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Benchmarking approach to improve the public procurement process
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SPECIAL ARTICLE
Benchmarking Approach to Improve the
Public Procurement Process
Samir K Srivastava, Amit Agrahari
While governments in India have adopted electronic
means to streamline their procurement process, the data
generated by these portals have not been used to derive
any meaningful information. This article presents a
data-driven, multi-method approach to use
benchmarking as a tool to improve the public
procurement tendering process. Developing the
relevant key performance indicators, it measures and
compares the performance of the public procurement
tendering process in Uttar Pradesh, Delhi, and West
Bengal in the last five years.
This work was supported by funding from the World Bank for setting up
a procurement observatory in Uttar Pradesh. We thank senior officials
in the UP state government and participants of the three workshops
organised by the observatory. This would not have been possible without
their cooperation, inputs, and insights. Finally, we thank Shanker Lal,
senior procurement specialist at the World Bank and his team for their
inputs and valuable suggestions at various stages of the study.
Samir K Srivastava (samir@iiml.ac.in) and Amit Agrahari (amit@iiml.
ac.in) teach at the Indian Institute of Management, Lucknow,
Uttar Pradesh.
58
G
overnment departments procure a large variety of goods,
works, and services to carry out their operational
responsibilities according to their plans and policies.
Public procurement is a dynamic process involving bidders,
regulators, and procurement agencies. It includes identification
of needs, selection and solicitation of sources, preparation and
award of contracts, and all phases of contract administration
through to the end of a services contract or the useful life of
an asset (Thai 2008).
At the global level, public procurement spending accounts
for about 15% of gross domestic product (GDP), which amounts
to trillions of dollars. Organisation for Economic Co-operation
and Development (OECD) countries spent an average of
13% of their GDP on public procurement in 2011, while some
developing countries spent up to 20% of their GDP on it
(Green 2014).
Developing countries are gradually recognising that an
effective, open, and transparent procurement can bring significant savings in public procurement. An ability to precisely
measure results in a comprehensive way may foster voluntary
commitment and accountability towards the final goal of optimising public expenditure (Gardenal 2015). Given various
open data initiatives, the need to benchmark and measure performance in public procurement is more urgent.
Government departments worldwide procure goods, work,
and services through numerous methods such as open-cry
auctions, competitive bidding through request for quotation
(RFQ), and agreement through negotiation. Of these, competitive bidding through RFQ, also called the two-bid tendering,
is the most frequently used method for high-value procurement. In this method, the procurement agency publishes a
notice inviting tender (NIT) to invite sealed technical and
financial bids from participating bidders. Bidders compete by
quoting the lowest possible rates. The procurement agency
receives multiple quotations against RFQ from different
potential bidders, and after a sequence of procedures, awards
the contract.
Figure 1 (p 59) shows a typical two-bid tendering process.
According to the Central Public Works Department Works
Manual (2003), it is the only method to award construction
project contracts. Tendering is a lengthy process where it may
take months to finalise the award of contract (AOC). There is a
need to analyse the existing system to ascertain the causes
and effects of the inordinate amount of time taken for this
process.
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SPECIAL ARTICLE
Figure 1: Two-bid Tendering Process
Bidders prepare
techno-commercial
bids and submit
Publication of
notice inviting
tenders (NIT)
Tender evaluation
committee opens
technical bid documents
Evaluation of technical
bids and selection of
bidders for commercial
evaluation
Evaluation of
commercial bids and
indentification of
L1 bid
Award of
contract
Tender evaluation
committee opens
commercial bids
Objectives of Public Procurement in India
Articles 298 and 299 of the Constitution lay the foundation for
public procurement. Rule 137 of the General Finance Rules
(GFR) 2005 states the fundamental principles of public buying,
where every authority delegated with the financial powers of
procuring goods in the public interest shall have the responsibility and accountability to bring about efficiency, economy,
and transparency, to treat bidders fairly and equitably, and promote competition.
The central government has set out an ambitious national
e-governance plan to automate various government-to-government (G2G), government-to-business (G2B), and government-tocitizen (G2C) functions to tap the efficiency, cost-effectiveness,
and transparency of internet-enabled applications. In line with
this, e-procurement is being adopted on a mission mode. It is
mandatory in several states and central government organisations. Although e-procurement should cover the entire order–
to–delivery process, it is now confined to the tendering process
in India.
