Procurement tainted by graft

Contractors are seeking extra money in 70% of procurement packages in Bangladesh by delaying delivery or degrading quality, which causes compromises in achieving value-for-money, says a report by the World Bank.

It says powerful contractors are making more profits by manipulating the government officials related to the contracts with bribes, while small contractors are losing their competitiveness.

The report titled "Assessment of Bangladesh Public Procurement System" has been prepared based on direct interviews with Bangladeshi officials of the government procuring agencies, the Central Procurement Technical Unit (CPTU), the Implementation Monitoring and Evaluation Division (IMED) of the planning ministry, and the representatives of the contractors.

The report says contractors are collecting confidential information about tenders by bribing officials. Most of the bidders submit the same price for a package, and distribution of work is finalised through a lottery without considering the efficiency of the parties.

Spending in public procurement in Bangladesh was about $24 billion in fiscal year 2018-19, representing 45.20% of the national budget and 8% of the GDP.

"As the public procurement represents about 85% of the Annual Development Program [ADP], any improvement in the system is likely to have a significant financial effect," reads the report.

At least half of the packages had a single bidder in June 2019, which happened for only 20% of packages in 2016. The average number of participants per package decreased from 4.2 to two at the same time, the report says.

Open tendering method begins with bribery

About 80% of goods and work contracts were processed through the open tendering method, but the use of a price cap to reject bids with more than 10% below or above the estimated cost is distorting the market.

After the imposition of this price cap, about 90% of responsive bidders quoted prices at exactly 10% below the estimated costs, which implies that the bidders unlawfully managed to collect the confidential estimated cost of the work.

The report said large bidders are monopolising the market and small bidders are being marginalised as the business share of bottom 10% of bidders decreased by 40% and the share of top 5% increased by 21%.

The method has also increased the possibility of corruption by disclosing official estimates and encouraging informal sub-contracting, said the report.

Unlimited irregularities in the limited tendering method

The limited tendering method was introduced to encourage small and new bidders for contracts worth up to Tk3 crore, but its provision to use a lottery to determine the winner in the case of tied bids is not consistent with international good procurement practices.

The method resulted in failed construction, delays and cost-overrun, the report says.

According to the World Bank, the new and small bidders are not getting the advantage as large bidders can also participate in the procurement processes.

The winning bidder was selected through lottery in 100% of cases, mainly because of the high rate of participation. The probability of winning a contract is very low as all bidders quote a price at below 5% of the estimated cost.

However, the larger bidders can participate in more packages, being in a position to provide the necessary bid security, thereby increasing their chance of winning a contract while small bidders cannot participate for all packages.

Additionally, the method does not require past experience. So larger bidders have created multiple firms in several names, and are participating in the same bidding process to increase the chance of winning the contract.

Not enough measures to prevent graft

About 31% of the surveyed bidders admitted that they had offered bribes worth more than $300 to officials to make procurement decisions in their favour.

The value of the illegal gifts is below Tk25,000 in 17% of the cases and more than Tk25,000 in 62% of the cases. Bidders have bribed officials in the form of trip or dinner in the remaining 21% of cases.

Saying that the debarment process leaves no space for independent review, the report recommended enhancing guidelines to determine the length of debarment period for different types of misconduct, and how to determine the extent of debarment.

The report has also sought development of a protocol for sharing information and receiving feedback from the Anti-Corruption Commission (ACC) for instances of fraud and corruption.

The report also recommends introducing a provision for citizen engagement in contract implementation monitoring.

What the experts and officials concerned say

Abul Mansur Md Faizullah, secretary of the IMED, recommended contacting CPTU officials when he was requested to comment on the report.

However, Director General (DG) of CPTU Mohammed Shoheler Rahman Chowdhury told The Business Standard he had not seen the report.

"I took charge as the DG in January this year. I was out of office for a long time due to Covid-19. That is why I have not seen the draft of the report, he said."

Planning Minister MA Mannan also said he had not seen the report.

"That is why I am unable to make any comment about the technical issues. We will analyse the report to find out the difficulties in public procurement. The government will take necessary action to prevent graft in public procurement, if there is any," he added.   

Dr Iftekharuzzaman, executive director of Transparency International Bangladesh, said the World Bank findings may be debated in terms of exact numbers, but what it truly represents – reality – cannot be disputed.

He said, "It reaffirms the widespread perception that public procurement is considered an opportunity for illicit profiteering and self-enrichment through collusive corruption."

"Examples of ensuring justice and accountability are rare. Hence procurement has become almost synonymous with: corruption, irregularities, over-budgeting, and subpar quality delivery," he added.