Improving public procurement in Pakistan

LAHORE : Pakistan’s public procurement sector faces significant challenges, plagued by inefficiencies, corruption and a lack of transparency, resulting in substantial financial losses. 

According to Transparency International and local audit reports, the country loses an estimated 10-30 per cent of its procurement value annually due to corruption and inefficiencies.

With public procurement accounting for 15-20 per cent of Pakistan’s GDP, these losses could exceed Rs1 trillion each year, depending on GDP size. Nepotism, favouritism and opaque bidding processes erode public trust and inflate costs through kickbacks, bribes and cartelisation among suppliers.

Audit reports reveal that flaws in procurement processes for infrastructure projects frequently lead to cost overruns of 15-20 per cent. Also, delays, mismanagement and under-invoicing in customs and the procurement of imported goods exacerbate losses, amounting to billions of rupees annually. Weak oversight mechanisms, insufficient penalties for malpractice and bureaucratic red tape have created an environment that enables inefficiencies and corruption. Prolonged bidding and contract awarding processes delay project implementation, while a lack of streamlined procedures hampers efficiency. Moreover, poorly trained procurement staff lack the expertise to manage processes effectively. Many agencies fail to adhere to Public Procurement Regulatory Authority (PPRA) rules due to weak enforcement and limited accountability mechanisms. Contracts are often awarded to the lowest bidder without evaluating long-term costs or quality, a misinterpretation of value-for-money principles recommended by the World Bank. Manual procurement processes dominate, leaving room for errors and manipulation. Despite the World Bank’s emphasis on e-procurement systems for enhanced transparency, Pakistan has yet to implement such systems widely. Insufficient tracking of contract execution further contributes to subpar performance and wastage.

Neighbouring countries like India and Bangladesh have made notable strides in improving transparency, efficiency and accountability in public procurement, offering valuable lessons for Pakistan. India’s public procurement is governed by the General Financial Rules (GFR), with additional oversight from agencies like the Central Vigilance Commission (CVC). The Government e-Marketplace (GeM) has significantly enhanced transparency, reducing corruption and fostering competition.

India adheres closely to World Bank guidelines for projects funded by multilateral agencies. However, high-value contracts still face challenges such as political interference and favouritism. Shifting from cost-based procurement to quality and value-based selection has yielded improved outcomes in sectors like IT and healthcare.

Bangladesh’s Public Procurement Act (PPA) 2006 and Public Procurement Rules (PPR) 2008 align with international best practices, including World Bank guidelines. The Central Procurement Technical Unit (CPTU) monitors and builds capacity for procurement processes. The introduction of the Electronic Government Procurement (e-GP) System in 2011 has reduced manual inefficiencies and increased transparency. By 2023, most large-scale government procurement processes were conducted online, adhering to World Bank and ADB guidelines. Despite these advancements, challenges like bidder collusion and political interference persist, particularly at the local government level. However, post-procurement performance evaluations in sectors like health and education have started ensuring value for money.

To address its procurement challenges, Pakistan must implement e-procurement systems, publish procurement plans and performance evaluations online, enforce penalties for malpractice, train procurement officials and prioritise quality over cost in contract awards. By learning from the successes of India and Bangladesh, Pakistan could save hundreds of billions annually, improve efficiency, and restore public trust in its procurement system.