Sharing ACC’s Experiences … Enhancing Efficiency and Accountability Presented at

1. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Presented at 5th Engineering Conference Royal Banquet Hall 22 April 2009

2. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Background Worldwide, construction sector is corruption prone Wastage of funds in APR – 30-35% Bhutanese scenario is no better In the Tenth FYP, total outlay 145-160 billion Taking 25% as construction outlay Taking wastage at conservative estimate of 10-20% Bhutan may lose ~ 1 billion/annum to wastage/leakage

3. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Bhutanese Scenario From audit reports, concerns raised by ACC and MoWHS, the following are the main problem areas: - Faulty design, drawings and unrealistic BoQs - Excess and illegitimate payments - Excess consumption of materials and labor - Execution and acceptance of sub-standard works - Cost escalation, abnormal delays… abandonment - Poor/lack of supervision - Unethical practices

4. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Bhutanese Scenario… contd The problems associated with the construction sector show the symptoms of larger malaise in the system on: - Planning and coordination - Preparing designs, drawings and BoQs - Contract administration - Contract preparation - Contract award - Contract implementation - Capacity building, incentive structure

5. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Planning and coordination - No larger stakeholders consultation - Not much interaction among architects, engineers - “Compartmentalized” working system - “Prototyping” and “Stereotyping”

6. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Knowing the laws for deterrence From ACA 2006, some corrupt practices are: • Misuse of trusted authority • Misuse of public resources • Giving or enabling to receive preferential treatment • Leaking revenue, privileged information • Delay decision/action deliberately for wrong motives • Without due diligence • With conflict of interest • Facilitation of payments

7. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Knowing the laws for deterrence Penalty from Penal Code of Bhutan 2004 • Official misconduct • Misdemeanor • If convicted, termination as per BCSR 2006 • 1-3 years • No need to prove that you have taken money • Restitution of loss to government

8. Contract preparation SCC/PCC Inclusion of arbitrary clauses in contrast to GCC “The form of bid should be filled up completely without leaving any blank spaces”… otherwise on the spot rejection of bids Guideline says (SD II) “When one incorporates SCC, on must amend and/or supplement the provisions of GCC” “A responsive bid is one which conforms to the terms, conditions and specifications of the bidding documents without material deviation or reservation” Sharing ACC’s Experiences …Enhancing Efficiency and Accountability

9. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Tender opening • No authentication of the corrections/over-writing • No proper BORS • No minutes of the meeting

10. Bid evaluation Non-uniform application of correction of arithmetical errors Non clarification of AE, discrepancies in writing No MoM Contract document says …the employer may, at the employer’s discretion, ask any bidder for clarification ... in writing to confirm AE or discrepancies …material deviation and reservation Sharing ACC’s Experiences …Enhancing Efficiency and Accountability

11. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability

12. Discrepancies/AE Contracts awarded without clarifications

13. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Bid Evaluation • Non-scrutiny of documents - Work in hand - Bank guarantee - Work experience • Must be done by a committee • MoM must be kept • Must mention salient features • Calculation of cost index –BSR

14. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Contract Implementation • Material at site advance without materials • Mobilization advance without performance bond

15. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Contract Implementation - Supervision • No regular site supervision • No site order book • No site hindrance register • No enforcement of staff and equipment deployment at site • Poor quality of work • Abnormal delays

16. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Contract Implementation – Enforcement of T&C • No due diligence in general contract administration • Laxity in enforcement of contract provisions • Specifications become the first casualty • Non-uniform application of contract provisions • Preferential treatment of contract firms • Payment made on manipulated measurements • Excess and illegitimate payments • Cost escalations

17. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Where do we stand? – Self assessment! • Faulty contract document • Poor quality of work • Abnormal delays • Excess and illegitimate payments • Cost escalations • Corruption…. Must heed the “writing on the wall” – strive for better way forward!

18. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Cause and Effect

19. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Way forward –Build capacity • Build capacity on Procurement Manual/SBD • Impart mandatory training to all Procurement Officers and engineers • All staff involved in contract administration should be taught MKP of laws, rules, manuals • Provide periodic refresher courses

20. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Way forward – Operationalize PCE • Prepare and operationalize engineers’ code of ethics • Institute Engineers’ Association to provide platform for collective voice, to nurture belongingness, for collective growth, peer pressure/review • Encourage declaring conflict of interests

21. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Way forward – Free Engineers’ time • Do not bog down engineers with “other” works • Plan and program their work through work plan • Provide mobility • Reduce paper work wherever possible • Provide technical support by resource pool

22. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Way forward – Enhance transparency & accountability • Disclose estimate • Disclose evaluation processes and results • Disclose a time frame for hearing grievances • Declare and institute a surprise supervision system • Prepare a supervisory check list • All supervisory instruction must be recorded in the site order book • All site documents must be maintained

23. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Way forward – Peg performance with incentives • Synchronize fast track promotion with proven performance and integrity • Institute awards for best quality construction work • Institute awards for clean engineers

24. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Way forward – Plug system loopholes • Reduce opportunities for corruption • Review obsolete rules • Simplify and reduce procedures • Think “out of the box” • Review the whole system of contract management

25. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Conclusion In conclusion, let me present a tool to remind you against wrong actions It is called the “Sunshine test” – a simple test As the text imply, an action committed yourself, in secrecy, darkness, when exposed must not create or bring the sense of wrongdoing, inappropriateness, or public opinion against it

26. Sharing ACC’s Experiences …Enhancing Efficiency and Accountability Conclusion… Sunshine test Failing the sunshine test has moral, public and even legal liabilities Anything you do in contract administration should pass the sunshine test to exonerate oneself from any liabilities