Disclaimer: The views and the opinion expressed in this article are those of the author and does not necessarily reflect the views and positions of Public Policy and Governance Society IIT Kharagpur.

Key Issues faced in Governance and Public Procurement, which are to be addressed:

Public Procurement is a process by which government sectors obtain work, goods, and services from private organizations. It represents an important strategic instrument in government agenda and public policy. The main objective ensures that procurement and purchasing are done with effective quality of goods to promote economic efficiency. A global exercise by Bosio et al. (2022) estimates that around 12% of GDP is spent on public procurement-highlighting the need for conscientious spending by the government. Several hurdles and challenges to be tackled are listed below:

1. Corruption

According to the World Economic Forum, corruption is the second most challenging factor in doing business in India. Corruption is one of the most significant issues that remain in many public procurement processes, leading to the misallocation of resources and distorted market competition. Transparency International’s Corruption Perception Index (CPI) ranked India at 94 (out of 176 countries) in 2013, with a CPI score of 36 based on an overall potential score of 100 (100 being the least corrupt). Promoting and empowering institutions such as the Central Vigilance Commission (CVC), Enforcement Directorate (ED), and Anti Corruption Bureaus (ACBs) to actively investigate the financial aspects and scrutinize the public procurement processes. Public procurement involves a significant portion of governmental budgets, accounting for 29% of general government expenditures totalling 4.2 trillion EUR in countries of the Organization for Economic Cooperation and Development (OECD). India’s expenditures may be less, but the corruption, with so much money at stake, takes its place at 10 to 30%. Multinational companies operating in India often depend on third-party intermediaries, including agents, consultants, and distributors, to engage with government agencies and officials. Certain intermediaries specialize exclusively in government-related transactions and may concentrate on collaborating with specific government departments, customers, or officials. These longstanding relationships may foster familiarity and established patterns of interaction, creating a context where improper payments or benefits to government officials can be discreetly facilitated. This complexity adds challenge to detection efforts, making it more difficult to identify and address instances of corruption within these intricate networks.

2. Lack of Discretion

The Indian Government’s expenses are audited and accounted for by the Comptroller and Auditor General of India (CAG), which looks at a plethora of aspects, including whether the tendering process was fair and transparent. Over the years, the CAG has picked up many challenging problems like manipulation of the auditor and other internal inconsistencies. Transparency is crucial for maintaining public trust in government processes. When citizens and stakeholders are not informed about how public funds are being spent and how procurement decisions are made, it can erode trust in the government's ability to use resources wisely and fairly. The stages of public procurement involve pre-tendering which needs assessment, planning and budgeting. Other types include tendering and post-award which impact invitation to tender, evaluation and contract management. India does not have a defined structure for pre-tender market consultations. Without transparency, there may be limited visibility into how procurement decisions are made. This lack of information can result in biased or non-competitive practices, favouring certain suppliers or individuals and hindering fair competition among potential vendors.

3. Monopolistic Market

Limited competition and a Monopolistic market result in inflated prices, reduced innovation, and compromised quality of goods and services. Many vertical and horizontal agreements that violate anti-cartel provisions are undertaken. The public procurement market is particularly interesting because monopolies and oligopolies could emerge in some sectors. The bureaucracy, the diverse legal framework, and the low expertise of public authorities raise entrance barriers to non-officials, especially small and medium-sized enterprises (SMEs). If the monopoly supplier faces financial instability, operational problems, or failure to deliver, it can disrupt public services, leading to dependencies that are not in the best interest of the public sector. Public agencies may have limited choices when selecting suppliers, reducing their ability to find the best-fit solutions for their specific needs. This limitation can hinder effective and customized procurement processes. Monopoly has fiscal disadvantages and makes the government dependent on some big players, but also influences the general notion of other policies and can be seen as a hurdle toward good governance. Often, governmental policies may conflict with the interest of such vendors, but due to the favouritism practiced, they may be subject to work contrary to public welfare.

4. Inefficiency and Delays

The tender process for specific sectors, such as defense and railways, could be more active and composite. This stems mainly from prior procurements challenged by lengthy, convoluted bid terms and multiple layers of protocols. There are several delays in many processes, such as the extension of the bid or proposal date, delay in opening bids, and delay in starting and finishing the evaluation and approval process. Negotiations and postponement of board meetings become critical for the timely completion of processes. Lengthy procurement processes and bureaucratic red tape hinder timely project implementation. Many government officials are embroiled in corruption and bribery charges that weaken them in making quick, honest decisions. Public procurement is no exception and faces many of these issues. Further, the acquisition becomes complex and is delayed as faith and integrity are lost.

