Soon, all civil work and service contracts awarded by government departments and public sector companies and the goods they purchase — from pencils to motorcars — will be handled through an open electronic auction system.
This will help eliminate the lowest-bidder-wins — or L1 — principle that governs most public procurements. Annual spend on procurement is Rs2.5 lakh crore to Rs3 lakh crore or about one-fourth of the union budget.
Rocked by the recent spate of scams, the government will come out with a comprehensive public procurement law to ensure full transparency and to clearly demarcate powers and responsibilities of the various authorities. The legislation will cover issues before and after awarding of contracts.
It will “spell out the core principles for a comprehensive public procurement policy”.
A special committee under former Competition Commission of India chairman Vinod Dhall, formed to recommend changes in the procurement process, said in its recommendations that the L1 principle was “the seed for most corrupt practices, making a mockery of the bidding process”.
The committee presented its recommendations to the nine-member group of ministers on corruption, headed by finance minister Pranab Mukherjee. Set up in January, the Dhall committee has recommended a “fully equipped e-portal to provide end-to-end solutions and ensure disclosures, transparency and function as a one-stop shop for tendering and payments of earnest money”.
The committee has called for an “in-depth review” of the procurement practices of the Indian Railways where the open bid concept was not being followed in many areas.
A comprehensive overhaul of the general financial rules (GFRs), which serve as guidelines for government purchase in the absence of a law, is also on the cards. The GFRs, last updated in 2005, have been found to be “woefully inadequate” for “works and services”.