National Procurement Commission – Justice Minister’s comments

By Dr. Janaka Ratnasiri

In an interview held in one of the TV channels on 07.09.2020 ending at midnight, Justice Minister Ali Sabry said that the National Procurement Commission (NPC), established among the several independent commissions under the 19th Amendment to the Constitution, has not served any useful purpose during the 5 years of its existence and is a redundant organization. Perhaps during his short tenure as the Justice Minister, he appears to have not grasped the importance of the NPC and hence this write up.

NEED FOR PROCUREMENT GUIDELINES

Sri Lanka’s budget for 2019 has been LKR 2,365 Billion for capital and LKR 2,178 Billion for recurrent expenditure according to Central Bank of Sri Lanka Annual Report for 2018 (Table 100). Other than the payments on salaries and interest & capital repayment on loans, the rest will have to be spent on procuring goods and services both by the government institutions and semi-government institutions. Hence, it is important that there are norms and guidelines in place for incurring such expenditure to ensure that public funds are not siphoned out either by officials or by suppliers.

Originally, the Department of Public Finance (DPF) functioning under the Treasury played the role of managing the expenditure in public sector organizations and had the responsibility for a sound public finance regulatory framework which improves transparency, accountability and service delivery in the public sector. The DPF has issued several guidelines for the benefit of public sector organizations outlining procedures and methodologies for the procurement of goods and services.

However, media reports reveal that more often than not, public sector organizations act in violation of these guidelines causing millions of rupee losses to the government. One reason may be that DPF lacks a mechanism to monitor whether these organizations strictly follow these guidelines or not. Any shortfalls generally come to light only when their finances are audited when it is too late to take any corrective measures.

NATIONAL PROCUREMENT COMMISSION

Realizing the need to have a strong body to monitor procurements amounting to several thousands of billions of rupees annually being undertaken by various government ministries, departments, as well by semi-government organizations including statutory boards, commissions, authorities, universities, banks and government owned commercial enterprises, the government established in 2015 the National Procurement Commission as an independent commission. It is the sole authority for the governance of all procurement activities by Government Institutions.

This was included as one among the nine independent commissions established under the Nineteenth Amendment to the Constitution (NAC) of Sri Lanka. The NAC Act describes the constitution, functions and powers vested on the NPC. However, as lamented by the Justice Minister, during the last five years of its existence one cannot be satisfied that it was effective in streamlining procurement procedures and in monitoring the procurements being made in government organizations as provided for in the NAC Act.

CONSTITUTION AND FUNCTIONS

The NPC comprises five members appointed by the President on the recommendation of the Constitutional Council (CC), of whom at least three members shall be persons who have had proven experience in procurement, accountancy, law or public administration. The President shall, on the recommendation of the CC, appoint one member as the Chairman of the NPC. The NAC Act has assigned the following functions to the NPC.

(1) It shall be the function of the Commission to formulate fair, equitable, transparent, competitive and cost effective procedures and guidelines, for the procurement of goods and services, works, consultancy services and information systems by government institutions and cause such guidelines to be published in the Gazette and within three months of such publication, to be placed before Parliament.

(2) It shall be the function of the Commission to:

(a) monitor and report to the appropriate authorities, on whether all procurement of goods and services, works, consultancy services and information systems by government institutions are based on procurement plans prepared in accordance with previously approved action plans;

(b) monitor and report to the appropriate authorities on whether all qualified bidders for the provision of goods and services, works, consultancy services and information systems by government institutions are afforded an equal opportunity to participate in the bidding process for the provision of those goods and services, works, consultancy services and information systems;

(c) monitor and report to the appropriate authorities on whether the procedures for the selection of contractors, and the awarding of contracts for the provision of goods and services, works, consultancy services and information systems to government institutions, are fair and transparent; and

(d) report on whether members of Procurement Committees and Technical Evaluation Committees relating to the procurements, appointed by government institutions are suitably qualified; and

(e) investigate reports of procurements made by government institutions outside established procedures and guidelines, and to report the officers responsible for such procurements to the relevant authorities for necessary action.

EXERCISING THE FUNCTIONS UNDER THE NPC

Though the functions of the NPC are clearly laid down in the NAC Act as listed above, the NPC does not appear to exercise them when public sector organizations procure goods or services. This may be due to the fact the NPC has not published any gazette notifications announcing any regulations that other public sector organizations are bound to follow when making procurements. The NPC does not seem to voluntarily monitor procurement processes in other organizations though it has the mandate to perform that function. This was evident from their response to a query made by the writer with regard to procurements undertaken by the Ceylon Electricity Board (CEB).

The CEB has been attempting to procure thermal power plants with capacity 300 MW in the recent past which have not been finalized yet. It is noteworthy that such a power plant will cost around USD 300 million or LKR 50 billion. The writer pointed out in several of his writings in the Island (28.03.2019, 19.08.2019 & 03.10.2019) the shortcomings in their procurement process that has caused delays in finalizing the procurements. The CEB is also planning to procure a coal power plant of capacity 300 MW from China without going through the approved procurement guidelines despite the fact that the procurement involves such a large sum of money.

