Rethinking Procurement; Quality vs Cost

Procurement involves a huge chunk of budget annually. Out of this huge pie 20% goes fruitless. For instance out of 100 million ,20 million is a loss to the government exchequer in a year. What other countries took  centuries we have done in decades. To match this pace of development, procurement is also taking speed.Procurement is a necessary activity for a fast developing economy like ours. We need to develop basic infrastructures by using the imported machineries and technologies.
From iron bars to excavators, stationeries to computers all we import ; we produce almost nothing at home. These equipments and machineries are needs not wants. In our endeavor to fast economic development, procurement is inevitable. Procurement is not as simple as we presume it is. If Bhutan has to reap the best out of procurements we have to rethink the whole process of procurement.

Funds are very difficult to come by, we have very thin sheet of internal revenue, therefore there is a grave need to  fruitfully utilize the money that we have and the ones that come in the form of foreign aids.Let us discuss the procurement rules that the finance ministry has come up with. Every time suppliers has to participate in a quotation they have to make at least two copies of a 100 page document. The document consists of  mainly standard rules which can be kept as a standard and not exchanged everytime. Strictly speaking out of 100 pages only 10 pages are quite relevant, 90 pages are just bullshit. What could the ministry do is bring about a standard rule and then reduce the paper work to 10 necessary pages.
 Ignorance of law is not an excuse, who will quote a bid If not with information and capital. One interesting fact is making copies involve costs, these costs add up to suppliers overhead costs, raising the bidders quotation equally by the same amount. Standard bidding documents backfires the people who came up with. Its like digging a pit in which your brother falls. Besides losing money by making 300 or so page document, a precious duration of time is lost. It is not only losing the human resource capacity of the supplying agent but in a broader sense the nation at large is losing because there will be slack in private sector growth.

Next there is the question of quality. Quality is one controversial topic given the absence of a yardstick of measurement. Without black and white documentation one cannot ascert quality. Even without documentation we know that quality matters. In all the government agencies there are tender committees who are mostly randomly picked to say that the process is transparent. But they are not specialised in procurement. A tender committee has the responsibility of evaluating the bids not just based on the price  but the specifications and make evaluation is a dire need. In the documents they proudly claim that it will be awarded to the lowest evaluated bid but the truth is they award it to the lowest quoted bid because they are not capable of defending the quality question, just because they are not the experts. On the other hand annual audit will be asking for justification for the award for the lowest evaluated bid. They must be able to justify the long term implication due to quality. For instance there can be two competitive brand of computers  exactly fulfilling the specifications but different qualities. We must accept the fact that with quality comes the cost. But only experts know the thin line of difference. Evaluation team without such competencies award it to the wrong bidder. The procured goods goes obsolete before its expected time, thus wasting government resource.
How long can we complacently squander public money?. We must be mindful of how we use the tax payers money. One important aspect that needs to be addressed is the human resource capacity. We need more people specialised in procurement.

We are such a small economy we cannot afford to waste money just like that. Whatever little we have; we must put them to good use. Our tax base is too small, even if we raise the tax rates and widen the scope of taxes it will not help, If we donot stop such leakages. We are still at a point of peaceful return, we must rethink procurement and must return If need be. Cautiously considering the quality will pay, even at a higher cost. Buying one thing of quality at a time may be cost effective than time and again of inferior quality. Here this way I am not concluding but opening the door for further discussion, that is why I have used the term rethinking! 
    

Comments

  1. i will just see whether what you wrote are true,because i have the new procurement manual with me.

    ReplyDelete
  2. Sure brother! Please correct me if i am wrong! I have written the post based on whatever little I have read, heard and know. I can still be wrong, but mistakes might help me learn.

    ReplyDelete

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