Concerns over corruption

THE National Procurement Commission which replaces the previous Central Supply and Tenders Board will improve efficiency and transparency in the public procurement system, which over the years has lost millions through corruption. Business reporter PETER ESILA writes.

Corruption in public procurement is still a big concern for companies, says Paul Barker, the director of the Papua New Guinea Institute of National Affairs (INA).
He said some companies would not even bother to apply for tender because they would have to deal with corrupt “back door” government officials.
“And that has been there modus operandi over the years,” Barker said.
The new National Procurement Act 2018 which replaces the previous Central Supply and Tenders Board aims to improve efficiency and transparency in public procurement.
Chief Ombudsman Michael Dick defined corruption as: “Any wrong conduct, any wrong decision that anyone makes with the intention to conceal, only to be exposed through an investigation process, or prosecution in court.”
Barker, Dick, Prime Minister James Marape, Central Governor Robert Agarobe and Finance secretary Dr Ken Ngangan were part of a discussion panel on the government’s public procurement reform through the National Procurement Act 2018.
The discussion was hosted by the Papua New Guinea-Australia Alumni Association in Port Moresby last week.
Barker, who returned from the June 18-19 Extractive Industry Transparency International Global Conference hosted in Paris, said open data and open contracting was one new environment to encourage more transparency and accountability.

Open Data
“Open data, open contracting, is all about trying to make the processes more transparent, so that the public is able to see what the transactions that their government is participating in and to build up that trust,” Barker said.
“Open data is about trying to enhance the level of trust, citizens have in their government.
“All over the world we have this trend about the government towards what I call disbelief in government and government systems and belief in fake news rather than anything that is necessarily and completely legitimate.”
Barker said it took different players to be involved to make open data a reality.
“Not all companies will see benefits from this process because those that are used to or prefer going through the back door probably are used to dealing with their friendly officials, maybe a friendly politician and that is the modus operandi.
“But the genuine companies that one wants to operate, really are the ones that are going to have to compete because they have a particular skill and a particular service and a particular good that they can compete for, and whether that is in trying to secure natural resources, in a country which is what Extractive Industries Transparency Initiative (EITI) is particularly about, or whether they are trying to gain contracts from the government and provide public goods whether it is pharmaceuticals or delivering a road construction or other services.”

