Law and Regulation of eGP in India

1
Law and Regulation ofeGP in India

• Sandeep Verma
• Director, Archaeology Museums
• Government of Rajasthan
• Jaipur, Rajasthan 302 014, India.
• sverma_at_rajasthan.gov.in, sverma_at_rajasthan.net

2
Verdicts on Government Procurements in India

• Tenders are a major source of corruption (CVC
  1998)
• Deviations in practice rather than absence of
  rules (World Bank 2003, Hoda and Bansal 2004)

3
Irregular practices in Government Procurement

• Access to Knowledge
• Absence of notice (selective/ restrictive
  advertisements)
• Lack of knowledge of tender rules and
  decision-making processes
• Lack of clarity in technical specifications
• Non-transparency in payments
• Access to Opportunity
• Selective sale of tender documents
• Obstruction/ intimidation of bidders
• selective acceptance of bids
• Modification/ substitution of quotes and tender
  papers
• Delays in processing of tenders
• Multiple in-situ and ex-post facto interventions

4
eGP Frameworks

• Trust in electronic commerce versus
  Correctness in public procurement
• Public procurement space in India versus that
  elsewhere
• General level of trust
• Enforcement of rights in civil and criminal
  matters
• Multiple levels of in-situ and ex-post-facto
  interventions (within the executive, and from
  outside- the judiciary, the Lokayukta/ Ombudsman,
  the CVC, the CAG, the Information Commissioners)
• Single-shot success versus Sustainability
• One Man show versus organisational effort

5
Government Procurement and International
Negotiations

• GATT 1994 government procurement of goods
  excluded from scope of national treatment and MFN
  clause but covered by transparency obligations
• GATS 1994 exclusion of government procurement of
  services from provisions of unconditional MFN and
  specific commitments of market access and
  national treatment but as a temporary measure
  only
• GPA 1981 Tokyo Round- transparency and
  non-discrimination provisions, India is not a
  signatory
• GPA 1996 Uruguay Round/ WTO Agreement services
  included, transparency, domestic challenge
  procedures to be established
• Doha Round 2001 Transparency in Government
  Procurement is one of the four Singapore Issues,
  negotiations are underway

6
UNCITRAL Model Law eGP

• UNCITRAL Model Law on Procurement of Goods,
  Construction and Services is the basis
• In its 36th session, the Commission expressed
  strong support for addressing issues arising out
  of increasing use of electronic communications
  and technologies in public procurement
• Working Group I sets out policy objectives for
  eGP
• Functional equivalence of electronic and
  paper-based records
• Technology neutrality
• Mandatory/ optional use of electronic publication
• Consent of suppliers
• Use of reverse auctions

7
Government Procurements the legal scenario in
India

• Access to Information
• Right to Information Act
• Procurement Rules/ Acts
• CVC Guidelines
• Access to Opportunity
• Procurement Rules/ Acts
• Competition Act
• CVC Guidelines
• Electronic Environment
• Information Technology Act

8
Legal foundations of eGP in India

• No Act/ set(s) of rules deals with eGP one needs
  to read local procurement acts/ rules together
  with the IT Act and attempt inferences on
  electronic procurement mechanisms and electronic
  publication
• Negotiations and counter-offers are strictly
  restricted if not prohibited, price-bid
  disclosure is similarly prohibited
• CVC guidelines offer a minimalist framework
• E-procurement/ reverse auctions are permitted
  provided they are conducted in a fair and
  transparent manner
• Switchover from manual paper-based tendering
  systems to e-procurement/ e-sale allowed wherever
  practical and feasible

9
A legal autopsy of anelectronic Reverse Auction

• A reverse auction is a dynamic procurement
  system based on negotiated multiple
  counter-offers, with real-time price-disclosure
  to all bidders while keeping their identities
  secure
• Ergo
• It is nothing like the traditional simultaneous,
  sealed-bid, first-price auction!

10
eGP Mechanisms

• Electronic Tendering
• Electronic Disclosure of tender opportunities
• Automated/ Assisted Registration Distribution
  of documents
• Electronic Bid Submission
• Electronic Contract Management
• Electronic Reverse Auctions
• Electronic Purchases
• Electronic Auctions
• Supply Chain Integration and Automation
• Electronic Vickrey/ second-price auctions
• Rate Contracts and Framework Agreements

11
eGP Reverse Auctions

• Position of Negotiated Procurements and Multiple
  Bidding under
• Local Procurement Acts and Rules
• CVC Guidelines
• Position regarding Price- disclosure requirements
  (through the Buyer to other bidders) vis-à-vis
• Local Procurement Acts, Rules and Guidelines
• RTI Act, IT Act
• Preferences for SSIs and other socioeconomic
  entities
• Consent implied by Participation voluntary
  consent

12
eGP Reverse Auctions

• Reverse Auctions for what commodities?
• Clear technical specifications and buyers
  capacity to enforce compliance Standardised,
  commercial, off-the-shelf products
• Only for fungible products? For services?
• Role of non-price factors
• Adequate market intelligence
• Safety concerns