5. Legal and Regulatory Compliance

At the pinnacle of the Indian legal structure overseeing public procurement stands Article 299 of the Constitution of India. This article mandates that every contract executed by the executive authority of the Union of India or a State Government must be on behalf of the President of India. Prevention of Corruption Act (1988) is the primary legislation that deals with corruption in India, including bribery. Section 9 of the PCA makes it an offense for a public servant or an official of an international organization to accept or obtain any valuable thing without consideration from a person with whom they have official dealings. This provision can apply to foreign public officials interacting with Indian public servants or organizations. Non-compliance with laws and regulations should be taken under investigation and strict scrutiny. Regularly updating and enforcing legal frameworks and working on the loopholes is highly missed in the system. Ensuring adherence to international standards is critical.

Brief Description of the proposed technology intervention:

To address these challenges pertaining to corruption, lack of transparency and inefficiency in public procurement, we propose Bharat e-Procurement System (BePS) a standalone platform for managing different stages of Public Procurement and a manifesto for addressing the aforesaid issues. BePS would make use of the following manoeuvres:

1. e- Auctions

The Government defines the procurement requirements, including specifications, terms, and conditions. Thereafter the procurement opportunity is announced on the e-informing platform or relevant portals. Interested bidders register on the e-ordering platform by providing necessary information and documentation which is then verified by the procuring entity. Bidders submit their electronic bids through the platform before the specified deadline. The Bids typically include details such as price quotes, technical specifications, and any other required documentation (e-informing). A pre-bid meeting may be conducted to clarify any questions or concerns raised by the bidders. The e-auction platform facilitates the real-time bidding process where the bidders can view current bid prices and adjust their own bids accordingly. After the bidding period ends, the procuring entity evaluates the bids based on predefined criteria, which may include price, technical specifications, and other relevant factors. The contract is awarded to the successful bidder with the most favourable bid, meeting all specified requirements.

Digital Identity Verification with the means of secure tokens and biometrics authenticates the identity of individuals or entities participating in the procurement process which improves reliability and curbs down the risk of knavery in the procurement process. It ensures that only sanctioned entities participate in sensitive procurement activities thus, reinforcing the integrity of the overall process. Digital Signature Certificate (DSC)-a unique identity token for bidders and stakeholders would be required to take part in the tendering processes ensuring greater security in online transactions. Certification of credibility and suitability for the tender can also be issued to eliminate incompetent vendors from the system.

2. Blockchain Technology

The World Economic Forum estimated that rationalizing data through blockchain is expected to increase trade by 15%. This revolutionary technology will exponentially enhance efficiency if implemented into public procurement systems. Blockchain is a decentralized approach to tamper-resistant transaction models where each successful contract is added as a token at the end of the chain and linked to the previous token, thus creating an immutable record trail for agile verification and auditing. Smart contracts that ensure that the qualifications of bidders are checked against predefined criteria automatically, auto-trigger execution, and automation at various stages of procurement-vendor verification, documentation, and payment would not only save paperwork and time but also significantly reduce the error. The government initiatives taken up by the Ministry of Electronics and Information Technology (MEITY) such as National Blockchain platform and India Blockchain forum intend to raise awareness.

Data analytics in procurement aids in proactive risk management by identifying and prioritizing supply chain risks, while predictive algorithms ensure accurate demand forecasting and supplier performance evaluation. Quality and reliability are enhanced through systematic supplier performance analysis, including root cause analysis for issue resolution. Data analytics also ensures compliance by monitoring regulatory changes and maintaining transparent audit trails. Lastly, in procurement planning, analytics leverages historical data to formulate strategic plans, and in supplier collaboration, it identifies opportunities for cooperation, creating a responsive and efficient supply chain. Data analytics transforms procurement by informing decisions, mitigating risks, ensuring quality and compliance, and fostering collaboration with suppliers.

3. Cloud based Procurement Solution

The rising Indian Public Cloud services market is projected to achieve a value of $17.8 billion by 2027, with a CAGR of 22.9% anticipated for the period 2022-2027 so, integrating multifaceted platforms for Government agencies for managing bids, requests for proposals and award contracts in this cloud based system. This system would therefore help to establish a centralized pedestal accommodating a much wider and larger data storage, providing real time data analysis and improved compliance.