The National Informatics Centre (NIC) launched an
e-procurement portal in 2007–08, where bids are received
and their status can be tracked online. Table 1 shows statewise
the cumulative number of tenders published on the NIC e-procurement portal (GePNIC) till November 2015. Twenty-four states
and union territories now use this portal and the estimated
procurement value from 2007–08 to November 2015 is `7.43
lakh crore. More and more states and departments within
states are adopting this portal. Besides, a few states such as
Table 1: Cumulative Number of Tenders Published on NIC e-Procurement Portal
State
Number of Tenders
(from 2007)
State
Number of Tenders
(from 2007)
Maharashtra
29,660
Jharkhand
West Bengal
85,965
Uttarakhand
Odisha
70,142
Assam
Kerala
1,28,845
Puducherry
14,636
4,613
8
549
Jammu and Kashmir
35,047
Punjab
7,010
Delhi
23,681
Tripura
158
Haryana
94,547
Meghalaya
53
Uttar Pradesh
15,705
Sikkim
57
Rajasthan
32,372
Manipur
128
Tamil Nadu
54,615
Mizoram
72
Chandigarh
28,050
Arunachal
14
7,978
Nagaland
25
Himachal Pradesh
Cumulative tenders (from 2007–08): 625,145.
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Andhra Pradesh and Karnataka have their own e-procurement
portals. It is estimated that only 15% to 20% of all public tenders use this or any other e-portal.
While various governments in India are using e-procurement to streamline their procurement processes, data generated
by these portals have not been used to derive much meaningful information. In this paper, we use data available on NIC
e-procurement portals to compare and contrast the performance of e-tendering processes in the states of Uttar Pradesh
(UP), Delhi, and West Bengal (WB).
UP is critical to India’s growth as it is the most populous
state, which gives it a dominant position in national politics.
However, it lags behind in the context of public procurement
practices and outcomes. Unlike states such as Tamil Nadu,
Karnataka, and Rajasthan, UP has, so far, not enacted any legislation to govern public procurement. In 2008, e-procurement
was introduced in the state. But unlike in WB and Maharashtra, there is no government order (GO) notification making eprocurement mandatory. Therefore, as of now, data sharing is
voluntary. However, e-procurement adoption has been gradually picking up in the state since 2011, and it seems to be in
place in at least a few departments. From 2008 to November
2015, the e-procurement portal has supported 15,705 tenders
managing the process for `11,475 crore, which represents
about 15% to 20% of the total public procurement spent in UP
for the period.
While this paper presents a generic benchmarking
approach to improve public procurement processes, we have
applied it to the context of UP in particular. UP is benchmarked
with Delhi and WB. Delhi is a neighbouring state with a per
capita net state domestic product (NSDP, at current prices for
2014–15) at `2,40,849. While it is predominantly urban, WB
bears a geopolitical similarity with UP. UP is among the poorest states with a per capita NSDP of `40,373, and WB is around
the national average at `78,903 (Statistics Times 2015). Quantitative results obtained after comparing the three states were
shared with the relevant stakeholders in three workshops to
identify improvement opportunities for UP.
Literature Review
Public procurement is more regulated than private procurement, and there are more rules to comply with, more policy
considerations to take into account. At the national, supranational, and international levels, public procurement sits within
legislative, administrative, and judicial frameworks (Murray
2009). Even those public bodies that genuinely wish to change
are restricted by standing orders, public accountability, and
probity constraints. Elected members “steer” in determining
outcomes to be achieved, what public money is to be raised,
and on what public services it is to be spent, unshackled by
defining service outcomes through the constraints of their
own workforce, while “officers row” in recommending the best
fit delivery means (Lyne 1996: 1–6).
Westring and Jadoun (1996) recommend that procurement
procedures should be characterised by clear rules and by
means to verify that those rules were followed. Carayannis
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SPECIAL ARTICLE
and Popescu (2003) enumerate a number of weaknesses in the
public procurement process such as lack of information quality,
absence of a clear information technology (IT) policy, a complicated procedure and extended relationships, and excessive
state intervention, including favouritism in awarding public
contracts and resistance to change.
Many jurisdictions worldwide have listed, implicitly or explicitly, various management objectives for public procurement
(Jones 2002; Qiao and Cummings 2003; Thai 2008). Procurement has to be evaluated in its complexity, which encompasses
numerous goals—to rationalise expenditure, to reduce “administrative confusion” and costs, to foster operational efficiency
(Croom 2000), and to explore ways to automate certain procurement activities (Aisbett et al 2005). Competitive sourcing
in public procurement is expected to encourage innovation as
well as improve efficiency and performance (US Government
Accountability Office 2005). In recent years, countries, such as
Albania, Brazil, Ghana, and India, have embarked on substantive
public procurement reforms, mainly focusing on publishing
more information and increasing transparency in the bidder
selection processes (Estache and Iimi 2011).
Transparency is a core governance value. It provides an
assurance to investors that contracts will be awarded in a fair
and equitable manner (Smith-Deighton 2004). The literature
reveals that three factors are essential for a public procurement regime to be classified as transparent. First, there have to
be clear public procurement rules. All participants should be
informed about the procurement rules that will be applied by
the contracting authority (for instance, what are the criteria
for selecting suppliers, awarding a contract, and so on). Second,
procurement opportunities should be public to enable all possible interested bidders to participate. This is achieved by publishing procurement opportunities in national and regional
bulletins/newspapers. Third, the opportunity should be given
to scrutinise decisions and to enforce the rules to ensure that the
procurement agency has adhered to them and that the decision was motivated by commercial consideration, not self-interest. To actually measure these, certain key performance indicators (KPIs) need to be in place.
Impact of e-Procurement
E-procurement may generate positive impacts, especially in
the efficiency, effectiveness, dematerialisation, competitiveness,
and transparency impact dimensions (Gardenal 2015). Providing a better quality of information will result in a satisfactory
purchase (Erridge et al 1999). In the Indian context, Panda
and Sahu (2011) carried out a qualitative case study and found
that differences in the enabling environment (like IT infrastructure, internet penetration and IT literacy) were major
hurdles to implementation of these practices.
Schapper et al (2006) argue that the public procurement
environment is characterised by tension due to conflicting
stakeholder interests at the political, business, community, and
management levels. This is exacerbated by competing claims
between executives, lawyers, technologists, and politicians for
lead roles in this arena. They suggest that the application of
60
new technology in this discipline offers a qualified potential to
substantially resolve these tensions.
Relevance of Benchmarking in Public Procurement
Benchmarking and performance measurement are the main
techniques that have been used by leading researchers and
practitioners to improve business processes. It is a practice that
implies a systematic measurement and comparison of the activities of individuals and organisations with a view to improving
their efficiency and quality. Benchmarking may be distinguished from other traditional forms of evaluation by its attempt
to visualise best practice through normalising comparison and
by urging public entities to ask themselves what they can do to
promote “best practices” (Triantafillou 2007). It enables and
motivates one to determine how well one’s current practices
compare to other practices, experience best practices in action,
locate performance gaps, prioritise opportunities and areas for
improvement, and improve current levels to world-class standards (Palaneeswaran and Kumaraswamy 2000).
Benchmarking has been extensively used to understand
various socio-economic phenomena. Kothari and Joshi (2002)
describe a simple, quick, and easy-to-administer tool for measuring literacy skills. Thomas (2007) suggests that the Indian
aviation industry may implement a mass transit strategy by
benchmarking with China. Different types of benchmarking
have been used in purchasing departments of business enterprises in both developed and developing countries (SanchezRodriguez et al 2003).
Procurement benchmarking may be used to measure the
performance of a supplier of goods or services on the basis of
quality price and timely delivery (Tudor 2005). Raymond
(2008) investigates the technique of benchmarking to improve
the quality of the public procurement process and discusses
the importance of benchmarking to overcome perceived weaknesses with these processes in a case study of Sri Lanka. She
suggests that reform solutions within government procurement systems must include measures that address issues of
accountability, transparency, value for money, a professional
work force, and ethics. To be effective, a public procurement
performance management system must focus on “measuring
the correct things” (Murray 2009).
The literature review identifies a few gaps. Murray (2009)
finds that there is an inbuilt bias in public procurement
research through over-reliance on procurement managers as
the key respondents. There has been little published literature on actual observations and practice. Further, limited
empirical research has been conducted on e-procurement
implementation, benefits, and value in the public sector
(Gardenal 2015; Vaidya et al 2004). Data generated by various e-procurement portals is publicly available but there
have been no efforts to derive meaningful information by
carrying out comparisons between various departments and
governments. This paper attempts to bridge some of these
gaps by defining the key performance indicators for the public procurement tendering process, and by comparing them
across UP, Delhi, and WB.
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Data Used and Approach Adopted
The NIC has implemented e-procurement portals for UP, WB,
and Delhi, among others. These portals provide tender-wise
e-tendering process information. We use these data to develop
base line statistics and use them to measure and compare procurement performance across the three states for the last five
years. As the data available at the NIC portal are not easily
amenable to analysis and comparison, we designed a web
crawler that collects tender-wise data in a tabular format that
allows easy analysis and comparison within and across states.
In this paper, we analyse the data from three states, although
the web crawler collected data from eight states and the e-procurement portals of some public sector undertakings (PSUs).
We also designed a data visualisation tool that allows easy
comparisons among various states on different KPIs using
simple drop-down menus. This tool is available at www.procurementobservatoryup.com. So, the approach used in this
paper is generic and can be used in other contexts as well.
Following a multi-method approach to give meaning to the
numbers generated by quantitative analysis, we conducted
three workshops with stakeholders drawn from government
departments of UP, multilateral development agencies, and
academics from India and the US. The workshops were carried
out under the umbrella of the public procurement observatory
for UP that we established at the Indian Institute of Management, Lucknow, in July 2013. By observing procurement processes and advocating better practices, this observatory aims
at enhancing public procurement performance in the state. It
shares the best global practices (from other states in India and
countries abroad) in procurement management with decisionmaking/policymaking state government officials through workshops, newsletters, and other means.
Developing KPIs for a Tendering Process
In line with the GFR 2005, we develop KPIs to measure
efficiency, fair and equitable treatment of bidders, and promotion of competition. Efficiency is defined in terms of the
time taken to execute various activities in the procurement
process. It captures various delays and changes to show if the
process is running efficiently. Fair and equitable treatment is
defined as creating a process that provides equal opportunities and a level playing field to all bidders. Promotion of
competition among bidders needs a larger number of bidders
participating in the process, and process design should enable
and encourage this.
The number of KPIs should neither be too large nor too
small. Further, they should be simple enough to measure and
understand so that they can be applied to research data sets.
Based on this, we developed an initial set of KPIs and, after due
deliberations with academia and multilateral development
agencies, was further narrowed down so that it could be applied across any set of tenders. The logic for their importance
and selection is described here, and a detailed KPI list, along
with their measures, is summarised in Table 2 (p 62).
(i) Average delay in technical bids opening: If bids are not
opened on the scheduled date (and at the scheduled time), it
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causes inconvenience to bidders and has an impact on their
trust in the entire process.
(ii) Average time taken to evaluate technical bids: Technical
bid evaluation can be made simple using pre-defined technical
qualification criteria. An efficient process should not take unduly long. Too much time taken indicates poorly designed technical specifications, lack of well-defined evaluation criteria, and a
lack of capable human resources evaluating the technical bids.
(iii) Average time from technical evaluation to financial bid
opening: After technical evaluation, financial bids should be
opened at the earliest. Any delay indicates a lack of planning
and resource unavailability.
(iv) Average time taken to evaluate financial bids: Faster commercial bid evaluation and award of contracts indicates that
there is no post-tender negotiation with the L1 bidder. It also
indicates that the administrative and financial approval processes are not taking too long to complete.
(v) Average time taken from NIT publication to financial evaluation: It is a measure of the procurement order cycle. The
government agency should take a reasonable time for it. A too
high or too low value in this KPI is undesirable.
(vi) Average bid validity days: The Central Vigilance Commission (CVC) in a circular (No 31/11/08) observed that while a
short validity period calls for prompt finalisation by observing
a specific timeline for processing, a longer validity period has
the disadvantage of bidders loading their offers in anticipation
of likely increase in costs during the period. Hence, it is important to fix the period of validity with utmost care.
(vii) Percentage of tenders where cycle time is higher than the
bid validity period: At the time of submitting the bids, buyers
mandate their validity in days. The tendering process cycle
time from bid submission to financial bid evaluation is expected to take less time than the bid validity. A higher score in this
indicates a less-efficient tendering process.
(viii) Average payment options for bidders: Bidders are expected to deposit 2%–5% of the estimated tender value as earnest money to participate in the process. Earnest money can
be deposited in the form of a fixed deposit receipt, banker’s
cheque, banker’s guarantee, demand draft, and small saving
certificates. Providing more options to the bidders ensures
larger participation.
(ix) Bidder adequacy ratio for technical bids: This is the
average ratio of initial number of bidders over the number of
bidders awarded the contract. Although the GFR states a
minimum number of initial bidders to initiate any tendering
process, the desired number should be much higher than the
minimum number. To ensure competition among bidders, this
ratio should be greater than 3. A higher score in this KPI indicates more competition among bidders.
(x) Bidder adequacy ratio for financial bids: In some cases, almost all technically qualified bidders are awarded the contract
since no single bidder may have the capacity or capability to
fulfil the contract. In other cases, the work is divided into
small pieces and all bidders are given a piece of the contract
even if capacity is not a constraint. This defeats the very purpose of conducting the tendering process.
