Page 1 Page 2 Balochistan – Procurement Systems Performance Assessment ii 5HSRUW\031R\11ffihungarumlaut\1acaronff\103.\03 \03 %$/2&+,67$1\033529,1&(\03 3$.,67$1\03 3URFXUHPHQW\036\VWHPV\033HUIRUPDQFH\03$VVHVVPHQW\03 May 2007 UK’s Department for International Development The European Commission Asian Development Bank Government of Balochistan and Development Partners The World Bank Group Government of Balochistan Page 3 Balochistan – Procurement Systems Performance Assessment iii Page 4 Balochistan – Procurement Systems Performance Assessment i $&521<06\03$1'\03$%%5(9,$7,216\03 ADB - Asian Development Bank AG - Accountant General AGA - Autonomous Government Agencies BDA - Balochistan Development Authority BLIs - Baseline Indicators BPM - Balochistan Purchase Manual CDWP - Central Development Working Party CPI - Compliance Performance Indicators CPO - Chief Purchase Officer DAC - Departmental or District Accounts Committee DAO - District Accounts Officer DDWP - Departmental Development Working Party DFID - Department for International Development (UK) DG - Director General EDO - Executive District officer EU - European Union FD - Finance Department FY - Fiscal Year GCC - General Conditions of contracts GoB - Government of Balochistan GoP - Government of Pakistan JV - Joint Venture LG - Local Government BLGO - Balochistan Local Government Ordinance MDA - Ministries, Departments and Agencies MOF - Ministry of Finance MTBF - Medium Term Budget Framework NAM - New Accounting Model NBP - National Bank of Pakistan OECD - Organization for Economic Cooperation and development P&DD - Planning and Development Department PAAS - Pakistan Audit and Accounts Service Page 5 Balochistan – Procurement Systems Performance Assessment ii PAC - Public Accounts Committee PAO - Principle Accounting Officer PCF - Provincial Consolidated Fund PDWP - Provincial Development Working Party PE - Public Enterprises PEC - Pakistan Engineering Council PEFA - Public Expenditure and Financial Accountability PFC - Provincial Finance Commission PFM - Public Financial Management PFMAA - Provincial Financial Management and Accountability Assessment PIFRA - Project for Improvement in Financial Reporting and Auditing PPRA - Public Procurement Regulatory Authority P-PRSP - Provincial Poverty Reduction Strategy Paper PSDP - Public Sector Development Program RA - Revenue Administration S&GAD - Services and General Administration Department SBP - State Bank of Pakistan SME - Small and Medium Enterprise SN - Sub national SOE - State Owned Enterprise SPO - Senior Purchase Officer STO - Senior technical Officer TMA - Tehsil Municipal Administration TO - Tehsil Officer UNDP - United Nations Development Program WFP - World Food Program Page 6 Balochistan – Procurement Systems Performance Assessment iii &217(176\03 \03 %$&.*5281'\032)\032(&'\10'$&\03352&85(0(17\036<67(06\03$66(660(17\03)5$0(:25.\0f\036&23(\03 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3URFXUHPHQW\036\VWHPV\1d\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11breve 3LOODU\03,\03±\03/HJLVODWLYH\03DQG\035HJXODWRU\\03)UDPHZRUN\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11caron ,QGLFDWRU\03fi\11\033XEOLF\03SURFXUHPHQW\03OHJLVODWLYH\03DQG\03UHJXODWRU\\03IUDPHZRUN\0f\03DFKLHYHV\03WKH\03DJUHHG\03VWDQGDUGV\03DQG\03 FRPSOLHV\03ZLWK\03DSSOLFDEOH\03REOLJDWLRQV \11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11caron Sub-indicator 1(a) – Scope of application and coverage of the legislative and regulatory framework...6 - The structure of the regulatory framework governing the public procurement and the extent of its coverage ...............................................................................................................................................6 - Public Access to the rules / regulations.............................................................................................6 Sub-indicator 1(b) – Procurement Methods.............................................................................................7 Sub-indicator 1(c) – Advertising rules and time limits.............................................................................8 Sub-indicator 1(d) – Rules on participation.............................................................................................8 Sub-indicator 1(e) – Tender documentation and technical specifications..............................................10 Sub-indicator 1(f) – Tender evaluation and award criteria ...................................................................10 Sub-indicator 1(g) – Submission, receipt and opening of tenders..........................................................11 Sub-indicator 1(h) – Complaints ............................................................................................................11 ,QGLFDWRU\03ffl\1d\03([LVWHQFH\03RI\03,PSOHPHQWLQJ\035HJXODWLRQV\03DQG\03'RFXPHQWDWLRQ\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fiffl Sub-indicator 2(a) – Implementing regulation that provide defined processes and procedures not included in higher-level legislation.........................................................................12 Sub-indicator 2(b) – Model tender documents for goods, works, and services......................................13 Sub-indicator 2(c) – Procedures for pre-qualification...........................................................................13 Sub-indicator 2(d) – Procedures suitable for contracting for services, or other requirements in which technical capacity is a key criterion........................................................................13 Sub-indicator 2(e) – User’s guide or manual for contracting entities....................................................14 Sub-indicator 2(f) – General Conditions of Contracts (GCC) for public sector contracts covering goods, works and services consistent with national requirements and, when applicable, international requirements...................................................................14 Page 7 Balochistan – Procurement Systems Performance Assessment iv 3LOODU\03,,\11\03,QVWLWXWLRQDO\03)UDPHZRUN\03DQG\030DQDJHPHQW\03&DSDFLW\\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fiff ,QGLFDWRU\03ffi\11\037KH\03SXEOLF\03SURFXUHPHQW\03V\VWHP\03LV\03PDLQVWUHDPHG\03DQG\03ZHOO\03LQWHJUDWHG\03LQWR\03WKH\03SXEOLF\03VHFWRU\03 JRYHUQDQFH\03V\VWHP\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fiff Sub-indicator 3(a) – Procurement planning and associated expenditures are part of the budget formulation process and contribute to multiyear planning.....................................15 Sub-indicator 3(b) – Budget law and financial procedures support timely procurement, contract execution, and payment...........................................................................................15 Sub-indicator 3 (c) – No initiation of procurement actions without existing budget appropriations.....16 Sub-indicator 3(d) – Systematic completion reports are prepared for certification of budget execution and for reconciliation of delivery with budget programming .................................17 ,QGLFDWRU\03ff\11\037KH\03FRXQWU\\03KDV\03D\03IXQFWLRQDO\03QRUPDWLYH\12UHJXODWRU\\03ERG\\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fi\1a Sub-indicator 4(a) – The status and basis for the normative/regulatory body is covered in the legislative and regulatory framework .....................................................................18 Sub-indicator 4(b) – The body has a defined set of responsibilities that include but are not limited to the following............................................................................................................18 Sub-indicator 4 (c) – The body’s organization, funding, staffing, and level of independence and authority (formal power) to exercise its duties should be sufficient and consistent with the responsibilities...........................................................................................18 Sub-indicator 4(d) – The responsibilities should also provide for separation and clarity so as to avoid conflict of interest and direct involvement in the execution of procurement transactions.............................................................................................................19 ,QGLFDWRU\03breve\1d\03([LVWHQFH\03RI\03LQVWLWXWLRQDO\03GHYHORSPHQW\03FDSDFLW\ \11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fihungarumlaut Sub indicator 5(a) – The province has a system for collecting and disseminating procurement information, including tender invitations, requests for proposals, and contract award information...................................................................................................19 Sub-indicator 5(b) – The country has systems and procedures for collecting and monitoring national procurement statistics..............................................................................................19 Sub-indicator 5 (c) – A sustainable strategy and training capacity exists to provide training, advice and assistance to develop the capacity of government and private sector participants to understand the rules and regulations and how they should be implemented.............................................................................................................19 Sub-indicator 5(d) – Quality control standards are disseminated and used to evaluate staff performance and address capacity development issues..........................................20 Rating ‘1’ 20 3LOODU\03,,,\11\033URFXUHPHQW\032SHUDWLRQV\03DQG\030DUNHW\033UDFWLFHV\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fflfl Sub-indicator 6(a) – The level of procurement competence among government officials within the entity is consistent with their procurement responsibilities ....................................21 Sub-indicator 6(b) – The procurement training and information programs for government officials and for private sector participants are consistent with demand....................................21 Page 8 Balochistan – Procurement Systems Performance Assessment v Sub-indicator 6(c) – There are established norms for the safekeeping of records and documents related to transactions and contract management ..............................................................21 Sub-indicator 6(d) – There are provisions for delegating authority to others who have the capacity to exercise responsibilities...........................................................................................22 ,QGLFDWRU\03\1a\11\03)XQFWLRQDOLW\\03RI\03WKH\03SXEOLF\03SURFXUHPHQW\03PDUNHW\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fflffl Sub-indicator 7(a) – There are effective mechanisms for partnerships between the public and private sector.......................................................................................................................23 Sub-indicator 7(b) – Private sector institutions are well organized and able to facilitate access to the market......................................................................................................................23 Sub-indicator 7 (c) – There are no major systemic constraints (e.g. inadequate access to credit, contracting practices, etc.) inhibiting the private sector’s capacity to access the procurement market ................................................................................................23 ,QGLFDWRU\03dotaccent\11\03([LVWHQFH\03RI\03FRQWUDFW\03DGPLQLVWUDWLRQ\03DQG\03GLVSXWH\03UHVROXWLRQ\03SURYLVLRQV\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fflffi Sub-indicator 8(a) – Procedures are clearly defined for undertaking contract administration responsibilities that include inspection and acceptance procedures, quality control procedures, and methods to review and issue contract amendments in a timely manner.....................................................................................................................24 Sub-indicator 8(b) – Contracts include dispute resolution procedures that provide for an efficient and fair process to resolve disputes arising during the performance of the contract....24 Sub-indicator 8(c) – Procedures exist to enforce the outcome of the dispute resolution process..........25 3LOODU\03,9\11\03,QWHJULW\\03DQG\037UDQVSDUHQF\\03RI\03WKH\033XEOLF\033URFXUHPHQW\036\VWHP\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fflbreve ,QGLFDWRU\03hungarumlaut\11\037KH\03FRXQWU\\03KDV\03HIIHFWLYH\03FRQWURO\03DQG\03DXGLW\03V\VWHPV\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fflbreve Sub-indicator 9(a) – A legal framework, organization, policy, and procedures for internal and external control and audit of public procurement operations are in place to provide a functioning control framework................................................................................25 Sub-indicator 9(b) – Enforcement and follow-up on findings and recommendations of the control framework provide an environment that fosters compliance ..................................26 Sub-indicator 9(c) – The internal control system provides timely Information on compliance to enable management action..................................................................................................26 Sub-indicator 9(d) – The internal control systems are sufficiently defined to allow performance audits to be conducted........................................................................................................26 Sub-indicator 9(e) – Auditors are sufficiently informed about procurement requirements and control systems to conduct quality audits that contribute to compliance............................27 ,QGLFDWRU\03fifl\11\03(IILFLHQF\\03RI\03DSSHDOV\03PHFKDQLVP\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11ffl\1a Sub-indicator 10(a) – Decisions are deliberated on the basis of available information, and the final decision can be reviewed and ruled upon by a body (or authority) with enforcement capacity under the law ............................................................................................27 Sub-indicator 10(b) – The complaint review system has the capacity to handle complaints efficiently and a means to enforce the remedy imposed...........................................................28 Page 9 Balochistan – Procurement Systems Performance Assessment vi Sub-indicator 10 (c) – The system operates in a fair manner, with outcomes of decisions balanced and justified on the basis of available information........................................................28 Sub-indicator 10(d) – Decisions are published and made available to all interested parties and to the public.......................................................................................................................28 Sub-indicator 10(e) – The system ensures that the complaint review body has full authority and independence for resolution of complaints..............................................................29 ,QGLFDWRU\03fifi\11\03'HJUHH\03RI\03DFFHVV\03WR\03LQIRUPDWLRQ\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fflhungarumlaut Sub-indicator 11(a) – Information is published and distributed through available media with support from information technology when feasible............................................................29 ,QGLFDWRU\03fiffl\11\037KH\03FRXQWU\\03KDV\03HWKLFV\03DQG\03DQWLFRUUXSWLRQ\03PHDVXUHV\03LQ\03SODFH\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11fflhungarumlaut Sub-indicator 12(a) – The legal and regulatory framework for procurement, including tender and contract documents, includes provisions addressing corruption, fraud, conflict of interest, and unethical behavior and sets out (either directly or by reference to other laws) the actions that can be taken with regard to such behavior.................30 Sub-indicator 12(b) – The legal system defines responsibilities, accountabilities, and penalties for individuals and firms found to have engaged in fraudulent or corrupt practices...30 Sub-indicator 12 (c) – Evidence of enforcement of rulings and penalties exists....................................31 Sub-indicator 12(d) – Special measures exist to prevent and detect fraud and corruption in public procurement.............................................................................................................32 Sub-indicator 12(e) – Stakeholders (private sector, civil society, and ultimate beneficiaries of procurement/end-users) supports the creation of a procurement market known for its integrity and ethical behaviors...........................................................................32 Sub-criteria 12(f) – The country should have in place a secure mechanism for reporting fraudulent, corrupt, or unethical behavior ................................................................................32 Sub-criteria 12(g) – Existence of Codes of Conduct/Codes of Ethics for participants that are involved in aspects of the public financial management systems that also provide for disclosure for those in decision making positions...................................................33 %DORFKLVWDQ\03*RYHUQPHQW\035HIRUPV\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11\11ffiffi Decentralization Support Program.........................................................................................................33 Balochistan Resource Management Program........................................................................................33 PIFRA PFM Capacity-building Programs.............................................................................................33 Page 10 Balochistan – Procurement Systems Performance Assessment 1 BACKGROUND OF OECD-DAC PROCUREMENT SYSTEMS ASSESSMENT FRAMEWORK, SCOPE AND NATURE 1. Increasing the effectiveness, efficiency and transparency of procurement systems is an on-going concern of governments and of the international development community. Among the developing nations including our country, there is a growing recognition of the fact that increasing the effectiveness of the use of public funds requires the existence of an adequately effective, comprehensively structured and efficient public procurement system at all levels of public service delivery including the National, Provincial / State and other sub National levels (District, Tehsil / Sub division and Union Council Governments). The major focus of the OECD-DAC intervention is on Strengthening Procurement Capacities in Developing Countries. 2. Under the auspices of the joint World Bank and OECD Development Assistance Committee (DAC) Procurement Round Table initiative; developing countries; bilateral and multilateral donors worked together to develop a set of tools and standards that provide guidance for improvements in procurement systems and the results they produce. The Round Table initiative culminated with the December 2004 adoption of the "Johannesburg Declaration" including a commitment for the adoption of the Baseline Indicators Tool as the agreed international standards for assessment of national procurement systems. Following the conclusion of the Round Table initiative, under the coordination of the Working Party on Aid Effectiveness of the OECD/DAC, the Joint Venture for Procurement was created and has further advanced the development of the methodology for application of the baseline indicators and associated compliance and performance indicators. 3. The intervention of the OECD-DAC to provide a tool for procurement systems assessment for national and sub national governments is intended to: · Provide a common tool, which developing countries and donors can use to assess the quality and effectiveness of national procurement systems. · Provide an understanding among the stakeholders that the assessment will provide a basis upon which a country can formulate a capacity development plan to improve its procurement system. · Provide the requisite basis to the donors for using the common assessment for developing strategies to assist the capacity develop plan and to mitigate risks in the individual operations which they decide to fund. · The long-term goal is that countries will improve their national procurement systems to meet internationally recognized standards enabling greater effectiveness in the use of funds to meet country obligations. 4. Under the auspices of The World Bank, this intervention for assessing the procurement systems of the provincial with the objective of benchmarking the performance of procurement management systems was embarked upon. This report covers the assessment for the province of Balochistan undertaken in the month of September 2006. This snapshot of procurement systems performance assessment is mainly based on historical data and current practices observed during the mission. 5. Based on the developed and refined indicators for procurement systems assessment by the JV of the OECD-DAC, this report sets out the first ever findings, observations and analysis as an outcome of the procurement systems assessment for the province of Balochistan based on the Baseline indicators. Page 11 Balochistan – Procurement Systems Performance Assessment 2 Based on these indicators, assessment was done on a scoring system that ranges from 3 to 0 for each baseline sub-indicator. LIMITATION OF THE ASSESSMENT · The assessment of procurement systems for the province of Balochistan commenced with a field visit to Quetta between the 5-14th of September 2006. This period succeeded an incident that created general law and order problem which proved to be a limitation while traveling away from Quetta and even at Quetta. However, part of the assessment could also be conducted at District Pishin, headquarters. · Being first of its kind, for the province, apprehensions existed in letting out the information regarding the effectiveness, utility and efficiency of the procurement systems in the province. The greatest difficulty faced was the non-readiness of the officials for providing a copy of contracts managed or being managed by them limiting us to assess only the Baseline indicators (resultantly CPIs could not be assessed). · In terms of coverage, all civil works departments including the Communication & Works, Public Health Engineering and Irrigation departments were consulted. Along with, consultations were also held with the provincial departments of Finance, Planning & Development. At the district level, the planning & finance, Works and Public Health Engineering departments were consulted for the assessment. However, limited number of civil works contracts could only be obtained. · Since there are no automated systems or even duplicate records of procurement available, confirmation of records and assumptions could not ascertained. · The Tehsil / Sub division and the level below were not included in the assessment. Province of Balochistan 6. Balochistan is the largest province with 44% (347,000 sq. kms.) of the land area but 5% of the population (6.5 million). The province is blessed with a large number of natural resources which are to a great extent unexplored and unutilized. It has an 1100 kilometers coastline which can prove to be an important trade corridor in the region by connecting China and Central Asian republics in the north to the sea in the south and India, Bangladesh in the East. Economic development is needed to deal with significant structural problems both political and socio-economic. 7. The province is relatively backward with inadequate health, education and employment facilities. The population is predominantly rural with almost 50% of the total assessed as living below the poverty line 1 . Other socio-economic statistics are literacy 29.8%, unemployment 33%, annual per capita income USD 762 2 , and formal labor force participation 25.7% (substantially government employees). Revenue resources are predominantly federal with only 6-7% are generated provincially. The province was hit in the recent past by severe drought and generally lacks sufficient waster resources to exploit its natural potentials and sustain its local economies. Government has not been able to sustain the level of bringing up more water reservoirs against the rise in demand mainly owing to rise in population and cross boarder migration from the war-torn Afghanistan. 1 Balochistan Poverty Reduction Strategy Paper, November 2003. 2 HIES 1996- 97 (SPDC’s Annual Review 2000) Page 12 Balochistan – Procurement Systems Performance Assessment 3 Nature and Scope of Public Expenditure : 8. Public expenditures are categorized into two main types; the salary and the non-salary. Budgets are prepared each year for the two categories. Under the non-salary, there are further two types of expenditures; the non-salary non-development and the non-salary development. Provision of all these main expenditure is made for the provincial and district governments under the annual provincial budget and the provincial finance commission award, respectively. The budget for development expenditure is based on an annual public sector development program for the province where projects are placed along with their nomenclatures and allocable (category wise). According to the nature of the developmental activity, project documents are prepared from the sponsoring agency / organization / department on the government prescribed formats PC-I and II (planning commission I and II). These are scrutinized at DSE (departmental development committee) and provincial Development Working Party (PDWP) in accordance with the authorization limits of these two forums. In case the projects are of a higher worth, they are recommended and referred to the Central Development Working Party (CDWP) and the ECNEC at Planning Commission for their approvals. Following the approvals of the developmental projects and upon receiving funds, releases are made by the Finance department to the respective executing agency / department. Accountant General’s office realizes the financial releases and keeps record of the transactions. 9. These expenditures are made by the respective departments who are responsible for execution. Procurement of Goods, works and services are made by these agencies in accordance with the public procurement rules and procedures as are provided in the Balochistan Purchase Manual. Payments are made from the government treasuries to the suppliers, contractors and other service providers as per the awarded tender and the contract agreement. All transactions are maintained by the respective government. However, till now commitment accounting is not institutionalized and payment arrears are not reflected in budget books. 10. Accounts are maintained by the AG’s office. Provincial government besides keeping PLA’s outside the Central Bank keeps 4 different accounts at the State Bank of Pakistan. The Treasuries of the provincial and district governments reconciles with the State Bank of Pakistan where government maintains the four accounts, on a regular basis. Account # 1 holds the receipts and payments both in respect of provincial consolidates funds and public accounts. Account # 2 is the food account, and account # 3 is for receipts and payments of Zakat funds. Account # 4 is for all receipts and payments of the district governments. There is generally a delay in consolidating the actual cash flow as assignment and special accounts are not accounted for as a routine practice. In fact the government is struggling to get information on all PLAs / assignment & special accounts from various procuring agencies. 11. There is serious delay in consolidating and updating district related cash flows with the provincial FD. Accounts are prepared for the district governments with delays. The district governments in Balochistan do not have cash flow forecasting as they are totally dependant on releases from the provincial government. 12. The accounts are audited for every year for the provincial line departments and the district governments by the offices of the Auditor General of Pakistan. The Director General (Provincial) is responsible for the Provincial line Departments’ audits whereas the Director General (District) is entrusted with auditing of district government’s accounts. The district government auditing is gradually picking up in the province but is still far from any expected level. Page 13 Balochistan – Procurement Systems Performance Assessment 4 Role of the provincial and district Governments : 13. With the new devolution of power promulgated through Balochistan Local Government Ordinance (BLGO 2001), financial management is required to be decentralized to the District, Tehsil and up to the union council level. Each government tier is supposed to have its own budget planning, implementation, accounting as per the rules. The District Accounts Committees (DAC) are being formed at the district and tehsil level in accordance with the Local Government Ordinance but most of them are yet to commence their statutory business under the BLGO 2001. There is still great confusion over interpretation of rules, regulation and powers as delegated by the BLGO 2001 and that the provincial government holds on to the subjects which were devolved by the LGO 2001. The situation is perhaps worse in Balochistan as compared to the other provinces as the implementation of BLGO 2001 is fragmentary and still the Tehsil Municipal Administrations and district governments do not enjoy the autonomy in terms of financial management and planning. 14. The provincial line departments prepare salary and non-salary budgets. The non-salary is classified as development and non-development. The Finance Department (FD) then makes the annual budget. The Provincial Planning and Development Department (P&DD) prepares an annual Public Sector Development Program (PSDP) which makes up the total development budget for the province. PSDP planning and execution has not been devolved to the local governments at the district and sub divisional level (Tehsil). Such devolution as per the Balochistan Local Government Ordinance 2001 is an outstanding demand of the district governments which have very limited role in development of provincial PSDP. The Provincial Finance Commission (PFC) in the FD makes the award for provincial budget transfers to the district governments. In 2006 the PFC award has been announced for a period of three years. The provincial government provincial consolidated fund account, public account, and food account are with the State Bank of Pakistan. 15. Development projects are prepared in line with the provisions of the annual PSDP and are placed before competent forums for approval. Small and medium projects are scrutinized at the Departmental Development Working Party (DDWP) and large projects are approved by the Provincial Development Working Party (PDWP). Though this mechanism exists at the district and tehsil (sub-division) levels and as provided in the Balochistan Local Government Ordinance, the developmental schemes / projects proposals are in practice continues to be made by the provincial departments of various devolved functions like C&W, PHE, Education, Health, Social Welfare at the Departmental and provincial level and passes on the approved project and releases to their devolved offices at the district and tehsil levels for implementation and accounting / recording. There is thus a great resentment among the district governments of not having the function of planning devolved along with the subject. Releases are made by the FD on a needs and priority basis in light of the releases authorized by the Planning and Development Department and to the provincial department which further passes on the funds to the respective district office representing their organization at the district and tehsil levels. The DDWP, at the provincial level, is chaired by the Secretary of the concerned department who is also the Principal Accounting Officer (PAO). In case of the district government, it is the District Coordination Officer (DCO) who chairs the DDWP. The PDWP is chaired by the Additional Chief Secretary (Development). Budgetary and control mechanisms : 16. The Balochistan Local Government Ordinance 2001 was promulgated and local governments at district, tehsil & union council level were formed. At present, Balochistan is divided into 29 districts which have their own district governments. Till now the Budget planning and preparation of the annual Public Sector Development Program is done at the Provincial level. The provincial budget is first Page 14 Balochistan – Procurement Systems Performance Assessment 5 prepared and placed before the legislative assembly. The PFC award is announced as per a given formula of 75:25 (area: population). 17. The Government of Balochistan prepares the budget by adhering to the budget calendar. A budget call letter is issued by the Finance Department. Subsequently the budget is prepared by the provincial departments which are scrutinized by the Provincial Finance Department and the entire budget is evolved as an outcome of this process. 18. In case of the district governments, the budget circular is issued by the Provincial Government to the districts for which the timelines are not adhered to, strictly. One of the issues faced by the province is the role of the newly established district governments. Devolution of powers to the district governments is still in its infancy stage in the province. The issue of district government’s capacity to deal with the budget planning and formulation is yet to reach the desired level. 19. The provincial and the district governments do not have a well defined monitoring mechanism for the public expenditure. The accounts are audited at the end of the year whereas in year monitoring of expenditure is not done. Nor there is any mechanism for procurement audits in place at the provincial or district governments. However, the financial transactions are pre-audited in various departments and district governments where officers are deputed for internal audit. Although, these are the internal auditors but do not prepare any management report to assist for monitoring or streamlining the public expenditure. Procurement Systems: 20. The procurement systems in the province needs focused attention to safeguard the interest of the state and use of public funds. To start with there is a dire need to overhaul the legal and regulatory framework which does not comprehensively address all sorts of procurement including goods, works and services keeping in view the current requirements of the public sector and the market prices. Lack of desired procurement practices; absence of a public grievances redressal system; interaction between the demand and supply sides and public information systems needs immense capacity building. In cases of procurement of works and goods the practices are more close to the desired level than in the case of procurement of services (with the exception of donor driven projects). 21. The provincial finance department of Government of Balochistan has prescribed a Balochistan Purchase Manual which is currently in use. Although all agencies interviewed, confirmed the use of this manual but a copy of the manual was not found to be with any of these departments with the exception of the Provincial Finance Department. For the civil works department, the rules of Pakistan Engineering Council are followed. The procurement is to an extent decentralized function with powers delegated to the line departments. Procurements are done by the concerned executing agencies with representation of Planning & Development and Finance departments on the committees. The powers of overall procurement at the provincial level vests with the Additional Chief Secretary (Development). The departments though have been demanding greater autonomy in terms of procurements of goods, works and services. At the district level, the procurement is done by the concerned department of the district government responsible for execution and the committee comprises of the concerned Executive District Officer, the Executive District Officer (Planning and Finance) and other concerned deputy district officers. The approving authority is the District Coordination Officer. 22. Currently, there is no statutory body which reviews the procurement practices in line with the rules or regulates the procurement practices from time to time brining in the required changes in the Page 15 Balochistan – Procurement Systems Performance Assessment 6 procurement rules and regulations. However, establishment of a provincial Public Procurement Regulatory Authority is in the offing. The provincial PPRA is being formed by replicating the model at the federal level and will be placed under the administrative control of Finance department once the bill is passed through the legislative assembly. However, the establishment proposed in the draft bill does not seem to address all the listed functions of the proposed authority, and significant work at the policy level will have to be undertaken to mak e a meaningful shift towards ‘good practice’ procurement systems in the process, that ensure the best use of public funds. 23. The Task Team for this Procurement Assessment comprised Asif Ali, Senior Procurement Specialist World Bank; Ismaila B. Ceesay, Senior Financial Management Specialist; David Johnson, Senior Governance Advisor DfID; Sandra Nicoll, Senior Governance Advisor, ADB; Thorsten Bargfrede, Second Secretary, EC; Waqas ul Hassan, Project Officer, ADB. Peter Trepte, an international consultant on public procurement peer reviewed the report and local consultancy support was provided by Zeeshan Tariq Janjua of Sustainable Development Consultants. Pillar I – Legislative and Regulatory Framework Indicator 1. Public procurement legislative and regulatory framework, achieves the agreed standards and complies with applicable obligations. This indicator covers the legal and regulatory instruments from the highest level (national law, act, regulation, decree, etc.) down to detailed regulation, procedures and bidding documents formally in use. This indicator is broken down into eight sub-indicators (a-h) which are individually scored. Sub-indicator 1(a) – Scope of application and coverage of the legislative and regulatory framework . Rating ‘1’ The structure of the regulatory framework governing the public procurement and the extent of its coverage : 24. At present, the procurement system in the province revolves around the Balochistan Purchase Manual which provides the rules for petty and large procurements, the regulations and the procedures and a blanket guideline to meet the necessary standards of transparency, accountability, effectiveness and efficiency. The manual mainly covers the procurement of goods whereas the procurement of Works, the Pakistan Engineering Councils’ rules, and prescribed procedures are followed. Their does not exist a procurement guidelines for procurement of services. What is also missing is a single set of rules/regulations or a compendium for all types of procurement including Goods, Works and Services. There is a committee set at the departmental level with the Planning & development and Finance departments as its members which procures, services. However, in case of the foreign funded projects, the funding donor’s procurement guidelines are followed in addition to the national / procurement procedures. This is done in the cases where the funds are provided as loan. In case of grant funding, the funding agency’s guidelines are followed. Public Access to the rules / regulations : Page 16 Balochistan – Procurement Systems Performance Assessment 7 25. The rules / regulations and guidelines for the public procurement are hardly available, even with the provincial departments, the purchase manual is hard to find anywhere. The new procurements usually follow precedence. There is a growing understanding among the public sector for capacity building of its procurement systems, however, the public at large stays unaware of the public procurement rules / regulations; their utility to the public. The concept of giving access to the general public, information regarding procurement is disregarded by most. This is primarily the reason why the public has no access to the public procurement rules, regulations or procurements whatsoever as they are neither published largely nor placed at government outlets or on the website of the government. 26. The purchase manual covers the procurement of goods only and that of the works is covered under the Pakistan Engineering Council’s guidelines. However, their still lacks a very clearly drawn out rules, regulations and guidelines for procurement of services (including the consulting services). The guidelines of donor agencies for their respective funded projects are followed by the provincial government. Usually, the precedence is followed and the procurement practice of similar nature may differ from the other practice. 27. Based on the above discussion, this sub indicator is rated, score ‘1’. Sub-indicator 1(b) – Procurement Methods Rating ‘1’ This sub indicator assesses whether the legal framework includes: a) a clear definition of the permissible procurement methods; and b) the circumstances under which each method is appropriate. 28. The provincial procurement system has open competitive tendering as a default method of procurement where tenders exceed the prescribed limit of petty purchases in case of goods. Limited tendering to the registered firms can be undertaken in case the value of indent is lower than the limit for open tendering. 29. These methods of procurement for goods are explained with the roles and responsibilities set out to prepare the indent, for setting out and verification of specifications and for actual procurement. However, there are certain limitations. For instance, in case there arises a requirement for direct sourcing or emergency purchase, the rules do not clearly describe the circumstances, method for justification or delegation of power in case deviation is to be made. 30. Fractioning in procurement, though is prohibited but is not observed in true letter and spirit 31. The decision making in relation to the procurement (including the deviation from the usual practice) rests with the administrative Secretary, who is titled as the “Chief purchase Officer” (as per the Purchase Manual). The Administrative Secretary of the concerned procuring department is required to appoint 2 Senior Officers as Purchase and Technical Officers from his department. The hierarchy for procurement is well defined along with the roles and responsibilities and acts as an important safeguard to pilferage and corrupt practices. 32. Procedures are defined but do not cover all possible circumstances and factors that can be critical or can play a role, in which procurement of goods, work or services can be undertaken. Civil works, rules; regulations and procedures are well defined by the Pakistan Engineering Council. Page 17 Balochistan – Procurement Systems Performance Assessment 8 33. As per the indicators, the procurement system of the province has the open competitive method as the default which is also the foremost requirement of any comprehensive procurement system. The law, regulations are not in a single compendium and certain gaps exist as discussed above. Fractioning or splitting is not checked in true letter and spirit therefore Rating of ‘1’ is assigned to the sub indicator. Sub-indicator 1(c) – Advertising rules and time limits Rating ‘1’ This sub indicator assesses whether: a) the legal framework includes requirements to publish contract awards as a matter of public interest and to promote transparency; b) there is wide and easily accessible publication of business opportunities; and, c) there is adequate time provided between publication of opportunities and submission date, consistent with the method and complexity of the procurement, to prepare and submit proposals. Time between publication of the invitation for prequalification applications, or for an open tender and the submission of proposals relates to the complexity of the procurement and the level of competition expected. If foreign bidders are expected to compete, this is a factor to consider. The law and regulations should establish the criteria for setting the minimum time between advertisement and submission of proposals. 34. The procurement opportunities above the threshold for open tendering are advertised with a view to ensure transparency and encourage free competition to ensure a quality-cum-cost effective procurement. However, they are usually circulated, though a national paper but the same edition may not be in national circulation, the competition is thus limited. That is the primary reason why procurements in the past do not have service providers from other provinces. 35. Contract awards are not published neither as a routine nor even in rare cases. This information is believed to be confidential; not of much utility to the general public and an apprehension that this will in turn create issues like complaints and litigations. 36. Response time is adequate and would depend on the nature of procurement. However, minimum response time is kept as 15 days from the date of publication of tender notice. The response time in practice is sometimes reduced without assigning any reason thereof. In cases, where an immediate procurement is required, tendering through an open gallop tender is prescribed which has a reduced response period of 10 days in cases of simple nature. However, the Chief Purchase Officer in case of single tendering or quick tendering (gallop) needs to justify the deviation from the default method of procurement in cases where the procurement worth is above the threshold. Contents of the tender may or may not completely present sufficient information. 37. There is still a lot to be done in regulating the Public information of procurements. Based on the above, rating is assessed at ‘1’. Sub-indicator 1(d) – Rules on participation Rating ‘1’ This sub indicator assesses the participation and selection polices to ensure that they are non discriminatory. Page 18 Balochistan – Procurement Systems Performance Assessment 9 38. In some reported cases, the tendering was limited to National even local / regional based firms. This imposition on Foreign firms to compete does not having any relation to their qualifications in terms of participating in a procurement competition. As a general principle, firms, including foreign, national, provincial and regional should not be excluded from participating in a tendering process for reasons other than lack of qualifications. This only limits a healthy competition and may result in inefficient procurement and higher prices. However, there can be cases in which the legal framework will allow restrictions that require purchasing from or associating with domestic firms, or mandate inclusion of a minimum locally manufactured content. 39. The tendering process in the province in doing so gets mostly the local vendors / contractors and service providers as the competition gets limited on regional / geographical basis. There is an inherent focus on brining the local competitors. This also results in creating market cartels, which hamper the letter and spirit of an efficient and effective procurement. This, is a, dangerous practice as this can at all times, easily create local cartels. The regulatory framework should not include the obligation for foreign firms to associate with local firms or to establish subsidiaries in the country as a condition of bidding which is found to be the case. These conditions may promote the maintenance of oligopolistic or monopolistic conditions as opposed to promoting local industry development and can be a de facto barrier to competition. 40. Registrations can be done at all times in a year, through the registration committees of respective departments, in case of the civil works department. These applications are processed with the pre condition of being registered with the Pakistan Engineering Council. In case of Communication & Works and Irrigation departments, the criteria and merits laid down by the PEC guidelines serve as the principles for local level registration. Service providers are registered with these departments in the same category as is earlier endorsed by the PEC. However, they can be upgraded or down graded based on the performance of contracts executed along with these firms / contractors. There is however no defined or well structured registration or enlistment with the Planning & Development department of individuals or firms for service provision. Registration as a condition to participate in a bid may become an entry barrier unless registration is open all the time and can be completed in a simple way any time prior to contract award. 41. Both the Balochistan Purchase Manual and PEC, provides details for administrative debarment, black listing along with the associated steps/procedures to be followed before a contractor or vendor is black listed. There is however, no procedure laid down for debarment of consulting organizations. The appeal mechanism is weak and resultantly the debarment process might not be as transparent as required in a good procurement system. This needs to be strengthened. Administrative debarment (e.g. failure to perform in earlier contracts, etc.) is acceptable provided that there is due process to reach the decision and that the process, including any possible appeals, has been exhausted. There is a requirement to address the inadequacies of the debarment process. 42. No specific rules have been laid down for competing in a procurement process by government owned enterprises rather they are awarded the contracts, through direct or single source. There is a great tendency to award contracts directly to government owned enterprises to avoid competition and responsibility. Frequently, NESPAK is engaged for civil work engineering and National Institute of Public Administration for undertaking capacity building interventions (both public sector enterprises). The score is assessed to be ‘1’ for this sub indicator. Page 19 Balochistan – Procurement Systems Performance Assessment 10 Sub-indicator 1(e) – Tender documentation and technical specifications Rating ‘2’ The sub indicator assesses the degree to which the legal framework specifies the content of tendering or solicitation documents to enable suppliers to understand clearly what is requested from them and how the tendering process is to be carried out. 43. Tendering documents should contain sufficient information like technical specifications, dates for submission for submitting and opening of tender and evaluation criteria to enable the submission of responsive tenders/proposals and to establish the basis for a transparent evaluation and award process. However, un related and unnecessary information is neither needed for the process nor should any such information be included for submission of tenders as Excessive information and documentation requirements are considered to cost money and can reduce competition or lead to disqualification of potential bidders on the basis of unnecessary requirements. The procedure is comprehensively laid out both in PEC Rules & manual and Balochistan Purchase Manual. These are the mandatory responsibilities of the Senior Technical Officer to ensure completeness of information in terms of technical specification, contract details, modalities and evaluation criteria etc., of the respective department, designated as such by the Chief Purchase Officer. As describes in the Balochistan Purchase Manual, the duties of the Senior Technical Officer includes vetting of specifications given in the indent; technical scrutiny of offers and inspection of stores when required. The Senior Technical Officer can designate as many Technical Officers of his department as he may deem necessary for vetting the indents and their specifications made by the department and ensure the publications of these specifications to the extent of completeness and comprehensiveness whit an aim not to limit a healthy and responsive competition. 44. The civil works tendering documents as reviewed contained most of the required specifications without going into unnecessary details and complications, which may limit a healthy competition. In the case of Goods procurement, the specifications may fall short of the actual procurement being done in some of the cases. In a couple of tender notices reviewed, there were no background tender documents. These were noticed in the tenders for procurement of engineering services. In case of the foreign funded projects, the prescribed national procedures were found to be followed along with the guidelines of the donors as per the nature and scope of the services. The legal framework thus covers and ensures minimum required contents, which are sufficient for the competitive bidders. The rating is assessed to be ‘2’. Sub-indicator 1(f) – Tender evaluation and award criteria Rating ‘1’ This sub indicator assesses: a) the quality and sufficiency of the legal framework provisions in respect to the objectivity and transparency of the evaluation process; and, b) the degree of confidentiality kept during the process to minimize the risk of undue influences or abuse. 45. Pre disclosed and objective criteria are essential for efficiency, fairness and transparency in the evaluation of tenders. The evaluation criteria should be qualifiable and quantifiable as far as possible. Information related to the evaluation process and results should be disclosed as early as it is finalized. There should be rules of disclosure that protects information provided by bidders that is of proprietary nature, commercially or financially sensitive. Page 20 Balochistan – Procurement Systems Performance Assessment 11 46. All the specific and even minutest details are provided in the Balochistan Purchase Manual and PEC guidelines for receiving of tenders, placing them in a tender box, public opening of tenders, tender requirements like earnest money or bid bond, technical scrutiny of offers and preparation of comparative statements, acceptance and authorization of tenders, general principles of entering into contracts, monitoring progress of the contracts and clearances of deliveries are all adequately addressed. The evaluations of proposals in case of consulting services are usually not well defined except in the case of foreign funded projects where quality and cost based evaluation is done. The information of successful bidders or the correspondence with the competitors or qualifiers is not done in a properly regulated manner. The decision criteria for award are based on awarding to the lowest evaluated tender. However, the regulatory framework does not prohibit the use of evaluation criteria different from those set out in the tendering documents in clear and specific manner. Confidentiality and regulated communications with the bidders is maintained. In fact, the confidentiality is maintained even after the evaluation is finalized and resulted locked (an undesirable condition). This is necessary during the evaluation period are necessary to avoid abuse and undue interference in the process. Thus the Rating ‘1’. Sub-indicator 1(g) – Submission, receipt and opening of tenders 47. Clarity on how bids are submitted is critical in minimizing rejection of otherwise compliant proposals. The law and the regulations must give clear provisions in this respect. 48. Public opening of tenders is a mean of increasing transparency to an open tendering exercise. Bids are sealed and submitted against the prescribed address; addressee; date and time. There is no electronic bidding that currently takes place in the province. Bids are opened publicly and there is a growing realization of importance of doing so as compare to the past practices. The bids are opened in the presence of bidders or their representatives, which are permitted to attend. However, others including representatives of civil society bodies or public representatives are neither encouraged, nor they themselves show an interest to participate in the bids opening. This happens in most of the cases where procurement of goods and works take place. This public opening of bids immediately after the deadline for submission of tenders diminishes the possibility of loss or alteration of proposals or submissions. This may not be the case in procurement of consulting services where technical and financial proposals are opened or in case of pre-qualification of firms. The public opening of tenders is a well-defined, regulated mechanism & practice. 49. Records are retained and are available for review and audit purposes. However, in many of the external audit reports, the issue of non-production of procurement related record as not being available is highlighted from time to time. record of proceedings are properly advised though not followed in true letter and spirit. However, level of confidentiality remains an issue. Therefore this sub indicator is assessed as ‘2’. Sub-indicator 1(h) – Complaints Rating ‘0’ The purpose of this indicator is to assess whether the legal framework establishes; a) the right to review, b) the matters that are subject to review; c) the timeframe for such reviews; and, d) the different steps in the review process. Page 21 Balochistan – Procurement Systems Performance Assessment 12 Confidence in a procurement system is a powerful incentive to competition. A fundamental part of this is the establishment of the right to Even though the first review is normally carried out by the procurement entity; there should be an administrative/judicial review body that is independent from the procuring agency. That is, has no direct interest in the procurement process and does not report to the procurement agency and ideally is a separate agency. 50. To bring in the confidence in the overall procurement system, it is a fundamental requirement to institutionalize right of the stakeholders to review and scrutinize procurement decisions by an efficient and functionally independent process. At the moment, there is absolutely no complaints or grievances redressal system for the province of Balochistan, formally notified. In case there are complaints against a dealing officer, the complainant may write to the Chief Purchase Officer / administrative Secretary of the concerned department, the Chief Secretary or the Chief Minister of the province as would he feel appropriate. However, this is being done from case to case in the absence of a formal system to redress grievances and complaints. The legal and regulatory framework does not address this important right of the bidders to seek review of the procurement process followed and decisions made through an impartial, judicious and independent review process. Since there is no such formal system in place the dimensions of such a system including the appellate authority; time for seeking a review; time / duration to redress a complaint and powers to take punitive actions also does not exist. Performance against the indicator is rated as ‘0’. Indicator 2: Existence of Implementing Regulations and Documentation This indicator verifies the existence, availability and quality of implementing regulations, operational procedures, handbooks, model tender documentation, and standard conditions of contract. Ideally the higher level legislation provides the framework of principles and policies that govern public procurement. Lower level regulations and more detailed instruments supplement the law, make it operational, and indicate how to apply the law to specific circumstances. This indicator consists of six sub-indicators (a-f). Sub-indicator 2(a) – Implementing regulation that provide defined processes and procedures not included in higher-level legislation Rating ‘1’ This sub indicator aims at verifying the existence, clarity, accessibility and comprehensiveness of regulations to the law that further detail and clarify its application. Regulations are an important aspect of a procurement system as they provide the detail that explains and enables the application of the legal framework in a variety of applications. 51. The regulations have been made part of the Balochistan Purchase Manual and PEC guidelines for goods and works procurement, respectively. The Balochistan Purchase Manual has been subjected to revision from time to time with a main focus on increasing the limits of various procurement types. The sub indicator is assessed as ‘1’. Page 22 Balochistan – Procurement Systems Performance Assessment 13 Sub-indicator 2(b) – Model tender documents for goods, works, and services Rating ‘2’ 52. Both the PEC and Balochistan Purchase Manual provides model tender / bidding documents which are mainly for the procurement of work and goods including the contract agreements and other forms for tender inquiries, evaluation. Model documents are important as if they are of good quality, they in turn promote competition and increases confidence in the system. The model documents for procurement of goods as in the Balochistan 53. Purchase Manual includes but not limited to form for invitation to tender; tender inquiry form; condition for submission of tender form; tender slip; attendance sheet; comparative statement; advance acceptance of tender; confirmation of advance acceptance of tender; copies of contracts for transmission to payments office; amendment to contracts; tender / contract sample; approved sample; general conditions to contract etc,. However, the Government of Balochistan is yet to come up with standard bidding documents for the procurement of services but make use of the prescribed documents by the respective donor in case of the foreign funded projects. The sub indicator is therefore assessed as ‘2’. Sub-indicator 2(c) – Procedures for pre-qualification This sub-indicator covers the existence of procedures for pre-qualification of participants in a particular procurement. Pre-qualification is normally limited to requirements of a high level of complexity where it is possible to determine, primarily using pass/fail criteria, if the interested companies possess the capacity to perform the requirement. Assessment of qualifications can be combined with the tender documents as part of the specific procurement or it can be initiated as a separate exercise that is conducted before full offers are requested. In highly complex procurement, use of pre-qualification as a separate process can make the procurement more efficient by ensuring only qualified participants are included and it can save money by limiting the number of participants incurring the expense of putting together a comprehensive bid. Pre- qualification should be defined by procedures in order to ensure that it is not abused and used as a method for limiting competition by overstating the qualification requirements. 