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National Procurement Commission – Justice Minister’s comments

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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.



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Features

Why record export earnings may not be good news

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By Gomi Senadhira

The press release by the Central Bank on the external sector performance ,in June 2022, perhaps was the first piece of good news we had received for a long time. According to the press release, “Earnings from merchandise exports, in June 2022, increased by 23.9 percent over the corresponding month, in 2021, recording US dollars 1,248 million, which is the highest ever monthly export earnings recorded. An increase in earnings of both industrial and agricultural exports contributed to this favourable outcome, …. Cumulative export earnings, from January to June 2022, also increased by 14.3 percent, over the same period in the last year, amounting to US dollars 6,514 million.” So, most of us would think we have enough dollars to cover our essential imports. But, apparently, that is not the case.

Earlier, the Central Bank Governor, Dr. Nandalal Weerasinghe, had said that exporters only converted about 20% of their export earnings into Sri Lankan Rupees and the rest was not brought back to Sri Lanka. That amounts to the US $800 million a month! The Governor had also said “… At least 40% of the total export earnings should be added to the formal financial system of the country. So exporters have a responsibility, at a very difficult time like this, to bring back their foreign exchange, through the banking system, and if that happens, then we can resolve the fuel crisis comfortably.”

(Diesel shipment that arrived in Colombo, on 16 July, still not paid for want of dollars – The Island July 30th) It appears as if the Governor is pleading with the exporters to bring back at least 40% of their export earnings. More notably, from Dr Weerasinghe’s statement, it is clear that the exporter had only converted 20% of their export earnings to rupees during the last five months. Did they convert their export earnings to rupees during the last year, or in the previous years? For how long has this been going on? When the Central Bank says “… exporters have a responsibility, at a very difficult time like this, to bring back their foreign exchange, through the banking system,” does that mean the foreign exchange earned, with the exports, is brought through the hawala network, or other similar arrangements?

Exporters deserve credit for the great service they provide and should be rewarded, appropriately. But not disproportionately. The export earnings are not earned by the exporters alone. These earnings are earned by all those who contribute to manufacturing the export products. All of them should be getting their fair share of the export proceeds. If not, there is something terribly wrong with the system. Is this normal in international trade?

During the last few years, some of the studies by Indian scholars, including Utsa Patnaik and Shashi Tharoor, have placed in the public domain some of the less known facts on the effects of the British colonial rule on India. They explain how the British seized India, “… one of the richest countries in the world – accounting for 27% of global GDP in 1700 – and, over 200 years of colonial rule, reduced it to one of the world’s poorest,” and how during the period British Raj siphoned out $45 trillion from India.

How was this done? Patnaik explains, “In the colonial era, most of India’s sizeable foreign exchange earnings went straight to London—severely hampering the country’s ability to import machinery and technology in order to embark on a modernisation path, similar to what Japan did in the 1870s. …, a third of India’s budgetary revenues was … set aside as ‘expenditure abroad’. The secretary of state (SoS) for India, based in London, invited foreign importers to deposit with him the payment (in gold and sterling) for their net imports from India, which disappeared into the SoS’s account in the Bank of England. Against these Indian earnings he issued bills… to an equivalent rupee value—which was paid out of the budget, from the part called ‘expenditure abroad’.” Patnaik underlines that this was “something you’d never find in any independent country,”

But it appears something very similar is happening in Sri Lanka, many years after the independence! If the exporters do not “bring back their foreign exchange ,through the banking system,” or only bring back 20% of it, then how do they pay for goods and services obtained locally? The local value addition for most of our exports is 70% to 80% or higher! The only major exception is cut and polished diamonds. Tea exporters buy tea with rupees. Some of the imported inputs, like fertiliser, or diesel, are sourced locally! The garment industry had moved up the value chain during the last 40 years and provide many value-added services, like designing, locally.

How do the exporters pay for all these goods and services, if they keep more than 60% of their export earnings outside the country? Do they get it through “hawala” or similar arrangements? During the British Raj, payments to local producers were done with the taxes collected by the Raj. In present-day Sri Lanka, how does one manage to raise a large amount of cash to operate such a system?

If a sizeable chunk of Sri Lanka’s foreign exchange earnings goes straight to banks in London, New York, Zurich, or elsewhere, severely hampering the country’s ability to import essential items, doesn’t that mean, Sri Lanka’s wealth is getting siphoned out through our exports? And there is not much of a difference between what happened during the colonial period and the post independent Sri Lanka!