61
SPECIAL ARTICLE
Table 2: Key Performance Indicators and Their Measures
No
Key Performance Indicator Name
Measure
i
ii
iii
iv
v
Average delay in technical bids opening (in days)
Average time taken to evaluate technical bids (in days)
Average time from technical evaluation to financial
Average time taken to evaluate financial bids (in days)
Average time taken from NIT publication to financial
evaluation (in days)
vi Average bid validity days
vii Percentage of tenders where cycle time is higher than the
bid validity period
viii Average payment options for bidders (in number)
ix Bidder adequacy ratio for technical bids
x Bidder adequacy ratio for financial bids
xi Tender award with only one bidder available for financial
evaluation (in percentage)
xii Average time allowed to bidders for bid preparation and
submission (in days)
Actual technical bid opening date–scheduled bid opening date
Date of uploading technical evaluation–actual technical bid opening date
Actual financial bid opening date–date of uploading technical evaluation bid opening (in days)
Date of AOC–actual financial bid opening date
Date of AOC–NIT publication date
Available in NIT document
Percentage of process instances where cycle time is higher than bid validity days
Number of payment options are available in NIT document
Ratio of initial bidders to the number of bidders awarded the contract
Ratio of technically qualified bidders to the bidders awarded the contract
Percentage of instances where tenders are awarded to a single commercial bidder
Bid submission end date–NIT publication date
(xi) Tender award with only one bidder available for financial
evaluation: After technical evaluation, if only one bidder is selected for commercial evaluation, it almost converges to the
case of single bid tendering. This should be discouraged as it
may block competition.
(xii) Average time allowed to bidders for bid preparation and
submission: After publishing a notice inviting tenders, the
government agency should give potential bidders sufficient
time for bid document preparation and submission. This will
ensure that all interested bidders participate in the process.
We carried out a detailed analysis of procurement process on
the developed KPIs. The analysis is based on the tendering processes in UP and Delhi in the last five years, and WB in the last
four years (it adopted eTable 3: Number of Tenders, 2011 to 2015
procurement in only
State
Number of Tenders Observed
2012). Table 3 shows the
2011 2012 2013 2014 2015
Uttar Pradesh 121
11 164 375 639 number of tenders in
Delhi
629 1,077 1,344 1,417 551 each of these states in
West Bengal NA 1,491 3,371 6,774 6,293 the last five years. To
Table 4: Number of Participants in the Three Workshops
Departments
I Workshop
62
16
14.75
UP
14
12
10.6
Delhi
10
WB
8
7.31
7.23
6
3.59
4
4.42
2.88
2.71
3.45
4.1
2.84
3
2
2
1
0
2
0
4
0
0
0
0
0
0
2
0
No of Participants
II Workshop
III Workshop
1
5
2
1
2
0
1
2
2
0
2
0
1
2
0
5
0
0
1
2
6
2
0
9
0
2
0
2
0
0
1
8
2.8
3
1.28
2
Analysis and Interpretations
UPSRTC
UP health system strengthening project
Multilateral development agencies
Public works department
Planning department
Industries department
UP Bhoomi Sudhar Nigam
Academics and training institutes
Tourism department
PICUP
Stamp and registration department
UP Finance Corporation
Agriculture (dairy + fisheries)
Food and civil supplies department
National Informatics Centre
Others
Figure 2: Average Delay in Technical Bids Opening, 2011 to 2015
0
2011
2012
2013
2014
2015
bring logical consistency to our analysis, we limited it to only
tenders that reached the AOC stage.
To interpret meaning and derive insights, our analysis was
shared with UP’s drawing and disbursing officers (DDOs),
comprising principal secretaries, secretaries, and other
senior officers, multilateral development agency executives,
and personnel from Indian and US academic and training
institutes in three workshops. Details on participation are
in Table 4.
The following sections are based on workshop deliberations, key findings, and observations on the KPIs across the
three states.
Average delay in technical bids opening: Figure 2 shows the
average delay in technical bids opening in the three states in
days. We observe that UP has improved a good deal over the
years—now the average delay is around one day, from around
15 days four years ago. Delhi has also improved consistently,
while in WB, it is around three days.
