Friday, December 10, 2010

Payoffs don't pay - No Favors Required to get Govt Contract.

I am sure the business people in Malaysia, especially those in the construction business, will be most excited to hear the PM saying that they don't have to pay or give favors to secure government contracts, tenders and concessions. Datuk Seri Najib blandly said that they don't have to pay to conduct business with the goverment and such belief or perception should be dispelled.

I say that businessmen will be excited about this because dispelling the belief can work both ways -- stem out corruption or delay the work to be undertaken by government, terribly.

Yes, if businessmen stopped giving payoffs and offering favors in order to get a contract from government, corruptipn will cease. It is the attractive offerer which creates the receiver unless the party offering the contract, approving the tender or the cocession makes a demamd before giving the approval. When there is no offer the approval had to be given to the businessman most qualified for the job to be ubdertaken. If a demand was made before the approval, then a clear case of corruption is already committed ab initio.

A bribery offer is usually made by a businessman who isn't confident of getting a job based on offering 'the best for the least' in his tender proposal. The grand price quoted in the tender is made after including all costs. including the bribe to be given out of course, in the tender prosal. It is for this reason that the prices quoted in tenders are often rediculously exorbitant. If the cost of bribery had not been included in the tender proposal and had to be paid from the profit margin expected to be made my the contractor, it is a sure invitation to running a loss. Are businessmen prepared to do that? It may lead to the case of unfinished jobs and abandoned projects to ovoid serious cost overrun and perhaps bankcruptcy.

Those than are the dangers of not making allowance for paying bribes or payoffs. If no payoffs or favors is offerred at all to the party awarding the contract, tender or concession, it may also be the last contract the businessman might get. There would be others who are willing and prepared to pay, waiting to get the job. These businessmen would have included the bribery costs in their cost evaluation for the tender.

Delays in work implementation can be caused by many factors such as difficulties in getting the supply of work and building materials, incurring cost overruns, delays in getting progress payments, and the ultimate inability of the contractor to finance the work. Such problems on the part of the contractor can be due to all forms of delays on the part of the government, each compounding his problems. A delay in the initial start of work can be due to getting all the documentation ready and the approval to start work. All of the above involve continuous interaction between the contractor and the government. Thus at any point any delay by the party responsible in the governemt for giving the approval can cause serous problems and delay for the contractor which inevitably will lead to cost increases. Can the contractor accept this or isn't better to give some titbits all the way to get the things that you wants quite promptly. Otherwise the little delays will all add up to a huge implementation
shortfall that is not uncommon in the government.

The issue here is can the government just say"stop giving money and favours in order to get government contracts, tenders
and concessions." Businessmen will just be happy to do that but won't the government agencies responsible for issuing the contracts. evaluating the tenders, giving approval to start work and various other approval certificates before the work can be completed. approving payments etc. suddenly play cool and take their time to give the necessary approval such that all work will be slowed down? Businessmen talk about paying "grease money" to get things go faster and smoother. How can these be stopped as well aside from seeing to it that tenders, contracts and concessions are all evaluated, approved and issues without seeking some payments or kickbacks that we here generally call corruption?

A deeper examination of the way major works are done from the word go to their completion must be done to see where the payment of "grease money' might be involved aside from some commissions or kickbacks that really involve substantial amounts. Corruption is not a once-over thing in getting a government job done. It can happen all along the way. Whilst the MACC is doing a fine job to get the culprit taking huge payoffs from major government projects, many smaller payoffs might be missed.


kaykuala said...

Akhi Norzah,
If there's a change, I would think the headache and the brunt of accusations will now fall squarely on the decision makers and implementers. And the users would be helpless, initially.
I remember a simple change and how it affected the users.
A barber was given a contract at our college before. We were expected to get haircuts twice a month. The then procedure was for us to sign after each haircut.The paymaster would then deduct from our allowances the amount at the end of the month.
Invariably it would be tedious going through each names. It would be far easier to just deduct the cost of 2 haircuts for each.
So we need not sign, the barber need not prepare a list for deduction and the paymaster clerk's job was just automatic deduction monthly against each name.
The decision makers(authorities) made the change,and the implementers (the barbers) caused havoc. BEFORE, all 3 barbers would feverishly work on us. Waiting was minimal. We could come back fast and did other chores. AFTER, only 2 barbers worked, while the other took a rest and chatted with the long line of hopefuls waiting. RESULTS: Frustrations for those waiting, some got reprimanded for having long hair ( no patience to wait)and grumbled ( no haircuts but costs deducted )
Translate this to RMbil projects. The result would be the same - the
same havoc would occur.
Solution: A mindset change! The guardians of the law come into play.
There would be a lot of wrong-doers behind bars first to instill the 'respect for rights and wrongs'
We cannot shout 'no corruptions' on those wielding power ( big guns or lower rung police personnel) when the culprits are laughing!
The 'Whistle Blower Act' or something recently announced is a positive step. It'll take time, though.
Many are shouting hoarse against corruption, the MACC at their wit's end, it would be a long day!

abdulhalimshah said...

