Probity  Provisions of the Procurement Procedure

Defence Procurement Procedure -2008  (DPP-2008) has laid down clear guidelines for all foreign vendors. They are  warned not to resort to any unethical practice to influence the decision  makers.

A ‘Pre-Contract Integrity Pact’ has been made mandatory for all schemes  exceeding Rupees 100 crores. The vendors are required to sign and submit it  separately along with the technical and commercial offers. It is a binding  agreement in which the procurement agency promises that it will not accept  bribes during the procurement process and bidders promise that they will not  offer bribes. It also includes an undertaking by each bidder to disclose all  payments made in connection with the contract in question to anybody (including  agents and other middlemen as well as family members of officials).

The Government can enforce the following sanctions for any violation by  a bidder of its commitments or undertakings: - 
•Denial or loss of  contract. 
•Forfeiture of bid  security and performance bond. 
•Liability for damages to  the principal and the competing bidders. 
•Finally, debarment of the  violator by the principal for an appropriate period of time.

While signing the final contract, every vendor (irrespective of the  contract value) is required to give an undertaking that he has not given, offered  or promised to give, directly or indirectly any gift, consideration, reward,  commission, fees, brokerage or inducement to procure the contract. Any breach  of the aforesaid undertaking by the seller or any one employed by him shall  entitle the buyer to cancel the contract and all or any other contracts with  the seller and recover the loss arising from such cancellation. Should the  Government desire to ascertain if any unauthorized payments have been made, a  vendor has to allow inspection of his account books.

It will be seen that  debarment of a vendor is the last resort and has to be taken only in extreme  cases.

Appraisal of the  Issue

Before initiating any action against a  company, the Government must weigh pros and cons of all alternatives open to  it. While punishing a defaulting vendor, own interests must be fully  safeguarded. India must consider the following points while taking decision on  blacklisting foreign vendors:- 
•There  are limited manufacturers of major high-tech defence systems in the world.  Additionally, world defence trade is circumscribed by embargoes on technology  export. Thus, there are very few manufacturers who possess and are willing to  offer advanced weaponry to India. 
•To  develop indigenous defence industry, India needs imported technology and  reliable foreign partners with long term commitment. Blacklisting nullifies all  transfer of technology agreements, even if paid for.  
•India  needs to modernize its armed forces expeditiously and its shopping list spans a  vast canvas, including all major systems. As most major defence companies  produce a large array of equipment, blacklisting in one contract will have a  ripple effect on all other purchases as well.   
•India  possesses a huge inventory of weapon platforms which are in need of immediate  upgradation to increase their useful life. This task can be undertaken by a handful  of companies. Banning any will reduce own options. 
•No  company produces a complete defence system. Most major producers are in fact  mere integrators. They outsource major assemblies from varied sources.  Blacklisting of an assembly supplier can also jeopardize major acquisition proposals.       
•One  of the stated aims of DPP-2008 is to ‘demonstrate the highest degree of probity  and public accountability, transparency in operations, free competition and  impartiality’. Blacklisting of vendors reduces competition and forces the  Government to resort to single vendor procurements with related cost penalty.  This is also contrary to Government’s declared policy. 
•Every  time a finalised contract is suspended, the earmarked funds remain unexpended  resulting in their surrender. 
•Most  importantly, the services get deprived of the essential equipment. It may have  critical effect on nation’s war preparedness. Fresh floating of tenders entails  major delays and cost overruns.

In every irregular transaction, there  are always two parties – the bribe giver and the bribe taker. Action must be  taken against both and in equal proportion. It is unfair to apportion the  entire blame to bribe givers and take no action against those who demand and  extract bribes. It conveys an impression that the Government is reconciled to  the fact that procurement functionaries are bound to fall prey to temptations,  if offered to them. It amounts to a tacit admission by the Government of its  inability to find officials with unimpeachable integrity and to exercise control  over them. The Government thus, feels that the onus of keeping all transactions  clean is entirely on the vendors - they should decline to pay bribes even if  demanded by the decision makers. This is a strange logic. Instead of putting its  own house in order, India holds foreign vendors accountable for all  wrong-doings.