Principle and process of procurement Kezang Jamtsho Presented at “Sectoralization Training Program” ACC Conference Hall 26 February 2013 www.acc.org.bt - 5th Druk Gyalpo

Definition of public procurement Public procurement is known as Government procurement, also called public tendering, is the procurement of works, goods and services on behalf of a public authority, such as a government agency. With 10 to 15% of GDP in developed countries, and up to 20% in developing countries, government procurement accounts for a substantial part of the global economy.[1] Public procurement in Bhutan accounts for 40-45% of annual budget Ministry of Finance Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Principle of public procurement Public procurement is based on fundamental principle of “value for money” “Value for money” is secured through an open competitive bidding process Open competitive bidding process is to capture the market efficiency Open competitive bidding process is to give fair and equal access to all legitimate firms Open competitive bidding process requires safeguards due to the interface between people, money, resources and market Rules and regulations provide the framework within which the processes are to be completed Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Procurement processes - Safeguards Bench-marking, due diligence and transparency in the process are the safeguards to be exercised Bench-marking – price-referencing, knowing the market price, understanding the reasonable price, deciding whether the price offered is reasonable Due diligence – systematic in approach, appropriate carefulness (at every level, at all times), leaving nothing to chance (exhaustive), taking issues to logical conclusion Transparency – in an open manner, open to discussion, open to scrutiny, open to queries, while maintaining integrity and confidentiality of information as required by process/law Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Fundamental principle and process of procurement Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Procurement Cycle –logical sequences Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Vulnerabilities for corruption Need assessment – biased need assessment, not reflecting true needs, steer needs for works, goods and services to suit some contract firms, suppliers or consultants, quantification not divulged Procurement planning – Plan to suit certain groups, steer specifications to match certain groups, bloat estimates, share privilege information, build rapport/coalition for collusion Tender process – share privilege information, preferential treatment, collusive practices, bid rigging, biased bids evaluation, fraud and forgery, misrepresentation, quantity of items of work not specified, bid steering to favor a certain firm Contract implementation – Operationalization of collusion, Supervisor become partner and perpetrator, Poor quality control/supervision, sub-standard works/goods/services accepted, manipulate on the quantity of items of works/goods, excess and illegitimate payments made, window dressing of faculty works/goods/services, books of account/stock/issue register etc. matched, Contract closure – No proper handing/taking over, defective works/goods/services certified and accepted, liquidated damages not levied, terms and conditions of defect liability period not applied Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Must know Legal and procedural frameworks Contract Act 2013 – just enacted by the National Assembly of Bhutan Procurement Rules and Regulations 2009 Standard Bidding Documents (SBD) Instructions to Bidders (ITB) Terms and Conditions of Contract General Conditions of Contract (GCC) Particular/Special Conditions of Contract (PCC/SCC) Bill of quantity (BoQ) Specifications of Contract Items or Works/Goods/Services Drawings/Brochures/CVs Description of Item of Works/Goods/Services of special nature CDB Rules and Procedures on Contract Administration Trade Rules on Licensing, Fronting, etc. Tax Act/Revenue and Excise Act, etc. Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Larger Malaise in the Construction Industry Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Genesis of Poor Quality and its Impact Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt

Anti-Corruption Commission of Bhutan Presented by: Com KJ Anti-Corruption Commission of Bhutan www.acc.org.bt