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Thursday, November 26, 2020
What ails public procurement: an analysis of tender modifications in The blog
the pre-award process About

Instructions for
by Shubho Roy and Anjali Sharma. authors
Design patterns for
One source of low state capacity in India lies in the ability of the state to contract articles here
with private persons. The contracting process starts at procurement and runs till the
final payment or dispute resolution. This process suffers from delays and disputes, to Subscribe using RSS feed
the point where managers in government feel uncertain about whether a given Posts (Atom)
contract will work correctly, and private firms feel that doing business with the
government is problematic. While difficulties in the last step (payment delays (link, Follow using email:
link) and/or contract disputes (link, link) tend to loom large in the discussion, these
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are the final manifestations of weaknesses of the overall process of government
address:
contracting.
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Research on government contracting is required in order to diagnose the sources of
difficulty and design solutions. As an example, Lewis-Faupel et. al. (2016), analyse a
Authors
database of 35,600 contracts awarded by the government under the Pradhan Mantri
Gramin Sadak Yojana (PMGSY) to understand whether electronic procurement is author: Adam
Feibelman (6)
associated with better procurement outcomes. They find some improvement in
author: Anirudh
quality but not much impact on costs and delays. While state capacity in government
Burman (14)
contracting is an important problem, in the Indian context, there is a limited empirical
author: Anjali
literature on the subject. Due to difficulties with data, most studies rely either on Sharma (24)
small data sets (Goyal (2019)) or on the case study approach (Nag (2015)).
author: Arjun
Rajagopal (8)
In this article we use a new dataset about the public procurement process in India to
author: Ashish
measure one aspect of the public procurement tender process: modifications made Aggarwal (8)
by the procuring entity to tender documents. We analyse the frequency and nature
author: Bhargavi
of these modifications and the possible impact these modifications might have on Zaveri (46)
entities that participate in government tenders. We find that a large proportion of author: Chirag
tenders that are published see modification and that government procurers make Anand (6)
frequent modifications, especially in high value tenders. We offer some speculation author: Devendra
on the causes and consequences of tender modifications. Damle (8)
author: Dhananjay
Difficulties of measurement of the public procurement process Ghei (6)
author: Diya Uday
The Indian state buys through various entities and at various levels. Each (11)
government department or entity is responsible for following the General Financial author: Faiza
Rules (GFR) and purchasing the goods and services it needs to meet its operating Rahman (12)
requirements. Most government departments or entities do not have a centralised Author: Gausia
purchasing office. Purchasing is, often, distributed geographically and by value. Shaikh (6)
Small value purchases (relative to the entity's budget) are usually carried out by author: Harleen
lower rung offices, while larger value purchases are carried by regional or even the Kaur (7)
national headquarters. Similarly, purchases of goods or services may be carried out author: Harsh
at the location where it is required. For example, a contract to maintain an agency's Vardhan (11)
local office may be advertised only in the city where the local office is situated. The author: Ila Patnaik
(17)
fact that purchasing takes place at many locations makes it harder to assemble
author: Jeetendra
datasets about it.
(5)
https://blog.theleapjournal.org/2020/11/what-ails-public-procurement-analysis.html#gsc.tab=0 1/11
The first step in the process is tendering for bids. Advertisements for government author: Josh
procurement called Notice Inviting Tenders (called NITs in this article) are typically Felman (6)
published in local newspapers where the government entity is interested in procuring author: Karthik
goods or services. If the proposed procurement is above a certain threshold, it is Suresh (6)
advertised in newspapers with a national circulation. Any attempt to get data from author: Nidhi
Aggarwal (9)
NITs would call for scanning hundreds of newspapers, every day.
author: Pavithra
Manivannan (7)
A new opportunity for measurement
author: Percy
In 2011, a website called the Central Public Procurement Portal (CPPP) was Mistry (6)
established. From 2012 onwards, all central government organisations, including author: Pramod
Sinha (6)
Central Public Sector Enterprises (CPSEs) and autonomous and statutory bodies
under the Central government, are required to publish their tenders on the CPPP. author: Prasanth
Regy (7)
Since then, in addition to publishing of tenders and awards information online a large
author: Pratik Datta
part of the tendering process has also been automated using the portal. The
(36)
mandate has evolved from e-publish to e-procure.
author: Radhika
Pandey (26)
