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Saturday, April 10, 2010

Procurement controversies -- Pakistan

Transparency intervenes to save loss of Rs 269 million
Transparency International Pakistan has asked Trading Corporation of Pakistan (TCP) to clarify its position on cartelization in procurements and probe the matter of loss of Rs 268.8 million on award of tender to a defaulted contractor.

Syed Adil Gilani, Chairman of Transparency International in his letter to the newly appointed chairman TCP, S Anjum Bashir, has highlighted the flaws in the present system followed by TCP and has urged him to adopt Public Procurement Rules 2004 for awarding tenders.

The Prequalification option available in Public Procurement Rules 2004 is to be used for special reasons only i.e. in case of procurement of expensive and technically complex equipment to ensure that only technically and financially capable firms having adequate managerial capability are invited to submit bids. Such pre-qualification shall solely be based upon the ability of the interested parties to perform that particular work satisfactorily.

But TCP in 2006 started using Prequalification option in all procurements, which resulted in Cartelization of groups. This system is known to all enlisted bidders, and is open to making a cartel.

Regarding the loss Transparency International letter says that national media highlighted that M/s Sadan General Trading (STG) defaulted on 50,000 tons of Sugar Contract awarded at US $ 585 per ton, and the tender was scrapped in April 2010.

This firm should not be allowed to participate in the future sugar bidding, being a defaulter. But instead, STG has been entertained in the next TCP tender, and has been awarded Sugar Import Contract at US $ 649 per ton.

In such cases according to PPRA rules, the bid security, which is up to 5% of the Value of Contract, should have been forfeited by TCP, and the contract should have been awarded to next lowest responsive bidder. And if the Bid Security of the bidder was not genuine, the bid should have been declared non-responsive, and other bids should have been evaluated.

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