So, June’s record export earnings also mean nearly US$ billion was siphoned off during the month! A new record for the month of June! And that means Patnaik was wrong when she said this was not “something you’d never find in any independent country”

That is not good news.

(The writer is a specialist on trade and development issues and can be contacted at senadhiragomi@gmail.com)

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Improving trend needs to be sustained on multiple fronts

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by Jehan Perera

The government appears to have secured political stability in the short term.  So far President Ranil Wickremesinghe’s efforts to restore stability appear to be working. Political stability is necessary for decisions to be made and kept.  It is a necessary element for international support to come in.  One of the IMF’s conditions to provide the country with the multi-billion-dollar loan it seeks is political stability that would ensure that commitments that are made will be kept.  The protest movement has not mobilised public demonstrations on the very large scale of the past after the appearance of Ranil Wickremesinghe in leadership positions, initially as prime minister and subsequently as president. This would be seen as an achievement by the government.  The present governmental line that protests should be within the law is difficult, and also frightening, to challenge when a state of emergency is in force.

The government has shown its ability to wield the emergency law with deterrent effect. Under the state of emergency that President Wickremesinghe declared on July 18, the period that a person may be detained before being brought before a magistrate has been increased from 24 to 72 hours. The authorities have been granted additional powers of search and arrest, and the military has been empowered to detain people for up to a day without disclosing their detention. The state of emergency also gives the president and the police broad powers to ban public gatherings, allows the police or military to order anyone to leave any public place or face arrest, and makes it an offense to cause “disaffection” or to spread “rumours.” However, in a sign that Sri Lanka’s system of checks and balances is still working, the Colombo Chief Magistrate’s Court has rejected a request by the police to ban a public protest planned by political parties and multiple organisations on September 9.

Human Rights watch has pointed out that “these provisions are vague, overly broad, and disproportionate in violation of the rights to freedom of expression, peaceful assembly, association, and movement.”  The midnight strike on the protestors who had camped for over three months at the main protest site at Galle Face would make any reasonable person think twice before getting into physical confrontation with the government.  The social media coverage of events that night showed men in black uniform and wearing masks, attacking the unarmed protestors.  As these men did not wear identification badges, there is a question whether they were part of the official security forces or drawn from other groups that work with them.  This response brought discredit to the perpetrators and disturbed both Sri Lankan people and the international community that have the welfare of Sri Lanka at heart.

The government has also used the full power of the draconian law to ensure that the leadership of the protest movement is neutralised. Several of them have been arrested, some of them given bail, others remanded, which would send a chilling message to the others.  The government has also shown its willingness to offer high positions to those who are prepared to join it.  This has led to a situation where two trade union leaders active in the protest movement have been treated very differently.  One has been offered a high post while the other has been put into prison, although he has now been given bail.  In a signal that he is sensitive to public pressure and human rights concerns, President Wickremesinghe had spoken to leader of the Ceylon Teachers Union, Joseph Stalin, after he was remanded and reportedly said he admires the members of the protest movement who talk of a system change.

ECONOMIC STABILISATION

Apart from the appearance of political stability there is also the appearance of economic stabilisation.  The shortages of cooking gas, petrol and diesel, and the 13-hour power cuts were among the main catalysts of the protest movement.  It was during the period of long power cuts, when staying at home became unbearable, that neigbourhood groups began to converge in urban centres to hold candlelight protests.  However, at this time the supply of gas, petrol and diesel has improved significantly and the kilomere-long lines in front of fuel stations are much less common.  Credit has gone to the QR code system put in place that gives to each vehicle a weekly quota.

The challenge for the government is to ensure that the economic situation continues to be stable without experiencing the acute shortages of key items that causes distress to the general population.  The QR code system can only work if there is petrol and diesel to be distributed.  The current imports of cooking gas, petrol and diesel appear to have been made possible by a World Bank loan which was re-purposed to the purchase of essential items.  However, these funds will dry up soon.  The question is what will happen after that.  There is apprehension that the country will fall once again into a situation of severe shortage.  The government needs to take the people into its confidence regarding the future.  The government also needs to be trusted if it is to be believed.