4. Geospatial Technology

Using geographic-based systems like GIS and remote sensing for location-based decision making and planning. These technologies would be deployed to assess the environmental impact of public undertakings, site selection, optimization of resource allocation, and geographical implications, thereby improving project planning and feasibility analysis. The mineralogical and mining procurements can be allotted by using this technology. The National Geospatial Policy (NGP) aims at advancing the digital elevation model, thereby unleashing the true potential of this technology.

Risks which may impact the likely outcome and how these could be mitigated:

1. Integration and Compatibility Issues

Getting different governmental agencies to work together can be tricky. When one agency updates its system, it might not be compatible with others, causing disruptions. Making old systems integrate well with new ones takes time, causing delays. There is a risk of errors or security issues when transferring data between governmental agencies. Integrating new agencies requires training, and the whole integration process can slow things down. To handle these challenges, planning, and testing before making any integration between agencies is crucial. Using common standards helps technological systems cooperate. Using tools like APIs and adapters can facilitate smooth communication. Data cleaning is essential to prevent mistakes. Check contracts to ensure compatibility and safeguard data during integration to comply with privacy rules. Maintaining good documentation would be beneficial for future fixes. By following these steps, governments can make technology work together seamlessly, reduce problems, and optimize their processes.

2. Cybersecurity Threats

E-procurement, streamlining the buying process with digital tools, carries immense benefits like transparency, efficiency, and cost savings. However, it also unleashes a digital pandora's box of cybersecurity risks that can cripple operations and haemorrhage sensitive data. Studies by Cybersecurity Ventures show a 600% increase in cyberattacks targeting supply chains in 2023, for example, 16 lakh cyberattacks on the G20 website per minute. Beyond data breaches, digitalization opens new avenues for fraudsters. A 2022 Forrester report reveals a 32% increase in invoice fraud attempts, with manipulated bids and invoices slipping through digital cracks. This can lead to inflated costs, reputational damage, and costly legal battles. To mitigate these types of attacks, we have to implement strong encryption, like AES-256, which scrambles sensitive data into an unreadable cipher, rendering it useless to even the most adept cyber-thief, limiting privileges based on user roles and needs, ensuring only authorized personnel touch critical data, precise supplier vetting, including cybersecurity audits, identifies and mitigates fraud risks before they fester.

3. Steep Increase in Competition for Bidding

Public procurement faces the risk of collusion, including bid rigging and fraud, which can inflate prices and misuse public funds. Balancing transparency and flexibility in procurement processes is crucial to prevent anticompetitive practices. Mitigation measures include choosing appropriate bidding models, limiting joint bids, controlling sub-contracting, and imposing reserve prices. Stricter enforcement of competition laws and educating procurement officials are essential to counter collusion risks. Continuous monitoring and quantitative analyses of bidding activities help detect and prevent collusion in sensitive sectors, optimizing tender design and resource allocation for law enforcement efforts.

4. Vendor Lock-in

Vendor lock-in occurs when a government utilizing e-procurement or services faces difficulty transitioning to a competitor's offering. This situation poses a significant challenge, limiting the government's options and complicating the pursuit of optimal value for its expenditures. A Gartner report from 2023 estimates that 70% of organizations using proprietary e-procurement systems encounter at least one instance of vendor lockin. According to Forrester, the costs associated with data migration alone can amount to up to 30% of the initial system cost for those ensnared in proprietary software. McKinsey & Company's report highlights a 60% average innovation stall for companies with outdated legacy systems, impeding their access to new features and functionalities. On the contrary, entities adopting open standards in e-procurement report a 25% reduction in switching costs and heightened agility to adapt to evolving market requirements.

What is track record of technology intervention proposed (in other sectors/countries):

Public procurement represents a significant portion of government expenditure, yet processes are often still manual, inefficient, and non-transparent. To address these challenges, countries have increasingly embraced technology-driven interventions and digital solutions aimed at optimizing, streamlining, and opening up public purchasing. Examining the successful implementation of extensive e-procurement systems in countries such as South Korea, Brazil, and Bangladesh is crucial. In the case of Bangladesh, the nationwide adoption of an e-Government Procurement (e-GP) system since 2011 presents a pertinent case study for India, given the comparable governance obstacles. A thorough analysis of the effects, hurdles, and key takeaways from Bangladesh's e-GP experience can provide valuable lessons to guide India's e-procurement strategy.

