Reforms in sustainable public procurement policy needed to ensure transparency

The SME Fair in Dhaka. File Photo: TBS

The government of Bangladesh allocates around 40% of its annual budget to public procurement, a figure that continues to rise alongside the growth of both the national budget and the Annual Development Program (ADP). There is no doubt that the country requires new development initiatives each year. 

Ensuring the quality of government services and maintaining transparency are key prerequisites for sustainable economic growth. Effective public procurement, therefore, becomes central to delivering high-quality services to citizens. 

In this regard, the Public Procurement Act 2006, later amended in 2008, along with the Public Procurement Rules 2008, lays the foundation for the country's procurement processes.

One of the crucial objectives of the Sustainable Public Procurement Policy is to achieve the targets set by SDG 12.7. According to SDG indicator 12.7.1, a growing number of countries are implementing SPP policies, complete with action plans. Bangladesh is no exception, having framed its policy in line with these global goals. All other relevant policies will gradually be aligned to meet sustainability needs.

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To further these efforts, the government introduced the Sustainable Public Procurement (SPP) Policy in 2023 on 10 December last year. The SPP rests on three core pillars — environmental, social, and economic sustainability. Its aim is to align procurement practices with these sustainability targets. The key principles guiding public procurement under this policy are accountability, fairness, competition, and transparency.

In recent times, climate change has become a growing concern in budget reports, especially under the Mid-Term Budgetary Framework (MTBF). Ministries and divisions are required to factor climate change considerations into their budgetary expenditures. This means that public procurement must now actively contribute to reducing carbon emissions and conserving biodiversity. 

Over time, new guidelines, revised schedules, and updated documents will be prepared to incorporate these climate-related aspects, making public procurement more sustainable and efficient.

One of the crucial objectives of the SPP is to achieve the targets set by Sustainable Development Goal (SDG) 12.7, which focuses on Sustainable Public Procurement. According to SDG indicator 12.7.1, a growing number of countries are implementing SPP policies, complete with action plans. Bangladesh is no exception, having framed its policy in line with these global goals. All other relevant policies will gradually be aligned to meet sustainability needs.

The introduction of electronic government procurement (e-GP) represents another significant step forward in ensuring transparency in public procurement. Currently, 67% of tenderers are using the e-GP system. 

However, while around 70% of contracts are processed through this system, only 17% of the total contract value is managed via e-GP, with the remaining 83% being handled manually. This gap points to a need for greater transparency across the procurement system, with a shift towards e-GP for all services.

Globally, efforts are underway to streamline the public procurement process under the World Trade Organization (WTO). The Agreement on Government Procurement (GPA) was first established in 1979 under the General Agreement on Tariffs and Trade (GATT). 

It has since been revised and expanded, coming into force in 2014. At present, the GPA has 22 parties, encompassing 49 WTO members, with an additional 35 WTO members participating in the GPA Committee as observers.

Companies from GPA signatory countries that wish to sell goods or services covered by the agreement to procuring entities in other signatory countries can benefit from this arrangement. The WTO estimates that government procurement opportunities covered by the GPA are worth several hundred billion dollars annually. 

Bangladesh, however, has yet to sign any plurilateral agreement and prefers to focus on multilateral trade agreements. While the country may take its time joining the GPA, it must consider the long-term implications for attracting foreign investment, especially as it approaches graduation from least developed country (LDC) status in 2026. After this point, the preferential treatment given to domestic bidders over foreign bidders may come under question.

At present, domestic suppliers enjoy certain advantages in public procurement. For international tenders, a price-preference scheme offers domestic suppliers up to 7.5% preference for 'works' and up to 15% for 'goods'. However, joint ventures between domestic and foreign partners are not eligible for these preferences if the foreign share exceeds 50%. 

While these policies are meant to support local businesses, there are areas where the private sector feels disadvantaged, particularly engineering procurement and construction (EPC) companies involved in major infrastructure projects. 

Domestic EPCs do not receive the same level of preferential treatment as their foreign counterparts, highlighting the need for further studies and policy reforms to ensure the participation of local contractors in large-scale projects.

Local contractors have also raised concerns over certain policy-related issues, particularly around mismanagement within the e-GP system. There are calls to increase the participation of small and women entrepreneurs by removing outdated methods from the tendering process. 

The SPP, through specific clauses (7.2.2 and 7.2.3), acknowledges these concerns and encourages greater involvement of women-owned enterprises and small and medium-sized enterprises (SMEs) in public procurement.

One ongoing issue is the tendering system, which currently shortlists bidders within 10% of the lowest price. Section 4, Clause 33, Footnote 1 of the Public Procurement Law 2006 (amended in 2008) states that any bidder whose offer is more than 10% lower than the established threshold shall be automatically disqualified. Many stakeholders argue that eliminating this 10% restriction and selecting the lowest bidder would be a more effective approach. 

Under the current system, several bidders often submit similar rates within the 10% range, and final decisions are made based on factors such as previous experience, business size, and company establishment year. These metrics introduce flexibility, but also create opportunities for manipulation rather than relying solely on competitive bidding and technical expertise.

Despite these challenges, efforts are being made to reform the public procurement system, with a focus on full automation and transparency. While sustainability has not always been a priority in procurement decisions, integrating sustainable criteria and selecting tenders based on whole-life costs will ultimately benefit the country. This shift towards green public procurement will ensure long-term sustainability. 

However, the transition is complex, and the capacity of public entities, government officials, and private stakeholders must be significantly enhanced to achieve these goals.

Ferdaus Ara Begum. Sketch: TBS

Ferdaus Ara Begum is the CEO of Business Initiative Leading Development (BUILD), a public-private dialogue platform. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard