Tuesday, November 30, 2010

Why scams tail procurement, properties

Recently I was addressing a group of senior army officers at the ASC Centre and College in Bangalore covering the topic that seizes everyone’s attention today: procurement in defence procurement. I covered the whole gamut of revenue procurement enunciated in the Defence Procurement Manual, and mentioned en passant that with detailed procedures and processes in place we have/are still moved/moving into a regime of transparency.

I was besieged with questions. “You spoke about canons of financial propriety in making government procurement,” said one, no sooner than I had welcomed questions. “If I’ve to buy a TV for myself, I’ll opt for Sony, regardless of the amount which I know is the highest. But I can’t do that for the government. Why?” I laboured to explain that government procurement is price procurement while what he was referring to for himself was value procurement. He was right in that the lowest tender isn’t always the best buy in the long run, but in government, unless we did the life cycle costing to arrive at the ‘effective’ cost, amid the welter of factors, it is perhaps the best option possible for a variety of factors: tax-payers’ money, least discretion, and accountability; lowest common processes predicated on societal mores and benchmarked for transparency so that when decision-makers stand in the bar of history and their collegial acts anatomised post facto, this appears the most sensible.

Notwithstanding all that is obvious, I have often wondered one simple fact that has defied comprehension in government procurement. Year after year, procurement after procurement, the purchases of the same items made from the same firm(s) by the same organisation(s) keeps increasing. The ostensible reason, quite in sync with the outside world, is runaway inflation. This is the simplistic justification. To make matters worse, along with the price increase is cartelisation by firms which, in a manner of speaking, believe in and practice extortionist selling to a buyer (poor invisible person) seemingly driven to the end of his tether in exasperation. Often these very firms’ balance sheet would show that their entire earnings ever since they were set up are from the one or few government organisations which have had procured these at prices ‘dictated’ by them. It is one of those strangest cases where in a situation of monopsony — one buyer with many sellers — it should be the buyer’s market with the buyer calling the shots, it is made to morph into a monopoly (not even a duopoly or an oligopoly) where the seller pushes the buyer up the wall. Worse, the cartels flourish. This is rather intriguing.

About a decade ago in a certain case I had a gut feeling that the firm is taking us for a merry annual ride, year after year, and it was about time its bluff was called. I happened to have taken a decision instinctively much against the wishes of others in the committee, sticking my neck out, almost daring other decision-makers that they were wrong and I was right. Reluctantly, very reluctantly, they agreed, hoping and praying my plans failed. My instinct and action — much to the consternation and dismay of my fellow decision-makers — didn’t fail me: the recalcitrant supplier was made to eat the humble pie; and the overall saving to the government was in the region of about 60 per cent with the potency to cascade year after year.

I quickly came to the conclusion — already deductively ideated — that cartelisation in a monopsonic situation as in huge government procurement is an anachronism. If it still flourishes, be sure and be warned there is an unseen hand doing the rope trick! And such ‘unseen hands’ — capable of doing all sorts of smart magic — are not amused one bit when the cash outgo from government kitty is less than what they had originally envisioned. For many who work the government, spending less government money in buying the same item that can be bought at a higher price is thought of as a crime.

Now see all transgressions through this prism and the picture would become clearer. In government procurement, irrational price increases often masquerade as market trend and are adroitly touted and gracefully accepted; but be sure all this can’t be done without active insider’s connivance. The same goes with the wanton price increase through cartelisation. A young colleague recently told me an interesting case of three rates sourced from the same Original Equipment Manufacturer (OEM): the first through a tender from the OEM itself (the highest); a second one from the trader quoting the OEM’s ostensible rate plus some add-ons (the second highest); and yet a third mentioned in the OEM’s website (the lowest). Not surprisingly the organisation was rooting to buy from the OEM as per its tender. Possibly in fulfilment of its mission to ensure the maximum cash outgo from government account.

Zoom out and look around you, again through the same prism and see the findings in the latest breaking news story concerning the Adarshgate in tony Cuffe Parade of Mumbai. This is the same syndrome that afflicts nexuses that bleed the no-one’s government through criminal conspiracy though in this case the legitimate beneficiaries — Kargil martyrs and war widows — have been two-timed. And see the names of the beneficiaries to know where the rot begins and how it has a trickle-down effect. How national tragedies are turned on its head to benefit mercantilists!. Despite all the brouhaha and public outrage, you would be an outrageous optimist to imagine we’ll see light at the end of the long tunnel.

Sunday, November 28, 2010

A Million Leg-Ups: Snapshot of India Snailing!

Of the many analogies that bonsai and encapsulate events and situations, particularly the firm tongue-in-cheek kinds, I’ve never seen anything approximate Indian reality more than the one going around the net. It is the old Aesop’s fable of the humble – yet hardworking – Ant, and the lazy – yet bumptious – Grasshopper, that typifies our Dharmic India Bharat Mahaan.