54. The pre-qualification is done in case of goods and works in the cases the procuring agency feels the need to do so. There are clear guidelines and listing of pre-qualification criteria both in the case of civil works and goods procurement. The sub indicator is therefore assessed as ‘2’. Sub-indicator 2(d) – Procedures suitable for contracting for services, or other requirements in which technical capacity is a key criterion . Rating ‘1’ 55. There are no procedures for consulting services quality cum based evaluation. But in the case of foreign funded projects, it is the donors’ evaluation criteria whose details are followed in relation to the nature of procurement. In such cases, combination of price and technical capacity is permitted by law, the bidding documents also describe the manner in which they are combined and the relative weights allocated to technical capacity and price. For Procurement of Goods and Works, the criteria are well defined and followed to a great extent. Page 23 Balochistan – Procurement Systems Performance Assessment 14 56. Rating for this sub-indicator is assessed to be ‘1’ as the procedures are well defined for the two types of procurement and does not address the procurement of services, well. Sub-indicator 2(e) – User’s guide or manual for contracting entities Rating ‘0’ Such tools are more important as a system becomes more decentralized. Creating a manual or user’s guide is often a function of a central management unit and can help create a consistency of application within the government procurement system. Although not a substitute for training, a manual can contribute to building and maintaining capacity and provides an easy reference for users. 57. The Balochistan Purchase manual and the PEC guidelines are the two documents supporting the use of these rules, regulations and procedures. A user’s guide or manual for contracting entities is an important implementation tool that can help provide staff with information that incorporates the law, policy and procedures and helps turn policy into practice. However, currently no user guide is available for practice. The indicator is rated ‘0’ in the absence of user’s guides (comprehensive and complete) for procurement of Goods, Works and Servcies. Whatever guidance is available in the Balochistan Purchase Manual is incomplete; incomprehensive and do not include case studies for ready references. Sub-indicator 2(f) – General Conditions of Contracts (GCC) for public sector contracts covering goods, works and services consistent with national requirements and, when applicable, international requirements Ratin g ‘1’ This sub-indicator deals with General Conditions of Contracts that set forth the basic provisions, which will be included in a contract with the government. 58. GCCs are provided in the guidelines of PEC and Balochistan Purchase Manual. There are no GCC for the procurement of services, though well defined but they require regular updating. The GCC in case of Goods may not conform to the international practices. The rating is assessed to be ‘1’. Pillar II. Institutional Framework and Management Capacity Pillar II looks at how the procurement system as defined by the legal and regulatory framework in a country is operating in practice through the institutions and management systems that are part of the overall public sector governance in the country. Indicator 3. The public procurement system is mainstreamed and well integrated into the public sector governance system. This indicator looks at the procurement system to: a) determine its suitability to discharge the obligations prescribed in the law without gaps or overlaps; b) whether the necessary links with other sectors of government affecting procurement exist; c) whether procurement operations are constrained by other external institutional factors; and d) whether the managerial and technical capacity of the system are adequate to do procurement without unnecessary cost or delay. This indicator deals with the degree of integration of the procurement system with other parts of Page 24 Balochistan – Procurement Systems Performance Assessment 15 government and particularly with the financial management system given the direct interaction between the two, from budget preparation and planning to treasury operations for payments. There are four sub-indicators (a-d) to be scored under indicator 3. Sub-indicator 3(a) – Procurement planning and associated expenditures are part of the budget formulation process and contribute to multiyear planning Rating ‘0’ 59. Proper preparation of budgets needs reliable cost data and timetables for planned procurement. Therefore procurement planning serves an integral function of any structured budgeting and expenditure system of a country, state, province or other sub-national governments. Presently, there is no such mechanism for annual or multiple-year procurement planning in the province. 60. At the start of each fiscal year, the Public sector development program is evolved in consultation with the public representatives and the legislators. However, the actual implementation of the PSDP continues to be a challenge for those involved in the process. The provincial government entirely depends on the overdraft of the State Bank of Pakistan to meet its developmental requirements. The releases in accordance with the PSDP and for other out of budget expenditures are made by the provincial finance department to the respective departments which pass on the funds to their respective regional offices for execution. In all cases schemes of development are required to be incorporated in the PSDP and their project documents approved from the relevant forum. However the release is slow in the beginning of the year. 61. As soon as line departments of Provincial government receives funds, they intimate the relevant line departments of the provincial government for implementation of the schemes and projects identified in the PSDP and further transfer the funds to their regional and district based offices following the intimation. In case of Balochistan, the developmental schemes and the provincial PSDP has still not been devolved. Although as per the Local Government Ordinance 2001, the subjects of Education, health, C&W, Public Health Engineering were to be devolved to the district governments but the entire planning process and the releases are still done by the provincial line departments. The district governments have a limited role to play as against the spirit of Local Government Ordinance 2001. 62. In the absence of any annual or multi year procurement plans, there is no integration with the annual budget planning. Since commitment accounting and arrears in terms of government liabilities for payments to the contractors has also not been institutionalized, there cannot be future reflections made to the multi year budgeting. Therefore the indicator is assessed to be ‘0’. Having a planned year of procurement executed gives a fairly close estimate in relation to the actual cash flows versus the estimates along with the payment liabilities which gets carried forward to the next year and can directly improve the budget estimation for next year. Sub-indicator 3(b) – Budget law and financial procedures support timely procurement, contract execution, and payment . Rating ‘0’ 63. The funds committed in the budget, their release may not be as streamlined as required in good practicing financial management and procurement systems. In the case of Balochistan, the release of funds is totally dependant on receiving overdraft from the State Bank since the federal and the provincial Page 25 Balochistan – Procurement Systems Performance Assessment 16 governments’ receipts hardly covers the budget estimates for salary and non-salary non-development. For the last 2 years, the provincial government has stopped adding new development schemes to the PSDP and is only focusing on completing the earlier 64. Usually, the funds are placed with the relevant department of the provincial government after their release is authorized from the Planning & Development department subject to availability of funds with the Finance Department and assigning priority to it. Tenders for contracts are many times floated whit out getting the release from the Planning & Development or Finance Departments but after the project documents (PC-I and II) are stands approved. The reason that is assigned to it by the majority is late approvals of schemes / projects in the year and limited time left with them to complete the tender / contract, make payments before the end of the year and to avoid funds to lapsed and subsequently surrendered. Budget funds covering the full amount of the contract are not committed or appropriated within a week from the award of the contract as most of the projects are ongoing. The practice of last couple of years have been to roll over projects and schemes over large number of years by fragmenting them into small portions along with throwing forward the allocable. Subsequently, by default Contracts also get thrown forward and so does their releases. Even in case of smaller contracts, even if the entire amount in committed, it may take more than a week’s time before these funds are placed with the relevant procuring agency. 65. There are no standards, published or unpublished for processing the invoices of the service providers. They can even get delayed for more than a year in a number of cases as the availability of funds is always a major issue. Presently, the Government does not keep a consolidated stock of the expenditure payment arrears. However, relevant departments like the civil works and the social sector development departments keep project-wise account of arrears in terms of the accrued expenditures, that is the payment that is due as per the legal obligation of a procuring agency but has actually not been made. However, the provincial government feels the need to consolidate the data on expenditure payment arrears and looks for PIFRA implementation for this. 66. Discussions with the civil works department showed that there are delayed payments and the main reason is the inadequacy of funds reaching the projects. Many projects are rolled over many years. For 2006-7 no new schemes have been added to the annual PSDP and all the old schemes have been rolled over to the current year. 67. Payments in a many cases get delayed for more than a month’s time as almost all the departments face the problem of late release of funds by the Provincial Finance Department. Based on above discussion, the indicator is rated ‘0’ Sub-indicator 3 (c) – No initiation of procurement actions without existing budget appropriations . Rating ‘1’ This indicator assesses whether there are safeguards in the system precluding initiation of procurement actions unless funds have been allocated to the procurement in question. 68. The tenders are required to be solicited after the procuring agency has received the funds. But in case of Balochistan province, with the lower predictability in budget execution, justifications are given in a number of cases where notice for tender was issued to save time in the procurement process and to avoid surrendering funds to the provincial governments after they lapse following the end of the fiscal Page 26 Balochistan – Procurement Systems Performance Assessment 17 year. However, enforcement needs to be strengthened. The internal audit appears to be inactive, inefficient and ineffective. Wherever, internal auditors are placed, they are merely performing the task of pre-auditing the financial transactions. All transactions are cleared by them which are supported by sanctions/approval from the competent authority and may or may not be accompanied by all other relevant documents like tender notices, tender and bid documents, proposals / bids, their evaluation etc,. The internal audit requires to be streamlined along with emphasis needs to be brought in during the external audit of developmental accounts. The sub indicator is rated ‘1’. Sub-indicator 3(d) – Systematic completion reports are prepared for certification of budget execution and for reconciliation of delivery with budget programming . This sub-indicator is a measurement of the feedback mechanism needed to ensure that information on contracts covering major budget expenditures is provided to the budgetary and financial management systems in a timely manner to support the overall public financial management system. 69. The procurement system is not integrated with the Financial Management system. The information on contracts is scarce, incomplete and incoherent. The provincial Finance Department has its representation on the procurement committee. However, there is as such no consolidated information which is updated from time to time about these contracts and has no integration with the overall financial management at FD. 70. There is a serious issue of expenditure accounts especially in the case of PLAs and Assignment accounts. The financial management system lacks information associated with the expenditures made through these PLA/Assignment accounts. Therefore reconciliation in case of PLA/Assignment accounts cannot be done. In cases of other appropriation accounts, FD gets the expenditure details at the end of the year and reconciliation is done on a regular basis with the State Bank. However, the flow of this information needs to be improved. Lack of automation and capacity issues of the financial management at the procuring agencies and lack of financial monitoring at FD are the main reasons attributed to this weakness. Despite strict instructions, monies are drawn from State Bank of Pakistan and are kept in the other commercial banks over large period of time, with little or insignificant utilization. (large deposits are maintained). Repeated reminders from Accountant General for immediately withdrawing such monies from the commercial banks and be deposited back to State Bank in case of being unutilized, exists on record but are not being taken seriously. The suspense accounts are cleared regularly with exceptions. This all shows that the flow of even the most required information is not streamlined or in a manner that can directly support the financial management and the procurement management systems. The sub indicator is accordingly rated ‘0’ Indicator 4. The country has a functional normative/regulatory body Although this indicator refers to a normative/regulatory body, what matters most is not the existence of a body but the existence of the functions within the public sector and the proper discharge and coordination of them (i.e. one agency may be responsible for policy while another can be doing the staff training and another might be taking care of the statistics). When the assessment criteria below refers to the “regulatory body”, this may be read to refer to the “regulatory function” if applicable to the particular assessment. The assessment of the indicator will focus on the existence of the functions, the independence of the regulatory function, the effectiveness of performance and the degree of coordination between responsible organizations. There are four sub-indicators (a-d) to be scored. Page 27 Balochistan – Procurement Systems Performance Assessment 18 Sub-indicator 4(a) – The status and basis for the normative/regulatory body is covered in the legislative and regulatory framework . Rating ‘0’ 71. At present, there is no provision for a Procurement Regulatory body in the legal or regulatory framework of the province. Following the steps of the federal government, the Government of Balochistan through the Finance Department has prepared a draft legislative bill for setting up Balochistan Public Procurement Regulatory Authority whose mandate includes drafting of provincial procurement policy; Procurement Rules, regulations and Procedures; undertake review of practices in line with the laid down rules and procedures; advise the government on procurement related issues and assist the government in building up the capacity of the provincial government for undertaking procurement more effectively and efficiently. A number of functions are assigned to the provincial line departments and the district governments for the procurement. Indicator is assessed as ‘0’. Sub-indicator 4(b) – The body has a defined set of responsibilities that include but are not limited to the following : · providing advice to contracting entities; · drafting amendments to the legislative and regulatory framework and implementing regulations; · monitoring public procurement; · providing procurement information; · managing statistical databases; · reporting on procurement to other parts of government; · developing and supporting implementation of initiatives for improvements of the public procurement system; and · providing implementation tools and documents to support training and capacity development of implementing staff. 