The US relies on competitive bidding for procurement, adopting e-procurement for convenience and cost savings despite cyber risks, while Singapore utilizes centralized regulated procurement achieving efficiency gains through mandated e-procurement but faces agency fragmentation. In the case of Bangladesh, single bidder percentages are 35 and 15% respectively. eCertis, an online platform facilitating cross-border public procurement tenders in the European Union (EU), recently underwent a restructuring to enhance data structure efficiency, resulting in a 2.9% increase to 2,156 records. The November 2022 database now features 1,209 criteria for tender eligibility (6% growth from the previous year) and661 items on acceptable evidence and certificates (1.8% decrease from 2021). This expansion underscores eCertis' dedication to improving guidance despite architectural changes, reflecting a commitment to aiding contractors in navigating the intricate regulatory landscape of EU cross-border public tenders. While a comprehensive national e-procurement system is still in progress, India has implemented several electronic procurement platforms at the central and state government levels to progressively digitize and streamline public purchasing. Some of the key initiatives include the Central Public Procurement Portal (CPPP) for central government tenders, the Government e-Marketplace (GeM) for common use goods and services, adoption of Open Contracting Data Standards (OCDS) to enhance transparency, and rollout of statewide e-procurement systems by governments in Andhra Pradesh and Karnataka. Some of the key systems that India could practice from best international practices are implementing nationwide e-procurement and tendering systems, develop centralized procurement databases and policies, enhance transparency through e-portals, open data and RTI,strengthen auditing, accountability and anti-corruption laws, nurture domestic supplier capabilities and SME participation.

Likely Results and developmental impacts:

1. Reduced Corruption and Shaping India's Global Image

The impact of reduced corruption extends to fostering greater public trust in the government. When citizens perceive that public officials are conducting affairs with integrity, it cultivates a sense of confidence and compliance with established rules and regulations. The implementation of fair and transparent rules becomes pivotal in this context, acting as a magnet for increased competition and a wider array of vendor choices. This transforms the procurement landscape by minimizing instances of bribery, ensuring that decisions are made based on merit rather than underhanded influences. Transparency, anti-corruption laws, and ethical processes in public procurement show India's commitment to fairness and integrity in business dealings. Making anti-corruption laws sends a strong message and shows a positive impact at a global level. Investors bend more towards a fair and transparent system thus a credible public procurement system attracts international investors.

2. Efficiency and Transparency

Transparency provisions enable processes and decisions to be monitored and reviewed, help ensure that decision-makers can be held accountable, and help open public procurement to more competition. Transparency must pervade all steps in the procurement cycle, from the earliest decisions on needs assessments to developing procurement plans and budget allocations, bid evaluations, implementing the contracts (and any contract amendments), and auditing performance. As a core principle of high-quality public procurement, this robust transparency regime enables the public to hold politicians and public bodies accountable. These builds trust in nations' institutions. Enhanced transparency is crucial before the bidding stage to enable decision-makers and stakeholders to make informed judgments about the planned projects' cost, quality, socio-economic, and environmental impact. To avoid manipulation or obfuscation of the decision-making process. A fair and open bidding process also will help small businesses bid for and win government contracts, boosting competition in procurement and encouraging economic growth. The ‘right to reason’ and the ‘right of access to information’ are sometimes collectively called the ‘right to know’. Both rights enable a person affected by a tender decision to ascertain whether the decision was taken lawfully or not.

3. Increased Competition and Innovation

Competition is a key factor in ensuring that governments, and their citizens, receive the best value for money in their procurement process. There are at least three avenues through which competition can have desirable effects on procurement markets. First, with free entry and an absence of collusion, prices will be driven towards marginal costs. Second, suppliers will have an incentive to reduce their production and other costs over time. Third, competition serves as an important driver of innovation. Innovation friendly procurement processes can shape markets to create opportunities for new kinds of products or services and to be more accessible to new entrants. They can introduce novel approaches to user engagement and technology evaluation to enhance the innovativeness and quality of solutions as well. Because procurement processes can have unintended and unwelcome consequences for the viability of suppliers and the long-term competitiveness of markets, they can play a strategic role in establishing and maintaining competitive markets over time. Also promoting competition acts as a safeguard against the emergence of monopolies and cartels that lead to inflated prices. This approach also encourages the active participation of new small businesses. This competition improves the overall quality, service delivery and efficiency of the goods and services. Furthermore, it reduces the risk of award decisions being questioned.