NPA guidelines require urgent revision to remove ambiguities

Between June 2005 - May 2007 I worked as a Volunteer Consultant (Construction Project Manager) in helping the Sri Lankan government Tsunami Housing Re-construction programme (THRU), and later as a Consultant Construction Project Manager and Chief Quantiy Surveyor attached to a Semi-Government Construction Corporation in Sri Lanka after serving 33 years in foreign countries.

As I do not hold dual citizenship status (I strongly resent purchasing my birth rights by paying Rs. 200,000 to serve my country of birth) I paid close upon Rs. 50,000 for visa facilities and another Rs. 450,000 for air tickets to perform my duties to my motherland.

This excludes what I should have earned in Australia during the last two years and my accommodation borne by my immediate family members in Sri Lanka.

I am thoroughly disappointed as I am unable to provide any further service to my motherland as requested by the President from the Sri Lankan Diaspora. But I hope to expose the deficiencies I observed during my work, such as the public service getting denigrated and the spread of corruption like a wild fire trying to dismantle the future and the economic realities of my motherland.

‘Procurement’ is: “to procure a contract (work, services and supplies) incorporating a RISK free Condition of Contract to complete a project within the constraints -Cost, Quality and Time- to achieve the end results”. But the National Procurement Authority( NPA) has ignored these very important principles in their hasty preparation of these guidelines for this very crucial process.

As my duties included handling major construction contracts, I was compelled to use the Guidelines on Government Tender Procedures prepared and issued by the NPA. By glancing through the guidelines, I was very impressed with the good work gone into producing this document to eradicate and minimize the corrupt practices in our procurement process even though the guidelines lack clarity and clear directions.

While appreciating the efforts the NPA has utilized in producing this document, I think it is my duty as a procurement consultant (expert) to lend them a hand and offer these constructive observations to clear the deficiencies in this very important document, even though I am aware that they may recject my offer. When you study these documents very closely it appears that the officials of the NPA who were responsible in preparing this documents lack practical experience in running multi-million rupee or hard dollar contracts.

This inadequacy has created ambiguities and inconsistencies in this document as these officials failed to understand the contractual difficulties which may arise due to some of their restrictions. NPA has failed to understand that each construction project has differing details and its own set of risks, how much the players are experienced and every construction project would encounter the unanticipated. But the NPA has failed to realize these changes can be eliminated to a degree in the procurement stages if handles carefully.

The guidelines to a great length describe the action needed to be taken at the pre-procurement (pre-tender) stages by the TEC, and nominate the Procurement Entity (PE) and the TEC as the main players at this stage leaving the Consultants, who will be responsible to play a major role in the Post-contract administration of the procurement process, as secondary players or outsiders. But the guidelines lacks concise and correct guidelines to direct the PE and the TEC how they should interact with the Consultants responsible for the Design and Contract documentation which form a part of the bidding documents.

According to my professional experience gained in handling major procurement contracts, if I have a chance, I would curtail the excessive powers vested on the TEC and the TEC in the pre-bid process. At present, most TEC members appointed for this task have very little or no knowledge about the legal requirements of the procurement process. The TEC unnecessarily interferes with the consultants documentation, and tries to ridicule their expert knowledge in the documentation process. PE should select Consultants in a very careful manner for projects then the need for a TEC can be eliminated.

The actions of the TEC members under these NPA guidelines may enhance the probabilities of creating corruptions. But these guidelines failed to provide adequate direction to the TEC members how they should evaluate the contract documents prepared by the consultants and this is a very grave inadequacy and may create ambiguity and inconsistencies.

As per PGR 2.8.2, the responsibility for appointing these TEC members are entrusted with the CEO of the NPA. This is a very good practice, but the CEO of the NPA has failed on a few occasions in appointing at least two members who are ‘subject specialist’ selected from the nominees of the Secretary of the line ministry. I am of the opinion that this process is flawed and selection and appointment of TEC members are carried out by others in the NPA.

These guidelines are embarking into the domain of the Condition of Contract which forms a part of the Bidding Documents violating the basic procurement procedures. As such these ambiguities and inconsistencies may interfere with the proper administration of the contract. This may create unavoidable and legitimate risks which may increase the completion cost of a contract.

Since realizing the negative impact the procurement of works, services and supplies is having on the Sri Lankan economy, the Sri Lankan government has taken steps to eliminate these defects. But I believe that, due to drawbacks in the NPA guidelines the procurement of contracts for works, services and supplies is still facing severe shortcomings since launching these new measures.

