On Fiat in Public Procurement

One of the perils of being in the business of public procurement is the fact that everybody considers you easy and fair game. You are looked at with suspicion – and your every decision is seen from angles that you can never imagine while making them. The trouble is that the population at large has a rather low opinion of those entrusted with public procurement, and that translates into instances of vendors trying to cut huge corners, trying to mollify you with shavings from these cuts.

The problem is especially huge in items in which the functionality of the material is not impaired very significantly even on large departures from the specified parameters. Items like paper, stationery, garments, linen. The standard for photocopier paper (the ubiquitous ‘A4’) is 80 GSM, but my printer works fine with 58 GSM. And how does a passenger on board the Rajdhani Express know whether his sheets have 30 warps per cm or not. The unscrupulous vendors try to exploit this idea of functionality to pass on functional yet substandard products to you. This problem is especially acute in case of material shortage. The vendor knows the level of your desperation – and knows that you have little choice but to accept what he has to offer. The material is functional; you need the material desperately; the choice is between a.) turning a blind eye to the deficiencies and accepting the material, so that everybody is happy (even you can be happy, if you are willing to lower your morals) and b.) rejecting the material – functional material, that you need desperately, and earn the ire of your bosses and colleagues from the departments depending on you for the material. Someone has said that beggars cannot be choosers – this is very clear in such cases.

Such trouble can occur only in a public procurement process and not a private procurement deal. A private procurement manager can acknowledge that the firm has given them no choice, but for the next time, the vendor will not be considered. However, in public procurement, there is no grey area in acceptance. If accepted, material is deemed to be perfect, and hence the usual penal provisions of black listing such deviant forms can never be carried out – unless you have rejected the material.

Hence, public procurement needs to be strengthened in a way on public procurement can be – mandatory confiscation of substandard materials. Current practice is to let the vendors remove their defective materials and supply fresh ones in case of a rejction. Thus, a decision to reject is an order to starve yourself as much as it is an order to penalize the firm. However, if the government can give itself the power to confiscate and use such materials as it pleases, then the supply chain is not starved, and the vendor is penalized. It is a good countermeasure to the tolerance gaming that vendors do – they try to supply the material to the lower tolerance band – and in the effort dip even lower – and then try to convince the accepting authority of the ‘functionality’. In case of the confiscation rule, all this material can be used, at no cost to the government, and exemplary deterrent is given to the vendors. It also removes the pressure from the backs of honest and sincere officers, who are often forced to accept substandard materials only because the choice of starvation is much worse.