Law and Regulation ofeGP in India

Sandeep VermaDirector, Archaeology & MuseumsGovernment of RajasthanJaipur, Rajasthan 302 014, India.sverma@rajasthan.gov.in, sverma@rajasthan.net

Verdicts on Government Procurements in India

Tenders are a major source of corruption (CVC 1998)

Deviations in practice rather than absence of rules (World Bank 2003, Hoda and Bansal 2004)

Irregular practices in Government Procurement

Access to Knowledge Absence of notice (selective/ restrictive advertisements) Lack of knowledge of tender rules and decision-making

processes Lack of clarity in technical specifications Non-transparency in payments

Access to Opportunity Selective sale of tender documents Obstruction/ intimidation of bidders selective acceptance of bids Modification/ substitution of quotes and tender papers Delays in processing of tenders Multiple in-situ and ex-post facto interventions

eGP Frameworks

“Trust” in electronic commerce versus “Correctness” in public procurement

Public procurement space in India versus that elsewhere General level of trust Enforcement of rights in civil and criminal matters Multiple levels of in-situ and ex-post-facto interventions

(within the executive, and from outside- the judiciary, the Lokayukta/ Ombudsman, the CVC, the CAG, the Information Commissioners)

Single-shot success versus Sustainability

One Man show versus organisational effort

Government Procurement and International Negotiations

GATT 1994: government procurement of goods excluded from scope of national treatment and MFN clause; but covered by transparency obligations

GATS 1994: exclusion of government procurement of services from provisions of unconditional MFN and specific commitments of market access and national treatment; but as a temporary measure only

GPA 1981: Tokyo Round- transparency and non-discrimination provisions, India is not a signatory

GPA 1996: Uruguay Round/ WTO Agreement: services included, transparency, domestic challenge procedures to be established

Doha Round 2001: Transparency in Government Procurement is one of the four Singapore Issues, negotiations are underway

UNCITRAL Model Law & eGP

UNCITRAL Model Law on Procurement of Goods, Construction and Services is the basis

In its 36th session, the Commission expressed strong support for addressing issues arising out of increasing use of electronic communications and technologies in public procurement

Working Group I sets out policy objectives for eGP Functional equivalence of electronic and paper-based

records Technology neutrality Mandatory/ optional use of electronic publication Consent of suppliers Use of reverse auctions

Government Procurements: the legal scenario in India

Access to Information Right to Information Act Procurement Rules/ Acts CVC Guidelines

Access to Opportunity Procurement Rules/ Acts Competition Act CVC Guidelines

Electronic Environment Information Technology Act

Legal foundations of eGP in India

No Act/ set(s) of rules deals with eGP: one needs to read local procurement acts/ rules together with the IT Act and attempt inferences on electronic procurement mechanisms and electronic publication

Negotiations and counter-offers are strictly restricted if not prohibited, price-bid disclosure is similarly prohibited

CVC guidelines offer a minimalist framework E-procurement/ reverse auctions are permitted provided

they are conducted in a fair and transparent manner Switchover from manual paper-based tendering systems to

e-procurement/ e-sale allowed wherever practical and feasible

A legal autopsy of anelectronic Reverse Auction

A “reverse auction” is a dynamic procurement system based on negotiated multiple counter-offers, with real-time price-disclosure to all bidders while keeping their identities secure

ErgoIt is nothing like the traditional simultaneous, sealed-bid, first-price auction!

eGP Mechanisms

Electronic Tendering Electronic Disclosure of tender opportunities Automated/ Assisted Registration & Distribution of

documents Electronic Bid Submission Electronic Contract Management

Electronic Reverse Auctions Electronic Purchases Electronic Auctions Supply Chain Integration and Automation

Electronic Vickrey/ second-price auctions

Rate Contracts and Framework Agreements

eGP: Reverse Auctions

Position of Negotiated Procurements and Multiple Bidding under Local Procurement Acts and Rules CVC Guidelines

Position regarding Price- disclosure requirements (through the Buyer to other bidders) vis-à-vis Local Procurement Acts, Rules and Guidelines RTI Act, IT Act Preferences for SSIs and other socioeconomic

entities Consent implied by Participation; voluntary

consent

eGP: Reverse Auctions

Reverse Auctions for what commodities? Clear technical specifications and

buyer’s capacity to enforce compliance [Standardised, commercial, “off-the-shelf” products]

