Friday, February 26, 2021

PPRA rules hampering progress

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Though the incompletion of large projects is often blamed on the poor performance of the companies that have been hired for their execution, the real problem lies with the PPRA rules which need fixing. Recently a probe was demanded into the Peshawar BRT project by ANP because it could not be completed in the stipulated time. Similarly, the much-anticipated Islamabad Metro Bus project which was approved in 2017 is still not complete and the Capital Development Authority (CDA) has therefore refused to take charge of it from the National Highway Authority (NHA). There are numerous other examples of projects that now seem like a distant dream and the problematic PPRA rules are partly to blame for it.

We need to first dissect the process through which these projects are awarded to different companies. The government first invites bid and after an aggressive bidding process, one of the companies bags the project. Usually, the project is awarded to the to the lowest bidder without taking into account its past performance and competitiveness.

Read More: BRT Peshawar: PPP files complaint to NAB

Bribing public officials to win government business is also a common practice and corruption in large procurement projects remains widespread. In Pakistan, winning a deal too often means paying a bribe. Moreover, there have been several cases where contractors who had been blacklisted previously continued to get projects though PPRA rules read that ‘’the procuring agencies shall specify a mechanism and manner to permanently or temporarily bar, from participating in their respective procurement proceedings, suppliers and contractors who either consistently fail to provide satisfactory performances or are found to be indulging in corrupt or fraudulent practices’’

Another major reason why these public sectors projects stay incomplete is because of the various forms of guarantees that PPRA has set out incase the contractor backtracks and fails to fulfill its contractual obligations. For most of these government projects, 10 per cent to 20pc of the contract cost is put aside as performance guarantee, another 5 per cent is to be paid as the final bill once after the guarantee period expires. An additional 5 per cent is also retained and is released with the final bill. All these guarantees make up about 25 per cent of the cost of the project which means that there’s not enough working capital left behind to speed up the process. Therefore, it is understandable that if 25pc of the project cost is retained for an indefinite period of time, there is no motive for the contractors to complete it quickly. This answers the question of why there are so many unfinished development projects in the country.

PPRA rules need revision

To improve things, PPRA needs to update its rules and work towards making them easier for the contractors to comply with. Though guarantees are necessary to ensure the commitment of the company to the project but they should not be turned into an obstacle. Withholding a major chunk of working capital of the construction firm as security also acts as a disincentive and needs to be gotten rid of.  Instead, the government should only stick with the performance guarantee that it can obtain if the work is not satisfactory. It is true that often small players operating in the private sector just bid without any groundwork and are awarded these projects and most of the times, they fail to develop them. EPC (engineering, procurement and construction) firms should also carry out regular monitoring and inspection of these projects so that the problems can be detected at an earlier stage. Moreover, the plan of how the project needs to be executed needs to be chalked out in advance to save time.

Lastly, the PPRA rules should be revised thoroughly to address the requirements of the contractors involved so that potential for the disruption of the project can be minimized and development effectiveness can be improved. Competition Commission of Pakistan Director General Ahmed Qadir had earlier said that one of the major goals of public procurement is to get good value for the government, which can be ensured through vigorous competition and a holistic approach needs to be adopted which includes all stakeholders.

 

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