Daily Times

Public procurement expenditure accounts for 45 to 65 percent of a national budget, often equating to at least 15-20 percent of a country’s gross domestic product (OECD estimates). If this estimate was applied to Pakistan, where GDP, in June 2018, was reported to be US$ 312 Billion, this would approximate to an annual public procurement expenditure of US$ 46.8 Billion. Given the magnitude, clearly, there is a need for professionalizing procurement to ensure effective, efficient, and transparent use of public funds by procurement professionals. The aim of this article is to suggest a strategy to professionalize public procurement in Pakistan in a systematic manner.

Procurement inefficiencies result from ‘corrupt’ practices, and other, ‘non-corrupt’ reasons, e.g. the inability to apply and enforce procurement laws and regulations. Both lead to delays in the award of contracts, high transaction costs, prolonged implementation of projects, cost overruns and consequently delays to development agendas. Whereas reliable inefficiency values are difficult to quantify, national estimates can range from 10 to 20 percent (OECD estimates) of public procurement expenditure. If these estimates were applied to procurement in Pakistan, inefficiencies would approximate to between US$ 31 and US$ 62 Billion, leading, in many cases, to procurement of inferior quality goods, works and services, and often, unnecessary purchases. Put another way, Pakistan could be paying between US$ 31 and 62 Billion more annually than it should be for public goods, works and services.

Public procurement regulatory frameworks and practices can be categorized into two periods: 1947-2000 and 2002-to date. Prior to year 2000, public procurement in Pakistan was governed by the General Financial Rules (GFRs) of the Federal Government (Ministry of Finance). Besides the GFRs, Pakistan Public Works Code governed the procurement of works, while procurement of goods was regulated by the Revised Purchase Manual. Provincial governments had their own Works and Purchase Manuals. Country Procurement Assessment Report (CPAR) of World Bank, 2000 concluded that procurement was characterized by (i) a plethora of different systems and procedures operating simultaneously, (ii) lack of institutional capacity, and (iii) lack of human resources adequately trained to implement the systems and procedures.

In this backdrop, after the year 2000, Government of Pakistan (GOP) established Public Procurement Regulatory Authority (PPRA) through promulgation of Ordinance No. XXII of 2002 on 15 May 2002. The PPRA is mandated to regulate public procurement of goods, works and services in Pakistan. Subsequently, the PPRA notified Public Procurement Rules (PPR) in 2004; Public Procurement Regulations in 2008; and Public Procurement Regulations for Procurement of Consultancy Services in 2010. The Rules and Regulations, largely based on international best practices, are applicable to the procurement of goods, works and services by the federal government, state-owned enterprises and semi-autonomous organizations. The standard bidding documents (SBDs) developed by Pakistan Engineering Council in place and as an interim arrangement, PPRA has adopted PEC’s SBDs for civil works. Pakistan’s legislative and regulatory system is comprehensive, albeit with room for improvement. Progress is slow in reducing the lacunas, but the movement is in right direction. The PPRA has established a National Institute of Procurement (NIP) where standard training programs on Public Procurement Rules 2004 are run by some visiting speakers and/or PPRA staff. But this is not enough.As procurement is not recognized as a profession in Pakistan, level of knowledge about procurement in public sector is very low. The human resource to enforce and implement the new regulatory framework is lacking capacity and procurement knowledge base. The absence of professional procurement practitioners in the country seems to be the root cause of most of the inefficiencies in the procurement system. Donors (World Bank, ADB, USAID etc.) are conducting providing capacity development of transient staff who are not dedicated procurement professionals and who only have a passing interest in procurement. Consequently, the procurement capacity building effort lacks sustainability.

Procurement inefficiencies result from ‘corrupt’ practices, and other, ‘non-corrupt’ reasons, e.g. the inability to apply and enforce procurement laws and regulations. Both lead to delays in the award of contracts, high transaction costs, prolonged implementation of projects, cost overruns and consequently delays to development agendas

Forgoing above, Government needs to develop a cadre of procurement professionals to handle procurement and contract administration functions for improving procurement efficiency and ensuring value for money. The situation may be improved through application of a broad systemic approach. A three-pronged strategy is proposed in the ensuing paragraphs to professionalize public procurement in Pakistan. First, to develop a cadre of procurement professionals. Second, for capacity building of existing procurement practitioners; and thirdly the strengthening of the National Institute of Procurement.

A strategic approach is needed. Procurement as a subject relies heavily on the knowledge base of other subjects such as mathematics, economics, accounting, IT and law etc. Research reveals that certain core competencies are required in a procurement professional, namely, integrity and trust, customer focus, time management, planning, interpersonal savvy, building effective teams, and strategic agility etc. Similarly, certain technical competencies required include financial, procurement process planning/tendering/execution, legal, knowledge of engineering, computer literacy and accountancy etc.

Government must ensure that i) procurement management as a subject is taught during the specialized trainings programs conducted by various professional groups/services under the CSS program; ii) all the public sector engineering universities awarding engineering degrees and non-engineering universities awarding MBA degrees etc. offer one compulsory course on procurement and contract management; and iii) in addition, same course with some higher level of details may be offered as a standalone diploma in Procurement and Contract Management.

Capacity building should be divided into two categories: (a) capacity building of PPRAs staff (regulators); and (b) capacity building of officials engaged in undertaking procurement activity (procurement practitioners) in the government departments. For existing officials (both regulators and practitioners), there should be different types of training folios for two different categories of clients. The procurement officials may be divided into three categories; namely

Practitioners: (Expectations: They have awareness of procurement processes. They can understand the regulatory framework at basic level and are able to apply basic procurement processes to routine procurement situations. Experienced enough to know when to seek help or advice. Draft basic tender documents ensuring proper terms and conditions etc. and ensure tender queries are replied accurately and on time).

Frontline Managers (Supervisors): (Expectation: Familiar and comfortable with all aspects of procurement processes. Mentors, advises and lead team of practitioners).

Senior Management (Principal Accounting Officers): (Expectation: Expert on all aspects of procurement processes through experience and knowledge. Can decide to apply processes to secure best value for money in any set of circumstances. Have capacity to write policy, be a member of senior body, and contribute toward overall procurement strategy).

The NIP should be linked with public sector universities where public procurement is taught as part of a degree program. NIP should develop separate capacity development training programs for all three categories as stated above. The regulators (PPRAs staff) should be given a chance to get hands-on experience of procurement transactions through case studies.

The initiative must be demand driven and supply supported, not the reverse. The public and private sector in Pakistan need to recognize the significance of procurement to the national economy and demonstrate a commitment to professionalization.

To conclude, the hope is to get the procurement function recognized as a profession. The ground work is already done through establishment of public procurement regulatory authorities at federal and four provincial levels. Procurement regulatory frameworks, containing somewhat identical practices, are already in place. The federal PPRA must take the lead in developing a strategy for downstream actions which require engagement with a willing donor and a public/private sector university to join hands in developing curriculum for a course to be taught during the degree program.

Published in Daily Times, January 28^th 2019.