Corruption
Speaking on some of the procurement issues which lead to corruption, Dick said: “I think the nation and every one is fed up with the way things are happening, especially in the areas of procurement.
“I am sick and tired of the cost variations, that goes on to say that we do not know what we want, and we do not know how much it cost, to get what we want, therefore, somebody else is playing games on us,” he said.
Dick said a change of mindset, a change of the decision process, and attitude was the way to fight corruption.
“We can’t go where we want to go with the same attitudes, mindset and same ways of doing things, that would be contradictory and we would only deceive ourselves,” he said.
Dick said the Ombudsman Commission had initially pushed to be represented on boards but realised that they needed to maintain their neutrality and impartiality.
He said the OC was a watchdog and not a body out to be a hindrance to businesses and development.
“We should be seen as a partner in the whole development of the whole process,” he said.
“Our primary role is to ensure that all the laws, process and procedures are followed.”
When it comes to the traditional role of checking government department, Dick said the OC had undertaken to work with government departments and provincial administrations to establish a help desk to deal with matters at their level.
“We want to allow people out there to become watchdogs to make sure things are done properly, because we have limited resources and we can’t do everything,” he said.
“But some of the people we are trying to talk to think that we are trying to set up spy networks to keep check them, but coming back to the point of the National Procurement Commission (NPC), we want to be seen as a partner in ensuring that the laws and practices we put in place are complied with.
“Our role is not to obstruct but to make sure everyone is playing on a level field for the benefit of everyone.”
Barker said it was easy for corruption to grow and become more and more of a cancer, across the whole of society.
He said the NPC’s aim to improve efficiency and transparency in public procurement would not be achieved overnight.
“Curing corruption is an expensive process, but it is vital. If you can minimise the opportunities through open and transparent processes, and engage civil society groups along with the official watchdogs, the Ombudsman Commission, the Auditor-General and so on, then all the mechanisms start to click into place,” he said.
“Every few years, the INA makes a survey of businesses and investment and corruption is the second highest concern of businesses.”
The last one in 2017, the shortage of foreign exchange suddenly lapsed to the top, but I think everyone envisage that a lack of foreign exchange is something that can be readily addressed in a reasonably short period of time.
“Businesses put corruption as their top priority for action for governments to address. Addressing more wider law and order issues comes second because they see corruption as harder to address and, therefore in need of greater focus,” Barker said.
He said corrupt practices in land acquisition seemed to be most common because this provided the basis for other corrupt practices.
He said other area of corruption was in customs tax that affected an estimated 23 per cent of businesses.
He improper practices in public procurement accounted for a fifth of corruption in businesses and government.
“Obviously less companies were involved in public procurement, in putting in bids and tenders,” Barker said.
“It is a very costly exercise, preparing bids for government projects. When the contracts are invariably won by the highest bid or the second highest bidder, it is disincentivises companies from putting in legitimate bids.”
He said the inevitable outcome of that was a steady appreciation of the costs of goods and services the Government was trying to procure.
“Whether at the national level or the district level contracts, we have heard of phenomenally overpriced contracts on small projects,” he said.
“We’ve heard of a toilet block in one provincial capital which apparently cost several million kina when it should’ve been built for a hundred thousand.”
Barker said the overspending on these projects took away from funds that could be spent in other areas.
“Trying to establish an effective procurement system or a more effective procurement system can’t be achieved over night because the capacity isn’t there particularly at the sub-national level,” he said.
“I think the National Procurement Commission and all the mechanisms that have been designed are a step in the right direction.
“Getting the right board is going to be crucial but we know that the procurement process starts a lot earlier than that.
“We know that some of the problems of procurement over the years have often happened because there has been collusion behind the scenes and there has been a mechanism for knocking out legitimate bids on technicalities.”
Barker said the process had been compromised because legitimate bids would be disqualified while others that were not as competent were accepted.
“We also know that there are a lot of projects that haven’t been gone through proper procurement processes at all. Certain companies including around Port Moresby win contracts instantly,” he said.
“In PNG, certainly there are certain companies that have benefited hugely from these practices.
“I take that vast majority of companies would however prefer, to have a level playing field where everyone is bidding by the rules, we all will be able to participate on that basis, and that is why for example in the EITI process, companies have come on board themselves because they know that they will invariably miss out on the licenses and permits.”
Barker said corruption in the bidding and tendering process would see only a handful of firms benefit and that in itself would not guarantee the best goods and services possible were delivered.
He said the more companies were involved in the process, the greater the chance of hiring the best for the job.
With respect to EITI and contracting, Barker said EITI had opened up awareness on the level of funds, the flow of funds that were coming in from the companies to the government.
“It has helped highlight where some of the big gaps are, some of the companies are being less compliant in providing timely information and some of the government institutions have also been rather slow in their responsiveness, that’s including MRDC, as a trust entity on behalf of the landowners, and it also included some of the entities like Kumul Petroleum Holdings under the audit laws of PNG, all government entities were obliged to submit their accounts for auditing but somehow some of these entities have also introduced parallel laws that somehow exempt them from this process so that information is not revealed to Parliament or even to the relevant ministers,” Barker said.

National Procurement Commission
Ngangan said the National Procurement Act took into account the current business environment, information technology platforms and provided a more transparent, accountable procurement system.
“We had the provincial supply and tenders board, district supply and tenders boards, and specialised supply and tenders board, each of them operating independently and the sad thing about that was that we were not able to know what contracts were awarded, the value of those contracts, the performance of those contracts and more importantly the payments made to today and payments outstanding, at the end of the contracts,” he said.
“We only got the bills and the contract claims coming into the Department of Finance for payments. We had no clue as to who procured for what.”
Ngangan said the process had made the state liable to pay claims which it knew little about which was a dangerous situation to be in.
“What the NPC ensures now is that all the contracting is centralised, there is one system of procurement,” he said.
“Note that we are not taking away the function, the function is still played out at the provinces and districts and the specialised tenders boards, but accountability and reporting of that is now centralised to the NPC. We will now have a database of contracts and the performance of those contracts, and more importantly, the liability that stands from those contracts.”
He said capacity building at the sub-national level was still ongoing.
“We are still building capacity at the provincial and district level.”