The NPA or the Sri Lankan government has failed to understand the ‘risks’ caused to the procurement process using these guidelines as the government or the bureaucrat has no knowledge to understand the “Value for Money” concept. NPA discuss the “Value for Money” concept in their guidelines, but their knowledge in implementing the concept is very limited or absolutely poor. I was responsible in writing a TRO for the NPA to implement “Value for Money” concept, but I have no knowledge about the implementation. The government and the bureaucrats have no knowledge about the “Value of Money” concept in Sri Lanka to utilize the “Value for Money” concept.

The defects and shortcomings in the original NPA guidelines [Volume One (1)] was highlighted by the World Bank in their report - Volume II, and the WB was critical about the ambiguities and inconsistencies and recommended to redraft the guidelines. As a result of this report the Volume 2 of the guidelines (now in use) was published but it contains similar ambiguities and inconsistencies like in the original guidelines.

Guidelines for Procurement

Procurement of Works, Services and Supplies cannot be controlled only by guidelines. Guidelines are there to observe at the pre and post contract stages. The post contract stage is governed by the Contract Documents and for this you need expert contract administrators.

Ministries, departments and other bodies who are now depending on these guidelines to procure their contracts or to purchase their goods and services have no other salvation than to adhere to these guidelines and trust the people trained by the NPA, some without any knowledge about contract documentation.

During my service with the State Construction & Consultancy Corporation mentioned above I was responsible as the Consultant Chief Quantity Surveyor with my staff for the preparation of Tender documents for pre-selection of contractors as well as the contract documentation for the construction of the Customs Head Quarters Building in the Colombo Fort which includes sophisticated computerization of the whole building.

Appointment of TEC Members

The pre-selection of contractors for the “Customs Building” (Contract) has been turned into a circus by the TEC. This pre-selection proved to be a classic failure of these guidelines. The inexperienced TEC members made a mockery of the entire procurement process. If the appointment of a TEC is to wet the Consultant’s work then it created an ambiguity. The way NPA appointed these TEC members and the composition of the TEC is another major ambiguity. These NPA Guidelines undermine the contract procurement process in Sri Lanka.

As a Fellow of the Royal Institution of Chartered Surveyors working in the western world for the last 34 years (from a total service of 50 years) I have prepared documents for the pre-selection of contractors and tender documents for hard dollar contracs (multi-million dollar) during my time. But I have never come across or seen how ‘two Engineers and another Architect’ with very little experience in projects of this magnitude functioning as TEC members, displayed their ignorance by forcing the consultants to change the painstakingly prepared documentation to procure this multi-billion rupee contracts, the biggest construction contract in Sri Lanka to-day.

The appointment of the TEC members under PGR 2.8.2 which states that “at least two members shall be subject experts” has not been met in selecting the TEC members and they lacked experience in handling pre-selection for multi-billion rupee contracts of this magnitude. According to my expert knowledge and experience in handling major contracts these three members are not ‘subject experts’ and they failed to demonstrate that they even have a clear knowledge about the Sri Lankan construction industry.

It is a world wide practice, and the one practiced in Sri Lanka by most experienced Consultants to select at least 8 to 10 very experienced contractors to issue tender documents for any contract of this magnitude to create competition and to reduce the final tender cost. But in this multi-billion rupee contract we as the consultants were forced to be satisfied with THREE (3) contractors just reducing the competition between contractors. Reduction of the number of contractors will always allow the contractors to collude among themselves and increase the construction cost as may happened in this contract.

Pre-Qualification process

NPA guidelines 3.12 on Pre-Qualifications categorically states that the pre-qualification is to benefit the PE, to lower the bid price, to have leading contractors to bid and adequate competition by revising the bidding conditions. Guidelines further states that “if the pre-qualified applicants are too few to ensure competition a reassessment of the situation can be carried out”. But this TEC (3 Technical Members) appointed by the NPA refused to change their stance, and the competition was reduced to bare minimum.

Further to this, these same TEC members and the Tender board forced the Consultant to allow 6 specialized sub-contracts as separate contracts thus creating a nightmare in coordinating one major contractor and six major specialized sub-contractors. As the NPA guidelines have excluded the consultants in any decision making, TEC and the TB had their say. As I was so disgusted with the process, I refused to represent the Consultancy Team at the TEC and the Tender Board meetings, as I felt I am demeaning myself by working with these inexperienced members of the TEC and the TB. But, at the pre-tender meeting, the three leading contractors who bid for this multi-billion rupee project congratulated us the Consultants for a well prepared set of documents stating that it is the first time they have come across such meticulously prepared bidding documents in Sri Lanka. If the TEC listened to the consultants and kept the deleted conditions these documents would have created much more accolades from at least another few major contractors.

