Pakistan: Cabinet exempts state-owned entities from ‘transparency rules’

 

The federal cabinet has amended the procurement rules to allow the government to award contracts to the state-owned enterprises without floating public tenders, which may compromise transparency in public sector deals.

The federal government notified the amended Public Procurement Regulatory Authority (PPRA) rules on June 29 after approval from the cabinet, according to the notification.

According to the amended rule 42 (f), “A procuring agency may engage in direct contracting with state-owned entities such as professional, autonomous or semi-autonomous organizations or bodies of the federal or provincial governments for the procurement of such works and services, including consultancy services, which are time-sensitive and in the public interest”.

Only time-sensitive cases are allowed exemption, Managing Director of the PPRA Rizwan Malik said, adding that these cases would also be subjected to four major conditions to ensure efficiency and transparency.

He said the government bodies that would get contracts without competition would not be allowed to subcontract the work.

Sources said the major beneficiaries of this key amendment would be entities such as the National Logistic Cell, Frontier Works Organization and NESPAK.

The amendments were introduced after several government entities sought exemptions from the PPRA rules in the name of national security and defence.

However, the government has not yet been able to waive off violations of the PPRA rules in the case of Rs17 billion Kartarpur projects that had been awarded in violation of the PPRA rules.

But the rules allow direct contacts between the government entities on the conditions that the organisation or the body is eligible to perform the services and accomplishes the work including consultancy services, exclusively through its own resources without involving the private sector as a partner or in the form of a joint venture or as a sub-contractor.

In case there are more than one organisations or body eligible to perform the works or render the services, the procuring agency shall hold competition amongst them through limited tendering (notifications) without any advertisements. However, they will be allowed a reasonable time for the submission of their applications or proposals, according to the third condition for awarding a direct contract.

 

The procuring agency would devise a mechanism for determining price reasonability to ensure that the prices offered by the state-owned entities are reasonable for the award of the contract, according to the amended rules.

Malik said that the government has also set a spending limit under the force account to Rs200 million to provide more flexibility in spending to the government organization. The force account is defined as the execution of the small works and non-consultancy services through direct contracting with any state-owned entity.

In addition, according to the amendments, the procuring agency may use force account if the value of procurement does not exceed Rs200 million, subject to the conditions that the required works are small, scattered or remotely located for which qualified construction firms are unlikely to bid at reasonable prices; work is required to be carried out without disrupting ongoing operations; and urgent repairs, rehabilitation and remodelling works of national heritage requiring prompt attention to prevent further damages.

The amendments in the PPRA rules are part of conditions set for $400 million loan by the World Bank.

In the past year, about 23 major amendments have been introduced in the PPRA rules of 2004, the managing director said.

The managing director stressed that objective of bringing these amendments is to relax theconditions of doing business and bringing efficiency and transparency in public procurements.

The sources said that the new parameters are also aimed at ending fraudulent and corrupt practices that plague the public procurement systems and are generally accepted. The corruption is so enormous that the contractors are now becoming members of the parliament by using black money, sources added.

The MD said maintained that internationally blacklisted companies will also be blacklisted in the country “but a chance will also be given to public sector companies for review petition”.

The procuring agency will be required to devise a comprehensive mechanism for blacklisting and debarment of bidders for a specified time. The bidders will be disqualified for 10 years on corrupt and fraudulent practices. If the bidder fails to execute the contract, he will be disqualified for three years.

The government’s definition of the blacklisted company says: “Blacklisted means a bidder that is declared untrustworthy by the authority after establishing the fact that the bidder was found in any corrupt and fraudulent practices or declared incapable due to its established performance failure during the execution of the contract”.

On coercive practices like harming or giving threats to harm people, on collusive, corrupt and fraudulent practices a bidder can now be disqualified.

 

After procurements, it will be for the first time that the PPRA rules will also apply to the disposal of the public assets, Rizwan Malik said.

In rules, domestic procurements will be given preference while a standard bidding document would be uploaded on the website.

A bidder that is barred by one entity will be considered debarred by all the public sector procuring agencies in Pakistan.

The rules have also been amended to make room for timely announcement of the results of the bid.

Based on the procedure adopted for the respective procurement, the procuring agency shall announce the result of bid evaluation, in the form of a final evaluation report giving justification for acceptance or rejection of bids at least 15 days prior to the award of procurement contract: Provided that in the case where a technical proposal is to be evaluated separately, prior to the opening of the financial proposal, the technical evaluation report shall be announced before the opening of the financial proposal.

The government has omitted the rule that allows giving discounts on bids values.