Ensuring good governance in public procurement

Governments often rely on foreign loans. Russia’s loans covered 90% of the Rooppur Nuclear Power plant project's cost. Photo: Collected

I have three sons. The eldest, Farhan, is studying at university; the middle one, Fahmid, is in college; and the youngest, Faiyaz, is in school. I had a different perception of them. I used to think they were mostly absorbed in the virtual world, disconnected from reality. I believe they were unaware of issues concerning the country, economy, and nation. I thought their interactions were limited to their circle of friends. 

However, recent events have made me reconsider my assumptions.

For so long, I was living in a fool's paradise. All my sons have asked me countless questions, and among them, Fahmid stood out with his knowledge about our nation, independence, victory, and economy. It's incredibly difficult to mislead him. I truly salute the Gen Z.

I try to write on topics related to the economy and business. Professionally, I am a logistician and procurement specialist in the Bangladesh Army. During my PhD thesis on public procurement in Bangladesh, I identified several potential areas for improvement in our country's public procurement system. 

My son Fahmid raised many questions about these irregularities. He even asked me about the outcome of my PhD thesis: "What are your recommendations? Was the purpose only to earn the Ph.D. degree? Have you submitted your suggestions to any relevant authorities? If not, why?" I found myself unable to answer many of his questions, leaving me speechless.

Now, let's get familiar with a few definitions related to this discussion.

What is public money? Public money refers to any fund or revenue maintained by the government, collected through taxes, grants, loans, revenues, or the sale of bonds. This money is intended for the development of the country and the well-being of its citizens through various works and services.

What is public procurement? Public procurement is the process of acquiring goods, works, or services for the public using public funds. If public procurement is transparent, honest, and accountable, it builds trust and confidence among citizens. Conversely, corrupt procurement practices lead to mistrust, scepticism, and uncertainty.

What is Good Governance in Public Procurement? Good governance in public procurement ensures accountability, transparency, fairness, participation, compliance with procurement rules, justification for procurement, and value for public money by all stakeholders. When any of these elements are missing, bad governance emerges.

The principles of public procurement include transparency, fairness, competition, accountability, integrity, economy, and openness. The beneficiaries of public procurement are the citizens, and the owners of public funds are every citizen, from farmers and labourers to wealthy individuals. Therefore, public money, procurement, and good governance are interconnected. Ensuring good governance in public procurement ensures the honest and efficient use of public money.

Governments worldwide aim to meet the basic needs of their citizens. Since no government can fulfil all needs from its own resources, public procurement becomes essential. The Government of Bangladesh also aimed to establish good governance in public procurement. 

With support from the World Bank, the Public Procurement Reform Projects (PPRP) 1 and 2 were initiated. In April 2002, the Central Procurement Technical Unit (CPTU) was created under the Ministry of Planning within the Implementation Monitoring and Evaluation Division (IMED).

The Public Procurement Act (PPA) 2006 and the Public Procurement Rules (PPR) 2008 were introduced to increase accountability, transparency, and ensure the effective use of public funds. The intent was commendable, but how much we have achieved remains a million-dollar question.

For instance, every year, Upazila health complexes, district, and divisional hospitals receive various electro-medical equipment without proper acquisition plans. In some cases, they lack the technical staff to operate these machines, leaving them packed for years and rendering them non-functional. Items are sometimes supplied without meeting the required specifications, yet procurement staff are managed and payments are made. 

Estimated prices are leaked, allowing vendors to align their financial offers with the estimates. In some cases, inflated price estimates are colluded upon between purchasers and suppliers. For large projects, connections are forged between consultants, lobbyists, purchasers, and suppliers, undermining accountability. Who then will ensure fair judgement, uphold ethics, and safeguard public money?

We have seen instances where one curtain was procured at Tk37.5 lakh, a stethoscope at Tk1.12 lakh, and three digital pressure machines at Tk30.75 lakh. Corruption in procurement often begins with overestimated pricing, followed by tender manipulation, improper evaluation, and the leakage of estimated prices. These irregularities in public procurement erode public trust, deter foreign investors, tarnish Bangladesh's international reputation, and worsen inequality between the rich and poor.

The gradual erosion of the middle class, loss of social values, and an increasing reliance on muscle power contribute to a decline in law and order. This, in turn, leads to frustration among the younger generation, which can eventually result in social upheaval.

Governments often rely on loans from various countries, agencies, or banks. 

In Bangladesh, the Economic Relations Division (ERD) plays a key role in managing foreign loans and grants. The ERD staff must carefully analyse loan proposals, considering factors like loan utilisation criteria, tax exemptions (if any) for lender staff, procurement restrictions, arbitration procedures, dispute resolution laws, banking regulations, and Letter of Credit (LC) procedures. Bangladesh has taken loans from different sources under varying terms. For example, the World Bank charges 0.75% interest with a repayment period of 38 years.

Japan offers loans with a 0.01% service charge—the lowest among all—with a 50-year repayment period, including a 10-year grace period. 

China provides loans with a 2% interest rate and a 20-year repayment period, while India offers credit lines at 1% interest with a 20-year repayment period and a 5-year grace period. 

Bangladesh and Russia signed a loan agreement of $11.38 billion for the Rooppur Nuclear Power Project, covering 90% of the project's cost. The loan carries an interest rate of LIBOR plus 1.75%, capped at 4%, with a 30-year repayment period, including a 10-year grace period.

Before finalising any credit line, grant, or loan agreement, the ERD or the Finance Ministry must thoroughly evaluate the terms to ensure the country's best interest. Mismanagement of public funds leads to bad governance, further burdening the nation.

We envision a Bangladesh free from discrimination, where no one is judged based on religion, colour, or caste— a nation governed with transparency, honesty, and accountability in every sector. Ensuring good governance in public procurement will allow public money to be utilised effectively, providing the best value for the people. 

This reduces the potential for corruption and nepotism, fostering national progress. With the combined efforts of 180 million citizens, Bangladesh can become a symbol of prosperity and progress. 

Dr Brigadier General Md Munirul Islam. Sketch: TBS

Dr Brigadier General Md Munirul Islam SGP, SUP, psc is a procurement specialist, who completed PhD in "Public Procurement in Bangladesh" from  Jahangirnagar University. He can be reached at [email protected]

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.