Average time taken to evaluate technical bids: Technical
bid evaluation can be made simple using predefined technical
qualification criteria. So, an efficient process should not take
an unduly long time. Figure 3 (p 63) shows that, while Delhi
has improved its performance to reach an average of one day,
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SPECIAL ARTICLE
Figure 3: Average Time Taken to Evaluate Technical Bids, 2011 to 2015
Figure 5: Average Time Taken to Evaluate Financial Bids, 2011 to 2015
35
120
32.84
30
100
25
24.49
UP
88
Delhi
80
19.55
20
108
WB
59
60
UP
15
Delhi
10
5
4.79
3.36
3.18
3.56
2.47
2.33
2012
2013
0.1
5.79
3.96
0.95
0.95
2014
2015
0
32
31
22
22
19 21
20
22
12
11 11
0
2011
Figure 4: Average Time from Technical Evaluation to Financial Bid Opening,
2011 to 2015
35
30
39
40
WB
28.69
2011
2012
2013
2014
2015
Figure 6: Average Time Taken from NIT Publication to Financial Evaluation,
2011 to 2015
180
160
159
UP
142
140
25
120
20
UP
Delhi
WB
57
49
3.1
0.62 0.9
2.39
1.06
2.23
1.9
0.7
2.41
1.08 0.25 2.14
0
2012
2013
2014
Average time from technical evaluation to financial bid
opening: Figure 4 shows that all the three states are doing
satisfactorily on this KPI, though there were high values for UP
and Delhi in 2011. WB may possibly take action to improve on this.
Average time taken to evaluate financial bids: A faster financial bid evaluation and award of contract indicates that
there is no post-tender negotiation with the L1 bidder. It also
indicates that the administrative approval processes are not
taking unduly long. While Delhi and WB show a generally decreasing trend (Figure 5), UP shows a higher average time. In
2013, UP took on an average of 108 days to complete this activity per tender, while Delhi took almost 12 days. Stakeholders
opine that multiple layers of approval in UP may be the reason
for such poor performance. So, there is an urgent need to cut
down layers of approval and make the process more efficient.
31
35
2013
2014
35
25
20
0
2011
2015
UP alarmingly took almost 25 days on an average to evaluate
technical bids in 2015. So, although tenders are opened around
the due date, technical evaluation takes an unduly long time.
Stakeholders opine that this may be due to an increase in
scrutiny of the tendering process by governments and private
agencies. While other states are also subject to such scrutiny,
they have modified their procurement process to make it fairer, more equitable, and more transparent. UP has not made
any major changes to its procurement process so far.
50
45
40
5
2011
70
67
60
6.42
88
Delhi
80
15
10
WB
94
100
2012
2015
the three states. However, it is still much higher in UP and
needs attention. The process time components need to be
worked on and the bid validity days perhaps need to be increased in certain categories (Figure 6).
Average bid validity days: This refers to the precise period of
time the bidders certify for which their bids can be considered
valid. After this, the bidders are at liberty to change their bid
price if the contract is not signed by the last date of the bid validity period. The CVC (Circular No 31/11/08) observed that
while a short validity period calls for prompt finalisation by
observing a specific timeline for processing. A longer validity
period has the disadvantage of bidders loading their offers in
anticipation of a likely increase in costs during the period.
Hence, the average bid validity period is a measure of process
Figure 7: Average Bid Validity Days, 2011 to 2015
160
Delhi
140
104.1
100
91.5
134
99
89.4
84.6
130.2
122.8
121.5
UP
120
WB
94.7
102
97.7
87.2
73.4
80
60
40
20
Average time taken from NIT publication to financial evaluation: The procurement order cycle time is decreasing for all
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0
2011
2012
2013
2014
2015
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Figure 10: Bidder Adequacy Ratio for Technical Bids, 2011 to 2015
9
7.83
8
6.74
7
Figure 8: Percentage Tenders Where Cycle Time is Higher than the Bid
Validity Period, 2011 to 2015
70
60
59.5
51.8
50
WB
36.4
40
34.7
3
8.2 9.1
4.8
5.3
2012
2013
1.7
2014
2.69
2
1.72
Delhi
1.5
2.48
2.46
2.41
2.5
1.68
1.82
1.76
1.74
UP
1.04
1
1
0.5
0
2011
2012
2013
2014
2015
economy and it is important to fix the period of validity with
utmost care. Figure 7 (p 63) shows the average bid validity
days for the three states for the five years under study.
Percentage tenders where cycle time is higher than the bid
validity period: Process cycle time as measured by time between bid submission end date and date of award of contract
has generally been unduly long and often exceeded the bid
validity period. Figure 8 shows the percentage of awarded
tenders where the process cycle time is higher than bid
validity days.
Discussions and interactions suggest that such delays could
be mainly because of multiple layers (between tender evaluation committee and accepting authority) of scrutiny, particularly in high value procurements. Further, procurements are
based on budgetary provisions and procurement planning and
monitoring do not cover timelines. This needs attention in UP
and possibly process redesign. WB shows better performance
on this indicator.
