Sudan case is just a tip of the iceberg because "routine and retail" corruption in security and defense sectors over a year is more than the value of the Sudan graft. Fresh in our memory is the surfacing of various corruption cases in allocation of ration contracts to private suppliers by the security agencies last year. Low level of integrity in procurement has often led to corruption involving a number of actions such as bribery, facilitation payments, collusion, bid-rigging and influence peddling. The Commission for the Investigation of Abuse of Authority (CIAA) had to cancel the biddings and initiate investigation into ration contracts of the Nepal Police.
Granting of ration contracts to private suppliers within the security sector is rated as one of the juicy areas for corruption. Besides, Nepal Army and Armed Police Force, Nepal Police alone spends around Rs 2.41 billion of taxpayers’ money to procure rations to its 60,000-plus personnel annually. Charging between 10 to 12 percent of the agreed amount as a commission from the suppliers is a common practice.
Public Procurement Monitoring Office (PPMO), in its 2010 report, highlights prevalence of tendency among bidders to work in cahoots while bidding for supply of rations to the security agencies resulting in limited competition. The report, prepared after studying tender documents of the past three years, mentions that security agencies are found to have accepted tender forms even if the quoted prices are unreasonable. It was found that Nepal Police approved tender documents proposing almost equivalent amount against cost estimates while purchasing food over the last three years.
Assigning “turns” among the cartel members for winning public bids or agreeing to internal compensation payments for submitting high or other “failed” bids is what constitutes a collusion agreement. This has become an institutionalized practice in Nepal leading to unscrupulous competition and rise of corruption. A study on bidders for supplying rations to security agencies in some districts of Nepal reveals that around six to seven bidders have taken tender forms from each security agency while only three each have submitted bids finally. This substantiates a practice of cartel and collusion among the suppliers.
PLUGGING THE LOOPHOLES
Defense and security-related procurement graft is a bit of an uphill task to quantify due to the secret environs under it takes place. Given the huge amounts of tax-paid money being spent on contracts and procurements annually, enough transparency and accountability mechanism is a foremost need. Existing red tape, opaque decision-making and award of government contracts offers huge avenues for graft in these institutions. Rule-bending by Nepal Police as witnessed in Sudan scam shows our bidding and tender selection processes are routinely manipulated to favor the palm-greasers or suppliers that offer enormous kickbacks.
If we look at the past procurement deals and records of all security agencies, including Nepal Army, it shows us which manufacturers or traders have bagged lucrative contracts in a row for years. It would be an eye opener for all of us as corruption in security and defense sectors ultimately leads to failure in national security policies.
The Sudan scam has unraveled some more areas where systemic openness and transparency in procurement is badly required. Besides monetary aspect of the case, its systemic part is not any less important. Our procurement modality within defense and security sectors is set up in such a way that it always pushes for carters and syndicates.
The "enlistment system" for procurement within our security and defense sectors is a good example. If we look at the Approved Enlistment List of the last few years, we can find only a few companies and their local agents in the list. These select few companies are the ones that make multiple bidding runs into many folds bagging the major contracts. This is how the system is set up—only a select few local agents make sure that limited companies participate in each "tender".
The Nepal Police was still brave last time around to put their enlisted companies on their website but what about the other agencies such as the Armed Police Force and Nepal Army. With intent to make them more transparent and accountable, the list of enlisted companies must be made publicly available on the website to boost "systemic openness". Information and details about each stage of the procurement process must be uploaded on the website. Digitizing records of procurement-related official communications and voluntary disclosure of such information, as demanded by the Right to Information law, will ensure greater public accountability.
The other practice within the system is that "agents" bid on behalf of "manufacturers", which reduces the accountability of manufacturers because they can´t be held responsible as they are not directly supplying goods to the concerned security agency. Technically, the security agency is just the end user and hence the manufacturers can supply materials that may not comply with the required specification but can later claim that it was the agent who provided the wrong specification, the agent (who may be bidding) can claim innocence blaming manufacturer for the supply of non-complied goods. The Armored Personnel Carriers (APC) procured through a local agent based in Kathmandu from a London-based Assured Risks Company faltered on these grounds with the manufacturer claiming that the company provided APC as per the specifications while the ground reality sharply differed.
Thus, if a straight forward rule is applied for all items, let alone the security sector, by only allowing the manufacturers to bid, it may improve the situation. If manufacturers will have to provide the Bid & Performance Bond, then only serious and genuine manufacturers will participate in bidding as they have to protect their reputation in the international market. Hence, the chances of supplying obsolete or substandard equipments or material would be negligible or really tough.
The PPMO in February had issued directives to the security agencies making it mandatory in listed defense procurement to have the BB & LC in the same currency of bidding. This to a certain extent will discourage bogus companies from undertaking tenders locally but why not make it mandatory that only producers/manufacturers of the "particular items" should undertake bidding themselves.
The other part of the problem lies in how aware security agencies are of the "export license" of weapon trading companies situated in tax havens such as Hong Kong, Malaysia, Singapore, Dubai, among others. Why is it that LC´s are open in the name of agents or authorized agent who is normally situated in a different country than the manufacturers. Why can´t the government mandate for all procurements to be directly undertaken by manufacturers in big procurements deals? These lapses and loopholes provide grounds for corruption when non-compliance equipments are provided as everyone knows that they can blame the other party and get away with it. The same thing happened to the APC suppliers as well.
Thus, it raises a question. Why does the government not just place a blanket rule for procuring all items through a manufacturer only and have the results of all the tenders undertaken by each ministry, government agency or department placed on the PPMO´s website for public consumption and sharing? Senior officers in all security establishments know where the fault lies and their adamancy to reforms speaks clearly about their intentions. Everyone wants a piece of the pie.
Hence loopholes are there to be exploited. Why only blame the bureaucrats or senior officials? Why not change the system itself in such a manner that chances of corruption and leakages are minimized so that stamping out corruption will no longer remain wishful thinking? If we look at the past procurement deals and records of all security agencies, including Nepal Army, it shows us which manufacturers or traders have bagged lucrative contracts in a row for years. It would be an eye opener for all of us as corruption in security and defense sectors ultimately leads to failure in national security policies. Sudan graft is a just a wake-up call.
pbhattarai2001@gmail.com
Related story
Sudan's minister of defense dies of heart attack in south Sudan
