24-037-2015-1

PUNJAB GOVERNMENT’S PURCHASE OF MICROSOFT SERVICES AND

PRODUCTS: THE QUESTION OF INTEGRITY AND ETHICS1
Syed Ali Gilani, advisor to Transparency International-Pakistan (TI), the corruption watchdog, was solemn. The
watchdog had written to the Chief Minister of Punjab, Shahbaz Sharif- the head of government of the wealthiest
province of Pakistan- two days ago. The watchdog had demanded setting up of a formal investigation and to
make public documents connected to a software procurement undertaken in 2009 by the Punjab Government.
Evidence related to possible bribery by Microsoft leading to award of contract for this procurement had recently
been uncovered by the Wall Street Journal. The procurement, by Pakistani standards, had been huge: amounting
to PKR 810 million (USD 9 million), and was aimed at establishing a Strategic Partnership Agreement with
Microsoft and obtaining 15,000 its Office software licenses for the Punjab Government.

Today, August 27th 2013, responses from both the Punjab Government and Microsoft had been published. Both
had rejected claims of any misconduct. The responses from both parties appeared to be an effort to save their
own hides, rather than making a concerted effort to objectively scrutinize the procurement process undertaken.
The background procurement documents demanded by TI had not been made public either.

Gilani knew the Punjab Government needed to take steps to curtail misconduct in public procurement as this
was not the only one to have surfaced. 2 Incidences such as these undermined public and vendor confidence in
public institutions. He reflected on several questions playing on his mind. What should the role of civil society
organisations like Transparency International be in this situation? What could the government do to ensure
long-term integrity in public official’s dealings with vendors? What organizational measures ought the
Government take immediately to reduce such incidences of misconduct during procurement?

Transparency International in Pakistan

Transparency International (TI), an established global anti-corruption body, was headquartered in Berlin,
Germany. TI operated as a non-political, non-profit, non-governmental organization (NGO) with over 90
National Chapters (NCs) working globally. TI-Pakistan, based in Karachi, was one of these national chapters
and had been registered as an NGO under the Pakistan Trust Act 1882 in May 2002.3

Since 2002, TI-Pakistan had attempted to tackle corruption and improve transparency in the country through a
number of projects including the ‘anti-fraud hotline’ where citizens and civil society organizations could report
corruption and register complaints; the ‘Advocacy and Legal Advice Centre’ (ALAC) which helped citizens
1
This case has been written on the basis of public sources. Consequently the interpretation and perspectives presented in the case do not
necessarily reflect those of Transparency International or any of its employees.
2
“Procurement watch’ on http://www.transparency.org.pk/
3
Source: http://www.transparency.org.pk/wwr.php

This case was written by Dr Zehra Waheed at the Lahore University of Management Sciences to serve as basis for class discussion rather
than to illustrate either effective or ineffective handling of an administrative situation. This material may not be quoted, photocopied or
reproduced in any form without the prior written consent of the Lahore University of Management Sciences.

© 2015 Suleman Dawood School of Business, Lahore University of Management Sciences

PUNJAB GOVERNMENT’S PURCHASE OF MICROSOFT SERVICES AND PRODUCTS: THE QUESTION OF INTEGRITY
AND ETHICS
24-ASP31-2015-1

play an inclusive role in combating corruption; the ‘National Integrity Context and System Analysis Project’
which evaluated important institutions in Pakistan’s governance system; and the ‘Public Procurement Program’
that

2
continually monitored public sector procurements carried out under the Punjab Procurement Rules 2009. 4 It was
under this Public Procurement ‘Watch’ Program that TI-Pakistan had identified this case of bribery wherein a
senior public sector official had allegedly accepted a paid trip to Egypt with his wife. Three months after this
trip, a whopping USD 9million contract had been awarded by the Punjab Government to the vendor who paid
for the trip.

The E-Gateway Project, Punjab Government

The procurement was of a 36-month E-Gateway project of the Government of Punjab, a flagship program
intended to modernize the Punjab Government’s public services interface and to allow government departments
to utilize a shared, secure IT infrastructure. The project covered all provincial and district government
departments. It started on June 30th, 2010 and was completed on December 31st, 2013 at a cost of Rs 1,398.1
million (Table 1).5 The primary objective had been to bring the provision of public services in Punjab into the
21st century, improving public perception of these services, improving the web presence of the Punjab
Government and the establishment of a central, department-wide pool of technical resources.

