Insight into the public procurement process

Public procurement refers to the purchase by governments and state-owned enterprises of goods, services and works. As public procurement accounts for a substantial portion of the taxpayers’ money, governments are expected to carry it out efficiently and with high standards of conduct in order to ensure high quality of service delivery and safeguard the public interest. The size of public procurement is quite considerable in every country. It accounts for a significant proportion of the demand for goods and services in the nation and is increasingly considered an attractive instrument for developing society and nation. As a matter of fact, public procurement has come to play a major role in making society better, and thus, there has been much research in public purchasing and its efficient operations.

Pakistan decided to establish Public Procurement Regulatory Authority (PPRA) at the federal level, under the Public Procurement Regulatory Authority Ordinance 2002 followed by promulgation of Public Procurement Rules in 2004. The PPRA is an autonomous body endowed with the responsibility of recommending laws and regulations governing public procurements. It is also responsible for monitoring the application of procurement laws and performance of federal procuring agencies with a view to improve governance, management and transparency. The Provincial Governments have independent Acts and Rules of Public Procurement for provincially owned entities.

The Constitution provides certain fundamental rights which are available and enforceable against the Federation. The Federation and Parliament respectively cannot act or pass any law contrary to or in violation of fundamental rights which may result in unequal, discriminatory or arbitrary treatment. At the same time, unlike a private enterprise, the Federation is accountable for its acts. The Public Procurement Policy of Pakistan is based on such a foundation and seeks to achieve transparency and equal treatment for bidders. This Article presents the best practices evolved and prescribed in Pakistan in matters of public procurement.

The Independent Judiciary of Pakistan has also played a positive role in securing the transparent and fair mechanism for public procurement and for formulating the principles on which Pakistan’s public procurement laws and policies rest. There are numerous precedents where courts intervened to uphold the provisions of PPRA laws by directing the procuring agencies to adhere to the process provided therein.

In a leading case of alleged corruption in Rental Power Plants reported as 2012 SCMR 773, the Supreme Court held that the Procurement Authority may take such measures and exercise such powers as may be necessary for improving governance, management, transparency, accountability and quality of public procurement of goods, services and works in the public sector. Competition to establish transparency between the interested parties is in fact the theme of the PPRA Ordinance, 2002 as well as the Rules framed thereunder. Bidders have to compete with each other by filing their respective bids, therefore, while making procurement of an item like electricity through Rental Power Projects, the Authority is required to fix a reserved price while quoting lump sum Rental Charges, Rental Rate and Reference Fuel Cost Components.

The superior courts had laid the foundation of the law by emphasising on the entitlement to equal treatment who offer tender or quotations for the purchase of goods and further reiterated that the activities of the Government have a public element and, therefore, there should be fairness in procedure and equality. Thus, the Government cannot act in a whimsical or capricious manner, nor can it act as a private giver may.

Pakistan’s public procurement policy seeks to ensure transparency, equality and fairness and that public funds are not squandered or misused. The policy also addresses the issue of corruption and fraudulent practices. A shift towards e-procurement is inevitable and it is expected that a policy on that would be adopted soon.

The PPRA laws including rules framed thereunder at federal and provincial level serve as guidelines to Government ministries or departments providing for procurement of goods, works and services as well as consolidated policy decisions to promote transparency, competition, fairness and to eliminate arbitrariness issued by the Government from time to time. They can be supplemented/detailed as may be warranted. Some of the important measures to achieve the goal are:

1. The bidding document should be user-friendly, self-contained and unambiguous. Terminology used should be simple such as in common parlance in the industry. The eligibility criteria (past performance, financial position, technical capability etc.) should be specified. Similarly the procedure for preparing and submitting the bidders; deadline for submission; date, time and place for public opening of tenders; criterion for determining responsiveness; tenders evaluating and ranking of tenders and criteria for acceptance should be incorporated in the tender documents in clear terms. Any condition which was not incorporated in the tender document should not be brought into consideration while evaluating the tenders.
2. The tenderer must have a reasonable opportunity to question the tender conditions and/or rejection of the tender and are not permitted to alter or modify the tenders after expiry of the deadline for receipt of tenders. Negotiation with tenderers is severely discouraged. The name of the successful tenderer should be properly notified and informed to the general public also.
3. The general rule is that any tender above a value of Rs 2,000,000 must be through invitation by public advertisement. It must be published in a national newspaper having wide circulation and should also be published in the website of the organisation and the Public Procurement Authority. An international tender requires the tender notice to be published in international newspapers. The exception to the general rule of advertisement is provided in cases when the demand is certified urgent by the competent authority in the organisation, then the nature of the urgency and reasons why it could not be anticipated earlier should be stated, reasons are given as to why it will not be in public interest to procure the goods or services through advertised tender enquiry; and lastly when the sources of supply are definitely known and the feasibility of fresh sources beyond those being tapped is remote. In such cases a procuring agency can procure through direct contracting.
4. Bids should be received either through a tender drop box or hand delivered to the nominated officials. The guidelines provide that entry of all tender details in registers, duly signed, numbered and initialled by the authorised officials thus ensuring transparency. Each page of the price schedule shall also be initialled along with date. All tenders received in time shall be opened in the presence of authorised representatives of the tenderers whilst announcing the salient features of the tender at the designated date, time and place immediately after the deadline of receipts with minimum time gap in between.
5. To purchase capital equipment, high value plant, machinery etc. of complex and technical nature the tenderers should be asked to bifurcate their quotation in two parts (i.e. two envelope system). The first Part in the tender enquiry is to contain the relevant technical specifications and allied commercial details (“Technical Bid”) and the second, which would only be opened for further scrutiny after the technical offers are accepted, should contain only the price quotation (“Financial Bid”). Both the bids should be sealed in separate covers and put in a bigger cover, all duly super-scribed.
6. All aspects which are to to be taken into account for evaluating the tender, including the method to be adopted for determining the responsiveness, are to be incorporated in the tender enquiry in a clear manner without any ambiguity. Preliminary examination is the first step to see whether they meet the basic requirements of the tender and those which do not are to be treated as unresponsive and ignored.

Factors rendering a tender to be unresponsive include non-signature, ineligibility of the tenderer, earnest money deposit condition has not been met, the tenderer has not agreed to some essential condition (payment term, liquidated damage clause, warranty clause, dispute resolution mechanism, applicable laws or any other condition having a significant bearing on the cost/ utility / performance of the required goods or services etc.).

As per 2017 CLC 178 A.M Construction Company Private Limited Vs National Highway Authority, the honourable Lahore High Court has held that public authority should not be bound to give effect to every term mentioned in the tender document, as it had the power to waive technical irregularity of little or no significance. Public functionaries had the power and authority to deviate from and not insist upon strict compliance of a condition (in the tender). Any irregularity, including immaterial deviation or absence of financial impact during the preliminary examination if found by the procuring agency, may be waived. The tender will be ignored in the event that there is no confirmation to the minor non-comformity (e.g. certified copy of latest Income Tax Return) by the tenderer within a specified date.

7. All the quoted prices in the tender are to be converted into a uniform currency, that is, into Pakistani rupees as per the selling exchange rate established by the State Bank of Pakistan as prevailing on a particular date to be specified in the tender enquiry (generally it is the date of tender opening). Sometimes besides price, the purchase organization also gives special importance to factors like performance, environmental friendly features, running and maintenance costs etc., which are to be clearly stipulated in the tender enquiry.
8. Before accepting the bid, it should be ensured that it was an economic procurement by reference to factors such as last purchase, and current market price of the same/similar goods, cost analysis (raw material, production cost, overheads, etc). Negotiation with bidders is discouraged but can be used strictly only as an exception if bid price is not reasonable. If all the necessary requirements were not fulfilled by the purchase organisation to ensure more than one responsive tender or sufficient number of tenders then the tender should be reissued / re-floated after rectifying the deficiencies. However, if all aspects were fully taken care of and the quoted price is reasonable the contract may also be placed on that one responsive tenderer.

Pakistan’s public procurement policy seeks to ensure transparency, equality and fairness and that public funds are not squandered or misused. The policy also addresses the issue of corruption and fraudulent practices. A shift towards e-procurement is inevitable and it is expected that a policy on that would be adopted soon.