Several months ago, the writer brought this to the attention of the NPC inquiring whether NPC has monitored these procurements as mandated in the Act. The response the writer received was that the NPC would inquire into such cases only if they receive an official request from the relevant Ministry! This is an absurd situation, because one cannot expect the Ministry to make such a request when the Ministry itself is a party responsible for the delays.

Obviously, the Commission has not understood their mission and it is necessary to have a set of new members who understand their mission and motivated to exercise their authority without fear and favour. Enforcing guidelines on procurements worth several thousands or millions of rupees will not serve the purpose of having such a set of guidelines, if the guidelines are overlooked in the case of high-value procurements. If the NPC has not been effective in the past, the solution is to change its management rather than closing down the organization.

CURRENT PROCEDURE IN PROCUREMENT

For the purpose of procuring high value goods and services, several Procurement Committees (PC) are appointed to handle the procurement process and for the determination of contract award.

A department or an institute after identifying the need to make a procurement, a request is made to the Treasury through the relevant Ministry for budgetary allocation for the procurement along with a statement justifying the procurement. Thereafter a Technical Devaluation Committee (TEC) is appointed with the concurrence of the Ministry who will draft the specifications for the procurement. It is important that this is done carefully not making it too stringent or too general. Generally, a member from an outside organization with relevant expertise is included in the TEC.

The procurement division of the organization will then prepare a Request for Proposals (RFP) incorporating the specifications and other tender requirements such as specifying bid bonds and procurement bonds. Depending on the value of the procurement, Ministry Procurement Committee (MPC) and a Cabinet Appointed Procurement Committee (CAPC) will be appointed who are expected to screen the RFP to ensure that it does not favour a particular supplier. The RFP should also be written in simple language giving only the essential information so that the bid evaluation could be carried out expeditiously. Tenders with complicated RFPs invariably will end up in court cases. Once approved, the RFP is published in the media calling for proposals.

The functions of the NPC as listed above would require that the composition of the PCs and TECs as well as the RFP documents are approved by the NPC to ensure that members of the PCs are suitably qualified and also all qualified bidders are afforded an equal opportunity to participate in the bidding process, as required under the functions of the NPC. The author believes that this process does not happen now probably because there are no regulations gazetted by the NPC to that effect. This is one of the failures of NPC that needs to be rectified.

The bids received are first evaluated by the TEC and those meeting the specifications and other tender conditions are forwarded to the MPC and depending on the value of the tender, submitted to the CAPC as well. In making the final recommendation, compliance with specifications is given priority while taking note of the value of the bid offered as well as the suitability of the bidder for supplying the item or providing the service requested. If an unsuccessful bidder is not satisfied with the decision for the award, he may appeal to a standing Appeals Board requesting reconsideration of the evaluation.

CABINET INVOLVEMENT IN AWARDING CONTRACTS

It is the general practice today to seek the approval of the Cabinet of Ministers for bids worth above a certain limit. If one peruses the list of Cabinet decisions published weekly, it is noted that a significant number of decisions reported in every Cabinet meeting are in respect of approvals for awarding contracts for construction of buildings for the government including hospitals, Divisional Secretariats, schools, universities and other infrastructure facilities. Is this the function of the Cabinet of Ministers? Shouldn’t they spend their time on more important issues of national level?

The author would like to propose that the function of granting approvals for high-value contracts be vested with the NPC, relieving the Ministers of this responsibility. Afterall, the Cabinet cannot independently check the papers submitted to it for suitability of the item or whether correct procedures have been followed in selecting the successful bidder or not but have to depend on the recommendations of the CAPC.

On the other hand, if this responsibility is given to the NPC, it can independently verify whether the correct selection has been made after proper evaluation following the published procurement guidelines or not. Where necessary, NPC could co-opt outside experts for this purpose. However, one pre-requisite that needs to be followed is to have officers of the highest integrity to undertake such work.

Seeking cabinet approval may be limited to cases of large national scale developmental projects as well as on policy issues pertaining to procurements rather than granting approval for routine construction work. The Cabinet has no capability to verify whether the estimated costs are correct or not. It is best to leave it to the NPC.

CONCLUSION

Though the functions assigned to the NPC include monitoring and reporting to the appropriate authorities whether proper procedures have been followed in the procurement process undertaken by public sector organizations or not, the NPC has not been exercising this function adequately, probably due to want of commitment or lack of understanding of its functions by the Commission members. Hence, there is a need to have a more committed set of Commission members to make the NPC more effective rather than disbanding it.

In the event the 19th Amendment to the Constitution is repealed while introducing the 20th Amendment, it is still worth retaining the NPC by passing a separate Act of Parliament with more powers assigned to it. The NPC should be given powers to examine procurement processes undertaken by public sector organizations on its own initiative and to grant approval for high-value tenders, in addition to its current functions including monitoring.