September 8, 2000

Scheme to Substantially Reduce Incidence of Corruption in Government Related Purchases

Case Study
A Government hospital in North India recently issued a purchase order for supply of 1000 nos. of O.T. stainless steel trays for Rs. 2000 each as an emergency requirement based on lowest out of 3 quotes (all from related companies). The usual market price is Rs.50 per tray; higher price was justified by minor modifications to the technical specifications (in this case only the shape) from the ones readily available in the market.

Background

• There is a feeling of helplessness all over the country that nothing can be done to remove corruption; people have lost faith largely because of lower level corruption in all walks of life affecting day-to-day work.
• The leadership is committed to eliminate/substantially reduce corruption.
• The government has started a major initiative to provide Internet access to the remotest parts of the country.
• Transparency in government purchases is also a requirement of the WTO.

Methodology

• Every government and semi government department or undertaking and joint sector company will be required to create web-sites on the internet and announce tenders/inquiries/intent-to-purchase on their site.
• Technical specifications of each contract will be exclusively described on the Net. Inquiries and clarifications about the specifications will also be answered on the website to ensure free flow of maximum information and most competitive offers.
• All such purchase requirements will have the HSN code (used by customs and excise in India and based on international nomenclature) so that linkages can be provided to all requirements of a product all over the country. This will enable easy access to suppliers of a specific product.
• Sealed tenders will be opened in public and each offer will be described on the Website giving price, technical specifications, taxes, delivery and other terms and conditions.
• Negotiations, if permitted under the tender conditions, should be optional to all bidders with a defined time-limit to re-quote; preferably following sealed cover process again, on commonised specifications.
• Final offers with any changes in earlier specifications and terms will be shown on the net. The purchase decision should also be recorded on the net giving price, technical specifications, terms and conditions, name of the beneficiary and name of the person finalizing the order.

Expected Benefits

• Details of government purchasing will be widely publicized and get more suppliers; both domestic and foreign, and will generate healthy competition providing better quality products.
• Supplier cartels will be eliminated.
• Purchaser will hesitate to inflate prices or favour suppliers since his actions will be open to public eye.
• Prices will continuously fall in every subsequent purchase of same product; as past data is available to competitors; till it reaches lowest reasonable price. Scope of bribes will reduce to bare minimum.
• Several products which are wasted and never used in government departments will come to light.
• Transparency requirement of WTO will be met.