Govt's rules change to rock WB aid flow
As the government has finalised some major amendments to the public procurement rules, the World Bank last week said adoption of these changes could jeopardise its project aid including budget support for Bangladesh.
To amend the Public Procurement Act/Rules (PPA)/(PPR), the government has finalised about 50 articles of the PPA and PPR for amendment. Once the PPA and PPR is amended, it will allow the government to award contracts for jobs involving up to Tk 2 crore through lottery and selection of contractor without any pre-qualifications.
The ambitious Annual Development Programme (ADP) for the next fiscal year is 33 percent higher than the revised budget of the current fiscal year. Fifty-four percent of the ADP funding is expected to come from foreign aid and a large chunk of that from the World Bank.
If the government makes these amendments to the PPA and PPR, the implementation of the ADP could be at risk.
The World Bank in a letter to the government for the second time expressed its serious opposition to six of the proposed amendments.
The letter, written by World Bank Country Director Xian Zhu last week, read, "Some of the specific proposed changes in the existing provisions of PPR, being inconsistent with good procurement practices, could have serious implications for the bank's processing of future budget support operations and could restrict its ability to rely on the country system [PPA/PPR] in future operations."
The letter written to the Economic Relations Division (ERD) secretary also said, "In addition, over 80 percent of our ongoing operations rely on this country system for local procurement, and the agreements with the government of Bangladesh under these operations could be jeopardised."
Copies of the letter were sent to the finance minister, the planning minister and the prime minister's finance and planning adviser.
On May 25, the World Bank in a letter for the first time expressed its concern about the proposed amendments and after official meeting with the ERD secretary, the second letter was sent.
Government officials said the amendments are being made mainly for awarding contracts for work, through lottery and without pre-qualifications, to ruling party activists and people close to the party.
They also said the lottery system opens the door for corruption. The specific envelope that contains the bid of the favourite contractor is marked in a specific way so that it could easily be picked. The envelopes are sometimes kept in a fridge to make it easy to pick.
The World Bank issued the letter after detailed discussions with government officials concerned. The letter also mentioned the government logic behind the probable amendments and the bank's rationale behind opposing them.
The proposed amendments say that no pre-qualification (professional and technical qualification) and work experience is required for getting contracts worth under Tk 2 crore, the World Bank said, adding that as qualification requirement is a fundamental criterion in any competitive bidding, this change would undermine some key principles of the procurement process such as fairness of the process and the equitable treatment of competitors. It would introduce too much discretionary handling, it said.
The government says that as a result of the articles, new contractors can participate in the bidding at the district/upazila levels but others cannot compete.
Another finalised amendment said for jobs up to Tk 2 crore, if the quote is five percent above or below the official estimate, it will be rejected and the bid security will be forfeited.
The World Bank said, "The core reason is to put an end to bidders' malpractices. Therefore, the bank thinks that this amendment, a governance and anti-corruption risk mitigation, should not be addressed through additional provisions in the procurement framework, rather through a firm handling of the bidding process."
In support of the proposed amendment the government said if there were a provision of such limit, it would allow the bidders to quote within a reasonable limit.
The amendment provides that for equipment/vehicle purchase, brand names and/or country of origin will have to be mentioned.
The World Bank opposes the amendment saying to promote wider competition it is essential that technical specification of equipment be prepared taking into account the critical performance characteristics. For public procurement, use of brand names and/or country of origin will restrict competition and will be discriminatory.
The government rationale behind it is that in order to ensure quality of equipment/vehicles, it would be helpful if brand names and/or country of origin were mentioned.
The amendment also says that no representative of the FBCCI would be included in the review panel for complaints received against any bid. Instead a firm would be included.
Before sending any proposal to the purchase committee the ministry concerned can have opinion of the experts. However, a source concerned said it is not proper as the ministry can have opinion from an expert of its choice to influence the purchase committee.