Make procurement rules more inclusive

Bangladesh's leading manufacturers have called for changes to the public procurement system, arguing that discriminatory rules are locking out capable local companies from a $30 billion government spending pool.

At a roundtable titled "Budget 2025-26: Time to Make Public Procurement Work for Bangladeshi Manufacturers", organised by The Daily Star yesterday, top industrialists, procurement experts, and government officials gathered to highlight how the current framework fails to reflect the strength and capacity of Bangladesh's industrial base.

Despite the rise of multibillion-dollar companies in Bangladesh, domestic suppliers are often denied equal opportunity in public contracts. Speakers pointed to clauses in the Public Works Department's schedule of rates that create structural entry barriers.

One striking example discussed was the PWD's requirement that a firm must have 65 years of experience to supply elevators to government projects. This rule alone excludes emerging local players, which have already invested in lift production but do not meet this arbitrary threshold.

Another instance involved the procurement of air conditioners. The PWD rate schedule categorises ACs into country-based tiers, each with a different benchmark price. Tenders based on this classification often implicitly favour foreign brands, sidelining local manufacturers even though they supply nearly 90 percent of residential ACs and 80 percent of electronic home appliances in the domestic market.

We have institutions. We must build their capacity and standards. Now we are heading toward LDC graduation. That means quality and competition must rise. Otherwise, what's the benefit?

— Finance Adviser Salehuddin Ahmed

Responding to the concerns, Finance Adviser Salehuddin Ahmed, who attended the roundtable as the chief guest, said the government was already taking steps to make procurement more transparent and competitive.

He referred to a government decision to abolish the controversial rule that allowed bids to be automatically disqualified if they were 10 percent or more below the estimated value of the contract.

"This decision was taken to stop arbitrary cancellations and encourage fairer pricing," Ahmed said, adding that he would look into other issues to make public procurement rules more inclusive.

Ahmed has criticised flaws in Bangladesh's procurement system, citing excessive spending on foreign consultants and collusion in tendering processes.

"I often notice inefficiencies in service-related projects. Recently, I saw a Tk 180 crore consultancy for a complex project. I was shocked. Do we not have local experts for this?" Ahmed said.

He highlighted a tendency to favour international firms despite growing local expertise, pointing to a case where a government department allocated Tk 10 crore for consultancy fees, exceeding the construction cost for just 12 buildings. "This is a leakage issue. Consultants get paid, but we often hesitate to hold them accountable," he said.

Ahmed acknowledged that open tenders intended to ensure fairness are sometimes undermined by bid-rigging.

"Procurement methods need improvement. Open tendering is supposed to be fair, but collusion happens -- bidders sometimes fix prices among themselves," he said.

On large infrastructure projects, such as an $800 million airport terminal funded by multilateral lenders, Ahmed admitted that loan conditions often favour foreign contractors. For example, high-tech scanners required for the project are not yet manufactured locally.

"Over time, we will build capacity, but for now, we must comply with donor conditions," he said.

Speakers at the event emphasised that reforming procurement rules to support local industry would not only help unlock the full potential of domestic manufacturing but also create jobs, save foreign currency, and ensure greater self-reliance in public infrastructure and service delivery.

Bangladesh's public procurement system urgently needs reform to enhance transparency, inclusiveness, and technical precision, said Faruque Hossain, procurement policy consultant for the Ministry of Power, Energy and Mineral Resources.

While the Public Procurement Rules (PPR) provide a structure, many challenges persist due to ambiguity, lack of accountability, and manipulative practices.

He emphasised the need to clearly define whether tenders are national or international and categorise them properly -- goods, works, or services -- as these distinctions determine scope and eligibility.

Hossain criticised discretionary rejection of bids, especially those submitted by capable local firms.

He cited instances where compliant domestic bidders were rejected for invalid reasons, like "student preference for foreign laptops."

He also said the Bangladesh Public Procurement Authority's (BPPA) inaction during legal or technical disputes, leaving agencies in confusion.

Moreover, fear of anti-graft scrutiny discourages officials from taking bold yet necessary decisions, he pointed out.