This website allows us to observe tenders from the date they are published till they
are awarded. That is, from the time that the general public/interested bidders are author: Rajeeva
Karandikar (6)
informed that the government is interested in purchasing some goods or service or
author: Rajeswari
works, to the time that the government selects a supplier and awards the contract. Sengupta (24)
author: Renuka
The problem of tender modification Sane (85)
In this article, we focus on one measure of state capability in the procurement author: Rishab
Bailey (12)
process: modifications that are made to the NIT during the procurement process.
author: Shefali
When the government issues the NIT, interested vendors respond by submitting a
Malhotra (10)
bid document to the government. The NIT contains details about: (1) the item being
author: Shubho
procured (including details such as procurement category, technical specifications, Roy (46)
bill of quantity, estimated value of procurement, delivery specifications and period of
author: Smriti
work), (2) qualifications for eligible bidders (financial and technical eligibility Parsheera (24)
conditions), and (3) critical dates for the tender process (publishing date, submission author: Smriti
date, opening date). Any modification that is made to the NIT after it is first published Sharma (6)
is a source of substantial cost on all entities interested in bidding for the government author: Sudipto
procurement. For instance, if the government modifies the qualification requirements Banerjee (7)
for the bidder after publishing the NIT, those who originally qualified for the NIT may author: Sumant
not qualify after the change. The effort taken to develop a bid is then wasted. Once Prashant (6)
tender modifications are endemic, at every stage in the process, bidders build in author: Susan
expectations about future fluctuations through tender modifications, and this Thomas (28)
reshapes their decisions to try to sell to the government and the price at which author: Suyash Rai
(22)
engagement with the government could be profitable.
author: Viral Shah
The government often requires potential bidders to submit 'earnest money deposits' (12)
or EMD with their bids, which is a financial guarantee. Potential bidders need to take author: Vrinda
Bhandari (23)
steps to tie up the funds required for this EMD. This typically involves an explicit
cost, such as getting a line of credit from a bank, or an opportunity cost, such as
Posts of note
keeping this money aside and not using it for any other purpose. If the period of the
tender process is then extended by the government procurer, the period for which Analysing India's
this cost has to be borne by the potential bidder also gets extended. In large value KYC Framework:
tenders, this cost can be substantial. This cost has to borne by all potential bidders. Can We Do Things
Better?
For instance, if six firms bid for a civil works tender where the EMD requirement is
by Rishab Bailey ,
Rs.1 million, the aggregate cost to the economy is the cost of keeping Rs.6 million of Trishee Goyal,
capital aside till one supplier is selected. The selected supplier can internalise this Renuka Sane , and
cost in its bid. But for the five that are not selected, this cost does not have the Ridhi Varma.
Know-Your-
offsetting benefit. It will influence the supplier's overall business, not just its current Customer (KYC)
or future government engagement. norms require
customers of the
Similarly, modifications in the original technical specification of the goods and formal financial...
services in the NIT, may require interested bidders to substantially change their bid
What value does a
documents or even drop out of the process after incurring the costs of putting
university add?
together the bid documents. If the date of the delivery of goods or services is by Ajay Shah. In
modified, the ability of the supplier to manage its supply chain is hampered. Even judging what a
university does to a
when a firm feels confident that it will win a contract, unpredictable delays in student, the key
problem lies in
tendering hamper efficiency in the production and supply process.
distinguishing
differences in raw
We find three mechanisms through which the NIT can be modified: (1) cancellation, material vs. diffe...
(2) re-tendering, and (3) corrigenda. An outright cancellation is where the
government procurer retracts its decision to purchase some goods or service. A re- Helping litigants
tender is where a published NIT is withdrawn and replaced with a new NIT. This make informed
choices in resolving
fresh NIT usually has substantially different provisions and requirements for the debt disputes
bidders. Corrigenda are issued when the government procurer wishes to make by Pavithra
changes to the NIT that it deems as not so substantial as to warrant a re-tender, and Manivannan ,
instead amends certain terms of the NIT. Each of these three mechanisms of Susan Thomas ,
and Bhargavi
modifying NITs introduce uncertainty and costs for all potential bidders in the public Zaveri-Shah . The
procurement process. Indian legal system
faces numerous
These three mechanisms also make the tender process uncertain and costly for the difficulties, and the
government procurer. Procurers have to spend time and resources to prepare NIT discourse ...
documents, and frequent document changes add to this cost. For instance, if a
Global Turbulence:
tender is published and then cancelled, the effort and the resources go to waste. Its Unfolding
Similarly, frequent corrigenda also require time and resources to manage and Trajectory and the
monitor the change management process. If modifications to the NIT create disputes Likely Implications
for India
and complaints about probity from potential bidders, additional costs of investigation
A lecture by Percy
and enforcement alongside possible litigation arise. If frequent modifications to the S. Mistry at ASCI,
NIT create an outcome of too few or no bidders, there can even be an extreme Hyderabad, on 26
outcome of a failed procurement. August 2008.
Introduction Since
mid-2007, the
Given the uncertainty and costs that modifications to NIT can impose on both the
global economy
government procurers and the bidders, we think of these three mechanisms for has been
making changes as sources of errors in the tender lifecycle. Our dataset makes unravelling...
possible the measurement of the `modification rate' which is a metric of the friction in
Legal and
the procurement process.
regulatory
framework for
A few entities account for most of the procurement laboratory testing in
India: A case study
In November, 2020 there were more than 26,000 government procuring for Covid-19
organisations registered on the CPPP. An average of 0.225 million tenders were By Harleen Kaur ,
Ameya Paleja, and
published on the portal in FY 19 and FY 20 each. These tenders had an estimated
Siddhartha
value of Rs.8 trillion in each of these two years. We find that 11 procuring Srivastava. Testing
organisations within the Union government accounted for around 50% of the NITs by is central to
count and more than 80% of the NITs by value in both FY 18-19 and FY 19-10. Table understanding the
spread of the
1 gives the details of the NITs published by these entities. SARS-CoV-2 virus
at an indi...
Table 1: The largest organisations by NIT count and value across FY 19 and FY 20
Books that should
Share in Share in Average tender size be read before
Organisation starting a Ph.D. in
count (%) value (%) (Rs. million)
economics
Suppose a young
Airports Authority of India 2.0 1.8 32
person is going to
Border Roads Organisation 2.1 0.7 12 start a Ph.D. in
Defence Research and Development economics. What
3.3 0.2 3 essential readings
Organisation
would you
Delhi Metro Rail Corporation 0.2 1.2 188 recommend prior to
E-in-C Branch of Military Engineer this? In my opinion,
24.8 2.8 4 t...
Services
Engineers India Ltd 0.5 31.4 2,163
Food Corporation of India 2.1 14.6 241
IHQ of MoD (Army)-(OSCC) 14.9 1.3 3
Ministry of Road Transport and
1.1 8.5 263
Highways
National Highway and Infrastructure
0.1 2.0 893
Development Corporation
National Highway Authority of India 0.9 19.6 795
Total 51.9 84.2 57
The modification rate is high
For each of these entities, we study all three mechanisms for making modifications
to NITs: cancellation, re-tendering and corrigenda. For cancellation and re-tendering,
we examine the data from the CPPP analytics dashboard over the two year period,
i.e. FY 2018-19 and FY 2019-20.
For corrigenda, we find that there is no aggregate data available and it has to be
hand collected at the level of each NIT. We focus on collecting corrigenda data for
NITs published by the organisations in Table 1. The tenders for which we collect data
are those that are currently not active. A tender that is not active is one which has
either been awarded or cancelled. We focus on NITs published in the period of
January to March, 2020. We pick this period for our analysis as it is before to the
start of the Covid lockdown and allows us to study the corrigenda pattern in normal
times. In this period, we record which NITs have no corrigenda and which NITs have
at least one or more corrigenda. This analyse a set of 11,714 tenders across the 11
procuring organisations in Table 1 for the presence or absence of corrigenda.
Table 2 gives a summary of the modification rate for the three mechanisms. It shows
that across the 11 procuring organisations, potential bidders face substantial
uncertainty due to tender modifications. Since the corrigenda data is from a period
different from the tender cancellation and re-tendering data, these three modification
rates cannot be added up to arrive at the aggregate modification rate. However, it is
clear that a large proportion of NITs see changes, and that issuing corrigenda is the
most frequent mechanism through which NITs are changed. Corrigenda are issued
for nearly 20% of the NITs that get published in our analysis period.
We may expect that organisations that do more tendering would develop greater
organisational capability to do this well. We might expect that difficulties of
contracting in the past would have triggered off feedback loops into organisation
design that address these difficulties. However, across these 11 entities, we see the
reverse relationship. This raises concerns about the extent to which difficulties faced
by these organisation have generated feedback loops into modified organisation
design and reduced tendering inefficiencies.
Table 2: Sources of modifications in NITs (in %)
Organisation Re-tender Cancellation Corrigendum