Only for fungible products? For services? Role of non-price factors Adequate market intelligence Safety concerns

eGP: Reverse Auctions

Reverse Auctions for what quantities? For what class(es) of bidders? Bulk buying for individual user Agglomerated small buying for multiple users Buying from established and responsible

buyers Economies of scale versus socioeconomic

preferences Economies of scale versus monopolistic/

oligopolistic sellers Possibility of collusion Real-time bid-price disclosure: price

preferences and instant award

eGP: Reverse Auctions

Reverse Auctions as an interim stage after technical evaluation, or as the full procurement decision? Pre-screening and maintenance of

suppliers’ lists Rank Bidding, Transformational Bidding

and “True Best Value” Bidding

eGP: Reverse Auctions

Bid time-frames Hard Closure and Extensions Flexibility in decision-making by bidders

“Auction Fever” or the “Winner’s Curse” Impact on long-term relationships between buyers and

sellers Impact on R&D for products “fair and reasonable” price bands, possibility of Vickrey

auctions Quantity-based auctions Is under-bidding a real problem?

“Instant Award” versus “Post-auction analysis”

Electronic Government Procurement in India

An analysis of eGP projects from an access viewpoint

Access to knowledge of tender opportunities

Large number of websites, but very little integration and standards-based organisation of information

Infrequent updation and reliability of accurate, up-to-date information

Unprotected sites: digital verification and authentication of downloads not possible

Absence of automatic notification by email

Access to knowledge of bidding rules

Strong technical and financial bid evaluation both in paper-based as well as electronic mechanisms

E-reverse auctions: lack of sufficient information on bid parameters like start time and duration, rules on extension of time, bid increments, critical number of minimum bidders, and even delays in announcement of bidding rules

Trust in system integrity and bid challenge procedures

Low levels of public trust in general: few “good” bidders participate, “markups” generally made by vendors

ASP-centered approach effectively disables third-party audit Drop in connectivity Number of modifications by winning bidder

Absence of clear bid challenge procedures even on the electronic platform

Access to ICT & digital security infrastructure

3.6% of the population is internet users in 2005, 50% of them in top 8 metros (NRS estimates are even lower)

One in five persons reads a newspaper, while one in thirty uses the internet

Cost of access to ICT not lower than access to newspapers

Poor line and power quality even in capital cities

Compounds problems associated with poor organisation of electronic information, and with electronic reverse auctions

Electronic auctions and law of privacy/ data protection

Legal status of protection of sensitive commercial information and intellectual property

Whether mere participation equals consent to waiver of rights on IP

While IT acts lists criminal and civil penalties, most Govt-ASP agreements do not delineate liabilities, bidders indemnify the ASP as a pre-requisite to participation

RTI Act: allows public disclosure of commercial information

Agglomeration of quantity

No law/ rules/ guidelines existLeft to discretion of purchasing

agenciesImpacts on competition

Limiting number of players Favour large players at the cost of SSIs

and SMEs

Technology & Competition

Almost all eGP projects employ “mono”-methods Access to technology and ICT is restricted by costs,

quality and regions: thus affecting economic competition

MDB guidelines Electronic participation should not be mandatory but must

include paper-based options Electronic publication must be promoted but not solely

mandated No additional financial burden on bidders because of use of

technology platforms Competition Law in India

Ban on limiting supply, markets or provisions of services Prohibition of “tie-in” arrangements Ban on “refusal-to-deal” by restricting classes of persons Prohibition on practices that result in denial of market

access

Electronic Government Procurement

Back to Basics

eGP Issues

Agglomeration of Quantity and its relationship with economies of scale Market structure SSI preferences and capacities

GoI/ State Government/ PSU/ CVC/ MDB/ UNCITRAL Guidelines on Optional/ Mandatory eGP User-charges for participation in eGP Mandatory/ Optional publication of Tender

Notices and Awards

eGP Issues

Technology as Barrier to Entry Technology neutrality Choice of software platform Cost and availability of technology Regional dispersion of technology and capacity

Limitations of Technology Verifiability after certificate revocation and

expiry (validity period) Re-verification Digital Storage and retrieval Notararisation

eGP Issues Issues in Bid Challenge Procedures

Connectivity failures Handling mistakes Disclosure of identity Non-disclosure of own relative position Deliberate and malicious attacks System Recovery and Pause of bidding

Dispute Resolution Fora Does “Outsourcing of Services” equal “Outsourcing of

Grievance Redressal” Liability of Government functionaries vis-à-vis

computers and visa-a-vis Service Provider Multiple levels of in-situ and ex-post-facto interventions Civil and criminal adjudication authorities under the IT

Act 2000

eGP Issues

eGP as a subset of overall contract reform Electronic Payments ERP/ SCM systems

Develop Book-keeping, Accounting and Audit capabilities

Use and Maintenance of suppliers’ lists

Taxation of eCommerce

References

American Management Systems (2001), ‘The Case for Federal eProcurement’ [online] http://www.netcaucus.org/books/egov2001/pdf/The_Case.pdf

