Editorial: Procurement reforms overdue

For decades, ensuring quality standards in public works has been a major challenge for governments, both at the Centre and in the States. The complex and cumbersome tendering procedures are the key reasons for the problems plaguing public projects. Public procurement is an area that has been crying for reforms for years. Against this backdrop, […]

For decades, ensuring quality standards in public works has been a major challenge for governments, both at the Centre and in the States. The complex and cumbersome tendering procedures are the key reasons for the problems plaguing public projects. Public procurement is an area that has been crying for reforms for years. Against this backdrop, the Centre’s decision to initiate the process to overhaul the procurement system is a welcome development. Of particular significance is the move to get rid of the lowest cost being the only criteria for public procurement. In fact, L1 has been a curse for government projects and the decision to do away with the provision would help boost the big infrastructure push and pave the way for better quality standards. The guidelines for reforms in public procurement and project management, issued by the Union Finance Ministry, come as an attempt to incorporate innovative rules for faster, efficient and transparent execution of projects. There is a need to remove all the unwarranted roadblocks in the procedures and rules so that the taxpayers’ money is properly utilised and quality of works is ensured. According to the projections made by the NITI Aayog, India will require investments to the tune of around $4.5 trillion by 2040 to develop infrastructure for sustaining its economic growth. Unless radical reforms are undertaken in the way the infrastructure projects are executed in the country, investments of this magnitude cannot flow in. The Economic Survey had also batted for such reforms.

Industry experts have been strongly critical of the L1 process which has been repeatedly labelled as the bane of public procurement in the country, accused of compromising on quality because the entities that bid the lowest end up winning the project and many times delivering sub-standard product or service or even failing to finish the work on time leading to long delays, cancellation and re-tendering thereby costing the exchequer dearly. The L1 method has persisted because it is considered a regulatory default mechanism and no decision-maker in the administration wants to exercise discretion for the fear of future questioning. Some of the key reforms being proposed include prescribing strict timelines for payments because the timely release of ad hoc payments is expected to improve liquidity with the contractors, especially Micro, Small and Medium Enterprises (MSMEs). The new guidelines stipulate that ad hoc payments of not less than 75% of the eligible amount due shall be made within 10 working days of the submission of the bill by the contractor. Also, the progress and assessment of project timelines must be reviewed carefully, preferably through the use of digital systems like electronic measurement books (e-MBs). Along with other IT-based solutions, this would enable faster payments to contractors and a reduction in the number of disputes.

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