(FY 19 & FY 20) (FY 19 & FY 20) (Jan-Mar 2020)
Airports Authority of India 4.4 13.0 26.6

Border Roads Organisation 2.8 8.0 7.5
Defence Research and
4.4 7.0 18.3
Development Organisation
Delhi Metro Rail Corporation 0.1 25.3 56.3
E-in-C Branch of Military
16.6 5.7 17.2
Engineer Services
Engineers India Ltd 5.7 4.3 43.0
Food Corporation of India 1.4 7.3 35.6
IHQ of MoD (Army)-(OSCC) 6.0 10.4 10.5
Ministry of Road Transport and
7.8 15.3 43.1
Highways
National Highway and
Infrastructure Development 1.7 28.2 78.7
Corporation
National Highway Authority of
0.5 16.0 19.5
India
Total 10.5 8.1 19.5
Corrigenda are frequent
We turn to the nature and the frequency of the corrigenda being issued. For this, we
identify a sample of active tenders with corrigenda for the entities listed in Table 1.
Our analysis in Table 2 relied on tenders that were not active. However, on the
CPPP website, corrigenda details are only available for tenders that are currently
active. An active tender is one for which the tender lifecycle is yet to be completed.
In this analysis, we identify 104 tenders. These tenders had 536 corrigenda issued
against them when the sample was collected. Since, these are active tenders, more
corrigenda may have been added to them subsequently.
While a cancellation terminates the procurement process and the re-tender starts it
afresh, a corrigendum keeps the process running. The government procurer may
make incremental changes to terms of the NIT with a corrigendum. For example, the
government may add details to the technical specifications on the item being
procured. Or it may change the date by which bids have to be submitted. Or it might
demand additional documents from bidders as proof of eligibility. While the changes
introduced by a single corrigendum may be small, over time, with many corrigenda,
these changes may become substantial. So while corrigenda do not terminate the
process, they introduce significant uncertainty in the procurement process.
Our analysis of 536 corrigenda across 104 tenders shows that changes by
corrigenda are common. Table 3 presents some of the features of these corrigenda.
We observe:
On an aggregate basis, around five or more corrigenda are issued for

every tender. This number varies across organisations, with entities like
NHAI issuing as many as 30 corrigenda per tender.
Around 60% of these corrigenda are issued to change the bidding dates.
The remaining 40% are to make changes such as alterations to the
technical specifications, the bill of quantity or for issuing more details or
clarifications than were given in the original NIT document.
There is a systematic under-estimation by procuring organisations of the

time it will take to get bids. Across the 11 procuring organisations, the
original estimate of the time it will take to receive bids was 16 days.
However, through frequent issuance of corrigenda this period was
extended to 81 days. And since these are active tenders, the bid period
may increase even further.
Some entities, like NHAI and NHIDC not just have more tenders with
corrigenda but also more corrigenda per tender.
Table 3: Frequency and nature of corrigenda
Avg. corri- Original bid Revised bid

Avg. tender size O/w Date change
genda /tender period (Avg. in period (Avg. in
(Rs. million) (%)
(No.) Days) Days)
Airports Authority of India 504.2 2.5 60 17 33

