Enhancing Accountability in Tendering System in Ministries of Railways and Telecommunications

Enhancing Accountability in Tendering System on Indian Railways

(A Policy Recommendation)

Anil Sainani, IRAS(1989)

IIM Bangalore.

The dynamics of the tendering process in Indian Railways is so distressingly shrouded in files and is so cumbersome, that it makes itself open to, and perhaps in a way breeds the corrupt culture, which the public perceives as the defining characteristic of bureaucratic systems. The present tendering system suffers from delays, which hamper production and maintenance of equipment, result in time and cost overruns and delayed benefits from projects. The direct loss alone in terms of bribes paid is enormous. The suggested policy recommendation envisages, in practical and implementable ways, a major re- hauling of the current tendering procedures on Indian Railways - to reestablish a culture of accountability and integrity. The policy also has the potential to be a broad benchmark in respect of its applicability, to cover the entire range of Government departments/ministries, since the tendering systems are common all over the Government especially –The Office of Director General of Supplies and Distribution (DGS&D), the major government agency in charge of placing contract for supplies common to all ministries. The broad contours of the existing tendering system are given in annexure A.

Objectives of Policy Recommendation: To Bring about total transparency in the rules, procedures and award of tenders in the Ministries of Railways with the aim of eliminating delays and corruption in the tendering system.

What does the Policy Recommendation entail? Strategies of implementation:

· Posting on web sites of Ministry of Railways and all its constituent units[1] all tendering rules, regulations and procedures.

· All units of Ministry of Railways that deal with tenders should make all information (primarily time taken in each stage of each tender, the party to and rate at which it is finally allotted etc.) public on their web sites, on tenders costing over say one million rupees. In the first stage of implementation this information could be posted say every fortnightly listing the details of all tenders finalized up to the previous week. In the second stage, the information could be made available online.

· All parties whose offers are not accepted should be informed electronically about the reasons for the same, within one day of the decision on tender. The reasons could be higher price (which is and should be the reason in most of the cases), technical unsuitability, lack of required experience, financial credentials, non-compliance to special conditions of contract etc.

· The parties whose offers are not accepted should be given the right to appeal to the highest authority of the unit in which tender is being finalized. There could be a time limit of say three days for filing an appeal and seven days for disposing off the appeal. The letter of decision to award contract should be issued only after all pending appeals have been finalized. This condition of withholding decision to award the contract should be applicable only at the first level of awarding contract. This means that if on the basis of appeal the earlier decision to award the contract is changed, the right to appeal would not be available at the revised decision. This is suggested to check the possibility of series of appeals and consequent delays.

· The recommendations of the TC meeting and decision of Accepting Authority can be made public and posted on the web site at the second stage of implementation.

Resources Required for Implementation:

· For the first stage of implementation, each unit where tendering decisions are made would require a web site and the personnel to manage it. The Ministry of Railways, all Zones and Production units and some of the existing divisions/districts already have their web sites and the personnel to manage them. The divisions that do not have web sites have IT trained manpower to manage these sites. Clearly designated teams should be constituted to implement the policy in each unit.

· For the second stage of implementation, when it is recommended to make the information available online, significant resources would be required. Right from opening of case file with the opening of tender to final decision by the accepting authority, information would be required to be fed in computers/web site on online basis. This would require providing computers to all players in the tendering process, developing software, networking the computers and training staff/officers. Again in most of the units computers with local area network and trained manpower to manage them are already available and the extra needs in this area would be minimal. The major item of expenditure would be Software. Standardized software (estimated cost- 4.5 – 5 million rupees) on Tender Management would be needed to develop and all units could use this. The licensing charge per additional user is estimated to be around one hundred thousand rupees only. Sufficient executive leeway can be provided to the leader of implementation teams at the unit level so that the implementation of new system remains simple and cost effective.

· Political Will/ Support of the top bureaucracy: The proposed policy would face tremendous resistance from following quarters:

Ø Corrupt bureaucrats who will see this policy as a threat to their underhand incomes.

Ø Some bureaucrats may feel threatened by the openness of proposed system and argue that it could lead to false complaints, vigilance cases and harassment of honest officers also. Suitable safe guards should be built in, to protect bureaucrats who commit genuine errors through a review mechanism. The review committees constituted to examine complaints should consist of officers of unimpeachable integrity.