The Ant works hard in the withering heat all summer, building its house and laying up supplies for the winter. The Grasshopper thinks the Ant is a fool and laughs and dances and plays the summer away. Come winter, the Ant is warm and well fed. The Grasshopper has no food or shelter so he dies out in the cold.

This is the well-known universal story. But the Indian one is different, even nuanced – and not exactly malicious, if anything only a touch moralistic; and though we all know the parts, we rarely string them together into a kind of montage. So here it goes…

The Ant works hard in the withering heat and sweltering humidity all summer, building its house and stashing supplies for the winter. The Grasshopper thinks the Ant is a damned bloody fool and laughs and dances and plays the summer away.

Come winter, the shivering Grasshopper promptly calls a press conference and demands to know why the Ant should be allowed to be warm and well fed while others are cold and starving. The media is in full attendance.

NDTV, BBC, CNN show up to provide pictures of the shivering Grasshopper next to a video of the Ant in his comfortable home with a table filled with food. The World is stunned by the sharp contrast. How can it be that this poor Grasshopper is allowed to suffer?

Promptly, Arundhati Roy (Bless her spirit!), the doyenne of crusading spirits, stages a demonstration in front of the Ant's house.

Simultaneously, Medha Patkar (Salute her lifelong profession!) goes on a fast in company with other Grasshoppers demanding that Grasshoppers be relocated to warmer climes during winter.

Without ado, Mayawati calls this “Maha-Injustice” perpetrated on hapless Minorities and the destitute.

And without batting an eyelid, Amnesty International and Kofi Annan pitch in, criticizing India for not upholding the fundamental animate rights of the Grasshopper.

Pronto, the Internet – bless the netterati and twitteratti! – is awash with online petitions seeking support for the Grasshopper (many promising Heaven and Everlasting Peace for prompt support as against the Wrath of God for non-compliance).

Never the ones to miss out on such godsends, the Opposition MPs stage a walkout, while Left parties call for “Bangla Bandh” in West Bengal, and Kerala demands a Judicial Enquiry. In tune with past performance, the CPM in Kerala immediately passes a law preventing Ants from working hard in the heat so as to bring about equality and equal distribution of poverty among Ants and Grasshoppers.

Always at the ready to steal the thunder, Mamata Banerjee allocates one free coach to Grasshoppers on all Indian Railway Trains, aptly christened the “Grasshopper Rath”.

Not to be outdone, the Ministry of Civil Aviation issues directives to its state carrier to reserve all middle seats in aircrafts for Grasshoppers to travel gratis to escape the harsh northern Indian winters, if they so chose.

The Ministry of Health and Family Welfare loses no time to direct all government hospitals in the country to treat Grasshoppers free of charge when they present themselves for any treatment – largely arising out of lack of work and movement of limbs – and not necessarily connected with the cold and the blight.

Not to be left behind, the HRD ministry loses no time in sculpting out “Special Leg-Ups” for Grasshoppers in Educational Institutions and in Government Services.

Finally, the trigger-happy Ministry of Law quickly drafts the “Prevention of Terrorist and Anti-National Activities Against Grasshoppers Act” (POTANAGA) and the Parliament in a rare convergence of interest betraying a Good Samaritan passes the same unanimously in a jiffy without debate through a voice vote, and the Act comes into effect a month before the advent of the winter season.

The Ant is fined for failing to comply with POTANAGA and with nothing left to pay his retroactive taxes, its home is confiscated by the Government and handed over to the Grasshopper in a ceremony covered by NDTV, CNN, BBC courtesy their OB vans.

Arundhati Roy smirks and calls it “A Triumph of Ultimate Justice”.

Lalu, smug and grinning, calls it “Socialistic Justice” from the grass banks bounding his cowshed.

CPM calls it the “Revolutionary Resurgence of the Downtrodden and Upstaging of the Illusion of Thrift and Saving in Utopia”.

Not to be outsmarted, Kofi Annan invites the Grasshopper to address the UN General Assembly and the Security Council.

And many years later...

The Ant has since migrated to the US of A and set up a multi-billion dollar company in Silicon Valley while hundreds of Grasshoppers continue to die of starvation despite the wide array of support, and leg-ups granted them everywhere, even through such scams as Adarsh (see the delicious irony!) Kargilgate at every turn in India;


Consequent to losing all the hardworking Ants and patronizing the freeloading and state-protected and state-propped lazy, laidback Grasshoppers, India still snails along as a developing country, notwithstanding what Barack Obama had to say to pamper our uncertain ego and uneasy vanity. From time to time, to affirm its rightful place in the comity of nations and to get a ravishing feel-good factor going and flaunting itself as a resplendent emerging (even emerged!) economy, it covets to host such mega events as the Commonwealth Games that – despite its intrepid athletes – alas boomerangs and lands egg on its face, and paradoxically shows how much travelled it is in crony capitalism and as the last, living testimony of mercantilism in the 21st century.