Time frame for procurement

Procument Guideline Reference: 4.2.3 has given a Time Frame for Procurement Actions where Pre-Qualifications and Procurement is involved.

The period the Client (PE) should allow for this task for over Rs. 3000 million contracts in not less than 60 weeks. But these same guidelines allocates 23 weeks period for the TEC interaction in evaluating PQ application and the scrutinizing of the bidding documents. But the same guidelines allow not more than 75 weeks for the entire design and documentation process.
This shows that the NPA has very little knowledge about procurement of multi - billion rupee contracts and the time frame necessary to complete a project.

Procurement Guideline Reference: 4.2.2 the total time frame for a contract to be let from the time of commencement of the design and documentation is more than 200 weeks.

This time frame is very excessive and the NPA should revise this time frame by reducing the TEC involvements and come up with a realistic time frame to utilize the foreign funding to improve productivity and the economy of our country.

Construction risks

It is a known fact that our construction professionals are not cost conscious and lack expert knowledge to understand what contractual and construction risks are. For them the cost and the risk are not very important items in procuring a contract. Construction professionals’ worldwide use all avenues available for them to control the cost and the contractual and construction risk of construction projects, as the economy dictates the need for completion of cost effective construction projects. Even though, our economy demands us to use all avenues to plan and procure cost effective construction projects, we neglect this very important ingredient in procuring a contract. Some of the completed projects from loans obtained from agencies and donor countries bear testimony that we procure contracts without considering the cost. The Sri Lankan government rupee component was much greater than the loans we received to complete the Maduru Oya, Kotmale, Victoria and Randenigala as part of the Mahaweli projects. As such the government’s objectives in a cost effective procurement process should be well balanced by the NPA when drafting procurement guidelines without any ambiguities and inconsistencies.

Risks associated with multi-million-rupee contracts, which affect the project, should be distributed in a responsible manner between the government or the agency and the contractor. Risks are those factors where there is a probability of occurrence but the outcome and cost is uncertain.

The way a project is procured will expose the government or the agency to different types and levels of risks. The process of selecting a procurement strategy should therefore be an exercise in risk management for the process to have any benefit. In Sri Lankan procurement strategies the risk is distributed to the government, as the dice is loaded for the contractor to avoid any risks.

When selecting or deciding which procurement system to use there is no simple procedure to follow. Legislation or establishment of regulations cannot eliminate any contractual risks created by any defective procurement system. Each project will be different and must be treated on its merit and be matched to an appropriate procurement system, which exposes the government to an acceptable level of risks in attainment of the project objectives. In implementing the procurement strategy, the government/agency must firstly identify those constraints, which surround the specific project. In doing so the government should seek external expert assistance. Financial, physical, geographical, time, and functional or design constraints can affect any procurement selections.

If the NPA used experienced construction resource persons and experts in procurement systems to advice them during the preparation of these guidelines, then the NPA should have come on top and no individual will be able to criticise these guidelines. But the NPA’s decision was to ‘depend’ on ‘one individual’, who thinks that he is a procurement expert, may be responsible for creating all this ambiguities and inconsistencies. This individual was unable to understand that the procurement system is not only a set of ‘bidding documents’ , but it goes beyond the bidding documents and involves experience in understanding the process. Construction procurement is a specialized process which needs experience professionals.

The NPA’s belief that every professional is a procurement expert is a myth. If one is to be a procurement expert, he should be a master of many areas in the construction process, specially he should have a good knowledge in Contract Law, Contract Administration, Risk elimination and Risk allocation and in addition to other professional qualifications.

The lack of expert knowledge in the preparation of these guidelines is well demonstrated by the use of acronyms and the explanation given for ‘BOQ’ undermines the professionalism. Every individual in the construction industry is aware that BOQ is not ‘Bills of Quantity’ but ‘Bill(s) of Quantities’.

If the NPA is so ignorant to understand the meaning of BOQ, how can they understand the procurement process? Many professionals in Sri Lanka silently criticize these NPA guidelines, but due to various reasons they keep their voices very low. But, I think any ‘constructive criticism’ to eradicate corruption in the country should be taken “in good faith” for others to come forward to help the NPA to start ‘capacity building in procurement’ and to ‘create good corporate governance’.