72. The above functions are not clearly assigned to the different procuring agencies in the absence of a single mandated agency to perform all these tasks. However, Provincial Finance Department has taken the initiative of setting up the Provincial Procurement Regulatory Authority on similar lines as that of the National / Federal PPRA established with the Cabinet division. In case of the Punjab Government, the revision and amendment of Procurement Rules was done by the Provincial Planning & Development and Services & General Administration departments. Various projects are administered by their respective administrative departments and continue to be the default arrangement. There is a need to bring in more clarity and to re-assign these functions. Sub-indicator 4 (c) – The body’s organization, funding, staffing, and level of independence and authority (formal power) to exercise its duties should be sufficient and consistent with the responsibilities . Rating ‘0’ 73. At present, there is no regulatory authority being established. However, the provincial finance department is in the process of establishing the provincial Procurement regulatory Authority. In the draft bill for establishing provincial PPRA, it is proposed that the structure would work on an ex-officio arrangement with the Secretary Finance as its ex-officio Chairman and other officials of Finance Page 28 Balochistan – Procurement Systems Performance Assessment 19 Department will be the ex-officio Members. With the list of functions to perform including Policy Planning; Drafting of rules and regulations; procurement audits; monitoring and capacity building, the proposed ex- officio arrangement might be insufficient. The indicator is rated as ‘0’ Sub-indicator 4(d) – The responsibilities should also provide for separation and clarity so as to avoid conflict of interest and direct involvement in the execution of procurement transactions . Rating ‘0’ The proposed regulatory body is not responsible for direct procurement operations and is free from other possible conflicts (e.g. by being member of evaluation committees, etc.). Due to the nature of this sub indicator, scoring is either a 3 or a 0. 74. Since, there is no body performing these functions in the province, the indicator is rated as ‘0’ Indicator 5: Existence of institutional development capacity The objective of this indicator is to assess the extent to which the country or agency has systems to support and monitor the performance of the entire system, and to formulate and implement improvement plans. This requires among other things the availability of information systems, a capacity for analysis, feedback mechanisms and planning capacity for implementation of improvements. It is very important that responsibilities are clearly assigned and are being performed. This indicator has four sub-indicators (a-d) to be scored. Sub indicator 5(a) – The province has a system for collecting and disseminating procurement information, including tender invitations, requests for proposals, and contract award information . 75. The procurement system of the province in its entirety has many gaps. The procurement rules needs massive re-visit; the regulations and procedures need to be comprehensively laid down for all the three categories of procurement of goods, works and services; the capacities of the procurement systems including the personnel needs to be built; there is a total absence of procurement information system; the monitoring or procurement audit system is not in place even the internal audit system does not provide the requisite supp ort to the overall procurement system. The sub indicator is accordingly assessed as ‘0’ Sub-indicator 5(b) – The country has systems and procedures for collecting and monitoring national procurement statistics . Rating ‘0’ 76. Statistical information on procurement is essential to evaluate the policies and the operation of the system. The information can also be a tool for procurement planning and market analysis. At present, there is no statistical data collection system in place to collect procurement related statistics/data at provincial or district government level. The indicator is rated ‘0’ Sub-indicator 5 (c) – A sustainable strategy and training capacity exists to provide training, advice and assistance to develop the capacity of government and private sector Page 29 Balochistan – Procurement Systems Performance Assessment 20 participants to understand the rules and regulations and how they should be implemented . Rating ‘1’ 77. Capacity Building and Training the staff handling procurement matters on sustainable basis is a pre-requisite of an efficient and effective procurement system. There is always a growing need for institutionalizing training programs geared towards development of overall capacity of the procurement system. These programs are essential to maintain the supply of qualified procurement staff to public and private sectors. Balochistan does not have a strategy for building capacities of the systems and its personnel involved in the procurement planning and management. 78. However, in case of foreign funded projects / programs executed by the provincial gov ernment’s line departments, training is provided as an in built feature before commencing on the procurement of goods, works and services on the donor guidelines which may or may not in addition address the national / provincial procurement systems. The indicator is rated ‘1’ Sub-indicator 5(d) – Quality control standards are disseminated and used to evaluate staff performance and address capacity development issues . Rating ‘1’ 79. At present, the Balochistan Purchase Manual and PEC guidelines, lay out various instructions for assuring quality and standards in case of procurement of goods and works but provides no basis or set of parameters for procurement of services other than in the case of foreign funded projects. However, the QA system, which is though not very adequately laid out, does not provide a basis for performance evaluation of personnel handling procurement. Audits of the accounts are annually conducted and compliance levels are evaluated. The internal audit system, however, does not play its role in quality assurance of procurement practices in line with the procedures. The indicator is accordingly rated ‘1’. Pillar III. Procurement Operations and Market Practices This Pillar looks at the operational effectiveness and efficiency of the procurement system at the level of the implementing entity responsible for issuing individual procurement actions. It looks at the market as one means of judging the quality and effectiveness of the system when putting procurement procedures into practice. This Pillar is distinguished from Pillars I and II in that it is not looking at the legal/regulatory or institutional systems in a country but more at how they operate. Indicator 6. The Province’s procurement operations and practices are efficient. Rating ‘1’ This indicator looks at the efficiency of the operations and operational practices as implemented by the procuring agencies. Efficiency is considered to mean that the operational practices result in timely award of contracts at competitive market prices as determined by effective and fair implementation of procurement procedures. There are four sub-indicators (a-d) to be rated under this indicator. Page 30 Balochistan – Procurement Systems Performance Assessment 21 Sub-indicator 6(a) – The level of procurement competence among government officials within the entity is consistent with their procurement responsibilities . The purpose of this indicator is to assess the degree of professionalism and knowledge of those responsible for implementation of procurement activities. 80. There are no specific job profiles laid down for specialized procurement jobs. However, as a practice in case of the civil works, the procurement is mostly entrusted to the civil engineers working at various levels. They have the minimum knowledge of procurement for civil works that has been acquired by them while on job practicing but are not formally or specifically trained for the job. In addition, the practices needs to be studied in relation to the procedures and in depth to evaluate the level of those entrusted with the procurements. 81. Frequent transfers of officials from procurement related jobs to non-procurement jobs and vice versa affects the overall efficiency and performance of the system. The province suffers from this unusual pattern of frequent transfers. Another issue which has adversely affected performance of procurement systems is the misplacement of officials. Government Lecturers / Instructors are posted to management and implement development projects, something that they would have neither done or are expected to do in the normal course of their careers. Entrusting them with procurement planning, management and monitoring is putting the public funds at a great risk. Sub-indicator 6(b) – The procurement training and information programs for government officials and for private sector participants are consistent with demand Rating ‘0’ This sub indicator assesses the sufficiency of the procurement training and information programs in terms of content and supply. 82. Procurement Systems are not subjected to any skill gap analysis at any point in time. There are neither any training programs designed for procurement planning & management for the private sector as well as public sector nor there are any such plans of the provincial government. The sub-indicators is therefore rated ‘0’. Sub-indicator 6(c) – There are established norms for the safekeeping of records and documents related to transactions and contract management Rating ‘0’ 83. Availability of information and records that track each procurement action provides the basis for evaluating performance of procurement implementation. Almost all the systems in the provincial and district governments are manual; hence obtaining information is always difficult. Further, the accuracy of information, its authenticity and completeness cannot be ascertained with the existing systems. However, there is a general understanding to place important records such as Public notices of bidding opportunities, Bidding documents and addenda, Bid opening records, Bid evaluation reports, Final signed contract documents and addenda and amendments, Final payments, Disbursement data. Since there is no formal complaints and grievances redressal system, information on any Formal appeals by bidders, their outcomes and Claims & dispute resolutions is scarce. Further, the existing legal, regulatory framework Page 31 Balochistan – Procurement Systems Performance Assessment 22 does not establish list of the procurement records that must be kept at the operational level and what is available for public inspection, including conditions for access. 84. This information with the Government offices is however, not available for the general public. The official’s reluctance and apprehension to let out this information is based on their perceptions that these records are confidential and that this might be misused by those who lost in the procurement competition and that issues of complaints, appeals and litigations would arise out of it. 85. There is neither a prescribed / practiced document retention policy that is compatible with the statute of limitations in the province for investigating and prosecuting cases of fraud and corruption and with the audit cycles, nor are there any established security protocols to protect records either physical or electronic. Indicator is accordingly rated ‘0’ Sub-indicator 6(d) – There are provisions for delegating authority to others who have the capacity to exercise responsibilities . Rating ‘3’ Delegation of authority and responsibility is a key to having a well functioning system especially when procurement is decentralized. When delegation is not provided, the system tends to function inefficiently and who have neither the training nor knowledge to make procurement decisions. Delegation should be undertaken in accordance with the following: 86. For an efficient and effective procurement system, it is imperative to delegate authority to the lowest executive tier. Without which the situation can lead to excessive concentration of decision making under a single or few individuals. In case of Balochistan, the procurement is largely to an extent decentralized with the Administrative Secretary being the Chief Purchase Officer for the department and the authority is delegated to the lowest executive tier in accordance with the legal and regulatory framework. The Chief Purchase Officer of the provincial department is also the Principal Accounting Officer. He is required to appoint a Senior Purchase and Technical Officer, one each who may in turn co- opt one or more purchase or technical officers as would they deem fit to do. These Officials have their authorities delegated. However, the Principal Accounting Officer or the Chief Purchase Officer can enhance the monetary limits of each delegated power whit in the total authority that vests with him. Procurement is largely done by procurement committees which have the representation of Planning & Development and Finance Departments. The delegation of authority is made to the lowest executive level with well defined limits. Accountability remains an issue. Since Procurement or Performance Audits are not embedded feature of the procurement systems, a systematic, objective focused and corrective accountability mechanism needs to be institutionalized. The indicator is rated as ‘3’. Indicator 7. Functionality of the public procurement market The objective of this indicator is primarily to assess the market response to public procurement solicitations. This response may be influenced by many factors such as the general economic climate, the private sector development environment and policies, the existence of strong Page 32 Balochistan – Procurement Systems Performance Assessment 23 financial institutions, the attractiveness of the public system as a good reliable client, the kind of goods or services being demanded, etc. There are three sub indicators (a-c) to be scored. Sub-indicator 7(a) – There are effective mechanisms for partnerships between the public and private sector . Rating ‘0’ 87. Public-Private Partnership creates a public procurement marketplace wherein the government is the