Akhi Norzah,
Hollow pronouncements of such a declaration do not mean much to stamp out the deep-rooted corrupt practices in the award of tenders on all types of works and supplies in the public delivery system of the Govt.
No matter how perfect the man-made sytem in the award of tenders whether for an open, restricted or selective tenders is prescribed, the obvious weakness is the implementation from the word go right to the stage where the works or supplies are completed. The temptations are at every level of award and implementation, the leakages are not that easy to plug. No amount of watchdog committees can perform the insormountable task of looking over the shoulders of the people involved. Neither can the MACC be expected to do its job effectively if the perception of the public that it is not completely independemt is not erased by the number of high profile cases being brought to book.
The War on Corruption must be conducted just like the War against the Insurgency during the Emergency. The Generalissimo in the likes of Templer must be resurrected and a no nonsense approach is needed to strike fear into the hearts of the culprits. It must not be a one-off exercise but a constant and systematic strategy and tactics must be devised to win the war. The MACC is hopelessly understaffed to curb corrupt practices in our political scenario and the landscape that pervades the Nation. The PM must first be the leading example of a clean and honest politician and leader and not be sorrounded by sychophancts and corrupt politicians or business people. He must not be allowed to make or even to show favours to anyone, even his wife must not be allowed to stir suspicions of being influenced or influencing his decisions on matters pertaining to the survival of the Nation. But alas what we see today is far from what the ideal should be. We seemed to focus on the few thousands being pocketed by crooked officials but letting of scot free those who swindled the Govt in billions by supplying unworkable hardware and weapons to the Armed Forces. The people in Mindef knows who are the officials who are laughing all the way to the bank and the ones charged are the Sergeants and subalterns, while the crooked senior officers stash their ill-gotten gains offshore. Just go and see the blog "Mindnoevil" by a retired BG Pak Chad, you will see the rot in the uniformed services.
So my take is that all the sound and fury only signifies nothing.

norzah said...

Akhi Hank. the barbers example is very a very lucid example of how the contractors can take advantage of
any rule made by the authorities. Once assured of getting a job if their record is good, they might take it easy and put any blame for delays on the authorities for the late issuance of the necessary documents or making progress payments. Hence the authorities must first make sure that there would not be any delay on their part, and that the offer of bribes or favors is not necessary to get things moving at maximum speed. Invariably it is the delays in processing submissions, tender proposals, the issuance of various work documents and making progress payments that make the contractors resort to offering 'grease money' and kickbacks.
Yessir, the guardians of the law must not allow the law to serve their own interest through discretionary and discriminatory enforcement to favor those who can pay.

norzah said...

Akhi Halim, you'd certainly know best how the contractors have to play the field in order to get the contracts, tenders and concessions, and get the work done with all the regulatory impediments and conditions that stand in their way. They either play the game as the big players do-- and these tycoons think nothing of coughing some extra millions to get a job done in order to rake in billions -- or loose out.

Stopping the initial payment to get the contract is one thing. To get through all the other requirements before a job can get done is another and that involves dealing with many authorities.
Even if you can stop the initial big deal through very tight supervision the other payments along the way will not be that easy to stop. You certainly cannot do it with just a pronouncement that such payments should stop.

I agree that it is the big deal that must first be tackled. It will be useless if the lesser deals are effectively arrested while the big deals pass through without a wave or if detected creates some wave for a while then disappeared in the ocean blue. It would a shame and a disaster to the nation if the
'sound and fury' we have heard so far 'signify nothing'. We certainly hope that there would be no attempt on the part of the lawmakers to safe their own kind when any infringement of the law is called to notice by anyone in society.
Let's hope that all 'under the table payment' can be stopped so that this overhead cost will not cause the cost of development to double or triple.

abdulhalimshah said...

Akhi Norzah,
You have brought up another interesting point, which is cost-overruns for mega projects or supplies.
Take for example the much touted "Menara Warisan" which is going to cost 10 billion. Why announce the price tag now when we know that is only a fictitious figure. I am sure when a tenderer knows that is the amount allocated for the project, he would also calculate the costs of the kickbacks to various people and party that have to be bribed and thus cut the corners wherever possible or even planned a ridicilous bid during the tender exercise but later add in the imponderables as variation costs when the project is halfway through. These are all the tricks that people play in mega-project bids and it is an acceptable practice in this country. The only thing is that in order to stop this nonsense is not to announce the price-tag even before it is tendered.

norzah said...

I absolutely agree with you Akhi. The early announcement of the money set aside for the job seem to be a sure way of allowing the would-be-contractor to cut the cake according to what the authority wants, so long as the actual cost plus profit are already included. Yes, the price-tag should be a top secret so that the company that offers the best for the least can be chosen.