Tendering System: The Worst Method of Purchase?

Tendering System: The Worst Method of Purchase?

By Dr. Mir Nazima Rasool Moludi
I am a novice but I have just begun to look at ways things work. Economics and finance, have been, and still are, beyond my comprehension. Therefore, I proffer my apologies well in advance, before my misunderstandings, errors and omissions are noted. All offices, government non-government , big and small need to make purchases at one or the other point of time; big institutions make purchases often and usually at a bigger scale. Public buying is intended to be conducted in a transparent manner to ensure fairness, bring competition and eliminate arbitrariness in the system. To ensure fairness and transparency, quite a few systems are in place for purchase and procurement of goods and services. Among these, one of the very commonly opted for and generally regarded as corruption free, is the tendering system of purchase wherein a company or a department that needs to purchase materials/goods/services, floats an advertisement in local newspapers, specifying all the terms and conditions of purchase including quality of the goods to be supplied, their model, frame and other attributes.

In case of electronic items, the purchasing authority of the department or the purchase manager, if the company has appointed one, may also specify additional attributes of the item. This constitutes what is known as an open tender; all the tender documents are advertised, inviting suppliers to bid directly for a contract. All interested parties then submit a tender which is followed by scoring and the successful party is then awarded the contract.

Companies or individuals that can supply the items submit their Expression of Interest (EoI) by a specific date or before a specified deadline. The company which is interested in supplying goods or services prepares an inventory of the items to be supplied which is called a bid or quotation or a tender. Tender carries all the information regarding the specifications of the items that will be sold and explicitly mentions the rate per item. Tenders are collected in sealed boxes at the respective offices of the companies or departments that intend to make purchases and are opened on a pre-notified date in presence of members of Purchase Committee of the department or the members of the Purchase Subsection of the company.

If the technical bid of a tenderer, which is essentially opened first, is complete and contains all the essential documents (ITR etc.), only then the financial bid, which contains rate quotations, is opened. This is followed by preparing a Comparative Statement of Rates, wherein rates quoted by different bidders are mentioned against the goods/services to be procured. The lowest rates quoted by different bidders for different goods/services or by a single bidder for all the goods/services are encircled. This is followed by award of the contract which obviously goes to such bidders as have quoted lowest rates or to a single bidder with lowest rate quotations for all the items.

Apparently these purchases are made following a uniform, systematic, efficient and cost effective procedure, in accordance with the relevant rules and regulations of Government with an aim to enable healthy competition among the prospective tendering parties and avoid corruption. During the tendering system, we buy from any bidder who has quoted lowest rates but the lowest rates in tender documents do not necessarily coincide with the lowest market rates, they are rather exuberant when compared with the rates in the open market.

Retailers follow a rate list wherein a buyer can check rates before making purchases but in the tendering system, rates come as a surprise and people choose to buy at a particular rate just because it is the lowest among three, four or forty tenders that have been received. Recently, after following all the norms, rules and regulations of tendering system of purchase, we bought some 15 core i3 desktops @ 53,000 which incurred us an expenditure of about Rupees 795,000. In the open market, the highest price per piece would have been around 20,000. At the rates, that we bought these (obsolete) pieces of computers, we could have bought core i5 laptops from the open market.

All this begs a question. Before I pose it, I would like to proffer my apologies for my inadequate knowledge of the subject. What I fail to understand is the logic of buying things at 10 times their market rate through the, so called ‘efficient system of purchase’. No system is perfect neither do I expect the tendering system of purchase to be.

All I want to do is put a perspective on the system. The method of purchase in contention , that is, tendering, should not be considered as the ultimate way of fair purchase and it should not be thought of as beyond revision and criticism. I may be wrong but I think that the tendering system of purchase should be given a thought especially in case of goods/ services where we know the retail prices (gas heaters, geysers, computer and most of the laboratory equipment), in the market survey , which along with direct buying is not much difficult. Moreover, the system of purchase that I have critiqued is most vulnerable to corruption, and unscrupulous and underhand negotiations are possible.

Let us assume that each and everyone involved in the purchase chain is honest but tendering system itself is flawed, and it, on the whole, entails buying goods/services at much higher prices than their usual, open market rate therefore. This system then is inherently flawed. It, therefore, needs a rethink- especially in case of items which can be bought from the open market and, in case of institutes, which are at initial stages of their development and where funds need to be used most judiciously.


The author is Assistant Professor in the University of Kashmir and can be reached at: rasoolnazima@gmail.com

One Response to "Tendering System: The Worst Method of Purchase?"

  1. sne   May 18, 2017 at 8:48 pm

    Hello I would really appreciate to see how the question are asked based on this case study