Why We Need Open Tenders

Good morning. I am preparing to go to Parliament. Just a short note before I forget.

Yesterday at the PAC hearing, I asked a policy question to the MoF officials. While I cannot disclose the substantive content of the hearing (by right, in the new Malaysia, all Committee hearings should be aired live), I am able to disclose the policy point I raised in the meeting.

We were hearing an abandoned government project from a company that got the project via negotiated tender (i.e no open tender). So I asked the official to disclose what is the current PH policy on negotiated tender. There has been no substantive policy change, no new directives or guidelines.

I recall in August 2017 when I completed the advance draft of the PH Alternative Budget 2018, I had to brief all the PH senior leaders and get their feedback. In the meeting, I spoke about the issue of government tenders. During the 2 hour briefing, no one said a word.

After the meeting, Mukhriz Mahathir approached me and the following day we had a 3 hour meeting in his office. He wanted to share his insider views on how to make government tenders better and more competitive. We had a very productive meeting and together we refined the policy on tenders, improving on the quantum limit, pre-qualification and graduation system that I designed.

To put it simply, the PH government must quickly implement new procurement policies, especially on the issue of tenders. They must set a quantum limit whereby any project above a certain value must be done via open tender.

For instance, a simple policy is to say that all procurement supplies and services above RM1 million must go through an open tender. No negotiated tender except for projects below RM1 million (the cost of the tender exercise will consume a chunk of the profit margin). Any engineering projects above RM20 million must also go through higher financial, experience and engineering capability pre qualifications.

Bumiputera companies may be given a reasonable percentage of government contracts according to a project value scale, but they must compete against each other in an open tender format. There must also be a graduation process, for instance after successfully delivering the third government project, these Bumiputera companies must “graduate” to compete with others, including foreign companies in open tenders. This is to prevent the creation of a few dominant Bumiputera companies that will retard and block the rise of the next generation of Bumiputera entrepreneurs.

In other words, we have to change the procurement and tender policy from political and arbitrary entitlement (hence open to corruption and abuse of power) and move to one that focuses purely on providing initial opportunities, managed and limited by project value and time graduation.

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