Table 1: Project Brief, Punjab E-Gateway Project

Project Title Punjab E-Gateway Project (E-governance Initiative)

Sponsoring Agency Punjab Information Technology Board (PITB), Government of Punjab
End-Users/ Beneficiaries Punjab-wide provincial and district government departments
PC-1 Original cost PKR 830.1 million
Actual cost as per PC-IV PKR 1398.1 million
Licensed Software and SPA PKR 809.9 million
component
Actual start date 30th June, 2010
Actual end-date December 31st, 2013

This E-governance gateway a.k.a. ‘E-Gateway’ was required to provide government departments in Punjab with
province-wide connectivity through a secure intranet, web-based applications and shared data warehousing. The
system was intended to enable the government to provide a wide range of public services via internet, through
kiosks as well as through mobile phones and call centers (Exhibit 1). The main components of the E-Gateway
system included department-specific (vertical) software applications, shared (horizontal) software applications,
shared IT infrastructure (hardware, software, and human resource), as well as design and assessment work. The
project had two main categories of applications: Citizen Services (G2C) and “Back Office” processes (G2G).

Under the licensed software (Enterprise Agreement) and Strategic Partnership Agreement (SPA), jointly called
SPA/ EA, the Punjab Government purchased 15,000 Enterprise licenses every year for three years. The
agreement stipulated that the cost for the Enterprise Licenses was the only amount to be paid to Microsoft,
whereby the consultancy services for setting up of the gateway project would be provided by Microsoft free of
cost. As per Agreement, 15% of the Enterprise Agreement payment would also be recycled back for
development of customized software for the Punjab Government through local companies located in Punjab.
The total cost of this Enterprise Agreement was set to be the real time currency exchange value in PKR of USD
3 million per year (for three years) and included 15,000 licenses of Microsoft Windows, Office and Forefront
4
For details of Punjab Procurement Rules visit http://www.ppra.org.pk/doc/punjabpprarules.pdf
5
Source: Final Project Evaluation Report, Punjab E-Gateway Project, June 2014. Published by the Directorate General Monitoring and
Evaluation, Planning and Development Department, Punjab.

3
Punjab Government’s Purchase of Microsoft Services and Products: The Question of Integrity and Ethics

Protection Suite along with 50 Windows server 2008 licenses per year. The licenses were thereafter reported to
have been distributed to 150 government departments including the Agriculture Department, Board of Revenue,
Chief Minister’s Secretariat, Excise and Taxation Department and the Higher Education Department, among
others.6 Surprisingly licensed software (Enterprise Agreement) and Strategic Partnership Agreement (SPA) was
the costliest component of the 36-month program, with 58% of totals costs attributed to this component alone
(Figure 1).

Figure 1: Component-wise total Planned Cost and actual utilization of each component7

The Bribery Allegation

Transparency International had become aware of a bribery allegation leading to the granting of the SPA/ EA
contract recently through an investigative piece in the Wall Street Journal on August 21 st, 2013 titled ‘Microsoft
bribe probe reaches to Pakistan, Russia deals.’ 8 The paper had alleged that according to a tipster, the executives
at Microsoft’s Pakistan Operations paid for a luxurious trip to Egypt for a Senior Pakistani government official
and his wife in December 2009 and subsequently this incident had led to the award of a lucrative $9 million
contract to Microsoft three months after. The trip had been booked by a travel consultancy on behalf of
Microsoft and included business class airfare and stay at a luxurious hotel in Egypt. This senior official was
later identified as the now Chief Secretary Javaid Aslam (then Additional Chief Secretary). 9

Since the procurement was of a very large amount and was done on behalf of 150 government departments in
Punjab, Gilani felt that there was an immediate need for the Punjab Government, which followed the Punjab
Procurement Rules 2009, to revisit the procurement and examine whether it had been carried out as per these
Rules. Transparency International- Pakistan had demanded that all procurement documentation (PPRA Rules
stated that such procurement documentation- apart from PC-IV- must be made public once contract had been
awarded)10 including PC-1, PC-IV, Bid Evaluation and Contract Evaluation by NAB be made available for

6
For complete details of departments in receipt of the licenses, look at http://www.pitb.gov.pk/microsoft_licenses
7
Source: Final Project Evaluation Report, Punjab E-Gateway Project, June 2014. Published by the Directorate General Monitoring and
Evaluation, Planning and Development Department, Punjab.
8
http://www.wsj.com/articles/SB10001424127887324619504579027200320722342
9
See Exhibit 2: ‘The News’ report dated August 28th, 2013
10
Rule 47, Public Access And Transparency, at http://www.ppra.org.pk/doc/punjabpprarules.pdf, page 18