buyer and the private sector is the supplier of the needed goods, works or services. Accordingly, dialogue between the government and the private sector needs to exist and the voice of the private sector needs to be heard with regard to practices by the government that may undermine the competitive effectiveness of the private sector. In Balochistan, there is no trend of holding open dialogue with the potential vendors, service providers, contractors, consultants. There is still a need to make an effort by the government to promote a healthy competition among the service providers other than to advertise the tender. Sometimes the information provided even along with the tender documents also limits the participation since it would be in complete for many who wish to participate. The process of dissemination of information for a healthy competition is virtually non-existent. Government is not engaged in any interaction with the private sector for its development or for the sake of encouraging any public private partnership. The indicator is therefore rated as ‘0’ Sub-indicator 7(b) – Private sector institutions are well organized and able to facilitate access to the market . Rating ‘0’ 88. The private sector in the province is negligibly small as efforts are not giving the desired results. A well functioning procurement system can also be assessed by analyzing the organizational capacity of the Small and Medium Enterprises (SMEs) and the access they have to information and other services to promote their participation. The private sector in the province is not growing and the procuring agencies are faced with the issue of getti ng poor responses to their calls for bids. Rating is assessed as ‘0’ Sub-indicator 7 (c) – There are no major systemic constraints (e.g. inadequate access to credit, contracting practices, etc.) inhibiting the private sector’s capacity to access the procurement market . Rating ‘1’ 89. There are number of constraints that restrict the engagement of private sector in the procurement process. This includes the lack of adequate information for competing; lack of capacities of the private sector firms; inadequacy of the tender notice; non-existence of public private interaction forums like pre- bidding conference, post bidding de- briefings. Indicator is rated as ‘1’ Indicator 8. Existence of contract administration and dispute resolution provisions Page 33 Balochistan – Procurement Systems Performance Assessment 24 This indica tor’s objective is to assess the quality of contract administration practices which begin after contract award and continue to acceptance and final payments. This is an area that many procurement systems fail to consider. It is also a period where many issues arise that can affect the performance of the contract and impact on service delivery. This indicator covers three sub indicators (a-c) to be scored. Sub-indicator 8(a) – Procedures are clearly defined for undertaking contract administration responsibilities that include inspection and acceptance procedures, quality control procedures, and methods to review and issue contract amendments in a timely manner . Rating ‘1’ 90. There are prescribed limits for undertaking contract amendment. The standard contract agreement for the civil works used by the Communication & Works Department does not contain sections for contract amendment. There are no set criteria for quality assurance in the civil works contract. Further there are no such clauses / provisions for prompt final payments. However, the Balochistan Purchase Manual and PEC guidelines have these clauses as a part of the standard contract agreement / bidding documents. 91. The civil works departments are mandated, by the Planning and Development department to appoint Consultants for survey, design and top supervision of all developmental schemes/projects which is usually adhered to by the civil works departments. 92. The final payments are reported not to be processed promptly and may take a long while. Mostly it is the unavailability of funds at the disposal of procuring agency and their reluctance to clear the account of a service provider at the earliest. 93. The case of foreign funded projects is different. The indicator is assessed as ‘1’ Sub-indicator 8(b) – Contracts include dispute resolution procedures that provide for an efficient and fair process to resolve disputes arising during the performance of the contract . Rating ‘0’ The following describes current good practice with regard to dispute resolution. 94. Disputes during the performance of a contract are a common occurrence. For avoiding long delays while resolving disputes, a good resolution process should be defined in the contract that provides for fair and timely resolution. There is an Arbitration Law in the country as is provided by the Constitution of 1973. However, use of alternate dispute resolution as an effective tool to settle disputes at low /affordable costs and whit out entering into formal litigation is extremely rare. Most of the government contracts neither have any provision for arbitration or any other type of ADR. However, the foreign funded projects have provision for arbitration in accordance with the constitutional provisions. The indicator is assessed as ‘0’ Page 34 Balochistan – Procurement Systems Performance Assessment 25 Sub-indicator 8(c) – Procedures exist to enforce the outcome of the dispute resolution process . Rating ‘0’ 95. There is no defined manner in which the winner of arbitration can get the decision enforced neither there is any process to monitor this area of contract administration and to address performance issues. The indicator is assessed as ‘0’ Pillar IV. Integrity and Transparency of the Public Procurement System Pillar IV covers four indicators that are considered necessary to provide for a system that operates with integrity, has appropriate controls that support the implementation of the system in accordance with the legal and regulatory framework and has appropriate measures in place to address the potential for corruption in the system. It also covers important aspects of the procurement system that include stakeholders as part of the control system. This Pillar takes aspects of the procurement system and governance environment and seeks to ensure that they are defined and structured to contribute to integrity and transparency. Indicator 9. The country has effective control and audit systems The objective of this indicator is to determine the quality, reliability and timeliness of the internal and external controls preferably based on risk assessment and mitigation. Sub-indicator 9(a) – A legal framework, organization, policy, and procedures for internal and external control and audit of public procurement operations are in place to provide a functioning control framework . Rating ‘0’ 96. Internal controls exist but remain loose to a great extent. Compliance and practice of these controls is inadequate. The provincial and district governments do not have a well focused internal audit system. The internal audit is institutionalized in almost all the civil works departments at the provincial level including communication & works department, irrigation department, public health engineering and Balochistan Development Authority (BDA) to the extent of pre auditing the transactions. However, with the few exceptions like in the case of the Health Department, the internal audit system is in place with internal audit reports being prepared by auditors deputed by the office of provincial Accountant General. These reports are regularly reported to the management of the department and necessary actions are taken accordingly. The expenditure commitments are in some cases made with out the actual cash being available. Sometime the public procurement process is initiated and Public tender is given out in the press, while the formalities required before doing so, are still incomplete. In case of the development expenditure, the commitments are made in many cases after the project document is approved from the relevant forum, DDWP and PDWP. Since the releases are done very late in the year, departments initiate the procurement process whit out having the releases with them from the provincial Planning and Finance departments. Page 35 Balochistan – Procurement Systems Performance Assessment 26 97. The Local Government Ordinance 2001 requires the District Governments to set up Monitoring Committees. Although the committees have been notified by the provincial and respective district governments but they have neither the capacity to deliver nor are practically functional. The indicator is assessed as ‘0’ Sub-indicator 9(b) – Enforcement and follow-up on findings and recommendations of the control framework provide an environment that fosters compliance . Rating ‘1’ The purpose of this indicator is to review the extent to which internal and external audit recommendations are implemented within a reasonable time. 98. Internal audit is not institutionalized across the provincial government. Even in the departments where internal audit sections have been created, their role remains limited to the pre-auditing of financial transactions. Since no reports are being generated by the internal auditors for assisting the management, there is no question of implementation whatsoever. 99. In case of the external audit, which is a statutory function performed by the office of the Auditor General, the recommendations are deliberated upon, firstly, during a departmental accounts committee meeting where some of the audit paras are dropped by satisfying the observations raised by the auditors, the remaining are then taken up at the Public Accounts Committee which is formed at the provincial legislature. The indicator is assessed as ‘1’ Sub-indicator 9(c) – The internal control system provides timely Information on compliance to enable management action . Rating ‘0’ The following key provisions should be provided: (a) There are written standards for the internal control unit to convey issues to management depending on the urgency of the matter. (b) There is established regular periodic reporting to management throughout the year. (c) The established periodicity and written standards are complied with. 100. As explained in the above sub-indicators, there is no real internal control system in place at the provincial government hence rating is assessed to be ‘0’ Sub-indicator 9(d) – The internal control systems are sufficiently defined to allow performance audits to be conducted . Rating ‘0’ There are written internal control routines and procedures. Ideally there would an internal audit and control manual. Finally, there is sufficient information retained to enable auditors to verify that the written internal control procedures are adhered to. Page 36 Balochistan – Procurement Systems Performance Assessment 27 101. The internal control systems are not properly defined nor are the systems actually functioning with the exception of pre- auditing of transactions. The sub indicator is rated ‘0’. Sub-indicator 9(e) – Auditors are sufficiently informed about procurement requirements and control systems to conduct quality audits that contribute to compliance . Rating ‘0’ The objective of this indicator is to confirm that there is a system in place to ensure that auditors working on procurement audits receive adequate training or are selected following criteria that explicitly requires that they demonstrate sufficient knowledge of the subject. Auditors should normally receive formal training on procurement requirements, principles operations, laws and regulations and processes. Alternatively, they should have extensive experience in public procurement or be supported by procurement specialists or consultants. 102. The auditors are trained by experience in financial auditing where various inter linked aspects of procurement are also scrutinized. This is only a part of the financial auditing and there is no procurement audit being done separately. Further, there is no formal training on procurement rules, regulations and procedures. Since procurement auditing is not done presently, it is, though, a need for the auditors to have adequate knowledge & training, it is not a requirement. The sub indicator is assessed as ‘0’. Indicator 10. Efficiency of appeals mechanism The appeals mechanism was covered under Pillar I with regard to its creation and coverage by the legal regulatory framework. It is further assessed under this indicator for a range of specific issues regarding efficiency in contributing to the compliance environment in the country and the integrity of the public procurement system. There are five sub indicators (a-e) to be scored. Sub-indicator 10(a) – Decisions are deliberated on the basis of available information, and the final decision can be reviewed and ruled upon by a body (or authority) with enforcement capacity under the law . Rating ‘0’ This sub indicator looks at the process that is defined for dealing with complaints or appeals and sets out some specific conditions that provide for fairness and due process. (a) Decisions are rendered on the basis of available evidence submitted by the parties to a specified body that has the authority to issue a final decision that is binding unless referred to an appeals body. (b) An appeals body exists which has the authority to review decisions of the specified complaints body and issue final enforceable decisions. (c) There are times specified for the submission and review of complaints and issuing of decisions that do not unduly delay the procurement process. Page 37 Balochistan – Procurement Systems Performance Assessment 28 103. There is no centralized authority or a body to review the complaints. In fact, at present, the government does not have any grievances redressal system in place. The complaints are as a practice send to the Supervisory officer of the concerned officials dealing in certain procurement, however, there is generally, a tendency to send complaints to the Chief Executive of the province. All of this is pure practices and are not a part of any legal or formal regulation or procedure for complaints submission, processing and disposal. The complaints made may or may not be processed and there are absolutely no timelines for responding back to the complainant for a hearing or disposal of the case. The only possible way is o go to the courts for seeking relief. The indi cator is assessed as ‘0’ Sub-indicator 10(b) – The complaint review system has the capacity to handle complaints efficiently and a means to enforce the remedy imposed . Rating ‘0’ This indicator deals specifically with the question of the efficiency and capacity of a complaints review system and its ability to enforce the remedy imposed. It is closely related to sub indicator 10(a) which also refers to enforcement. This indicator will focus primarily on the capacity and efficiency issues. 104. Since there is no formal or legal complaint review and grievances redressal system for the province of Balochistan, the resolution of complaints, if at all, may take a long time. The complaints addressed to different authorities, whenever processed usually spells out a timeline for receiving comments from the related quarters. However, this may be just one step in complaints resolution and at best be done in 10- 15 days. The indicator is therefore rated ‘0’ Sub-indicator 10 (c) – The system operates in a fair manner, with outcomes of decisions balanced and justified on the basis of available information . Rating ‘0’ The system needs to be seen as operating in a fair manner. The complaint review system must require that decisions be rendered only on relevant and verifiable information presented and that such decisions be unbiased, reflecting the consideration of the evidence presented and the applicable requirements in the legal/regulatory framework. 