Border Roads
264.5 4 63 22 64
Organisation
Defence Research and
9.7 1.6 63 18 26
Development Organisation
Delhi Metro Rail
2,811.9 1.3 77 7 14
Corporation
E-in-C Branch of Military
1.9 1.2 8 7 7
Engineer Services
Engineers India Ltd NA 3.3 33 16 31
Food Corporation of India 1.6 2 - 16 19
IHQ of MoD (Army)-
2.0 3.8 89 16 49
(OSCC)
Ministry of Road Transport
1.9 1 100 7 7
and Highways
National Highway and
Infrastructure 1,561.9 4.4 20 10 24
Development Corporation
National Highway
7,620.3 29.7 67 44 584
Authority of India
Total 1,848.2 5.2 60 16 81
An illustration of changes through corrigenda for a complex

project
Table 3 presents a subset of a larger set of parameters on which the original tender
is modified through the corrigenda. We illustrate the extent to which original tenders
can experience change using one example of a tender for a complex procurement:
the NHAI Contract to upgrade a stretch of road at Panipat from two lanes to four
lanes. The estimated value of the tender is Rs. 2.1 billion and the estimated period
of work post award is 2 years. Potential bidders are required to submit an EMD of
Rs. 21 million, 1% of the tender value.
Table 4 is a brief summary of the timeline of the NIT. As of the date of data
extraction, the NIT has been amended 31 times, and has been active for 693 days
as against the original bid period of 44 days.
Table 4: An example of frequent changes to a tender
Time elapsed
Date NIT change event
(in days)
Original NIT published on CPPP website. Original bid

10th Dec.
submission timeline: 23rd January, 2019. Bids to be -
2018
opened on on 24th January, 2019.
NHAI publishes first corrigendum. This adds a new set
11th Dec.
of information about the procurement. Additional 1
2018
documents added to the NIT by NHAI.
NHAI issues second corrigendum two days before the
21st Jan. final date of submitting bids. This corrigendum extends
42
2019 the submission timeline from 23rd January to 12th
February, 2019.
One day prior to the submission deadline, bid
11th Feb.
submission date extended by 7 more days to 19th 63
2019
February, 2019.
NHAI publishes three corrigenda on a single date. They
are titled "Revised Tender Documents", "Financial
Proposal", and "Letter". After nearly two months of
publication of original NIT, NHAI makes substantial
13th Feb. changes to the planned procurement. Interested
65
2019 bidders would have to go back to the drawing board
and redo their bids. On 13th February, the deadline to
submit the bids was 19th February, so the bidders
would have just six days to absorb all the changes,
make fresh documents and submit them.
The NHAI publishes another corrigendum. This one
14th Feb. contained replies to queries raised by the bidders. The
66
2019 clarifications may have required the bidders to redo
their bids or make substantial changes.
One day before the bid submission deadline, NHAI
18th Feb. changes the deadline for the third time. Now, the final
70
2019 date for submitting bids would be the 25th of February,
2019.
22nd Feb. The NHAI goes on to publish 25 more corrigenda, each
2019 to extending the deadline for submitting bids by about two
679
19th Oct. weeks. The bid submission timeline is now 17th
2020 November, 2020.
2nd Nov. We extract corrigendum data for this tender. The tender
693
2020 is still active so more corrigenda can be added.
Conclusion
In this article, we have used a novel dataset and discovered some new facts about
the public procurement process.
While there is significant decentralisation in the procurement process across

government entities, there is a possibility of improving public procurement by
initiating reforms at a few entities that make up the bulk of procurement activity.
A large proportion of the tenders published are modified by the government procurer,
either through a corrigendum or through re-tendering and tender cancellation. These
tender modifications are taking place at a scale that increases uncertainty in the
procurement process. There is a need for organisational reform within government
organisations, so that better analysis is done before the first document is unveiled,
so that the need for changes thereafter is minimum.
How the state contracts with private persons is one important element of the overall
problem of state capacity. There is a need to build knowledge, and a literature, on
this subject. This article constitutes one small element of that overall research
program.
References
Sean Lewis-Faupel, Yusuf Neggers, Benjamin A. Olken and Rohini Pande (2016),
Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public
Works in India and Indonesia, American Economic Journal: Economic Policy, Vol. 8,
No. 3.
Bodhibrata Nag (2015), Combating Corruption in Indian Public Procurement - Some

