• Procurement law being drafted by National Procurement Commission: Treasury
• National Procurement Guidelines of 2006 being overlooked due to lengthy processes
• IMF notes alarmingly high corruption vulnerabilities in public procurement

Since the onset of Sri Lanka’s economic crisis towards the end of 2021, there has been a notable increase in large-scale State procurements bypassing the Government’s established tender process. This trend, which has been reported in the media for years, has become more pronounced, particularly in critical sectors such as power and energy, healthcare, and agriculture.

The National Procurement Guidelines (NPG), introduced in 2006 by the then National Procurement Agency (NPA), outline the standard procedures for State procurements. However, these guidelines have increasingly been overlooked. In several cases, these deviations have allegedly resulted in substantial financial losses for the Government.

Authorities defending these actions often cite the lengthy timeframes required by the current procurement process as a key reason for bypassing established protocols. They argue that adhering to these time-consuming procedures, particularly in sectors like electricity, has led to delays that are financially detrimental to the institutions involved.

Despite the justifications offered by authorities for bypassing the established tender process, significant concerns about corruption in public procurement remain.

Corruption vulnerabilities

This issue is highlighted in the ‘Technical Assistance Report – Governance Diagnostic Assessment’ prepared by International Monetary Fund (IMF) staff, based on information available as of September 2023.

The report highlights that corruption vulnerabilities in Sri Lanka’s public procurement system are alarmingly high. One of the primary reasons for this is the absence of a comprehensive public procurement law, which creates ambiguity in the legal framework. 

This lack of clarity has fostered high levels of political involvement in selecting procurement winners, leading to poor contract management, limited transparency, and insufficient oversight of procurement processes and outcomes.

As further highlighted, additional issues arise from inadequate procurement planning, a reliance on non-competitive methods for awarding contracts, insufficient competition, and inconsistent attention to contract performance and enforcement. 

Furthermore, the absence of information on the beneficial ownership of companies compounds the risk of conflicts of interest in contract awards. These factors collectively contribute to a procurement environment where corruption can thrive, exacerbating the already challenging economic situation in Sri Lanka.

Procurement guidelines

The NPG provided a clear framework for how public procurement should be conducted by Public Entities (PEs) in Sri Lanka.

According to the NPG, public procurement is the process through which PEs acquire the necessary inputs for public sector investments. These investments are vital for national development, encompassing physical infrastructure, institutional capacity building, and other critical sectors. 

The inputs procured fall into three main categories: works (such as bridges and highways), goods (like equipment and medical supplies), and services (including technical assistance and maintenance).

The success of public sector investments hinges on the quality, timeliness, and cost-effectiveness of these procured inputs. A sound procurement system is designed to maximise value for money, adhere to established standards and regulations, ensure fair competition, expedite delivery, maintain transparency, and protect confidentiality.

The NPG, which was approved by the Cabinet of Ministers, applies to the procurement of goods and works, superseding earlier guidelines except those related to inventory disposal and public asset divestiture. The guidelines emphasise strict adherence to established procedures, with any deviations requiring prior approval from the NPA.

Timeline

The Procurement Time Schedule (PTS) has outlined each step of the procurement process from start to finish and is developed in two stages. 

Stage 1 includes activities from the initiation of the process up to the preparation of draft bidding documents, with the PE responsible for its creation and updates. Stage 2 covers the activities following the drafting of the bidding documents, also prepared by the PE. 

The PTS must be reviewed and approved by the Procurement Committee (PC) at its first meeting. After approval, the chairpersons of the PC and the Technical Evaluation Committee (TEC) monitor progress with the PE. 

In case of significant delays, the chairperson must identify causes, take corrective actions, and notify the NPA. For Central and Ministerial Procurement Committees, this responsibility is held by the secretary to the line ministry.

Govt. response

Speaking to The Sunday Morning, Treasury Deputy Secretary R.M.P. Rathnayake said: “The Finance Ministry provides its observations when the matter is referred to the ministry, but that happens at the end of the process. The procurement process is primarily handled by the relevant institution. The ministry only provides assistance through our officials if they specifically request a Treasury representative.”

While denying any losses being caused by the process, Rathnayake added that the procurement law was currently being formulated by the National Procurement Commission and that it was nearing completion.

Regarding e-procurement, Rathnayake said: “We began implementing e-procurement before the IMF programme commenced. Initially, our initiative was limited to the shopping method. We are now expanding it to include other procurement categories for both national and international competitive bidding. The system is currently being updated and I anticipate that all Government procurement will soon transition to e-procurement.”

Addressing concerns about delays, he noted: “There is a timeframe specifically mentioned in the guidelines and different procurement methods have varying durations.”

Meanwhile, National Procurement Commission Director – Policy A.D.P.I. Prasanna told The Sunday Morning that various procurement methods each had specific timeframes to ensure transparency. “The NPG outlines the time periods required for each category,” he explained.

Addressing concerns about delays, Prasanna suggested that authorities should have planned their procurement activities accordingly, noting that some methods required less time than others.