105. There were no such instances quoted during the consultations on procurement systems where decisions were made to resolute the dispute. The indicator is rated ‘0’ Sub-indicator 10(d) – Decisions are published and made available to all interested parties and to the public Decisions are public by law and posted in easily accessible places (preferably posted at a dedicated government procurement website in the Internet). Publication of decisions enables interested parties to be better informed as to the consistency and fairness of the process. Page 38 Balochistan – Procurement Systems Performance Assessment 29 106. The dispute resolution, in the cases that it takes place, the information will remain restricted to the main parties only and would not be shared with the general public at large. There is a generally a tendency not to publish information about various stages of the procurement process in the province. This indicator is also assessed ‘0’. Sub-indicator 10(e) – The system ensures that the complaint review body has full authority and independence for resolution of complaints . Rating ‘0’ This indicator assesses the degree of autonomy that the complaint decision body has from the rest of the system to ensure that its decisions are free from interference or conflict of interest. Due to the nature of this sub indicator it is scored as either a 3 or a 0. 107. In the absence of a centralized Complaints resolution or grievances redressal system in place in the province, the complaints are usually dealt by the officials of the same department /organization leaving behind no possibility of an independent and impartial environment required for a judicious decision. The indicator is assessed ‘0’ Indicator 11. Degree of access to information This indicator deals with the quality, relevance, ease of access and comprehensiveness of information on the public procurement system. Sub-indicator 11(a) – Information is published and distributed through available media with support from information technology when feasible . Rating ‘0’ Public access to procurement information is essential to transparency and creates a basis for social audit by interested stakeholders. Public information should be easy to find, comprehensive and user friendly providing information of relevance. 108. There is a big vacuum of information dissemination particularly in the case of procurements of goods, works and services. The interested parties or service providers (competitors) may need to struggle to get even the basic information like; has the contract been awarded; to whom has it been awarded or the value of the contract. It is certainly much more difficult when someone is interested to find more about the procurement process followed and to acquire greater information about the competitors, short listing and evaluation conducted etc,. A good procurement system should include provisions to protect the disclosure of proprietary, commercial, personal or financial information of a confidential or sensitive nature. Information should be consolidated into a single place and when the technology is available in the country, a dedicated website should be created for this purpose. Commitment, backed by requirements in the legal/regulatory framework should ensure that agencies duly post the information required on a timely basis. The indicator is rated ‘0’ Indicator 12. The country has ethics and anticorruption measures in place This indicator assesses the nature and scope of the anticorruption provisions in the procurement system . There are seven sub indicators (a-g) contributing to this indicator. Page 39 Balochistan – Procurement Systems Performance Assessment 30 Sub-indicator 12(a) – The legal and regulatory framework for procurement, including tender and contract documents, includes provisions addressing corruption, fraud, conflict of interest, and unethical behavior and sets out (either directly or by reference to other laws) the actions that can be taken with regard to such behavior . Rating ‘0’ This sub indicator assesses the extent to which the law and the regulations compel procuring agencies to include fraud and corruption, conflict of interest and unethical behavior references in the tendering documentation. This sub indicator is related to sub indicator 2 b on content for model documents but is not directly addressed in that sub indicator. 109. In case of the foreign funded projects being executed by the provincial government’s line departments, the conditions to participate and for executing the contracts is very comprehensively defined including the relevant clauses for ‘conflict of interest’ and ‘corrupt or fraudulent practices’. However, the provincial government does not specify these provisions in their contracts which do not follow any standard contract for procurement of goods, works and services. The indicator is accordingly assessed as ‘0’. Sub-indicator 12(b) – The legal system defines responsibilities, accountabilities, and penalties for individuals and firms found to have engaged in fraudulent or corrupt practices . Rating ‘1’ This indicator assesses the existence of legal provisions that define fraudulent and corrupt practices and set out the responsibilities and sanctions for individuals or firms indulging in such practices. These provisions should address issues concerning conflict of interest and incompatibility situations. The law should prohibit the intervention of active public officials and former public officials for a reasonable period of time after leaving office in procurement matters in ways that benefit them, their relatives, and business or political associates financially or otherwise. There may be cases where there is a separate anticorruption law (e.g. anticorruption legislation) that contains the provisions. This arrangement is appropriate as far as the effects of the anticorruption law are the same as if they were in the procurement law. 110. There are no provincial procurement rules and regulations for procurement of goods, works and services. There are provisions in the PEC guidelines which address many of the factors relating to the fraudulent & corrupt practices and laws for black listing. The Balochistan Purchase Manual places a system for black listing / de-registration of contractors and lists out the possible reasons for doing so. The list of reasons however does not specify all possible corrupt & fraudulent practices including conflict of interest or consequences for government employees found involved in such practices. The list of possible reasons includes; · Making false statements and allegations to gain undue advantage, · Commission of fraud, Page 40 Balochistan – Procurement Systems Performance Assessment 31 · Commission of embezzlement; Criminal breach of trust; Cheating; forgery; falsification; or destruction of records; Receiving stolen property; False use of trade make; Securing fraudulent registration; Giving false evidence; Furnishing of false information, · Failure to make payments of outstanding dues including any dues on account of contract placed at the risk of the cost of the contractor, · Professional misconduct that is failure to proceed with the signed contract, withdrawal of the commitment, quoting ridiculously 111. The black listing shall be for a specified period which should not be less than 3 years and should be based on the extent of seriousness of allegations and evidences. The private concern may be removed from the list of registered contractors for the following reasons: · Submitting quotations knowing his in capacity technically or financially, to meet the tender requirements. · Repeatedly (at least on 4 consecutive occasions) dispatching tender quotations late so that these reach after the date and time of opening of tenders. · Submission of 4 successive quotations all of which are 50% above the quotations ultimately accepted. · Failure to deposit renewal fee. · Professional misconduct that is failure to proceed with the signed contract, withdrawal commitment, quoting ridiculously low rate and withdrawing the offer and not responding to the written communication. · Repeated failure to observe instructions given in tender forms including schedule there to. · Failure to perform a contract(s) satisfactorily in accordance with the contractual obligations where the failure was in the opinion of competent authority due to the exclusive fault of the contractor. · Failure to make payments of outstanding dues including any dues on account of contract placed at the risk and cost of the contractor. Rating is assessed as ‘1’ Sub-indicator 12 (c) – Evidence of enforcement of rulings and penalties exists . Rating ‘1’ This indicator is about the enforcement of the law and the ability to demonstrate this by actions taken. Evidence of enforcement is necessary to demonstrate to the citizens and other stakeholders that the country is serious about fighting corruption. 112. During the discussions with various stakeholder of the procurement system, it was observed that enforcement of the rulings and penalties exist to a certain and limited extent. Anti corruption department of the provincial government deals with various complaints from the provincial line departments and some from the general public and penalties are enforced. However, it is the considered view that overall Page 41 Balochistan – Procurement Systems Performance Assessment 32 enforcement is weak for penalizing the responsible in the procurement system. Accordingly, sub-indicator is assessed ‘1’. Sub-indicator 12(d) – Special measures exist to prevent and detect fraud and corruption in public procurement . Rating ‘1’ This sub indicator looks to verify the existence of an anticorruption program and its extent and nature or other special measures which can help prevent and/or detect fraud and corruption specifically associated with public procurement. 113. At present, there is no comprehensive anticorruption program, which includes all the stakeholders in the procurement system, assigns clear responsibilities to all of them, and assigns a high- level body or organization with sufficient standing and authority to be responsible for coordinating and monitoring the program. There are tough various anti corruption activities which are not linked to any integrated or a c omprehensively chalked out strategy or a program. The indicator is rated, ‘1’. 114. Ideally, the control organizations (supreme audit authority) and the legislative oversight bodies (e.g. the parliament or congress), are responsible for detecting and denouncing irregularities or corruption. The civil society organizations are responsible for social audits and for monitoring of procurement to protect the public interest. These may include NGOs, the academia, the unions, the chambers of commerce and professional associations and the press. The judiciary should also participate, in the form of special anticorruption courts and dedicated investigative bodies that are responsible for investigating and prosecuting cases of corruption. Sub-indicator 12(e) – Stakeholders (private sector, civil society, and ultimate beneficiaries of procurement/end-users) supports the creation of a procurement market known for its integrity and ethical behaviors . Rating ‘0’ This indicator assesses the strength of the public in maintaining a sound procurement environment. This may manifest in the existence of respected and credible civil society groups that provide oversight and can exercise social control. 115. There is no process of a debate with the private sector, civil society, service providers and end users and the procuring agencies on how to build on the system in terms of its capacity to deliver more effective and efficiently. Many of the stakeholders believe in having a more defined procurement system with adequate dissemination of information at the time of tendering and contract award. However, what they generally do not express to have is a strong system of checks, balances, an anti corruption strategy and laws for debarment from competition are the areas. Government also does not feel the need to engage with these stakeholders. Indicator is accordingly rated ‘0’. Sub-criteria 12(f) – The country should have in place a secure mechanism for reporting fraudulent, corrupt, or unethical behavior . Rating ‘0’ Page 42 Balochistan – Procurement Systems Performance Assessment 33 The country provides a system for reporting fraudulent, corrupt or unethical behavior that provides for confidentiality. The system must be seen to react to reports as verified by subsequent actions taken to address the issues reported. 116. There is no system in place for reporting fraud, unethical behavior and corrupt practices. The rating assigned is ‘0’ Sub-criteria 12(g) – Existence of Codes of Conduct/Codes of Ethics for participants that are involved in aspects of the public financial management systems that also provide for disclosure for those in decision making positions. The country should have in place a Code of Conduct/Ethics that applies to all public officials. In addition, special provisions should be in place for those involved in public procurement. 117. There is a general code of conduct in the PEC guidelines. However, code of conduct has not been added to the Balochistan Purchase Manual nor there is one for the procurement of services. Indicator is rated ‘1’. Balochistan Government Reforms 118. The Government of Balochistan is engaged in various Institutional reforms which in turn are expected to improve the capacity of the provincial procurement system. Decentralization Support Program 119. Along with the federal government, GoB initiated the Decentralization Support program which is funded by Asian Development Bank to initiate the process of capacity building of the Government at District, Tehsil and Union Council level. Two other initiatives of the provincial government for supporting the Local Governments include the recent initiated Balochistan Devolved Social Services Program at a cost of Rs.378 million and the Assistance to Governance Reforms Practices. An earlier phase “Support to Devolution Reforms in Balochistan” ran successfully with the assistance of UNDP. Balochistan Resource Management Program 120. Another major intervention of the government is to map its potential resources and provide support and technical assistance to the line provincial departments for putting these resources to good use. The project titled “Balochistan Resource Management Program” was initiated by the Government of Balochistan with the assistance of Asian Development Bank at a cost of Rs.249 million. PIFRA PFM Capacity-building Programs 121. The Government of Balochistan is also supported by the Federal Government capacity building Project for Improvement of Financial Reporting and Accountability (PIFRA). The objectives of the PIFRA project are: (a) to assist the Borrower in continuing to build capacity to improve the accuracy, comprehensiveness, reliability, and timeliness of financial and fiscal reporting at all levels of government; (b) to directly support the Borrower’s commitment to improved public financial management, accountability, and transparency; (c) to enhance the capacity of public sector managers to use credible financial information for better and informed decision-making; and (d) to facilitate oversight Page 43 Balochistan – Procurement Systems Performance Assessment 34 of the use of public monies, and increase the national and international credibility of government’s financial statements and assurance processes.