Exploratory Case Studies, The Journal of Institute of Public Enterprise, Vol. 38, No.
1&2.
Yugank Goyal (2019), How Governments Promote Monopolies: Public Procurement

in India, American Journal of Economics and Sociology, Vol. 78, No. 5.
Anjali Sharma is a researcher with the Finance Research Group. Shubho Roy is a
doctoral candidate at the University of Chicago. The authors would like to thank
Susan Thomas for discussions and useful inputs and Charmi Mehta and Sejal Gajjar
for assistance with collecting the data.
at 17:24
Labels: author: Anjali Sharma, author: Shubho Roy, publicfinance (expenditure),

state capacity
5 comments:
SC Wednesday, 2 December 2020 at 16:41:00 GMT+5:30

Please have a look at the bid cancellation percentage on GeM
Reply
Anonymous Friday, 11 December 2020 at 17:27:00 GMT+5:30

Interesting article. However, it is possible that there could be merits in revising the ToR
and evaluation based on feedback from potential bidders. It could show that the Govt.
is responsive to ground realities rather than imposing a pre-conceived structure. In
other words, corrigenda are not necessarily all bad
Reply
Shubho Roy Thursday, 24 December 2020 at 04:18:00 GMT+5:30

Government should talk to potential bidders before publication of a formal tender
inviting bids. Responsiveness of government behaviour needs to be balanced with
predictability of the government. When a contract is supposed to be awarded on a
specific date, most of the time, it should happen on that date. Changing specification
introduces extreme uncertainty. While errors should be corrected, we see persistent
error rates even in the purchase of standardised goods. This is indicative of some
underlying problem.
Reply
rajeswari Tuesday, 25 May 2021 at 09:38:00 GMT+5:30

"One source of low state capacity in India lies in the ability of the state to contract with
private persons." Before going into the details of a specific issue and explaining how
that can be solved, it might have helped to first outline the problems (with data)
associated with government contracting and procurement. The claim is that
government contracting and procurement does not work well in India. But other than
three links (1 out of the four links given is a repetition) no empirical evidence has been
provided to establish this claim. Maybe it requires a different article but it is important
to first show that government procurement doesn't work efficiently. Then comes the
question of specific issues etc.
Reply
Anonymous Tuesday, 25 May 2021 at 10:46:00 GMT+5:30

One recent example is a demo of the failures of government contracting.
Reply
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The Leap Blog - What Ails Public Procurement - An Analysis of Tender Modifications in The Pre-Award Process

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01/10/2023, 19:52 The Leap Blog: What ails public procurement: an analysis of tender modifications in the pre-award process

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Thursday, November 26, 2020

What ails public procurement: an analysis of tender modifications in The blog

the pre-award process About

Total 51.9 84.2 57

The modification rate is high

Table 2: Sources of modifications in NITs (in %)

Organisation Re-tender Cancellation Corrigendum

Airports Authority of India 4.4 13.0 26.6

Total 10.5 8.1 19.5

Corrigenda are frequent

On an aggregate basis, around five or more corrigenda are issued for

There is a systematic under-estimation by procuring organisations of the

Table 3: Frequency and nature of corrigenda

Avg. corri- Original bid Revised bid

Airports Authority of India 504.2 2.5 60 17 33

Total 1,848.2 5.2 60 16 81

An illustration of changes through corrigenda for a complex

Table 4: An example of frequent changes to a tender

Original NIT published on CPPP website. Original bid

While there is significant decentralisation in the procurement process across

Bodhibrata Nag (2015), Combating Corruption in Indian Public Procurement - Some

Yugank Goyal (2019), How Governments Promote Monopolies: Public Procurement

Labels: author: Anjali Sharma, author: Shubho Roy, publicfinance (expenditure),

SC Wednesday, 2 December 2020 at 16:41:00 GMT+5:30

Anonymous Friday, 11 December 2020 at 17:27:00 GMT+5:30

Shubho Roy Thursday, 24 December 2020 at 04:18:00 GMT+5:30

rajeswari Tuesday, 25 May 2021 at 09:38:00 GMT+5:30

Anonymous Tuesday, 25 May 2021 at 10:46:00 GMT+5:30

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