Commodities worth billions of dollar are transacted all over the world through tenders, which look transparent yet remain citadels of corruption. There cannot be a bigger farce in the transaction economy than a tendering process in the 21st century. From presidents of various countries to a peon of a government department, everyone knows that the tender system is corrupt, farce and irrelevant. Then why are we continuing with such a system? The system of tendering has gratified the greed of so many powerful and influential persons all over the world (including international multilateral institutions) that an alternative transaction mechanism of commodities and services has not been allowed to emerge.
In times of crisis, government has encouraged import tenders (for pulses and edible oil) through public sector undertakings. While the process has remained transparent, the collusive practices of the supplier have caused price bids to remain at a high level. Army procurement, crude procurement by oil companies, state civil supplies, Commonwealth Games and NHAI all work under a tender system, which has become useless over the years. Not only crores of rupees are lost by way of suboptimal price discovery, the corrupt goes scot-free while honest officials (at times) gets embroiled in false charges. Transnational companies in commodity-rich African countries have developed it into an art form where tender processes are always followed but spirit is suffocated.
The objective of any transaction is to achieve the best price at that point of time. However, the tender process has focussed more on the objectives of accountability (in the spending of public money) and transparency (in the steps of the decision-making processes). A best available price in the real world cannot be ascertained. If the best price cannot be ascertained, then the loss to the exchequer cannot also be conclusively proven. Government procurement is often carried out by the process of tendering. Commodities do not work on a fixed price and therefore the 1991-92 case of palmolein oil import in Kerala was a game of oneupmanship to score a political point rather than addressing a fundamental issue.
The guidelines of the Central Vigilance Commission (CVC) on the tendering process make an interesting reading. It says “as post-tender negotiations could often be a source of corruption, it is directed that there should be no post-tender negotiations with L-1, except in certain exceptional situations.” Nothing wrong except that the guideline forgets that the cornerstone of price discovery is the interactions that take place between sellers and buyers.
In actual life, an inadequate knowledge of the available commodities or services is made up for by the experience with the persons or firms supplying them are one of the most important facts which enable one to solve the immediate problems. The function of competition is here to teach who will serve well: which company and which supplier. Thus tender conditions are often made to suit those who are actually known. On the other side, these companies will ensure that the pre-bid conditions are also made to suit their own interest.
Gigabytes of guidelines have been written on corrupt, coercive and collusive practices in the tendering process and its prevention. Generally, trustees (officials) of the tendering process have tried to ensure the process is followed in letter and the fundamentals of price discovery are conveniently ignored. This has caused corruption to multiply but can never be proven. In recent times, this outmoded method of transaction has been improved by E-tendering and E-auction. Though the change in the bidding process has improved, some of the transparency issues and the methodology of transaction remain irrelevant. Simple corruption has also given way to E-corruption.
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