The absence of a national public procurement policy and delays in implementing much-needed revisions in the General Financial Rules (GFR) have resulted in procurement agencies following broad directions with little emphasis on the practicalities of executing projects
By Richa Chakravarty
public procurement seminar at EFY Expo 2014
Thursday, September 11, 2014: In India, government procurement constitutes approximately 25-30 per cent of GDP. Unfortunately, the rules and policies followed for procuring IT products are similar to those followed for projects in other sectors such as infrastructure and port development. Policies for procuring IT products need to be futuristic as technology in this field changes at a brisk pace. “It is high time that the government develops procurement procedures and policies that are sector-specific and futuristic in nature,” said J V Ramamurthy, president, HCL, while addressing the seminar on ‘Selling to the Government and Best Practices in Public Procurement: An Industry Perspective’, held on February 20, 2014, during the EFY Expo 2014.
Highlighting some of the major issues in ICT procurement, Ramamurthy said, “It is important to include the exchange rate variation (ERV) clause in the procurement contracts. We also need to bring in operational excellence to the process, which would benefit the companies as well as the respective government departments. The current payment process, documentation requirements, and the number of steps to be followed for payments spread over a long cycle time, could be reduced and made electronic.”
Challenges of procurement
Absence of standards, rules and a framework for procuring goods and services leads to issues like lack of transparency, lack of accountability, ineffective vendor selection and non-collaborative ownership.
Presence of multiple procurement rules and policies: At present, procurements are governed by the General Financial Rules (GFR) and the Delegation of Financial Powers Rules (DFPR). Procurements are usually done by the ministries of defence, railways, public works and the public sector, and the Directorate General of Supplies & Disposals (DGS&D). “The presence of multiple procurement rules, guidelines and procedures issued by multiple agencies results in confusion and non-transparency in procedures, which negatively impacts the efficiency of the system,” said Ramamurthy.
Non-collaborative ownership: The involvement of multiple agencies and ministries in the procurement process leads to non-collaborative ownership. This is more accentuated when procuring ICT products.
Issues related to variations in exchange rates: An official memorandum issued by the ministry of finance in October 2013 clearly states that all IT procurements that have substantial import components and involve delivery periods of over 12 months from the contract date, should include the ERV clause in the contract. Yet we have hardly seen any tenders following this rule . Sensitising procurement agencies on this very important clause is the need of the hour. Also, changing the delivery period from 12 months to a maximum of 3 months for including the ERV clause would benefit both parties—the procurement agency and the supplier.
Ineffective order cycles: Sometimes, the order cycle is such that by the time the product is procured, it is already obsolete. So its components and spares are unavailable in the market.
Payment issues: The payment process is presently cumbersome, which leads to delays. Payments, which were so far being done in a centralised manner through the chief controller of accounts (CCA), are now made directly through user departments. So, companies have to spend more time in tracking payments from the user departments.
In a nutshell, the absence of a national public procurement policy and delays in implementing much-needed revisions in the GFR have resulted in procurement agencies following broad directions with little emphasis on the practicalities of executing projects. The lack of sector-specific guidelines like in the IT industry, for instance, leads to problems related to obsolete technology, high import dependence and price variations. Shorter time cycles, which cover order placement, signing of the contract, making deliveries and collecting payments will increase participation and improve competition.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine
