Thursday, February 9, 2012


The entire process of tender in India is corrupt

There is no secret in the fact that cost overrun and time overrun are two biggest melancholies that are haunting development projects since decades. These two deliberate predicaments have not only resulted in unbridled leakages in the system but also led to huge opportunity cost and negative externalities. Today, almost all projects that are awarded through tenders are 'fixed' and subsequently awarded to a select few contractors and not always to the lowest bidder. This facilitates redirection of funds to personal coffers of middlemen and has allowed mafias to thrive.

Take the case of inviting tenders for awarding contracts. Every year, tenders are invited for various public development programs. Fundamentally, the lowest bidder is awarded the majority of the contracts and thus bidders quote low rates at times, even without any feasibility checks. This not only increases their chances of winning the tender but also eliminates competition coming from genuine bidders. But then, in order to cover the cost, these contractors eventually compromise on the quality of work and keep their profit margins intact. Today, tenders are no more awarded to lowest bidders but to bidders who are a part of bureaucratic nexus and those who have been able to manage the tender bidding and winning process for long. Thus, these bidders, irrespective of quoting higher price, win the project. So much so, the tenders for Indian Railways and Department of Telecom have created a full- fledged mafia. In effect, organised crime found a nice way to legitimize their money by involving itself into it.

The World Bank Health Scam in 2008 literally let the beans spill. Almost 15,000 tenders were allotted to fraudulent and blacklisted companies (even to bogus companies). The bids never materialised and most of the money, estimated around $550 million, was swindled by intermediaries which never reached the target audience. In 2009, scams worth Rs.400 crore were found to have crept in during tender bidding process for high security car registration plates. In January this year, Bruhat Bangalore Mahanagara Palike (BBMP) was found to have announced a tender for an infrastructure work that was already complete. BBMP along with Karnataka Rural Infrastructure Development Limited (KRIDL) had misappropriated Rs.483 crore through this bogus tender. On Feb 2, 2012, a petition was filed before the Kerala High Court challenging the tender for the expansion of national highway in which it is alleged that the tender was awarded to a company that didn’t even file for bidding. Amidst all these, its CWG bidding that has been the mother of all tender scams. Kalmadi was found (and arrested too!) to have inflated the tenders worth crores and thus embezzled an obscene sum of money.

Most of the scams that creep in governmental projects are through tenders and more because as our system is completely opaque and perfectly designed to suit the convenience of the current tendering process. The process of tendering should be urgently made transparent and automated. It’s imperative to eliminate human interference and allow technology to choose the eligible bidders. Moreover, no contractors should be allowed extra time and extra money post bidding and in case of such demand, a heavy fine should be imposed. This would keep non-genuine bidders at bay and the tenders would make meaningful impact on the economy.


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