NC points out holes in the Public Procurement System

The National Council’s Good Governance committee presented a report on public procurement system based on findings, methodology and objectives recognizing the significance of ensuring good governance and integrity in public procurement.

“Public procurement is a crucial pillar of service delivery for any government”, said the Chairperson of the committee Tempa Dorji while presenting the report, adding that the overall objective of the study was to enhance the quality of works, goods and services procured and minimize wastage of limited public procurement which is specifically aimed to diagnose factors affecting quality of public procurement and diagnose factors leading to inefficient utilization of public fund and identify the measures to improve quality and save cost on public procurement.

The chairperson said, “According to the Transparency International, countries spend 15 to 30 percent of the GDP on public procurement. In the case of Bhutan, out of the total budget of Nu.213 billion for the 11th FYP, Nu.92 billion is for capital expenditure”,

Taking capital expenditure as the budget for procurement and GDP as Nu. 104.38 billion (2014), he said that Bhutan may be spending around 17.6 percent of GDP on procurement an­nually. “This however excludes national level budget allocation for mega projects such as Hydropower and widening of Northern east-west highway for double lane traffic, which otherwise may push the procurement spending well beyond the 30% limit of many countries.”

In some of the Dzongkhags, expenditures on procurement constitute around 40-45% of their annual budgets. “Because of the sheer volume and size of the spending it represents, a well governed public procurement is imperative for fostering public sector efficiency and establishing citizens’ trust.” He pointed out.

The report states that although the public procurement system in Bhutan has undergone significant developments in the recent times with the establishment of Public Procurement Policy Division (PPPD) under the Department of National Properties, Ministry of Finance in 2008, followed by revised Procurement Rules and Regulations and formulation of SBDs, the public procurements continue to face the challenge of inferior quality of works/goods/services and inefficient utilization of public resources.

As per the findings based on factors affecting quality of works, the report states that awarding of tenders to the lowest quoted price is one of the main causes of poor quality of works.

According to Sarpang NC member Dhan Bdr Monger as per the PRR 2009, the tender committee is required to award the tender to the lowest evaluated bid. He said, “The lowest evaluated bid is defined asthe bid which offers the best value for money, evaluated on the basis of various objective criteria set out in the bidding document”, “It does not necessarily mean the lowest quoted price” he pointed out.

However on the contrary, he said that the tenders are awarded to the bidder with the lowest quoted price. “Such gap between the intent and actual awarding of contract has arisen because of fundamental flaws with the bid evaluation system, which as a result, most contracts have landed up compromising on the quality and timely completion of works.”

He also said that the reason influencing contractors to quote the price as low as possible despite knowing the works cannot be executed at a huge financial loss is due to oversupply of contractors and lack of professionalism.

When it comes to procuring all good and services through tendering process, Dagana NC member Sonam Dorji said, “Procurement of certain public goods and services can be best done through direct purchase from the market as there is a better deal both in terms of quality and cost efficiency” he added.

The Committee studied the price difference between direct purchase and the one routed through tendering process on the recent procurement of flight tickets for the delegation travelling to Geneva. It was found that the price of the flight ticket purchased through tendering process for business class is higher by Nu.70,946 per person, and for the economy class by Nu. 15,510 per person.

Sonam Dorji said, “The limited resource we have shouldn’t be wasted with such blunt method which may give rise to corruption”

He said, “It should announced within the time frame of one month where it benefits the party, government and private sector. Had such rules been implemented in the past, huge amount would not been wasted in drain benefitting few”

He further added, “This shows that there is definitely a scope for the government to rethink on procurement of certain goods and services to ensure efficient utilization of limited financial resources.”

The committee reported that the inefficient utilization of fund is also due to delay in timely execution of works and projects. “Timely execution and completion works, goods and services is crucial not only for effective delivery of public services but also for an efficient utilization of public resources” sates the report.

E-tool is used to evaluate the technical capacities of the bidders prior to evaluating their financial bids. The tool provides equal opportunity to all licensed contractors to participate in the bid. However, few issues were pointed out with regard to improve the system.

Paro NC Kaka Tshering pointed out that the E-tool fails to capture crucial information such as the exact number of works a contractor has at hand, status of those non-registered construction equipment which has a direct influence on the fair selection of a bidder.

He said, “Currently, the entry of such data is privy to the designated E-tool focal person of the procuring agency, which makes credibility of the information updated in the system questionable”.

Based on findings, the committee proposed the recommendation to ensure effective quality control mechanism, collaborate on learning best practices and to regulate regular interactive sessions for the stakeholders to discuss on procurement related issues.

The recommendations was also made to enhance transparency in procurement process, Review procurement of certain goods and services through tendering process where the mandatory requirement of all goods and services to be procured through tendering process be reviewed and a need to have a separate public procurement act.

However, recommendations are not final and will be deliberated on Monday.




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