Procurement reform is clearly a crucial building block in improving governance and public sector management and accountability in Bangladesh. Poor public procurement practice lends itself to corruption and wastes scarce public funds. It is now well documented that corruption in public procurement also affects economic growth and worsens the investment climate, skewing public investment and spending to those areas where the opportunities for personal gain are highest and away from those that the economy needs most. At the most fundamental level, corruption in public procurement causes erosion of public confidence in government and its leadership, seen or suspected to be acting in their own, not the national interest. In more than one country in recent memory, governments have been voted out of office by a disillusioned electorate, voting in a “cleaner” government. The World Bank’s new Country Assistance Strategy (CAS) puts governance at center stage. Governance will be the core focus in every sector we engage, and sector governance reform will be the target of every Bank-supported project. The strategy also aims to enhance transparency and accountability and reduce opportunities for corruption by (i) strengthening "core" governance institutions, including such key "watchdog" agencies as the Comptroller and Auditor-General (C&AG), Public Accounts Committee (PAC), Public Service Commission, Securities and Exchange Commission (SEC), and the Bangladesh Bank; and (ii) the "core" governance processes of public financial and budgetary management and public procurement, among others. Mainstreaming governance is also at the heart of our “Joint Strategy” partners’ programs—ADB, DFID, and Japan. The new draft Procurement Law, tabled in Parliament, is awaiting approval in the next session. Procurement reform is never an easy undertaking, and the law has encountered opposition—even in very high quarters. The government can be commended for its persistence in this important reform. A comprehensive Procurement Law, properly implemented and enforced by the government, will provide a strong platform for better governance, specifically, for better governance of budgetary spending, with economy and efficiency in public purchases. The draft Procurement Law incorporates many of the provisions considered necessary for a well-functioning procurement process. In the draft Law, the Central Procurement Technical Unit (CPTU), established in the Ministry of Planning, remains responsible for procurement regulatory and policy functions, including monitoring of public procurement actions. Nonetheless, there are two features of the draft Law that we believe should be further strengthened for the Law to be fully effective: A Complaints Mechanism and Independent Review Panel to address bidder grievances is a must. This enables bidders’ concerns to be redressed, without having to go to the courts. It is essential that the panel be independent: to ensure independence, no official on active government service should be allowed on the panel, and all members should have appropriate professional skills, and sound reputations. The independent review panel provided for in the PPR 2003 meets all these criteria, but there appears some dilution of "independence" in the draft Law—which is silent on this point of panel composition, thus allowing government officials on active service to be members. It is envisaged that in the Parliamentary discussions, the independence of the review panel—as specified in the PPR 2003—will be restored in the Law that is finally approved.
An adequate Anti-corruption, Misconduct and Sanctions Mechanism is also a key element. Without an effective enforcement mechanism, the Law will have no teeth. On sanctions, the draft Law refers to the Government Service Rules (1985), the Prevention of Corruption Act (1947), and the Penal Code of 1860. The draft Law needs greater clarity, and the provision needs to be strengthened with respect to sanctions. The Law that is finally approved should have specific and strong sanctions for corruption-related irregularities, for both government officials and bidders. In the current text, there is no provision for debarring contractors/suppliers/bidders for corrupt or collusive bidding practices, although such misconduct is a criminal offense and would therefore be punishable under the Penal Code. It would be advisable to have debarment provisions and make those clear in the law so that the procuring entity can take immediate actions after appropriate hearing and prior to criminal proceedings. This is a necessary disincentive against fraud and corrupt, coercive, or collusive practices.
In sum, the draft Law is a huge step forward. The Parliament needs to keep all its good provisions and avoid any dilution, as no amount of tinkering with the rules and regulations later can modify flaws in a law. With the strengthening of these two provisions, Bangladesh will have a truly world class procurement legislation, which will be a model one in South Asia and beyond. Of course, the World Bank is very pleased and proud to be associated with this important reform initiative. ******* Once enacted, implementation of the intent of the new procurement law will be key, and the monitoring and enforcement of the Law become crucial. In many countries, involvement of civil society and/or NGOs in procurement monitoring has been important in ensuring that procurement processes are accountable and outcomes are defensible. Oversight by beneficiaries, communities, and NGOs will reinforce the intent of the new procurement law. In conjunction with actions to strengthen oversight agencies, including the ACC and the C&AG, such participatory monitoring would help deter leakages of funds due to flawed procurement regimes from the ground-level up, and lead to strengthening the voice of civil society in its advocacy of accountability and transparency, enhancing the demand for good governance. An exemplary effort by civil society in procurement monitoring comes from the Philippines, where the NGO “Procurement Watch” works with beneficiaries and the procuring entities towards reducing corrupt procurement practices. As the World Bank implements its new Country Assistance Strategy for Bangladesh, the plan will be to systematically involve communities in project design to reinforce other measures for improved governance. ******* Lets now turn to e-procurement. First of all, what is it? E-procurement is the use of secure web-based platforms by the government as a buyer to communicate with bidders in a paperless environment, free from the inconveniences, delays, and physical insecurities of any kind. Through the web interface, procurement information becomes accessible, competition and transparency are enhanced, and corrupt and collusive bidding practices become more difficult. For many countries, e-GP has proved a cost- and time-saving tool, increasing procurement efficiency. Several Indian states, such as Andhra Pradesh and Karnataka, are pioneers in e-GP, and the list of benefits include cost savings from enhanced competition and less corruption, thanks to the greater transparency of e-GP. Previously, in the paper-based system with physical bid delivery, competition was often restricted by colluding bidders threatening those outside their "ring" and physically preventing outsiders from submitting bids. With e-GP, bids are submitted remotely and anonymously, and intimidation of bidders is more difficult. More competition and cost savings are the result. E-GP would bring similar benefits in Bangladesh, where contractors face quite similar problems. E-GP has also transformed the landscape in the Philippines. Before e-GP, bidders relied on procurement notices in national newspapers. As elsewhere, these were often manipulated, with notices published only in a limited edition; or an entire print run "purchased" by a group of colluding bidders; sometimes the notice was printed in a single copy of the newspaper that could be shown to the donors. All these practices limited the number of suppliers and excluded smaller enterprises from bidding. But now the electronic publishing of procurement notices makes the information transparent and available to any contractor, on the web, and the resulting competition has reduced costs and improved the quality of goods and services procured.