13
eGP Reverse Auctions

• Reverse Auctions for what quantities? For what
  class(es) of bidders?
• Bulk buying for individual user
• Agglomerated small buying for multiple users
• Buying from established and responsible buyers
• Economies of scale versus socioeconomic
  preferences
• Economies of scale versus monopolistic/
  oligopolistic sellers
• Possibility of collusion
• Real-time bid-price disclosure price preferences
  and instant award

14
eGP Reverse Auctions

• Reverse Auctions as an interim stage after
  technical evaluation, or as the full procurement
  decision?
• Pre-screening and maintenance of suppliers lists
• Rank Bidding, Transformational Bidding and True
  Best Value Bidding

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eGP Reverse Auctions

• Bid time-frames
• Hard Closure and Extensions
• Flexibility in decision-making by bidders
• Auction Fever or the Winners Curse
• Impact on long-term relationships between buyers
  and sellers
• Impact on RD for products
• fair and reasonable price bands, possibility of
  Vickrey auctions
• Quantity-based auctions
• Is under-bidding a real problem?
• Instant Award versus Post-auction analysis

16
Electronic Government Procurement in India

• An analysis of eGP projects from an access
  viewpoint

17
Access to knowledge of tender opportunities

• Large number of websites, but very little
  integration and standards-based organisation of
  information
• Infrequent updation and reliability of accurate,
  up-to-date information
• Unprotected sites digital verification and
  authentication of downloads not possible
• Absence of automatic notification by email

18
Access to knowledge of bidding rules

• Strong technical and financial bid evaluation
  both in paper-based as well as electronic
  mechanisms
• E-reverse auctions lack of sufficient
  information on bid parameters like start time and
  duration, rules on extension of time, bid
  increments, critical number of minimum bidders,
  and even delays in announcement of bidding rules

19
Trust in system integrity and bid challenge
procedures

• Low levels of public trust in general few good
  bidders participate, markups generally made by
  vendors
• ASP-centered approach effectively disables
  third-party audit
• Drop in connectivity
• Number of modifications by winning bidder
• Absence of clear bid challenge procedures even on
  the electronic platform

20
Access to ICT digital security infrastructure

• 3.6 of the population is internet users in 2005,
  50 of them in top 8 metros (NRS estimates are
  even lower)
• One in five persons reads a newspaper, while one
  in thirty uses the internet
• Cost of access to ICT not lower than access to
  newspapers
• Poor line and power quality even in capital
  cities
• Compounds problems associated with poor
  organisation of electronic information, and with
  electronic reverse auctions

21
Electronic auctions and law of privacy/ data
protection

• Legal status of protection of sensitive
  commercial information and intellectual property
• Whether mere participation equals consent to
  waiver of rights on IP
• While IT acts lists criminal and civil penalties,
  most Govt-ASP agreements do not delineate
  liabilities, bidders indemnify the ASP as a
  pre-requisite to participation
• RTI Act allows public disclosure of commercial
  information

22
Agglomeration of quantity

• No law/ rules/ guidelines exist
• Left to discretion of purchasing agencies
• Impacts on competition
• Limiting number of players
• Favour large players at the cost of SSIs and SMEs

23
Technology Competition

• Almost all eGP projects employ mono-methods
• Access to technology and ICT is restricted by
  costs, quality and regions thus affecting
  economic competition
• MDB guidelines
• Electronic participation should not be mandatory
  but must include paper-based options
• Electronic publication must be promoted but not
  solely mandated
• No additional financial burden on bidders because
  of use of technology platforms
• Competition Law in India
• Ban on limiting supply, markets or provisions of
  services
• Prohibition of tie-in arrangements
• Ban on refusal-to-deal by restricting classes
  of persons
• Prohibition on practices that result in denial of
  market access

24
Electronic Government Procurement

• Back to Basics

25
eGP Issues

• Agglomeration of Quantity and its relationship
  with
• economies of scale
• Market structure
• SSI preferences and capacities
• GoI/ State Government/ PSU/ CVC/ MDB/ UNCITRAL
  Guidelines on
• Optional/ Mandatory eGP
• User-charges for participation in eGP
• Mandatory/ Optional publication of Tender Notices
  and Awards

26
eGP Issues

• Technology as Barrier to Entry
• Technology neutrality
• Choice of software platform
• Cost and availability of technology
• Regional dispersion of technology and capacity
• Limitations of Technology
• Verifiability after certificate revocation and
  expiry (validity period)
• Re-verification
• Digital Storage and retrieval
• Notararisation

27
eGP Issues

• Issues in Bid Challenge Procedures
• Connectivity failures
• Handling mistakes
• Disclosure of identity
• Non-disclosure of own relative position
• Deliberate and malicious attacks
• System Recovery and Pause of bidding
• Dispute Resolution Fora
• Does Outsourcing of Services equal Outsourcing
  of Grievance Redressal
• Liability of Government functionaries vis-à-vis
  computers and visa-a-vis Service Provider
• Multiple levels of in-situ and ex-post-facto
  interventions
• Civil and criminal adjudication authorities under
  the IT Act 2000

28
eGP Issues

• eGP as a subset of overall contract reform
• Electronic Payments
• ERP/ SCM systems
• Develop Book-keeping, Accounting and Audit
  capabilities
• Use and Maintenance of suppliers lists
• Taxation of eCommerce

