Public Procurement accounts for 25-30 percent of total GDP in Pakistan. In order to improve governance, management, and quality of public procurement of this magnitude, Public Procurement Regulatory Authorities (PPRAs) were established during the last decade by federal & provincial governments. These Authorities replaced various Procurement Manuals in vogue with a new and unified set of public procurement rules which were largely based on ‘UNCITRAL Model Law on Public Procurement’. The challenges involved in true implementation of these rules are myriad; the most important being the adaption of certain provisions to suit the local administrative environment of Pakistan.

One such provision of these rules pertains to establishing ‘Grievance Redressal Committees’ at the level of each public office to address the complaints of bidders which may arise during the bidding process. Although appellant bodies are also designated to hear appeals against decisions of these Committees, this arrangement is not functioning according to international standards due to inherent contradiction as members of these committees deal with complaints against their own colleagues where it is very difficult to ensure impartiality.

Similarly, in order to settle the disputes which may arise after award of contract to the successful bidder, the new public procurement rules generally provide for arbitration. The costs of arbitration include fee of the arbitral tribunal, travel and other expenses of the arbitrators, costs of expert advice and of other assistance required by the arbitral tribunal, and all expenses of witnesses. As a rule of thumb, all these and other related costs are borne by the ‘unsuccessful party’ unless the arbitral tribunal apportion these costs between the parties to a dispute. All these costs make arbitration an expensive method of dispute settlement.

Leaving aside the mega contracts and International Competitive Biddings, it is apparent that arbitration is not a viable option for contractors or the procuring entities in National Competitive Biddings because the costs involved in arbitration are likely to outweigh the benefits of any resultant relief. The cost of arbitration is, thus, a major deterrence to resort to this method of dispute settlement. Owing to already overburdened judiciary, litigation is a slow and, again, not a less expensive option to settle the procurement contract related disputes.

So it is clear that the existing public procurement regulatory regime offers little practicable remedies to contractors during the bidding process or after the award of contract. This is the reason why contractors prefer to settle any issues “off the record” through back channels with the public functionaries. All this is contributing to limiting the number of bidders in public procurement, creation of cartels, and other collusive practices. Further, it has made public procurement a ‘high risk - high return’ venture for contactors in Pakistan because the final amount of each bid includes a ‘risk premium’ to deal with any possible dispute with the procuring entity.

Keeping in view the phenomenal performance of and popular confidence in already functioning Ombudsmen in Pakistan, it will not be out of the box to propose the creation of ‘Public Procurement Ombudsman’ both at federal and provincial levels to provide inexpensive and speedy justice in public procurement related grievances and disputes. It will be particularly useful in case of small contracts, which constitute a vast majority of public procurement operations, where it is not feasible for the contractor and the procuring entity to challenge each other through arbitration or litigation due to relatively small monetary value of contracts. A similar model of Public Procurement Ombudsman is functioning successfully in Canada.

Establishment of Public Procurement Ombudsman can significantly enhance the confidence of bidders in public procurement system and can surely help in expanding markets and increasing competition of bidders for public procurement. The point to be stressed here is that the basic function of a good public procurement regulatory regime is, inter alia, to give confidence to bidders and to generate wider competition so that no amount of public money should be spent delinquently.

Lastly, one must not ignore the fact that no initiative for good governance or agenda of reforms is complete unless it explicitly includes measures for improving the spending of governments and maximizing value for taxpayers’ money.

 

The writer is a civil servant and currently working as Procurement Advisor in Punjab Agriculture Department, Lahore.

sheikhafzaalraza@gmail.com