Ø Established oligopolistic cartels (for different items supplied to ministries) will resist because the openness and efficiency of the new system could threaten their oligopoly. Overcoming these resistances would require political will and support from top bureaucracy.

· A policy implementation teams at the ministry level, of honest, competent and committed officers who are IT trained and well conversant with the tendering procedures and are provided with necessary funds (budget authorization) would be required to implement the policy. The team should report directly to Minister of Railways and Chairman Railway Board. The team should provide to all of the constituent units of Railways detailed rules and regulations of the tendering system that are required to be put on the websites, the stage one software in which information regarding actual finalization of all tenders would be made available, allocate funds wherever necessary, specify the authorities to which appeals can be made in different units, formulate and disseminate information regarding new policy, set the targets for implementation, maintain close coordination with all units, provide necessary support, monitor the progress of implementation and recommend rewards for units that show outstanding performance. The implementation teams should be given a fixed time frame, say 6 months, to come up with a detailed action plan. They should be asked to demonstrate the effectiveness of their proposal by taking up the activity of tendering in a particular unit. The results of this pilot project should be monitored and reviewed before committing further resources in this project, over the entire ministry.

· It would be extremely important to ensure that the new appeal system works efficiently. Also it would be equally important to ensure that the transparency of the new system does not lead to harassment of honest officials.

The success of the new policy would largely depend on the political will, support of top bureaucracy and the extent to which policy implementation team is able to do a professional job. The team can build support from media, common citizenry, railway employees, unions, suppliers - existing and new and Non Government Organizations (NGOs) working for bringing about probity and accountability and public at large.

Why would the Policy Create A More Responsive and Accountable Service?

· Even if 25% of the amount paid in bribes annually is passed on to the government by firms, it will result in huge recurring savings. The indirect savings on account of elimination or significant reduction in delays would also be substantial. These savings in public expenditure would mean either reduction in service charges or provision of new & better services.

· Corruption is a major issue with public and the new policy holds tremendous possibilities of political support because the political leadership can draw political mileage from the successful implementation of the policy.

· The policy has wide applicability –virtually all government ministries, departments and agencies can replicate it.

· Monitoring cuts delays (a major source of inefficiency and corruption), ensures accountability and enhances performances. The new system will promote monitoring by all stakeholders in the process.

· The phenomenal transparency and openness that the new policy will bring (information would be available to anyone interested in the matter, including press and vigilance department) will ultimately ensure greater accountability.

· Once firms become aware of the fact that in the tendering procedure there is very little discretion available with any single individual and decisions are largely taken as per clearly laid down rules, realizing the futility of giving bribes, they would be reluctant to make underhand payments.

· As already listed above there exists a whole lot of interest groups within and outside railways who would be interested in making this policy a success.

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Annexure A

The Existing System:

The basic criteria in awarding a contract are the technical capabilities and past experience of the firm, the price offered willingness to conform to time schedule and general and special conditions of contract. Majority of the tenders are open tenders in which the details of the work/supply are advertised and firms are invited to give their offers. On the nominated day and time the offers are opened in the presence of firm’s representatives and the rates and any special conditions (like payment and quantity discounts, free spares etc.) quoted by all firms are announced. The major stages and players of the process along with their functions are listed in Table A (attached).

Table A

Stages, Players and their Functions in the Tendering Process

Stage	Authority/Official in charge
Opening of Tender	One representative (supervisory level) each of Executive & Finance Departments.
Technical Evaluation	An Officer of the Executive Department.
Making of Comparative Statement and Briefing Note	An Officer of the Executive Department.
Vetting of Briefing Note	An Officer of the Finance Department.
Convening of Tender Committee (TC)	Convener- The executive in charge of coordinating the award of tender.
Finalizing the TC recommendations	The Convener, Finance member and the third TC member which is from a department different than the executive
Drafting TC recommendations and forwarding them to Accepting Authority	Convener
Decision on TC recommendations	Accepting Authority can accept, modify or reject TC recommendations
Issue of Letter of Acceptance of Offer to the selected firm	An officer of the executive department.
Signing of Contract.	An officer of the executive department.

[1] Railways is divided into Zones, Production Units and Centre for Railway Electrification. Each Zone is further divided into divisions.