4
Punjab Government’s Purchase of Microsoft Services and Products: The Question of Integrity and Ethics

scrutiny so that it could be ascertained that the contract had been awarded to the lowest evaluated responsive
bidder, and allegations of misconduct could be eliminated. Also, a letter was sent to Chief Minister Shahbaz
Sharif to directly investigate the bribery allegations put forth by the Wall Street Journal. Travel for self and
spouse on bidder’s expenses could easily count as malpractice under the National Accountability Ordinance,
Article 9, 1999. Had the said Additional Chief Secretary actual accepted the trip from Microsoft, then the award
of contract itself could be deemed unlawful. This was a serious allegation, if true.

Punjab Government’s response came the day after TI’s demands had been published in the local media. In its
clarification the Punjab government said:
 
Reference the article in The News dated 27th August 2013, regarding Government of
Punjab’s agreement with Microsoft, it is clarified that the Government of Punjab entered into
a completely transparent agreement with Microsoft in 2009, in order to rid the government
departments of pirated software…… helped to convert government offices to legal and secure
software for commonly used applications such as Microsoft Word, PowerPoint and Excel.

Punjab government’s statement had maintained that:

 
As part of the agreement, Government of Punjab purchased 15,000 licenses of commonly
used office and enterprise software from Microsoft at a highly subsidized rate. By negotiating
a bulk purchase price, Government of Punjab was able to secure these licenses at a highly
subsidized price, lower than the license costs of any other agreement of Microsoft with any
other entity in Pakistan…… It is a matter of record that the price at which government of
Punjab procured the software licenses is lower than the price Microsoft has offered to any
other organization in Pakistan…
 
Any insinuation that Microsoft influenced any government official into signing the contract is
totally baseless. Officials of Government of Punjab regularly visit other countries to
understand new technologies, solutions and applications to improve governance and service
delivery. Government officials/delegations are allowed to travel abroad only after obtaining
necessary permissions from the government, which were obtained in this case. The Punjab
two member delegation was officially invited and met with officials from the Government of
Egypt, including the Minister for IT, for understanding working of the Egyptian Gateway
model and Cairo IT Park. This was an intense two-day study visit with back to back meetings
and visits.
 
It is further clarified that Microsoft did not pay for the visit of the wife of one of the officers,
and all expenses including her airfare was paid privately by the officer himself.

Microsoft in Pakistan released its response the next day as well. The statement declared:

The Wall Street Journal recently reported that the US government is investigating allegations
that Microsoft employees and business partners may have engaged in illegal activity in
Pakistan and Russia.
 
Microsoft has stringent policies in place to control illegal activities in its work culture. The
company takes every allegation seriously, and cooperates fully in any government
inquiries….Microsoft has thoroughly investigated the business trip referenced in the Wall
Street Journal article. The information available to Microsoft showed that it was a reference
site visit whose expenses were reasonable …… Furthermore, Microsoft Pakistan assures to
continue its business operations under the highest level of legal and ethical standards as
expected …

5
Punjab Government’s Purchase of Microsoft Services and Products: The Question of Integrity and Ethics

The Way Forward

Syed Ali Gilani knew that this was one of dozens of recent procurements that Transparency International had
pointed out possible ethical misconduct in.11 He realized that the government needed to plan a line of action to
curtail misconduct in public procurement as instances such as these undermined public confidence in public
institutions. He mulled over several questions. What then was the role of TI and other civil society organisations
in reducing misconduct during procurement? What line of action should the government take to ensure integrity
in public official’s dealings with vendors? What organizational measures ought to be introduced to reduce
ethical misconduct during public procurement?

Until these questions were resolved, misconduct in public procurement, he contemplated, was set to remain a
reality in the country.

11
See “Procurement watch’ on http://www.transparency.org.pk/

6
Punjab Government’s Purchase of Microsoft Services and Products: The Question of Integrity and Ethics

Exhibit 1: High-level Architecture of Punjab E-Gateway

Source: Final Project Evaluation Report, Punjab E-Gateway Project, June 2014. Published by the
Directorate General Monitoring and Evaluation, Planning and Development Department, Punjab.

7
Punjab Government’s Purchase of Microsoft Services and Products: The Question of Integrity and Ethics

Exhibit 2: Local Newspaper Reports Covering the Episode (p1 of 2)

8
Punjab Government’s Purchase of Microsoft Services and Products: The Question of Integrity and Ethics

Exhibit 2: Local Newspaper Reports Covering the Episode (p2 of 2)

Source: