Transparency Issues in the Public Procurement - Essay Example

? TRANSPARENCY ISSUES IN THE PUBLIC PROCUREMENT Law Table of Contents Introduction 3 a. Transparency Needed to Foster Competition 4 b. Competition as a Best Value For Money 5 c. Transparency to Foster Confidence of the taxpayer 5 d. Transparency as a Powerful Tool to Fight Corruption 6 2. Critical Element of Transparency in the Public Procurement Process 6 a. PIN- periodic indicative notice 6 b. Notification and advertising 7 c. Open competitive procurement method 7 d. Restricted with two stage 7 e. Uses of Standard Tender Document 8 f. Pre Disclosure of Relevant Information 8 g. Public Bid Opening 9 h. Evaluation of Tender in Monitory Terms 10 i. Qualification of Bidders on the Basis of Pass/ Fail Requirement 10 j. Award to the Lowest Evaluated Bidder Meeting the Stated Criteria 11 k. Accessible to Applicable Laws and Regulation 12 l. Appeal Mechanism 13 m. Standstill Period 13 n. Debriefing 14 o. Publication of Award 14 Bibliography 15 1. Introduction Public Procurement refers to the process of purchasing of goods and services on behalf of the public authority, through government agencies. Public procurement involves government expenditure that is aimed at securing inputs and resources in order to achieve objectives, hence establish a significant impact on the crucial key holders and the society. Besides, government purchasing occurs through both domestic and international trade. In fact, about ten to fifteen percent of the GDP involves government expenditure on procurement; therefore, public procurement makes a significant contribution to the global economy1. Transparency has been considered an essential standard that facilitates improvement of public procurement; in fact, it involves a procurement process that is open for public scrutiny. Furthermore, this facilities competition, thereby increasing the efficiency of the process and the threat posed by issues such as corruption are alleviated. Transparency enables people to monitor public bodies, thereby holding these organizations accountable for their undertakings. The main objective of transparent public procurement is to facilitate fairness, competition and economic value in the process; this objective is achieved through effective and efficient procurement process that is developed by the principals monitoring the process. Apparently, sufficient controls are incorporated in order to promote competition, thereby reducing the risk associated with corruption, fraud, mismanagement and wastage of public resources. In this case, transparency is considered to be an effective tools aimed at hampering corruption and ensuring that there is value for money2. In addition, transparency is employed in different ways along with different practices such as advances publication of procurement plans, procurement policies are published, tender notices are advertised, the criteria for evaluation is disclosed, there are payment of prices and contract awards are published. a. Transparency Needed to Foster Competition International liberalization is applied in fostering competition among public procurement markets. Besides, competition can also be facilitated through participation in WTO Agreement on Government Procurement (GPA)3. In this case, competition can be fostered in four different ways, which include provision of vehicles by GPA in order to facilitate progressive opening of parties to markets in order for the to engage in international competition. On the other hand, there are other provisions that involve agreement focusing on offering information based on framework aimed that ensuring that the process is transparent4. Fostering competition involves signing agreements with GPA parties in order to facilitate establishment of domestic reviews and operations, where participants are allowed to challenge decisions that are deemed questionable. Therefore, decision made by national procurement authorities should be subjected to review by the competitors in order to avoid unfairness or discrimination. In addition, competition can be fostered through provision of recourse to WTO by GPA, where conflicts can be settled in situation where parties have a conviction that there is suppression of international competition. Besides, competition can also be facilitated by opening of bidding process to foreign suppliers, who do not suffice to engage in effective competition. b. Competition as a Best Value For Money The main objective of fostering competition in the process of public procurement is to ensure that government and citizens are receiving best value for their money through the process of public procurement. In this case, desirable effects of competition in competitive procurement market are achieved through three ways. First, agencies involved ensure that the market has free entry and there are no collisions; thus, the prices are pushed towards the marginal costs. Secondly, competitors are offered an incentive to decrease their production and other costs5. Thirdly, competition is considered a significant promoter of innovation in the procurement markets. The process of fostering competition has significant consistency with effort aimed at increasing transparency. On the other hand, fostering competition requires diffident refinements through employment of transparency measures. Therefore, application of laws in competition through the process of public procurement requires highlighting of situation that facilitates transparency. c. Transparency to Foster Confidence of the taxpayer Confidence by the taxpayers is achieved by the public procurement institutions through fostering transparency. Besides, confidence in the process of public procurement is maintained through clarity on issues regarding privacy, whereby they are considered vital since they are attached to the process. On the other hand, confidence is fostered through involvement of experts in procurement process, which have ample understanding of pertinent factors that support decision-making. For example, experts are able to develop discussions regarding data, which is subjected to rectification. Therefore, fostering confidence among the taxpayers is considered a way of succeeding in development of a transparent public procurement process. Furthermore, confidence facilitates retaining of trust among citizens towards the process; in fact, the transparency of this process is highly dependent on agents’ ability to retain public confidence. d. Transparency as a Powerful Tool to Fight Corruption Information required for making necessary decisions is accessed by the agents, thus, the principles are not expected to dictate the action to be undertaken by agents. In this case, this leads to reliance on professional judgment after collection and evaluation of relevant information6. In this case, discretion is eliminated, thereby converting the procurement process to merely a mechanical function. Conversely, these agencies are focused on quality, cost and value of money, and they are expected to ensure that they are using their discretion in the right way. Furthermore, the principal applies their tools of transparency in monitoring actions of these agents, by checking their undertakings against framework of regulations. 2. Critical Element of Transparency in the Public Procurement Process a. PIN- periodic indicative notice Publication of periodic indicative notice by public procurement agencies should correspond with the information that was offered previously by these agencies7. Moreover, publication of intervallic indicative notification is applied by entities in order to be used by government agencies. Nonetheless, there are alternatives for procurement agencies to chose, whereby they can start their tender procedure via the periodic indicative notice or state the specific work, suppliers or service that the contract will be awarded. b. Notification and advertising Notification and advertising focuses on the nature of requirements; thus, it is considered appropriate to use national website as a supplement and other forms of media such as various trade publications. In addition, the abbreviations should be used on the notice in order to entail relevant information of tender publication; thus, agents consider applying e-tenders website for this purpose8. On the other hand, advertised tendering procedure or notification can be sent to the candidates that are considered suitable to participate in bidding competition. c. Open competitive procurement method Open competitive procurement methods are considered advantageous since the bidders are evaluated in terms of their presentation through proposal concerning their prices and quality of services they are able and willing to offer. Therefore, these presentations are applied as a way of fostering understanding in order to elaborate and clarify pertinent issues regarding the process of public procurement. In this case, participants are expected to get into a dialogue, which is referred to as post tender negotiations, which involve pricing and substantial changes on the selection criteria. d. Restricted with two stage Restricted has a two stage that begin with advertisement of requirements by the public procurement agency, where parties that are interested are invited to bidding. The second stage involves a submission of specific information regarding parties that are interested; in fact, suitable vendors are selected by the Contracting Authority after submission of tenders. e. Uses of Standard Tender Document Standard tender documents are issued are prepare by the Public Procurement Authority, and they are provided in order to be implemented as law. In fact, these documents entail necessary perceptions regarding the institution and authorities up to when the enforcement of law is published in Official Gazette. Therefore, these documents are applied by the contracting authorities, thereby prevailing as principles and provisions of regulations. f. Pre Disclosure of Relevant Information Pre disclosure of necessary information is facilitated through objectives set by Promotion of Access to Information Acts, which focuses on eliminating reserved and insensitive culture. Therefore, these acts offer reforms that facilitated changes in public procurement that prevailed in 19949. In this case, these acts indicate that a person is expected to present his or her request for recorded information, which is in their possession or under the mandate of the public body; in fact, they are not expected to make any form of justification of the request. However, there are situations when the government agencies deny people to have access to information that concern the selected bidder. Nonetheless, this denial is applied in situation when these forms of disclosure involve information such as trade secrets and confidential information that would lead to a threat to national security. There is a form of commercially sensitive information entailed in the process of tender submissions; in fact, if some details contained in these documents were publicized, this would pose a commercial threat or harm to vendors involved. On the other hand, withholding of information would lead to allegations of abuse, thereby invoking organs of the state in a manner that would be desirable. Nonetheless, state organs are allowed to refrain from disseminating information involving financial, commercial or scientific information in situation that require safeguarding of trade secrets or prices offered by bidders. In fact, this decision is made due to realization of the harm that could be caused by release of such information. In addition, there is a form of distinction made by the court concerning disclosure of tender prices prior to the closing date and disclosures after these date. Tender prices are safeguarded, whereby they are not publicized before the closing date of the tender, and this information is not disclosed after closing date or award. Confidentiality in the process of public procurement is not a justification of withholding relevant information; government agencies and other third parties involved are expected to safeguard this information in order to avoid subverting the laws. In this case, the clause of confidentiality involves a contract in situation when there is nothing contained, which is worthy. Nevertheless, disclosure of information regarding the winner of the bidding competition is vital given that it ensures transparency of public procurement process; in fact, this is indicates that the award has been issued responsibly. Situation involving state security in public procurement process, there is increased susceptibility to corruption, especially when it involves military equipment10. However, this process does not involve disclosure of information; hence, this does not allow public scrutiny due to national security concerns. g. Public Bid Opening Public bid opening involves sealed bid procurements; for instance, this may involve bids that are unsealed in public, whereby they are disclosed to all bidders. In fact, the practice of public bid opening is perceived to be a significant way of dealing with corruption. Beside, this strategy can be applied in the process of facilitating collusion, thereby enabling members of a certain cartel to make necessary determination regarding co-conspirators’ satisfied assurances. On the other hand, stability of these cartels is increased by bidding or submission of artificially high bids that are referred to as ‘cover bids’. However, there are reforms that are made based o the idea of allowing private inspection of bids. In fact, this inspection is performed by guardians, who operate within the purchasing agency such as inspector general. Apparently, public bidding opening serves as a way of creating a balance or mutual accommodation for a fair competition that is not affected by concerns raised due to corruption. Therefore, with this form of a balance, measures focused on improving the process of public procurement are reinforced due to elimination of corruption and promotion of competition. h. Evaluation of Tender in Monitory Terms Tenders are evaluated economically, whereby the benefits derived from the tender are measured in terms of their price, thereby considering the other factors that are not related to prices such as maintenance cost, cost-effectiveness and productivity11. However, this evaluation involves tender proceedings that are derived from economic advantages of the tender that is expressed in its monetary values. i. Qualification of Bidders on the Basis of Pass/ Fail Requirement Qualification of bidders is based on passing or failing to meet set requirements by the agency involved in the public procurement processes. However, in order to determine those that have failed and passed objective selection criteria is applied in order to ensure that the competitors of contract are qualified participants. However, there is a risk involved due to increased mechanical exercise that involves collection of unnecessary documentation, which has been deemed mandatory by the agencies. On the other hand, this practice of selecting bidders is considered as a way of preventing corruption. The process of selecting bidders based on their qualification involves disclosure of information, which is considered an opportunity to demonstrate the rules that are involved in this process. Besides, this raises concern away from issues that may involve corruption; in fact, compliance to irrelevant has a cost to the bidders. j. Award to the Lowest Evaluated Bidder Meeting the Stated Criteria The criteria in the process of selecting suitable bidders involve transparency that is employed in ensuring, whereby all applicants are expected to meet requirements that are documented. On the other hand, the criterion of awarding these contracts involves two alternatives in the public procurement system. Firstly, agency considers selection of the bidder offering required goods or services at the lowest price. Secondly, the agency involved in public procurement process may focus on the price along with the other requirements such as after sales services and availability of spare part if a machine is being procured. There is an advantage associated with selection based on the lowest price offered by the bidders, since the process becomes quick and simple. However, there may be likelihoods of failing to benefit from these selections, especially where bidders involve are basing their competition of differentiation of their products. Then again, there are high probabilities of abuse due to application of the second alternative; for instance, there is a challenge associated with translation of qualitative aspects of the bid that considered quantifiable. Therefore, this allows given extent of discretion as an element of the agents, though this is not sufficient to offer chances for corruption. k. Accessible to Applicable Laws and Regulation Laws and regulations in the process of public procurement make a significant contribution to elimination of corruption. In fact, these laws have proofed to be effective even in situations that pose a direct opportunity for corruption in procurement process12. However, there are situation where these law and regulations are ineffective such as areas where there is systematic corruption. Besides this becomes a far more deeply rooted problem that surpasses opportunities for corruption. Nonetheless, compliance to these rules and regulations is not a guarantee of complete alleviation of corruption or else an indication of effective procurement process13. Laws and regulation are aimed at responding to problems experienced in the public procurement process. Therefore, this has led to introduction of new procurement reforms, which are focusing in imposing stringent regulations and alleviation of possibility of procurement agent exercising of discretion. Laws and regulation in the process of public procurement have played a significant role in ensuring that agents undertaking this process are not corruption, hence they are expected to employ procedures that are transparent concerning their requirements. Furthermore, these laws and regulations have been applied in situation that require elimination of systematic corruption through campaign, through dependence on government effort to make reform, which can change the attitude of the society to the process. On the other hand, there are situation where over-regulation may have a negative effect on agents’ ability to exercise their discretion. In some case, situations are worsened by good intentions, involving imposition of strict regulation. For instance, if the over-regulation had a negative impact on the public procurement process, this may result to condemnation by the public towards government, citing issues such as inefficiency and expensive purchasing. Therefore, regulation should focus on addressing causes of misuse of discretion instead of focusing on eliminating discretion. For this reason, government agents are required to be having a professional approach while making decision in procurement processes, though these regulations are not expected to prevent exercising of reasonable judgement. l. Appeal Mechanism Appeal mechanism applies in situations involving participants in the tendering process, who have claims of suffering a loss or damage because of procedure in the process that are unlawful. In this case, the participants is expected to file a complaints an appeal that conform to the procedures and values provided by law14. Nonetheless, the complaint and appeal application has been deemed mandatory as an administrative application that is exhausted prior to filing a lawsuit. Complaints applications are issued to contracting authority, while appeal applications are issued to Authority via signed petition. m. Standstill Period Standstill period refers to duration between notification regarding intended award of a contract, which is subjected to regulation and actual award of the contract; in fact, this is in the context of public contracts regulations of year 2006. In this case, standstill duration lasts for ten days, whereby this is the period between dispatch and signing the contract with a qualified bidder. n. Debriefing Debriefing is aimed at increasing transparency in the process of public procurement through fostering of understanding of this process, whereby the rationale involved in making various decisions is explained to bidders, who fails to qualify. The function of debriefing process is to be applied as a building tool, whereby vendors are required to improve offered that are to be provided in the future; thus, this is a value adding procedure. Moreover, debriefing encourages improvement of quality in the procurement functions, though they should be undertaken in the right manner to avoid potential harm to the process. For instance, there are situations where bidders that have not qualified for the selection might decide to file a challenge, thereby requesting debrief for feedback on its proposals. Therefore, mishandling of this debriefing may result to a loss of confidence in the entire process, thereby posing a challenge in the public procurement process15. o. Publication of Award Publication of award should occur within thirty days after issuance to a qualified bidder. Besides, this publication involved copies of tender and contract documents that are completed. In this case, the awarding body is expected to undertake some procedures such as opening envelops that contain administrative documents and verifications during a public session. Bibliography Arrowsmith, S. 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European Journal of Political Economy, Vol. 21, 2005, pp. 163–183 Gal-Or, E., Gal-Or, M., Dukes, A. Optimal Information Revelation in Procurement Schemes, The RAND Journal of Economics, Vol. 38, No. 2, 2007, pp. 400-418 KAMU iHALE KURUMU. Public Procurement Law. Republic of turkey Public Procurement Authority. 2002. Kolstad, I., Wiig, A. Is Transparency the Key to Reducing Corruption in Resource-Rich Countries? World Development Vol. 37, No. 3, 2009 pp. 521–53 Kim, S., Kim, H.J., Lee, H. An institutional analysis of an e-government system for anti-corruption: The case of OPEN // Government Information Quarterly, vol. 26, 2009, pp. 42–50 Lambert, A. Sonin, K. Corruption and Collusion in Procurement Tenders. http://www.cefir.org/papers/WP36.pdf (2003) Ohashi, H. Effects of Transparency in Public Procurement Practicies on Government Expenditure: A Case Study of Municipal Public Works. Review of Industrial Organization, 2009, Vol. 34, p.267-285 Podkolzina, E.A. and Balsevich, A.A. Contracts in Public Procurement: Theory, Problems, and Illustrations. Public Procurement: Management, Security, Placement. Normative-Analytical Journal, 2009, vol. 17, pp. 76-83. Parliament of Malaysia. Transparency in Public Procurement and Business and Civil Society Oversight. February, 2013. Web 28 May 2013 UNOPS. Transparency and public procurement: Supplement to the 2011 Annual Statistical Report on United Nations Procurement. July 2012. < http://www.unops.org/SiteCollectionDocuments/EB%20documents/2012/Second%20regular%20session%202012/2011_supplement_transparency.pdf > Read More