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overnance and governments in India have always been a bundle of contradictions. No prizes for guessing what and when. What really surprises me is the ingenuity that is used by those at the helms of affairs to bypass even the most well-defined processes and technologies that are otherwise meant to bring in transparency. eProcurement, for example, is a mission mode project (MMP) under the government’s national e-governance plan (NeGP) that aims at purging the very important public procurement process. Instead, it has been caught in a situation that can impact over 30 percent of India’s GDP – an estimated value of public sector procurement in the country. While the government of India acknowledges that automating procurement process using technology and enabling opportunities to suppliers fully supports the objective of non-discrimination, fair and open competition, some government agencies and public sector companies have been using their “dominant position” as a government organisation to muster past the industry competition without going through the critical tendering process. According to the national rural roads development agency (NRRDA), the organisation has paid over `6 crore to the national informatics centre (NIC) for implementation of the eProcurement system, which has been adopted by several states to float tenders of the Pradhan Mantri Gram Sadak Yojna. The project was given to the NIC without floating a public tender. In a similar case that violates both the central vigilance commission (CVC) guidelines and section 4 of the Competition Act, 2002, the Mahanadi Coalfields Limited (MCL) decided to entrust the NIC with the implementation of eProcurement project on a nomination basis. The PSU paid `85.12 lakh to
Many private sector companies are engaging government agencies and PSUs to front-end projects and gain ‘back-door’ access to public sector projects
NIC for procurement of servers, co-location charges, application and system software, SAN storage, helpdesk and training. As per the Competition Act, 2002 (chapter II, section 4, abuse of dominant position), organisations, including
Public procurement demons
government organisations, are not allowed to use dominant position to their advantage and, thereby, create conditions to discourage competition. The decision to give projects to a fellow public sector organisation on nomination basis also violates the CVC guideline for
66 GovernanceNow | July 16-31, 2013
A Click Into Digital Governance
implementation of eTendering solution in particular and public procurement in general. In fact, the CVC circular of January 2009 clearly states that, “… all organisations should invariably follow a fair, transparent and open tendering procedure to select the application service provider for implementing their eTendering solution.” Had the NRRDA and MCL floated an open tender to procure the system, it would have realised that private sector players provide the same solution on a “no cost” ASP model, and recover the cost by charging bidders a tender submission fee. Interestingly, both NRRDA and MCL officials do not seem to have much clue to the security features of the eProcurement solution implemented by the NIC. In response to RTI questions on the security features of the solution and the parameters used to measure confidentiality and integrity of data, both the organisations said the information was not available to them. The two organisations also did not have any information whether the implemented solution had been tested for functionalities and security as per the STQC guidelines or whether the NIC can ensure security and non-tampering of all data as per the mandatory ISO 27001 controls. The RTI question on whether the solution ensures non-tampering of data in cases of collusion also got the same response with the onus being passed on to the NIC. It is indeed strange that the otherwise strict tender condition would have forced the two organisations to go through each of the functionalities, particularly the security features and safeguards of the solution. However, the key security factor was clearly overlooked only on the basis of the trust that custodians of tender data and information in a fellow government organisation cannot do any wrong. The evidence also lies in the government of Delhi’s response to a question on the process followed by it to select an eProcurement service provider. “The NIC/NICSI being a government agency, the work has been allotted to the NIC directly,” the state’s department of IT said in its reply to an RTI query. The Delhi government charges `7,865 as annual registration fee from vendors for the use of the mandatory eProcurement system.
Besides, the fact that the NIC is a union government agency under the ministry of communications and information technology cannot automatically exempt it from proving itself technically, more importantly in maintaining the confidentiality of bid data at the time when it is lying on the NIC servers. With the floodgates open, and not to be left behind, many private sector companies are taking the public sector undertaking (PSU) route to gain ‘back-door’ access into the government market – both technology and nontechnology projects. The modus operandi is simple: tie up with a PSU or a government agency to front-end a project. The relationship is usually established between the PSU and the private sector partner on a revenue-sharing basis. The PSU usually lends its name and credibility while the private sector partner provides the solution and does the implementation. On its part, the PSU uses its relationship with the fellow PSU or government department to win the project on nomination basis and sell solution of its private sector partner, completely bypassing various public procurement norms and CVC guidelines. Such tie-ups do not only limit market access to other industry players and deny them the chance to offer solution at a competitive price, they also restrict fair competition. Besides, this practice denies the procuring agency the opportunity to buy the best product or solution at the L1 cost. From the IT industry’s perspective, such an omission is also against the basic principles enunciated in the draft IT policy 2011 that aims at strengthening and enhancing India’s position as the global IT hub and to use IT as an engine for rapid, inclusive and sustainable growth in the national economy. Strangely enough, the competition commission of India (CCI) has slammed the door on the industry by taking recourse to its definition of dominant position (dominance) in terms of a position of strength enjoyed by an “enterprise”, in the relevant market in India, which enables it to operate independently of the competitive forces prevailing in the relevant market or affect its competitors or consumers or the relevant market in its favour.
A relationship is usually established between a PSU and its private sector partner on a revenue-sharing basis. The PSU usually lends its name and credibility, while the private partner provides the solution and implements (the project in question).
In its judgment on a case filed by the Travel Agents Association of India against the PSU Balmer Lawrie & Co, the CCI had ruled that the case be treated as that against the government of India, and since it does not engage in any activity that relates to supply of products or provision of service, it does not fall under the definition of an “enterprise”. While the same rationale may be used by the NIC, other PSUs and government agencies, many of which thrive on such “front-ending” projects to even their balance sheet, it is time the policymakers take cognisance of this strange demon and address the issue sufficiently through the public procurement bill. A clarification on the definition of “enterprise” and inclusion of PSUs and government agencies like NIC in the list in Competition Act, 2002 and a comprehensive approach to bring in transparency, objectivity and competition are the steps that can enable India to comply with article 9 of the United Nations Convention against Corruption (UNCAC). The article states that countries will “take necessary steps to establish appropriate system of procurement, based on transparency, competition and objective criteria in decision-making, that are effective inter alia, in preventing corruption”. n
Parth is a senior journalist, communication specialist and technology-for-development enthusiast. firstname.lastname@example.org