The need to strengthen the public procurement process

The biggest challenge in the public procurement process is to harmonise the Public Procurement Bill 2012 with existing DGS&D rules, which counter each other, leaving the government and the industry in the lurch

Arijit Sen, manager, corporate affairs, HP, India addressing the crowd at the seminar on the public procurement at EFY EXPO 2014
Arijit Sen, manager, corporate affairs, HP, India addressing the crowd at the seminar on the public procurement at EFY EXPO 2014

By Kartiki Negi

Monday, October 21, 2014:  Procurement by the Government of India (GoI) accounts for approximately 29 per cent of India’s GDP, and thus forms a critical component of the nation’s development. The Central government is the single largest customer for the information and communications technology (ICT) industry, procuring around Rs 50,000 million worth of ICT equipment, annually. The state governments, too, play an active part in the procurement process and the size of their combined orders is mind boggling.

The purchase preferences and decisions of the Central government define how technology is absorbed across all departments of the Indian government. Most importantly, they signal to the IT industry the direction in which R&D efforts ought to be channelised. However, there is a need to further strengthen the procurement process so that it is beneficial to both the government as well as to industry. “The message that we are trying to put across to our stakeholders in the government and within the industry is that there will have to be some sea changes if India aims to go through to the next level of public procurement,” said Arijit Sen, manager, corporate affairs, HP India 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.

The GoI has formulated a draft of its Public Procurement Bill 2012, which is designed to govern the procurement process for all Central government and public sector units (PSUs) in the country. However, the challenge lies in harmonising the Public Procurement Bill 2012 with existing DGS&D rules.

- Advertisement -

LOGOEXPOefyHighlighting the concerns over the bill and the existing procurement policy, Sen said, “It is necessary to address the challenge of aligning all other regulations and legislation that impact public procurement in India with this bill. Unless the current rules are aligned with the public procurement bill, there is going to be a situation of two horses pulling in opposite directions.”

According to Sen, the government can make procurement a smoother and more transparent process in a number of ways. Some of these are listed below.

Creating a mechanism within government procurement departments to support innovation procurement: Currently, the rules prevent the government from procuring from a single vendor. Unless the minimum number of industry vendors bid for a tender, the entire bidding process stands cancelled. “If the government wants to have cutting edge technology, it cannot afford to have its hands tied by such rules. This rule hurts both the government and a company that might have invested in the R&D that results in innovative products or services. This gives an impression that industry is getting penalised for getting into R&D and innovation, which seems to be unfair,” said Arijit Sen.

There are special provisions whereby the government can procure from a single vendor in cases where national security is concerned. For the remainder of cases, in general, there are a minimum of three bids, without which rate contracts (RC) stand cancelled. From a government perspective, this is to ensure proper price discovery and a level playing field. However, industry perceives the current procurement process as a barrier to domestic innovation since there is no provision for the R&D efforts of the industry to translate into government sales. For a sector like IT, where innovation is critical to growth, this process discourages government procurement from the industry, including from domestic start ups, which often develop cost effective, efficient and path breaking home grown products. Hence, the government should introduce provisions that enable end users to procure cost effective innovative products outside the scope of national security as well.

Implementation of the ERV clause in DGS&D rate contracts: The exchange rate variation (ERV) clause notified by the Ministry of Finance is aligned to the general financial rules (GFR), which means that it provides a fluctuation buffer for contracts of 18 months and above. This implies that the DGS&D rate contracts, which are for a period of just one year, are outside the scope of this clause.

“Over the last year, the rupee has depreciated by almost 30 per cent against the dollar, resulting in industry margins significantly getting eroded. Implementation of the ERV clause by the DGS&D will protect both the industry and the DGS&D from the cyclical nature of exchange rate fluctuations,” opined Arijit Sen.

According to industry experts, the matter can be resolved by the Ministry of Commerce and the Ministry of Finance if they revise this clause in the interests of the long term benefits that will accrue to both the industry and the government. Notifying the ERV clause for contracts of one year will enable the DGS&D to pass the benefits to end users when the rupee strengthens.

Recognition of existing IPR (intellectual property rights) in government procurement contracts: Government procurement terms often stipulate that upon purchase of a specific IT solution or system, the ownership of the IP of that solution, too, must get transferred to the government. Though this is important in case of solutions that affect national security, asking for ownership across the board puts the industry at a disadvantage.

Any solution, even one that is tailor-made for a specific government customer, is built on top of an existing IPR pyramid. The existing foundation or building blocks of this pyramid are common, and are an IT company’s primary strength, used simultaneously on a global basis by the company. All IT companies invest significant R&D when building their base IP, and most end user solutions are customised by adding to the base of this pyramid. It is therefore not possible for an IT company to share/sell this existing IPR to any specific customer.

Strengthening quality control through a green channel: While the current terms outlined for a vendor to qualify for the green channel are adequate to ensure the financial credibility of a company, they do not weed out poor quality. Hence, relevant quality parameters need to be set in place to protect end users as well as vendors. This is all the more relevant because of the current DGS&D rule that mandates the forfeiture of the Rs 5 million deposit by green channel vendors in case of any complaint related to quality.

