By: Archit Gupta, 4th Year, B.A LL.B (Hons.), National Law Institute University, Bhopal
A sound procurement policy is essential for ensuring national security, safety and health of the citizens and for providing quality social and physical infrastructure to citizens in a cost effective manner. According to a World Bank (2003)[i] report, the total value of public procurement represents 13 percent of the national budgets and over 20 percent of the GDP, which are valued at US$100bn. According to a paper by the Competition Commission of India (CCI), out of the total public procurement, public sector enterprises (PSEs)[ii] alone procure to the extent of 8 lakh crore annually (the figure relates to 2008-09). The government wants best goods and services at lowest value possible. The competition amongst suppliers helps this objective. There are multiple guidelines in the conduct of procurement and it creates confusion for procurement officials. There is neither a single public procurement standard nor a single department to deal with it. In India, expect for Railways and DGS&D (Director General of Supplies and Disposal), no other department has a dedicated cadre for public procurement. [iii]
Competition Act 2002 prohibits any sort of anti-competitive agreements and abuse of dominant position. It also mandates competition advocacy for government organizations and it also prohibits bid-rigging and collusive bidding where suppliers engaged in same business enters into an agreement to control supply of goods and services or influence sales or purchase prices. Bid rigging means any agreement, between enterprises or persons referred to in sub-section (3) of Section 3 of the Act, engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding. The role of Competition Commission is important to enforce competition laws in public procurement. It is empowered to engage in advocacy measures to help government indentify bid-rigging and provide for better tender process. It can issue cease and desist orders, impose such penalty as it may deem fit not exceeding 10% of the average of the turnover for the last three preceding financial years upon each of person or enterprise, direct that agreements shall stand modified to the extent and in the manner as may be specified in the order of the Commission and pass any such orders as it may deem fit.[iv] Bid-rigging is a criminal offence in many countries such as UK, USA, Japan and Canada. OECD has also issued guidelines to fight bid-rigging. This is a sufficient financial deterrent on individual vendors / suppliers which will be apart from their blacklisting for 2 to 3 years prescribed under the various existing guidelines. CCI has imposed penalties in hundreds of Crores of rupees on individual companies on complaints filed by or in respect of procurement in Central public procurement agencies such as IOCL, Coal India Ltd., Food Corporation of India, Safdarjung Hospital, DGS&D etc. and cases are now increasingly being filed by other large procurement agencies such as the Railways etc.
In India, CAG and Central Vigilance Commission are responsible to flag out irregularities in public procurement. It has done so pointing out anti-competitive practices in Railways, Defense, etc. Apart from bid-rigging other anti-competitive practices such as limited tendering, bureaucratic hassles and limited advertising are also harmful for public procurement. A meager 2-3% saving in government deals can matter a lot in country like India. The CCI is creating awareness about such practices and government is also trying to deal with this problem. Many government departments are now blacklisting firms which are engaging in such practices. They are even providing rewards for tips on bid-rigging. Hopefully, such practices will go a long way in tackling this menace.
[i] Arrowsmith, S. and R. Anderson (2011), ‘The WTO Regime on Government Procurement: Challenges and Reforms’, Cambridge Press, New York, USA
[ii] Sandeep Verma, ‘Domestic Preferences in Public Procurement’, the Business Standard, December 26, 2011 available at www.businessstandard.com/india/print page accessed on August 01, 2012