Law and Regulation of eGP in India

Sandeep Verma

Director, Archaeology & Museums Government of Rajasthan Jaipur, Rajasthan 302 014, India. sverma@rajasthan.gov.in, sverma@rajasthan.net

Verdicts on Government Procurements in India
Tenders are a major source of corruption (CVC 1998) Deviations in practice rather than absence of rules (World Bank 2003, Hoda and Bansal 2004)

Irregular practices in Government Procurement
Access to Knowledge
Absence of notice (selective/ restrictive advertisements) Lack of knowledge of tender rules and decision-making processes Lack of clarity in technical specifications Non-transparency in payments

Access to Opportunity
Selective sale of tender documents Obstruction/ intimidation of bidders selective acceptance of bids Modification/ substitution of quotes and tender papers Delays in processing of tenders Multiple in-situ and ex-post facto interventions

and from outside. the Lokayukta/ Ombudsman. the Information Commissioners)  Single-shot success versus Sustainability  One Man show versus organisational effort . the CAG.the judiciary.eGP Frameworks  “Trust” in electronic commerce versus “Correctness” in public procurement  Public procurement space in India versus that elsewhere General level of trust Enforcement of rights in civil and criminal matters Multiple levels of in-situ and ex-post-facto interventions (within the executive. the CVC.

but covered by transparency obligations  GATS 1994: exclusion of government procurement of services from provisions of unconditional MFN and specific commitments of market access and national treatment. negotiations are underway .Government Procurement and International Negotiations  GATT 1994: government procurement of goods excluded from scope of national treatment and MFN clause. transparency. domestic challenge procedures to be established  Doha Round 2001: Transparency in Government Procurement is one of the four Singapore Issues. but as a temporary measure only  GPA 1981: Tokyo Round. India is not a signatory  GPA 1996: Uruguay Round/ WTO Agreement: services included.transparency and non-discrimination provisions.

UNCITRAL Model Law & eGP  UNCITRAL Model Law on Procurement of Goods. Construction and Services is the basis  In its 36th session. the Commission expressed strong support for addressing issues arising out of increasing use of electronic communications and technologies in public procurement  Working Group I sets out policy objectives for eGP Functional equivalence of electronic and paper-based records Technology neutrality Mandatory/ optional use of electronic publication Consent of suppliers Use of reverse auctions .

Government Procurements: the legal scenario in India Access to Information Right to Information Act Procurement Rules/ Acts CVC Guidelines Access to Opportunity Procurement Rules/ Acts Competition Act CVC Guidelines Electronic Environment Information Technology Act .

price-bid disclosure is similarly prohibited  CVC guidelines offer a minimalist framework E-procurement/ reverse auctions are permitted provided they are conducted in a fair and transparent manner Switchover from manual paper-based tendering systems to eprocurement/ e-sale allowed wherever practical and feasible .Legal foundations of eGP in India  No Act/ set(s) of rules deals with eGP: one needs to read local procurement acts/ rules together with the IT Act and attempt inferences on electronic procurement mechanisms and electronic publication  Negotiations and counter-offers are strictly restricted if not prohibited.

A legal autopsy of an electronic Reverse Auction A “reverse auction” is a dynamic procurement system based on negotiated multiple counter-offers. first-price auction! . with real-time price-disclosure to all bidders while keeping their identities secure Ergo It is nothing like the traditional simultaneous. sealed-bid.

eGP Mechanisms  Electronic Tendering Electronic Disclosure of tender opportunities Automated/ Assisted Registration & Distribution of documents Electronic Bid Submission Electronic Contract Management  Electronic Reverse Auctions Electronic Purchases Electronic Auctions Supply Chain Integration and Automation  Electronic Vickrey/ second-price auctions  Rate Contracts and Framework Agreements .

voluntary consent .eGP: Reverse Auctions Position of Negotiated Procurements and Multiple Bidding under Local Procurement Acts and Rules CVC Guidelines Position regarding Price.disclosure requirements (through the Buyer to other bidders) vis-à-vis Local Procurement Acts. IT Act Preferences for SSIs and other socioeconomic entities Consent implied by Participation. Rules and Guidelines RTI Act.

eGP: Reverse Auctions Reverse Auctions for what commodities? Clear technical specifications and buyer‟s capacity to enforce compliance [Standardised. “off-the-shelf” products] Only for fungible products? For services? Role of non-price factors Adequate market intelligence Safety concerns . commercial.