Ziaul Alam, additional managing director of Walton Hi-Tech Industries PLC, said Walton exports to over 40 countries and can meet domestic standards. However, restrictive procurement criteria often render them ineligible. He questioned why firms compliant with US standards were excluded at home. Alam argued that enabling firms like Walton to fulfill government contracts would boost employment and GDP.

Iftekharuzzaman, executive director of Transparency International Bangladesh, said public procurement still lacks transparency and fair competition.

Citing TIB data, he said around 27 percent of contracts involve corruption. Though the Electronic Government Procurement (e-GP) system was launched to address such issues, its impact has been limited.

TIB found that over 12 years, 62 percent of tenders went to just 5 percent of contractors, showing rising concentration in contract awards, he added.

Shoeb Ahmed Masud, former vice president of BASIS, called for the inclusion of local IT firms in government projects.

He said there was a decline in their participation in recent years despite growing opportunities in metro rail and smart city initiatives.

Drawing parallels with India, Masud urged Bangladesh to reserve certain digital infrastructure components for local SMEs to strengthen the domestic tech industry.

Farooq Ahmed, additional secretary at the ministry of housing and public works, emphasised integrating local firms into national development.

He urged a shift in mindset to trust capable local companies and tailor tender terms and specifications to allow their participation, without compromising transparency.

He also called for vigilance against corruption and inefficiency.

Md Shamsuddoha, additional chief engineer of PWD, echoed the need to reform procurement policies that disadvantage local manufacturers. He said outdated systems, such as legacy elevator categories, exclude qualified firms like Walton.

He criticised weak enforcement by BSTI, which allows inferior products to undercut leaders like BSRM, and recommended allowing local-international joint ventures.

Mizanur Rahman Mamun, finance director at Hatil Furniture, urged changes in rules requiring restricted local wood, which contradict forest conservation policies.

He stressed buying directly from manufacturers to avoid double VAT and reduce costs.

Mamun advocated giving preference to companies with proper environmental and labour compliance and simplifying bureaucratic processes.

Mahfuz Anam, editor and publisher of The Daily Star, called for a reassessment of the national payment policy.

Highlighting over $30 billion in annual transactions through public procurement, he said this is a national economic issue, not just financial.

He criticised policies that favour imports under the pretext of global standards, effectively sidelining competitive local producers. Anam termed such practices "a silent but systemic barrier" to domestic industrial growth.

AK Enamul Haque, director general of Bangladesh Institute of Development Studies, criticised the ineffective role of the Bangladesh Competition Commission, pointing out legal loopholes that benefit officials and foreign interests.

Haque drew examples like unfair disqualification of local firms, inflated procurement estimates, and poorly coordinated infrastructure work.

Highlighting systemic flaws, he stressed that uniform standards can't apply to all projects and that current public procurement practices often waste resources.

He urged structural reforms, transparency, and support for domestic producers to ensure fair competition and sustainable development.

RN Paul, managing director of RFL Group, said the quality of work should be assessed first, and only then should judgments be made.

"It's important to visit the factory and see firsthand what we are doing. Otherwise, it won't be fully trusted," he said.

Pran-RFL Group is a leading food processor and conglomerate in Bangladesh. It aims to export products worth $1 billion by 2025 and $2 billion by 2030, he added.

He also said that seeing the work on the ground will build confidence in Bangladeshi companies. "Our capabilities have grown significantly."

Currently, alongside meeting domestic demand, PRAN-RFL products are being marketed in 145 countries, he said, adding that therefore, local companies should be given priority when it comes to flourishing and expanding their operations.

Aameir Alihussain, managing director of the BSRM, one of the leading steel manufacturing companies in the country, said locally available products should not be made duty free, and the income tax rule should be made the same as the VAT rule.

Another issue that needs to be added to public procurement is the protection of suppliers. Here, bank guarantees or some other system should be put in place to provide protection to local suppliers, he said.

"If suppliers leave the country, how do we address them? If he is a local supplier, a case can be filed against him, or some other action can be taken. Otherwise, no action can be taken. No one accepts his responsibility.

"Another issue is that many times, we see that too many infrastructural changes are made in the middle of a project. This system should be fixed. There should be a general discipline issue here."

Tanjim Ferdous, in charge of NGOs and foreign missions at The Daily Star, moderated the discussion.