Procurement - Circle recommendations implemented

Earlier this year, we had received the circle recommendations below on improving procurement processes of Railways. Pleased to share with you that starting November, contractors bidding for railway projects will be able to track the entire process online, as Railways aims to improve transparency and streamline access to information. Railways has implemented an all India accounting software which has been up and running for the last couple of months. This will now be integrated with the procurement part of it, so that right from the time of procurement of materials to the actual process of tendering and finalising the tender and then getting payments, everything is online.

Improving Railway Procurement

Procurement in Railways – Solutions
1. The entire procurement system should be made technology based
2. An online tender application system should be put in place by Indian railways
3. The tender should be opened and announced in front of all the applicants
4. The payments system should also be computerised so that the human interaction, and hence corruption could be decreased
5. Railways should have a code of ethics and every employee in procurement must go through a recommitment exercise every six months
6. People operating the purchase department should be given a refresher course on procurement standards and processes twice every year
7. The analytics should be made stronger to ascertain the quantity of goods that should be purchased, based on the study of past purchases
8. Thorough background checks should be done on vendors before enlisting them
9. The purchased material should be inspected by trained professionals
10. A third party inspection and consultant committee could be appointed for preparing estimates, inviting tenders, measuring and certifying works and making payments on behalf of the railways
11. Rotation policy should be applied to staff on sensitive posts
12. Railways should deal with a few selected vendors who have inbuilt quality systems
13. The terms and conditions of procurement should be re-written and strictly enforced
14. Reverse auction for better price negotiation should be considered.

Procurement in Railways - Root Causes for Issues

1. Lack of professionalism in the working of the Railway
2. There is a nexus between contractors, railway staff & politicians
3. Procurement systems are not computerised yet
4. The officials collude with vendors to their own financial benefits
5. Tenders are opened privately to give the known vendors advantage
6. Bogus companies are created to rake in big money
7. Lack of proper inspection while purchasing
8. Officials raise the purchase rate and the excess amount is dispersed as commission and bribes
9. In many cases contractors who come through political/senior bureaucrat contacts drive things such that junior officers are compelled to accept bribes
10. Most of the payments are still cleared manually through cheques
11. Suppliers provide low or very bad quality goods because they know there is nobody to care for it
12. Lack of set protocols for procurement in Railways
13. Lack of an online tender application system
14. Contractors/suppliers/vendors with political influence get the major contracts
15. Higher level officers manipulate the process, to further their OWN ends and NOT Railways
16. The employee is loyal to his appointing authority and NOT to Indian Railways.

Procurement in Railways - Key Issues

1. The tenders are manipulated
2. Tenders are not opened publicly
3. There is a high level of corruption in procurement
4. Payments are not released without getting a cut
5. There are cartels for some types of work, especially those related to earth work, track laying etc.
6. Orders are given to bogus contractors
7. Sometimes goods are purchased for more than twice-thrice the time of its original value
8. Goods of inferior quality are supplied compared to what is mentioned in the purchase order
9. People operating the purchase department do not have in-depth knowledge of procurement
10. In centralized procurement, the purchasing power is left in the hands of a few individuals
11. In de-centralized procurement, the cost of the purchases becomes high
12. Often, more than required quantity of goods are purchased. more