29
References

• American Management Systems (2001), The Case for
  Federal eProcurement online http//www.netcaucu
  s.org/books/egov2001/pdf/The_Case.pdf
• Bhatnagar, S. (2003a), The Economic and Social
  Impact of E-government online
  http//www.iimahd.ernet.in/subhash/pdfs/UNDESAeGo
  vReport.pdf
• Bhatnagar, S. (2003b), E-government and access
  to information, Global Corruption Report 2003,
  Hodess, Inowlocki and Wolfe (Eds.), Profile Books
  Ltd, London, 2003, 24-32
• Central Vigilance Commission (1998), Improving
  Vigilance Administration, Orders No.
  8(1)(h)/98(1) dated November 18, 1998 online
  http//cvc.nic.in/ins1.pdf
• Chandrasekhar, C.P. (2003), Can Connectivity
  help the Poor?, Frontline, Vol. No. 20 Issue No.
  2, 2003 online http//www.hinduonnet.com/fline/f
  l2012/stories/20030620004911700.htm
• The Hindu Business Line (2004), SAIL, Tata Steel
  ties strained over Metaljunction portal online
  http//www.blonnet.com/2004/06/26/stories/20040626
  02860100.htm
• Hoda, A. and Bansal, S. (2004), Transparency in
  Public Procurement, Working Paper No. 129,
  Indian Council for Research on International
  Economic Relations online http//www.icrier.org/
  wp129.pdf
• Indian Railways (2006), Instructions for
  Suppliers/ Contractors/ Vendors for participation
  in Electronic Tenders online
  http//www.nreps.com/nrailways//publicDocs/EPSGUID
  E/instructiion.pdf
• Inter-American Development Bank (2005),
  e-Reverse Auction Guidelines for MDB Financed
  Procurement online http//idbdocs.iadb.org/wsdo
  cs/getdocument.aspx?docnum645477
• Metaljunction (2004), On Behalf of Steel
  Authority of India Limited online
  http//auction.metaljunction.com/attachments/SAIL
  20Bokaro20Terms20and20Condiotions(11-1-2004).pd
  f
• Metaljunction (2005), Invitation to Online
  Forward Auction online http//auction.metaljunc
  tion.com/attachments/IISCO20BURNPUR20BILLET2010
  00MT20CATALOGUE(8-11-2005).pdf
• Seifert, J. W. and Bonham, G. M. (2003), The
  Transformative Potential of E-Government in
  Transitional Democracies online
  http//www.spa.msu.ru/e-journal/2/25_1.php

• Stein, A. and Hawking, P. (2002), Reverse
  Auction E-Procurement A Suppliers Viewpoint
  online http//ausweb.scu.edu.au/aw02/papers/refr
  eed/stein/paper.html
• Turley, S. L. (2002), Wielding the Virtual
  Gravel-DoD moves forward with reverse auctions,
  Military Law Review, Vol. 173, September 2002,
  pp. 1-67 online http//www.loc.gov/rr/frd/Milita
  ry_Law/Military_Law_Review/pdf-files/27648D1.pdf
• UNCITRAL (2004), Recent developments in the area
  of public procurement- issues arising from the
  increased use of electronic communications in
  public procurement online http//daccessdds.un.
  org/doc/UNDOC/LTD/V04/547/11/PDF/V0454711.pdf
• Verma, S. (2004), Electronic Government
  Procurement A legal perspective on the Indian
  situation, Journal of Electronic Government,
  Vol. 1 No. 3, 2004, pp.328-334
• Verma, S. (2006), E-Buying The Works, The
  Economic Times, February 2, 2006 online
  http//www1.economictimes.indiatimes.com/corpamban
  ishow/1397271.cms
• Wallace, D. Jr., Yukins, C. R., Matechak, J. P.
  (2005), UNCITRAL Model Law Reforming Electronic
  Procurement, Reverse Auctions, and Framework
  Contracts, The Procurement Lawyer, Vol. 40 No.
  2, 2005 online http//papers.ssrn.com/sol3/paper
  s.cfm?abstract_id711401
• The World Bank (2001), Electronic Government
  Procurement Concepts and Country Experiences
  online http//wbln0018.worldbank.org/OCS/egovfor
  um.nsf/c3c9b2819079a45d852569bc007722a0/e559644298
  8cccfd85256af5006af56a/FILE/ATTUQ5LL/egpdiscpaper
  draft16.pdf
• The World Bank (2002), Electronic Government
  Procurement A legal perspective on Country
  Practices online http//wbln0018.worldbank.org/
  OCS/egovforum.nsf/c3c9b2819079a45d852569bc007722a0
  /c9070990a03d7e2585256af5006af56d/FILE/Legal20Su
  mmary2003-19-02web.pdf
• The World Bank (2003), Country Procurement
  Assessment Report (India) online
  http//www-wds.worldbank.org/servlet/WDSContentSer
  ver/WDSP/IB/2004/04/02/000012009_20040402111746/Re
  ndered/PDF/278590IN.pdf

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• Thank You