “tender sums” were read out and recorded, and the completed offer documents handed over to the TC for evaluation.

The first step taken by the TC thereafter was to reject those offers where the tenderers had failed to conform to the tender conditions. If the deviations from conformity were minor, the tenderer was given the opportunity of confirming that he would ensure full compliance with the contractual requirements without an increase in the tender sum.

There are other steps that are required to be taken before the contract is formally awarded and administered but the connected procedures are fairly routine.

Alarmingly, over the years, the open process described above has been grossly perverted to allow the public to be robbed with impunity. A few of the more common methods employed are described below to help citizens to recognize certain situations where they are probably being cheated by crooked politicians and supine administrators.

Often there is not enough money available in the State’s coffers for ostensibly urgent investments after priority expenditures have been met. The government then tends to turn to banks, lending institutions or foreign governments to secure loan facilities. Here is where things become murky. There are reputable lending institutions which would be prepared to come up with loans at a fairly low rate of interest and a long repayment period providing the borrower is able to demonstrate that the project concerned is a viable one with a satisfactory internal rate of return. In other words, the money must be used in a productive enterprise or in creating infrastructure which will save costs – for example, transport. The lender will insist that there should be a comprehensive project proposal, adequate investigations, planning, designs, costing and a transparent method of tendering before the procurement contract is awarded.

What tends to happen now is that this kind of supervisory role by lenders is conveniently resented. Instead, a “friendly” foreign lending institution or rich contractor is identified by a process that is cloaked in secrecy. The lender/contractor is given a more or less free hand to investigate, plan, design, cost, supervise, construct and deliver whatever has to be delivered. As the amount of the loan is fixed in the early negotiations and the detailed quality specifications are furnished by the contractor himself, the employer-borrower is usually not in a position to insist on the specifications being reviewed independently in the interest of the project. Invariably, the agreed rate of interest is much higher than that which can be obtained from a more prudent lender. The rich earnings from the high interest rate are, of course, in addition to the profits from the contract itself, where the prices charged would be already overly generous in the absence of competitive bidding.

To make things worse, the items in the Bills of Quantities for which the quoted rates are high may be deliberately underestimated by the contractor so as to keep the total tender price attractive at first glance, concealing the fact that the employer would eventually be compelled to pay for the actually measured quantities under the provisions for “Variations”, even in the case of so-called “fixed price contracts”.

From the many newspaper reports that have been published, two instances are given below where a lack of precision in defining contracts may have affected costs adversely on a large scale. There must be scores of other similar cases but the details published in the press regarding them are too sketchy for informed comment.

In the case of the infamous submarine rock outcrop that was discovered belatedly in the new harbour at Hambantota, one is forced to the conclusion that the necessary topographical, geological and soils studies were not properly done at the pre-award stage, probably because there would not have been stipulations for thorough investigations to be carried out. Ignoring the existence of this rock must be blamed for the huge extra costs that would no doubt have been incurred in belatedly carrying out rock-blasting under water, which is a much more expensive exercise than if the work had been executed under less demanding physical conditions.

As for Norochcholai, one does not have to be an expert to conclude from the many revelations that have been made in the media that, at the very least, the detailed specifications governing the quality of the condensers supplied by the contractor have been inferior. Also, from the technical observations made by knowledgeable senior engineers regarding other features of this power plant, one can hardly be accused of undue pessimism if one fears that, owing to various constraints on the achievement of good quality control, frequent failures may be the norm in the years to come. Needless to say, all the consequential extra costs and losses incurred by the Ceylon Electricity Board will continue to be recovered from the long-suffering public, by increasing the electricity rates, which are already among the highest in the world.

We have no data on how many such other vague work descriptions there are in the other big contracts that are given out in a similar manner and how much the public has to pay for these departures from strict procurement practices. In passing, one prays that the quality control pertaining to the construction of our expressways and bridges has been sufficiently stringent to obviate the necessity for us worry on that count.

Another common ploy is to ensure that one’s favourites get the more lucrative contracts. This is accomplished by exerting irresistible pressure on the TC (which is not a difficult thing to do nowadays) to write specifications for such contracts to ensure that only the favoured tenderers’ offers have any chance of meeting the requirements. This kind of manoeuvre leaves the favoured tenderers free to quote prices with enough profit margins to keep both themselves and their patrons happy.

Information pertaining to some purchases for the armed services cannot obviously be made available to the public but, in every responsible country, there are committees of the People’s elected representatives who are kept fully informed of all stages of such procurements. It is wrong to entrust only a “select” group of government employees with these responsibilities without keeping an appropriate multi-party committee of Members of Parliament fully informed of needs, selections, price negotiations and so on because it is the elected representatives in Parliament who are charged with the constitutional duty to exercise control over public finances on behalf of the People.

There are scores of other ways in which the public is cheated by the arbitrary, secret and unprofessional ways in which procurement contracts are awarded. The departures from the open procedures of the past have got progressively worse after the practice was adopted of appointing politically compliant public servants to important posts, exacerbated by the virtually unlimited powers that the 1978 Constitution and the 18th Amendment have given to our “masters”. The scope for corruption has expanded at a frightening pace. Doing away with the Executive Presidency, re-writing the Constitution more intelligently, so as to re-empower the People, and reducing the power of individual politicians and administrators, will make it more difficult for public funds to be misappropriated, especially in connection with the awarding of unfavourably structured, large contracts.



3 Responses to “AWARDING OF GOVERNMENT CONTRACTS”

  1. bren sosa Says:

    If the project is initially funded by the Exim bank of a country would it not be prudent to embark on the particular project even though it may be more expensive than an unfunded project?

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