Industry voices concern over procurement bill

Requests government to consider exchange rate variation for DGS&D contracts, cut short time taken in issuance of rate contracts and work out rate contract for cloud and managed services


Pratap Vikram Singh | July 17, 2013

Before the public procurement bill 2012 is passed by parliament, the IT industry has urged the government to incorporate its concerns.  

Among others, one of the major issues concerning the industry is the unprecedented strengthening of dollar against rupee and the simultaneous rise in cost of electronic equipment in the global market. The industry urged the government to resolve it by providing a buffer for extreme variation in exchange rates in the government contracts in the information technology domain.

The government does have a mechanism to deal with such fluctuations. However, the exchange rate variation (ERV), which has been notified by the ministry of finance, covers contracts of 18 months and above. The IT contracts, under the director general of supplies and disposal (DGS&D), have a duration of 12 months.

According to industry experts, in June-July last year, due to a 15 percent rise in the dollar value, the top five IT manufacturers – including HP, Lenovo, Acer, HCL and Wipro – lost between Rs 8,000 crore and Rs 9,000 crore.

Speaking on the sidelines of a seminar on the best practices in public procurement in ICT, JV Ramamurthy, president, manufacturers association for information technology (MAIT), pointed at key issues concerning the industry. According to Ramamurthy, the DGS&D takes over 200 days to issue a rate contract to a company. This should be minimised to less than 60 days, he said.

The payment process, which is presently a multistep and cumbersome process with a long cycle time, can be made electronic. 

Recently, DGS&D issued a notification that the payments, which were so far happening in a centralised manner through the chief controller of accounts (CCA), will now be made directly through user departments.

“With decentralised fashion of payment, the industry will have to assign at least three times as many man-hours for tracking payments from the user departments,” said Dr Jaijit Bhattacharya, chairman, procurement committee, MAIT and president, centre for digital economy and policy (CDEP), said.

“The payment process should remain centralised,” he said. 

Another issue is incorporation of new IT services, including cloud and managed services, into the procurement list and working out a rate contact for the same.

The IT companies are also demanding liberal provision for innovation procurement – which is essentially procurement from a single vendor owing to the uniqueness of the product – by the government. The procurement bill provides for special provisions under which the government can go for innovation procurement in cases of national security. In all other cases, there has to be at least three bids, without which the DGS&D rate contract would stand cancelled.

“It is a barrier to domestic innovation, as there is no incentive for the industry to promote research and development. The CDEP would request the DGS&D to introduce such provisions which would enable user departments to procure cost-effective innovative products even outside the scope of national security, he said.

Responding to the industry’s concerns related with decentralised payment process, Satya N Mohanty, director general, DGS&D, said, “According to the Vinod Dhall committee report on public procurement, the DGS&D should be divested with payment and inspection functions. This could happen anytime in the future.”

Globally, too, governments follow decentralised model of payment – where the buyer agency directly pays to the vendor, he said.

On the applicability of ERV for DGS&D contracts, he said that though as of now the existing policy would remain, the department would deliberate if the rates are revised every three months.

Commenting on reducing the time for issuing the rate contract, he assured the industry that DGS&D would try to bring down the duration to 60 days.  

The Public Procurement Bill 2012, which is based on Vinod Dhall committee report on procurement, aims to regulate government contracts valuing Rs 50 lakh and above. It aims to ensure transparency, accountability and probity in the whole process.

The aim, according to the bill, is to ensure “fair and equitable treatment of bidders, promoting competition, enhancing efficiency and economy, and maintaining integrity and public confidence in the procurement process”.



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