eGP: Reverse Auctions Reverse Auctions for what quantities? For what class(es) of bidders? Bulk buying for individual user Agglomerated small buying for multiple users Buying from established and responsible buyers Economies of scale versus socioeconomic preferences Economies of scale versus monopolistic/ oligopolistic sellers Possibility of collusion Real-time bid-price disclosure: price preferences and instant award .

eGP: Reverse Auctions Reverse Auctions as an interim stage after technical evaluation. or as the full procurement decision? Pre-screening and maintenance of suppliers‟ lists Rank Bidding. Transformational Bidding and “True Best Value” Bidding .

possibility of Vickrey auctions Quantity-based auctions Is under-bidding a real problem?  “Instant Award” versus “Post-auction analysis” .eGP: Reverse Auctions  Bid time-frames Hard Closure and Extensions Flexibility in decision-making by bidders  “Auction Fever” or the “Winner‟s Curse” Impact on long-term relationships between buyers and sellers Impact on R&D for products “fair and reasonable” price bands.

Electronic Government Procurement in India An analysis of eGP projects from an access viewpoint .

Access to knowledge of tender opportunities Large number of websites. up-to-date information Unprotected sites: digital verification and authentication of downloads not possible Absence of automatic notification by email . but very little integration and standards-based organisation of information Infrequent updation and reliability of accurate.

rules on extension of time. bid increments.Access to knowledge of bidding rules Strong technical and financial bid evaluation both in paper-based as well as electronic mechanisms E-reverse auctions: lack of sufficient information on bid parameters like start time and duration. critical number of minimum bidders. and even delays in announcement of bidding rules .

Trust in system integrity and bid challenge procedures Low levels of public trust in general: few “good” bidders participate. “markups” generally made by vendors ASP-centered approach effectively disables third-party audit Drop in connectivity Number of modifications by winning bidder Absence of clear bid challenge procedures even on the electronic platform .

6% of the population is internet users in 2005. and with electronic reverse auctions . while one in thirty uses the internet Cost of access to ICT not lower than access to newspapers Poor line and power quality even in capital cities Compounds problems associated with poor organisation of electronic information. 50% of them in top 8 metros (NRS estimates are even lower) One in five persons reads a newspaper.Access to ICT & digital security infrastructure 3.

Electronic auctions and law of privacy/ data protection Legal status of protection of sensitive commercial information and intellectual property Whether mere participation equals consent to waiver of rights on IP While IT acts lists criminal and civil penalties. most Govt-ASP agreements do not delineate liabilities. bidders indemnify the ASP as a prerequisite to participation RTI Act: allows public disclosure of commercial information .

Agglomeration of quantity No law/ rules/ guidelines exist Left to discretion of purchasing agencies Impacts on competition Limiting number of players Favour large players at the cost of SSIs and SMEs .

quality and regions: thus affecting economic competition  MDB guidelines Electronic participation should not be mandatory but must include paper-based options Electronic publication must be promoted but not solely mandated No additional financial burden on bidders because of use of technology platforms  Competition Law in India Ban on limiting supply. markets or provisions of services Prohibition of “tie-in” arrangements Ban on “refusal-to-deal” by restricting classes of persons Prohibition on practices that result in denial of market access .Technology & Competition  Almost all eGP projects employ “mono”-methods  Access to technology and ICT is restricted by costs.

Electronic Government Procurement Back to Basics .

eGP Issues Agglomeration of Quantity and its relationship with economies of scale Market structure SSI preferences and capacities GoI/ State Government/ PSU/ CVC/ MDB/ UNCITRAL Guidelines on Optional/ Mandatory eGP User-charges for participation in eGP Mandatory/ Optional publication of Tender Notices and Awards .

eGP Issues Technology as Barrier to Entry Technology neutrality Choice of software platform Cost and availability of technology Regional dispersion of technology and capacity Limitations of Technology Verifiability after certificate revocation and expiry (validity period) Re-verification Digital Storage and retrieval Notararisation .

eGP Issues  Issues in Bid Challenge Procedures Connectivity failures Handling mistakes Disclosure of identity Non-disclosure of own relative position Deliberate and malicious attacks System Recovery and Pause of bidding  Dispute Resolution Fora Does “Outsourcing of Services” equal “Outsourcing of Grievance Redressal” Liability of Government functionaries vis-à-vis computers and visa-a-vis Service Provider Multiple levels of in-situ and ex-post-facto interventions Civil and criminal adjudication authorities under the IT Act 2000 .

eGP Issues eGP as a subset of overall contract reform Electronic Payments ERP/ SCM systems Develop Book-keeping. Accounting and Audit capabilities Use and Maintenance of suppliers‟ lists Taxation of eCommerce .

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