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Public procurement: Transparency revisted?

Public procurement: Transparency revisted?

1995 was a big year for public procurement law in Cambodia. The Asian Development

Bank funded a project which resulted in a number of public procurement laws, regulations

and government institutions. The importance of a transparent public procurement process

is, of course, essential to the short and long term development of Cambodia as a

market economy.

The "Sub-Decree Governing Public Procurement in the Kingdom of Cambodia",

promulgated by the Council of Ministers last year is a key document in the series

of laws, regulations and internal guidelines that set up Cambodia's public procurement

system. The sub-decree contains seven articles.

The sub-decree was drafted with the assistance of international experts and local

procurement experts and is, in its written form, a complete legal document. However,

it contains few mandatory measures to ensure transparency and accountability by procurement

officials. Where detail is required, it refers to the implementing regulations issued

by the Ministry of Economics and Finance.

Entities subject to decree

The decree applies to all procurement contracts for goods and services, including

civil works contracts and consultancy arrangements. It covers procurement by all

levels of government, including state-owned and controlled institutions. The definition

of control is not defined.

Methods of Procurement

Procurement may proceed under the five methods:

  1. International Open Competitive Bidding
  2. Domestic Open Competitive Bidding
  3. International Shopping
  4. Domestic Canvassing
  5. Direct Purchase or Direct Contracting.

Transparency index

The first two methods - International and Domestic Open Competitive Bidding - requires

a procedurally complete and transparent bid tender process. International Open Competitive

Bidding is for "contracts involving large amounts" where foreign participation

is desired. Domestic Competitive bidding is where there is sufficient local ability

to handle the project or where the bid is not likely to interest foreign companies.

The last three methods - International Shopping, Domestic Canvassing and Direct Purchase

- are not competitive and lack transparency to varying degrees. They can only be

used in special circumstances. For example under "International Shopping"

the government may only solicit tender offers from a limited number of companies

and countries. Similarly, under "Domestic Canvassing", the government solicits

bids from a handful of Cambodian companies. Direct Purchasing or Direct Contracting

is the least transparent procurement method. Under this method, the government negotiates

directly with a qualified contractor or supplier of its choosing. The circumstances

under which the government may use Direct Purchase/Contracting are primarily limited

to repair of existing equipment, emergency situations, or where competitive bidding

has not been successful.

The implementing regulations set out the detailed procedures and threshold contract

values that apply to the various types of procurement methods. This column will look

into those issues in greater detail in the future.

Consultant Services

A separate section of the decree details the procurement of consultant services

- a very common procurement activity by the Cambodian government.

Projects by Bilateral and International Aid

Projects funded by bilateral and international aid are usually controlled by the

international requirements of the donor agency. In such cases, these requirements

take precedence over the Cambodian procurement law and regulations.

Department of Public Procurement

The decree sets up a framework for the establishment of a public procurement department

under the Ministry of Economics and Finance. The department will be lead by a director

appointed by the Prime Ministers, under the recommendation of the Ministry of Economics

and Finance. The department's main duty is to supervise public procurement by the

government ministries and agencies. Moreover, a "Prequalification, Evaluation

and Award Committee" is to be set up in every ministry, or other government

institutions to conduct prequalification, bidding and evaluation of tender offers.

Certain politically sensitive or high value contracts must be referred to the Council

of Ministers for a final decision.

Accountability

The Decree requires that the bidding process be reviewed by auditors. Unfortunately

these auditors are the auditors of the government institution procuring the goods.

The possibility for a non-independent audit in this situation is significant.

An official who commits an act that is a "grave abuse of discretion" or

a violation of the law or regulations, will receive administrative sanctions, and

may be the subject of possible criminal or civil actions in court. The official will

be personally liable for any monetary damages suffered by the government as a result

of the officials actions.

Private parties who induce such unlawful behavior by government officials will be

disqualified from the procurement process, and be subject to other penalties under

the law.

David Doran is the resident Managing Director of Dirksen Flipse Doran &

Le's Phnom Penh office. DFDL is an international law firm with regional offices in

Vientiane, Phnom Penh, and Ho Chi Minh City. Mr. Doran has been writing regularly

on Cambodian legal issues since 1992.

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