Average payment options for bidders: Bidders are expected
to deposit 2%–5% of estimated tender value as earnest money
deposit (EMD) to participate in the tendering process. Rule 157
of the GFR states that this money can be deposited in the form of
a fixed deposit receipt, banker’s cheque, banker’s guarantee, demand draft, and small saving certificates. Providing more options to the bidders promotes competition.
Figure 9 shows average payment instruments per tender
across the three states. Delhi tops the charts with consistent
64
2.62
2.36
1
2011
3.15
2.96
WB
3.81
3.35
2012
2013
2014
2015
Figure 11: Bidder Adequacy Ratio for Financial Bids, 2011 to 2015
3.5
2.81
4.83
3.81
0
2015
Figure 9: Average Payment Options for Bidders, 2011 to 2015
3
3.99 3.83
3.98
3.63
UP
5.18
2
10.2 10.3
10
7.7
0
2011
Delhi
4
20
8
WB
5
Delhi
30
10
5.86
6
UP
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
WB
3.71
3.72
3.51
3.18
Delhi
4.42
4.17
3.47
3.3
3.29
2.65
2.25
2.08
1.79
UP
2011
2012
2013
1.6
2014
2015
improvement, while UP has also picked up considerably. WB is
stagnant and needs to take action.
Bidder adequacy ratio for technical bids: This is defined as
the number of initial bidders to the number of bidders awarded
the contract, and is a measure of adequate competition at the
early stage of the process. The GFR states some minimum number of initial bidders to initiate any tendering process; however, the desired number of bidders should be much higher
than this minimum number.
As illustrated in Figure 10, while Delhi shows very high
bidder participation, WB and UP are not performing as well. In
UP, there has been improvement over the years. Our workshop
participants opined that ease of doing business may be a reason for higher bidder participation in Delhi. In UP, bidders
need to get registered in multiple departments as there is no
single procurement coordination agency. A single point registration of bidders may be introduced, which may apply to all
purchasers in the state and allow interested bidders to apply
for registration any time.
Bidder adequacy ratio for financial bids: This is defined as
the number of technically qualified bidders and is a measure of
adequate competition at a later stage of the process. As illustrated in Figure 11, while Delhi shows good and improving performance, WB and UP do not. UP has declined over the years,
which is very alarming from the fairness and competition
point of view. A closer examination reveals that in some cases
almost all technically qualified bidders were awarded the
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Figure 12: Tender Award with Only One Bidder Available for Financial
Evaluation, 2011 to 2015
16
13.68
14
13.15
12.73
12
10
10.89
9.61
WB
10.21
Delhi
7.62
8 6.61
6.52
6
6.7
6.13
4.85
UP
4
2
0.61
0
0
2011
2012
2013
2014
2015
Figure 13: Average Time Allowed to Bidders for Bid Preparation and
Submission, 2011 to 2015
25
23.5
23.17
Delhi
15.02
15
10
19.43
WB
UP
20
12.17
11.92
15.31
14.05
11.15
14.21
12.47
9.67
9.6
2014
2015
7.44
5
0
2011
2012
2013
contract despite no capacity constraint, while in others, the bid
was awarded to a single technically qualified bidder.
Tender award with only one bidder available for financial
evaluation: Figure 12 shows the percentage of instances in
the overall tendering process where the bid is awarded to a
single financial bidder left after technical evaluation. This
is similar to the case of single bid tendering and should be
discouraged. Delhi and WB in particular need to take action
on this.
Average time allowed to bidders for bid preparation and
submission: It is assumed that giving sufficient time for bid
document preparation and submission ensures that the NIT
reaches everyone and interested bidders can participate in the
process. Though Delhi scores the lowest among the three
states, it has very good vendor participation. Therefore, we
can conclude that UP and WB should set the time allowed for
bid preparation and submission more judiciously as it may increase the total procurement cycle time without much impact
on vendor participation (Figure 13).
Pathways for Improvements
Based on the deliberation in the three workshops, we highlight
the potential for improvements in the procurement processes
in the state of UP. These may have significant impact on effective services delivery to the citizens.
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Need for training and capacity building: Training and
capacity building on public procurement could lead to an easier,
efficient, economic and more transparent procurement process.
Potential bidders also need to be trained extensively for e-tendering. Post the first workshop, the UP State Planning Institute
identified resource persons/master trainers and carried out
two programmes on public procurement. The World Bank and
IIM Lucknow extended support through their experts on Indian systems of procurement in these two programmes. Besides
classroom training, it is suggested that capacity building and
training can be imparted through massive open online courses
(MOOCs) on public procurement. The World Bank and its partners have created an India-specific free online Certificate Program in Public Procurement (CPPP).
