Mis-procurement

The federal and provincial governments and their institutions are resorting to the procurements especially in the energy and infrastructure sectors in the absence of transparent and competitive bidding. Yet they claim that these procurements are in conformance with the public procurement laws and rules. They seek refuge behind exceptions and excuses such as government-to-government (G2G) procurements, urgency, fixed prices offered by the regulator and or that the financing is arranged by the private sector.
None of these situations warrants bypassing of the competitive bidding for the procurement of energy supplies and other infrastructure projects. These have to be procured through competitive processes so that qualified parties are selected and that the least or lowest cost is obtained. Unfortunately, the governments' reliance on the exceptional modes of procurements is lacking transparency and the deals are awarded to pre-selected parties. One of the most resorted techniques is G2G procurements and awarding projects to public sector entities without any competition. There are no exceptions under the federal or provincial laws for these modes of procurements. The bypassing of procurement laws lead to selection of unqualified sponsor consortiums who later indulge in rent seeking and claiming higher prices, as they are unbound and sometimes unqualified.
Even internationally, unsolicited procurements are limited to disaster or calamity situations and not otherwise. Where the procurement contracts are inked for twenty (20) to thirty (30) years, it is an unqualified obligation of the governments towards the taxpayers and consumers to ensure that purchases are made on the least cost basis in a transparent manner. When the foreign governments and their entities as well as local governments and their entities are bidding for a project they are acting in their commercial capacities and not in sovereign or public sector capacities and hence should be amenable to the rigours and iterations of bidding processes.
They therefore must compete against other bidders for procurement of any project to ensure transparency and least prices. The commercial aspect of the bargain is evident from the fact that these deals carry commercial terms and conditions. But in Pakistan, the governments are using G2G arrangements or Inter-Governmental Agreements as a shield through convoluted interpretation of Rule 5 of the PPRA Rules which states as follows:
"Whenever these rules are in conflict with an obligation or commitment of the Federal Government arising out of an international treaty or an agreement with a State or States, or any international financial institution the provisions of such international treaty or agreement shall prevail to the extent of such conflict".
This clause is operative in case where there is conflict between two schemes of procurements under international agreements and procurements envisaged under the national laws. Where the Governments enter into international contracts without inclusion of any mechanism for procurement of goods, works and services then the national laws of procurement are applicable as there is no conflict for the overriding effect of the Rule 5 to take effect. Most of the deals inked by the governments, including the procurements of RLNG (latest being procurement of RLNG from Maldives after Qatar), setting up of power projects and RLNG power plants set up by the federal and provincial government companies constitute mis-procurements under the PPRA Rules. More often than not, the sponsors, prices and implementation mechanism is changed after the award leading to post-bid variation without any penalties or cancellations which should be a norm in such circumstances.
Similarly, concessions and incentives are bestowed as well as tariff is determined and increased post-award. So how transparency is achieved is a question that always remains unanswered. The regulators of the power sector and oil and gas sectors - Nepra and Ogra - have abdicated their statutory bestowed roles by failing to object to non-transparency and illegalities; they are rather positively approving such projects which shall inject huge payments and debt obligations into the energy cycle already plagued with the circular debt Armageddon. In case of RLNG power projects awarded to the special purpose companies of the federal and Provincial governments, there is an added dimension of concern. These power projects are funded out of public funds/public sector development programme and yet they are given the tariff as if these are private power projects. The regulator fails to detect the anomaly that while the equity and debt are financed on concessional terms and conditions coming from government sources and or taxpayers money, the consumers are charged full cost of equity and debt including market returns. Moreover, these special purpose companies have entered into sovereign agreements with governments for availing concessions and incentives reserved for private investors, even beyond market principles, in breach of applicable laws. Such unsolicited awards are also contrary to Article 25 of the Constitution of Pakistan which preaches equality before law, entitlement to equal protection of law and non-discrimination.
Yet another category of arguments entails that the energy projects funded by the private financing are outside the purview of public procurement laws. Little do those who advance such arguments, however, know that procurement of private-funded projects is carried out through the revenues from the public accounts and hence these are subject to scrutiny of public procurements. The Supreme Court of Pakistan through a slew of decisions in cases relating to the Steel Mills privatisation, Lakhra Coal Power project award, the passing on unaccounted losses to the consumers by the Ogra, Safe City, LNG, etc., has laid down the principles for transparent procurement in the energy and infrastructure projects terming them as essential prerequisites, which are breached by the governments to the detriment of the unsuspecting taxpayers and unaware consumers.
(The writer is a practicing barrister at law in the corporate and energy sectors and has advanced degrees in fields of engineering, business management and law)