Verité identifies weakness in Sri Lanka’s public procurement

Nov 17, 2016 (LBO) – Verité Research, a private think tank, has identified three key weaknesses in public procurement in Sri Lanka. The study by the regional think tank has focused on the problems of public procurement, best practices of e-procurement followed in other countries, and the benefits for local businesses and the government. As per the study findings, information, high transaction costs and anti-competitive practices were identified as three key weaknesses. Information: The information related to procurement, such as tender opportunities and contract awards, is difficult to access. High transaction costs: Bidding imposes high transaction costs on businesses and government agencies, including costs associated with preparing and submitting bids. The manual administration of procurement is time-consuming and cumbersome for government agencies. Anti-competitive practices: Sri Lanka’s procurement marketplace has featured anti-competitive practices that have led to increased corruption. For instance, the practice of accepting unsolicited proposals for large, high value projects that circumvent the process stipulated by the government’s Procurement Guidelines, and altering specifications to suit the supplier. The Sri Lankan government spent approximately 597 billion rupees through public procurement in 2015. This is about 5.3 percent of its GDP, and 26 percent of total government expenditure though the public procurement process in Sri Lanka suffers from inefficiencies. Verité Research findings show that introducing an efficient procurement system will empower businesses and reduce wastage in public funds. Several countries have set up e-procurement platforms to streamline government procurement including countries like India, Bangladesh, South Korea, Philippines and Mexico. E-procurement involves the use of electronic systems to handle any or all steps of the procurement process, from online publication of tender notices, supplier registration and e-submission of bids. Verité Research highlights that introducing an e-procurement platform can significantly enhance the transparency, fairness and efficiency of Sri Lanka’s public procurement marketplace.
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E-procurement will also ensure an enabled operating environment for suppliers, and increase value for money for government agencies when concluding procurement actions. How can e-procurement increase the efficiency of procurement? 1. E-procurement results in cost savings both for government entities and suppliers. For example, South Korea’s e-procurement platform saved suppliers USD 6.6 billion due to reduced labour and travel costs. Additionally, government suppliers in the Philippines saved USD 11.5 million in advertising costs from 2002 to 2011, due to the introduction of an e-procurement platform. In Bangladesh, e-procurement resulted in the price-to-cost ratio of awarded contracts decreasing by 10 – 12%. 2. E-procurement increases fairness in the procurement marketplace. By making bids and procurement information more widely accessible, more suppliers are able to participate in public procurement. In Mexico, the number of contracts that were awarded to small and medium enterprises (SMEs) increased by 36% from 2010 to 2011. In Bangladesh, the number of registered bidders increased by 3500% (i.e. from 520 to 18,000 bidders) after the introduction of its e-procurement system. E-procurement systems also increase the transparency of the procurement process. For example, the system can ensure that suppliers are notified if bid specifications are altered prior to the close of bidding. The system can also publish the procurement plans of supplier entities, the composition of Technical Evaluation Committees and bid selection criteria. Further, the above measures will reduce opportunities and incentives for corruption in the bidding process. In Mexico, the existence of an e-procurement platform enabled journalists to discover corruption in the office of the President. 3. E-procurement has increased the efficiency of public procurement. After the introduction of an e-procurement platform in Bangladesh, the processing time for public procurement contracts decreased from 51 days to 29 days. In India, e-procurement has facilitated a reduction of the tender time cycle from 90 – 135 days to 35 days.