Clear parameters that define quality need to be introduced as part of the DGS&D green channel system. This will ensure a transparent mechanism that demarcates complaints based on quality from general customer grievances. In addition to the profitability and turnover criteria, the green channel privilege should be linked to quality and sustainability parameters such as power efficiency, environment friendly standards, life cycle management, safety and security standards that are harmonised to international norms, and general compliance to the RC specifications.

Awareness on standards for procurement: It is very important to be aware of international and national standards in the area of safety, security, energy efficiency, performance and electromagnetic (EMI)/electromagnetic compatibility (EMC). There is a need to incorporate internationally harmonised standards in the procurement process and yet be aware of the scope and limitations of standards. The application of standards should be judicious and centered around the usage requirements to avoid introducing unnecessary complexity.

There is also an urgent need to make the industry aware about the standards followed for procurement, because the government will soon introduce a series of standards and non-tariff barriers. “We understand and appreciate the fact that these are to be put in place to ensure that no sub-standard material flows into the country but there is a need to have a consultative process. What we are asking is that that government should introduce the provisions that enable the end users, that is the government departments, to procure cost effective and innovative products. The government should not have its hands tied in any procuring department, simply because the rules say that only those vendors with a certain number of years of experience or a particular turnover can be procured from,” said Arijit Sen.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

- Advertisement -
Loading form…

Industry's Buzz

thyssenkrupp

thyssenkrupp Expands Automotive Electronics R&D In Pune

0
thyssenkrupp Automotive Technology is expanding automotive electronics and software R&D in Pune, planning to grow its engineering team beyond 300 to support global programmes...

Nuuk and EPACK Durable Partner to Manufacture Small Appliances in India

0
Direct-to-consumer brands team up with contract manufacturers to boost domestic production of air fryers and circulator fans.  Direct-to-consumer (D2C) home appliance brand Nuuk has joined...

Potential US Curbs Bears Down on Chinese Optical Chip Stocks

0
Shares of upstream laser chip suppliers suffered steeper declines compared to downstream optical transceiver manufacturers. A report by Morgan Stanley, earlier this month, warned...
Prime Minister Modi

Modi Flags 6G And Domestic Electronics Production At IMC 2026

0
Prime Minister Narendra Modi has outlined India's next telecom priorities at India Mobile Congress 2026, linking the 5G-to-6G roadmap with semiconductor production, domestic electronics...
Fujitsu

Fujitsu-Owned 1Finity Deploys 200+ Engineers To Expand India’s Optical Networking Business

0
Japan’s Fujitsu-owned 1Finity is expanding its India networking business with more than 200 engineers as AI and data-centre growth drives demand for optical networking...

Learn From Leaders

Does India’s Chip Packaging Growth Need Local Materials At Scale?

0
What will it take for specialised semiconductor materials manufacturing to grow in India? Packaging volumes will be a key factor as OSAT facilities move...
Ronak Kumar Samantray, Founder, TM2Space Technologies Pvt Ltd.

“Our goal is to build data centres in space.” – Ronak Kumar Samantray, TM2Space

0
A space startup aims to build orbital data centres, letting users run AI models and store data on satellites while also supplying satellite hardware...

India’s Photonics Puzzle Is Finally Coming Together 

0
Can India turn its scattered photonics capabilities into a stronger industry? A new association aims to connect the ecosystem and strengthen the domestic value...
Jin Bains, CEO, Mini-Circuits

Mini-Circuits CEO Jin Bains on Navigating High-Frequency Component SWaP-C Constraints, Emerging Markets, and Career...

0
In this exclusive, Jin Bains, Chief Executive Officer (CEO) of Mini-Circuits, explains in a conversation with Dilin Anand of EFY about areas of emerging...

India Needs Not a Hundred, But Thousands of Chip Diversified Companies 

0
Can India build a semiconductor ecosystem beyond fabs? Indiesemic believes thousands of diversified chip companies are needed to make that possible. India’s semiconductor push is...

Startups

PowerMon

Aquaexchange Brings Monitoring And Automation To Shrimp Farming

0
The startup has developed an AI- and IoT-enabled platform that helps shrimp farmers manage farms, access financing, monitor operations, and connect with markets. The startup...

Drone-Like Aircraft For Logistics From BluJ Aerospace

0
Hyderabad-based BluJ Aerospace is developing indigenous electric and hydrogen-powered vertical take-off and landing (VTOL) aircraft for remote cargo transport. BluJ Aerospace, a Hyderabad-based aerospace startup...
Jash Jetly, Co-founder and CEO of EVE

“The cloud isn’t the only way to run AI. We’re proving it can happen...

0
A startup is building a decentralised AI and communication network that runs across everyday devices instead of centralised cloud servers. In an interview, Jash...
Mohit Gupta, founder and CEO, TYLsemi

Building AI Chips, One Block at a Time 

0
What if building an AI chip became as simple as assembling reusable blocks? The startup is working to make custom silicon accessible beyond the...
Seema Johar, Co-Founder and Product Director, Compcarta Solutions Pvt Ltd

“We Let Designers Focus on Innovation, Not Infrastructure.”- Seema Johar, Compcarta Solutions

0
In an exclusive interview, Seema Johar of Compcarta speaks with EFY’s Akanksha Sondhi Gaur about why setting up an EDA environment can be harder...