The cost savings that can come about through the greater transparency and enhanced competition of e-GP can be quite extraordinary. In Romania, an e-procurement system costing $100m reduced the annual cost of government purchases by $200m. Korea’s e-procurement system helped the government shave $2.5 billion off of its $17 billion annual procurement bill—a whopping 15 percent cost reduction. In Bangladesh, the public sector accounts for nearly a quarter of its GDP, and the budget and the state-owned enterprises (SOEs) procure about $3 billion worth of goods, works, and services annually. Introducing an effective e-GP system could generate substantial cost savings, freeing up resources for important areas such as infrastructure and social services. Thus, the benefits of e-procurement go well beyond government and bidders—to the nation and its citizens as a whole. ******* But implementing e-procurement has many challenges, and reaping such benefits will depend on how effectively the system is implemented. The e-GP Readiness Assessment highlights the challenges for both government and suppliers in e-GP. And it may be wrong to think that technology is the most critical challenge—various vested groups which gain from the present collusive and coercive bidding practices will oppose the transition to e-GP. Ultimately, e-GP success is, above all, about government leadership and commitment. Bangladesh is quite fortunate in this respect that, with the new Law, the government has demonstrated its commitment to procurement reform. In planning the transition to e-GP, similar government commitment and leadership will be required. One worrying finding in the e-GP Readiness Assessment is the private sector’s apparent suspicion of government procurement, and resulting poor perceptions also about e-GP. Unethical practices are seen and accepted as the norm, with widespread distrust in the government’s evaluation and contract award process, and e-GP is seen as offering no tangible improvement. Getting the private sector and the public at large on board during the transition to e-GP is the key; as we embark on this process, this would require extensive outreach for awareness building. While some segments of the bidding community or syndicates have a vested interest in maintaining the status quo, the private sector, especially the bidding community, needs to be convinced that it would benefit from—not lose—the introduction of e-GP. As for gains from e-procurement, it is obvious that the various "hidden costs" that are paid by bidders at different stages of the procurement process now will be minimized. On its part, the government and the procuring agencies have to signal their commitment to effective implementation of the Law by appropriate and consistent application of sanctions against violating bidders and procuring agencies. At the same time, dialogue and exchange of ideas between the government and groups or associations of the bidding/contracting community may help. Turning to the hardware, software, and internet connectivity challenge, we recognize internet access is uneven in Bangladesh and quite limited at the district and upazila levels. Appropriate arrangements must be put in place to ensure that small bidders and contractors are not discriminated against, for instance, by creating e-GP business offices in small towns so that bidders have access to such facilities. In tandem, training in the use of the new systems will also be a key factor in ensuring wider outreach. These are all significant challenges. To support the process, government has requested World Bank support for a follow-on Procurement Reform Project, with an important e-GP component. This will include necessary support for government agencies and the bidders, with inputs covering infrastructure, hardware, and equipment needs as well as training and implementation support. ******* The desire to obtain quick results needs to be balanced with the need to develop the technical capacity, organization, and expertise within the public and private sectors, and above all, to develop full ownership. The rollout should probably start with the simplest e-GP process—e-tendering. A focused approach that targets one ministry at a time is recommended. Even such small steps are no easy task. The World Bank is therefore keen to support the government’s endeavor, and to assist ministries interested in piloting this exciting new approach. The potential gains are enormous but implementing this approach will not be easy. At the risk of stating the obvious, success will depend on the attitudes of all those involved in public procurement—from the very top of the ladder to the bottom. It is very encouraging that the Bangladesh Government is leading the process of procurement reform and the World Bank will urge other development partners to become involved in this initiative. .
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