Need for procurement process redesign: Analysis of the
data on UP reveals the e-tendering process is marred by delays,
which entail waiting. The average financial evaluation takes
around 22 days and the average time from NIT publication to
financial evaluation is around 70 days. Similarly, observations
of more than 1,000 tenders in 2012 reveals that cancelled tenders spiked to 50%, while they were in single digits in the remaining four years. A possible but empirically unproven association could be a change in the political dispensation in 2012
and associated changes in the administrative structure.
Several interesting process redesign ideas emerged in the
workshops. It was observed that the state and central public
procurement rules are not harmonised, resulting in ambiguity
and confusion. Policies for specialised services (for example,
consultancy) and specialised projects (for example, PPP) need
to be framed properly for UP. Archaic rules such as mandatory
newspaper advertising for any procurement above `50,000
also need to be done away with in these changed times. Simple
ideas like buy-back for e-waste may be considered in the state’s
IT procurement policy. Additionally, using the NIC’s post
tendering module may lead to better and auditable procurement planning and control. The state may think about establishing a nodal agency for government purchasing along
with a procurement ombudsman.
A thorough review, updating, and standardisation of the
procurement policy is the need of the hour. It is felt that standardised manuals (similar to handbooks on election law in
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SPECIAL ARTICLE
terms of comprehensiveness) would make the procurement
process quicker, easier, unambiguous, economic, and more
transparent. Further, periodic review of these rules and guidelines should be done in future through Periodic Policy Review
Commissions.
Better bidder management for higher participation:
Almost 20%–30% of tenders in the last five years received no
bids. In these cases, the cost of procurement (such as the NIT
publication cost and resource cost) goes waste, and services to
citizens get delayed, causing losses. These clearly reflect bidder apathy and market making failure. While Delhi shows
high supplier participation, WB and UP do not. Our workshop
participants opined that ease of doing business may be a reason
for higher bidder participation in Delhi. In UP, bidders need to
get registered in multiple departments and there is no single
procurement coordination agency. A single point registration
of bidders may be introduced which may apply to all procurement processes in the state. It should also allow interested
bidders to apply for registration any time.
Besides, there are a few issues related to bidder registration
and blacklisting as well as payment that need to be resolved.
Bidder registration and blacklisting processes need to be simplified. An electronic platform could be a good solution. Now,
the payment has to be approved by the treasury; this process
too needs to be streamlined and simplified. For example,
governments may create a “pooling bank account” for government departments and another one for PSUs. A similar
practice is being followed in Kerala.
Transparent public procurement process using e-tendering:
E-tendering not only brings efficiency in public procurement,
but also makes the process more transparent, leaving an auditable trail. Such a trail will make statewide procurement
management information available for analysis or policy
formulation. Since the NIC’s e-tendering system does not mandate information sharing, an improvement in the e-tendering
system can ensure that AOC information of all financially evaluated tenders is shared before creating a new tender. In WB,
e-procurement has been made mandatory, and the number of
tenders on the e-tendering portal has gone up rapidly. However, in UP, where e-tendering is not mandatory, the number
on the e-tendering portal is still limited. Departments such as
the PWD carry out e-tendering only for procurement worth
more than `1 crore. It could be beneficial to make e-tendering
mandatory in UP.
Overall, while technology can bring efficiency and transparency in the public procurement process, there is a need for
education and capacity building on public procurement in UP.
Along with process redesign and policy review, UP needs to
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focus on better vendor management practices. To bring greater transparency in public procurement, contract implementation data may be shared in the public domain, so that the
state’s contract implementation process performance can be
measured as well.
Conclusions
The preconditions for achieving a sound public procurement
system are integrity and commitment to good governance
practices through the provision of well-designed legislation
and supporting regulations and review processes. Proper
performance measures and their benchmarking also help in
identifying improvement methods and pathways. This article
is an early attempt at this with particular focus on UP. It helps
to measure, compare, and contrast public procurement tendering process performance on well-defined KPIs across three
Indian states for five years to derive managerially relevant
insights, and also suggests a few paths for improvements. The
same could be extended across other states and also PSUs.
The ministries of finance and planning must review the
current legislations and identity areas for improvement. Training needs to be provided to all managers and staff involved in
public procurement to enhance capacity, thereby improving
performance in terms of efficiency. The state government also
needs to consider forming an independent regulatory body
which will be responsible for transparency and accountability
in public procurement. The government should also develop
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