Bhatnagar, S. (2003a), ‘The Economic and Social Impact of E-government’ [online] http://www.iimahd.ernet.in/~subhash/pdfs/UNDESAeGovReport.pdf

Bhatnagar, S. (2003b), ‘E-government and access to information’, Global Corruption Report 2003, Hodess, Inowlocki and Wolfe (Eds.), Profile Books Ltd, London, 2003, 24-32

Central Vigilance Commission (1998), ‘Improving Vigilance Administration’, Orders No. 8(1)(h)/98(1) dated November 18, 1998 [online] http://cvc.nic.in/ins1.pdf

Chandrasekhar, C.P. (2003), ‘Can Connectivity help the Poor?’, Frontline, Vol. No. 20 Issue No. 2, 2003 [online] http://www.hinduonnet.com/fline/fl2012/stories/20030620004911700.htm

The Hindu Business Line (2004), ‘SAIL, Tata Steel ties strained over Metaljunction portal’ [online] http://www.blonnet.com/2004/06/26/stories/2004062602860100.htm

Hoda, A. and Bansal, S. (2004), ‘Transparency in Public Procurement’, Working Paper No. 129, Indian Council for Research on International Economic Relations [online] http://www.icrier.org/wp129.pdf

Indian Railways (2006), ‘Instructions for Suppliers/ Contractors/ Vendors for participation in Electronic Tenders’ [online] http://www.nreps.com/nrailways//publicDocs/EPSGUIDE/instructiion.pdf

Inter-American Development Bank (2005), ‘e-Reverse Auction Guidelines for MDB Financed Procurement’ [online] http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=645477

Metaljunction (2004), ‘On Behalf of Steel Authority of India Limited’ [online] http://auction.metaljunction.com/attachments/SAIL%20Bokaro%20Terms%20and%20Condiotions(11-1-2004).pdf

Metaljunction (2005), ‘Invitation to Online Forward Auction’ [online] http://auction.metaljunction.com/attachments/IISCO%20BURNPUR%20BILLET%201000MT%20CATALOGUE(8-11-2005).pdf

Seifert, J. W. and Bonham, G. M. (2003), ‘The Transformative Potential of E-Government in Transitional Democracies’ [online] http://www.spa.msu.ru/e-journal/2/25_1.php

Stein, A. and Hawking, P. (2002), ‘Reverse Auction E-Procurement: A Supplier’s Viewpoint’ [online] http://ausweb.scu.edu.au/aw02/papers/refreed/stein/paper.html

Turley, S. L. (2002), ‘Wielding the Virtual Gravel-DoD moves forward with reverse auctions’, Military Law Review, Vol. 173, September 2002, pp. 1-67 [online] http://www.loc.gov/rr/frd/Military_Law/Military_Law_Review/pdf-files/27648D~1.pdf

UNCITRAL (2004), ‘Recent developments in the area of public procurement- issues arising from the increased use of electronic communications in public procurement’ [online] http://daccessdds.un.org/doc/UNDOC/LTD/V04/547/11/PDF/V0454711.pdf

Verma, S. (2004), ‘Electronic Government Procurement: A legal perspective on the Indian situation’, Journal of Electronic Government, Vol. 1 No. 3, 2004, pp.328-334

Verma, S. (2006), ‘E-Buying: The Works’, The Economic Times, February 2, 2006 [online] http://www1.economictimes.indiatimes.com/corpambanishow/1397271.cms

Wallace, D. Jr., Yukins, C. R., Matechak, J. P. (2005), ‘UNCITRAL Model Law: Reforming Electronic Procurement, Reverse Auctions, and Framework Contracts’, The Procurement Lawyer, Vol. 40 No. 2, 2005 [online] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=711401

The World Bank (2001), ‘Electronic Government Procurement: Concepts and Country Experiences’ [online] http://wbln0018.worldbank.org/OCS/egovforum.nsf/c3c9b2819079a45d852569bc007722a0/e5596442988cccfd85256af5006af56a/$FILE/ATTUQ5LL/egpdiscpaperdraft16.pdf

The World Bank (2002), ‘Electronic Government Procurement: A legal perspective on Country Practices’ [online] http://wbln0018.worldbank.org/OCS/egovforum.nsf/c3c9b2819079a45d852569bc007722a0/c9070990a03d7e2585256af5006af56d/$FILE/Legal%20Summary%2003-19-02web.pdf

The World Bank (2003), ‘Country Procurement Assessment Report (India)’ [online] http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/04/02/000012009_20040402111746/Rendered/PDF/278590IN.pdf

Thank You