The World Bank has given an indication that they are still to be convinced regarding the provision of further assistance to Sri Lanka.  Earlier this month, the World Bank issued a statement “expressing deep concern about the dire economic situation and its impact on the people of Sri Lanka yesterday said it does not plan to offer new financing to Sri Lanka until an adequate macroeconomic policy framework is in place.  Issuing a statement, the World Bank Group said it is repurposing resources under existing loans in its portfolio to help alleviate severe shortages of essential items such as medicines, cooking gas, fertiliser, meals for school children and cash transfers for poor and vulnerable households.  To date, the World Bank has disbursed about US$160 million of these funds to meet urgent needs.”  This is extremely concerning as the World Bank is closely connected to the IMF on which Sri Lanka is pinning its hopes for a big loan.

POLITICAL STABILITY

The issue of political stability is highlighted by the government as being necessary to obtain international assistance and also as a justification for quelling the protest movement through emergency laws.  There is explicit blame being apportioned to the protest movement for creating instability in the polity that is deterring the influx of foreign assistance and investments.  However, the fuller picture needs to be seen.  The IMF as much as the World Bank, and indeed other potential sources of donor support, want their resources to be used for the intended purpose and not be squandered or siphoned away corrupt practices and in sustaining loss-making state institutions.

The hoped-for IMF-supported programme to provide assistance to Sri Lanka is being developed to restore macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlock the country’s growth potential. IMF mission team to Sri Lanka last month specifically mentioned the need to reduce corruption stating that “Other challenges that need addressing include containing rising levels of inflation, addressing the severe balance of payments pressures, reducing corruption vulnerabilities and embarking on growth-enhancing reforms.”

Both the international funding agencies and the protest movement are on the same page when it comes to opposing corrupt practices.  The main slogans of the protest movement during their heyday was the ouster of the then president, prime minister and cabinet of ministers, and indeed the entire parliament, on account of the corruption that they believed was responsible for having denuded the country of its foreign exchange reserves. This was not simply the replacement of one set of corrupt leaders by another. There are disturbing signs that some of those accused of corruption are once again on the ascendant.

The underlying demand of the protest movement was and continues to be the very “systems change” that the president has said he admires in his reported discussion with remanded trade union leader Joseph Stalin. Civil disobedience to obtain a government that is transparent and law abiding, that does not steal the wealth of the country, is a noble goal, no less sacred than the civil disobedience struggles engaged in by Mahatma Gandhi in India and Martin Luther King in the United States.  The ingredients for a rebound of the protest movement continue to be in place and hopefully the evidence of a systems change will become more convincing.

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Brenda Mendis… ‘Gindara Kellek’

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I first got to know Brenda Mendis when she was very much a part of the group Aquarius, before joining Mirage..

With Aquarius, her dynamism bloomed, on stage, when she partnered two other female vocalists – from the Philippines.

And…yes, they certainly did rock the scene; the three girls were the talk-of the-town and they were featured at some of the best venues in the city.

She was also, at one time, associated with the band 2Forty2.

Brenda now operates with an outfit called C Plus Band, and with whatever free time, that comes her way, the talented artiste is now working on originals.

The latest is the song ‘Gindara Kellek’ and this is what Brenda has to say:

“I have known this guy Chathurangana de Silva for a very time and he has been involved in composing certain songs for the C Plus Band.

“We then got down to discussing about putting together a song which could be classified as a fast genre in music, and Chathurangana, along with Sampath Fernandopulle, came up with the suggestion for the lyrics, and they did so, based upon a proper observation of my lifestyle and the personality portrayal of myself, and that’s how “Gindara Kellek’ came into the scene.”

Brenda went on to say that the composing was done during a tight schedule.

“As I am the female vocalist, on a full time basis, with the C Plus Band, it took us more time than what is usual spent at a recording session, because of our public performances.”

‘Gindara Kellek’ is not Brenda’s maiden effort. She has been involved in quite a few other originals, including ‘Tharu Peedena Seethale,’ ‘Obai Mage Thaththe,’ ‘Mage Raththaran,’ ‘Kaprinna (Chooty),’ ‘You Never Know,’ ‘Mea Nilwan Nimnaye, and ‘Sitha Igilee Gihin.’ And, they are all uniquely different to each other, she says.

With the country going through a tough period, Brenda, spends her free time working out and reading.

“I would take this opportunity, through your very popular music page, to thank all those who helped me throughout my journey in this wonderful field of music.

“I shall continue to keep music lovers happy, with my music, and I would also thank my followers for supporting me and for being with me throughout my career in showbiz.”

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