How to call open tender to avoid corruption?

Koon Yew Yin 12 Dec 2020

Once upon a time, Malaysia was one of the richest countries in Asia, if not the richest country in Asia. At one time, we were the biggest producer of tin, rubber and palm oil. Moreover, we have timber and petroleum. Yet we are still not classified as a developed nation. Our GDP per capita was about the same as neighbour Singapore, Taiwan and South Korea in 1970. Currently Singapore, Taiwan and South Korea is 4 times, 3 times and 2.5 times ours respectively. All these 3 countries are classified as fully developed nations and they all do not even have timber to build their houses. 

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The biggest culprit is giving out large construction contracts, concessions for toll road, power plants, water supply, sewerage works, issuing licence, permit, selling state land etc without calling for open competitive tenders to select the best offers.    

Every country has a large budget for national procurement of essential goods, services and infrastructure development. 

Basically, there are 4 types of contracts, name lump sum contract, Schedule of rates contract, negotiated contracts and open competitive tender contract. 

1. Lump sum contact is for small construction work like construction of a guard house, repair lamp post which was damaged by motor vehicle or repair a sink hole on the road. 

2. Schedule of rates contract is for construction work which the final amount of work cannot be fixed. For example, replacing broken water pipes, drains, roof tiles, touch up damaged painting of Government buildings etc 

3. Negotiated contract is only meant for the supply of very special goods and services. For example, supply of the approved Covid 19 vaccines or to repair the high voltage sub-station. To avoid corruption, do not allow one single officer to negotiate and accept the contract. Always select a few honest officers to form a committee to carry out the negotiation. 

4. Bill of quantities contracts for large construction projects is the best way to avoid corruptions. 

The ADB and the World Bank give out low interest loans to help poor countries to improve their economy. They insist all the borrowers to follow their guidelines for calling open competitive tenders to avoid corruptions. 

A few years ago, Perak Academy invited me to talk on the subject. I am proud to mention that our Ipoh born Mr Lee Ming Tai who is a senior manager of ADB came to listen to my talk. He is now posted in Beijing.   

First employ a reputable engineering consultant firm with the necessary expertise to produce the design drawings, specifications and bill of quantities for the project.  

All the contractors must be prequalified before they are allowed to submit their tenders.  

All the tenders are open publicly to show all the tendered prices and award the contract to the contractor who submitted the lowest price.  

However, contractors are allowed to submit alternative designs provided they are cheaper than the original design. In this case, the consultant would have to examine the alternative design to make his recommendation. Unless the saving is quite substantial, the consultant would not recommend acceptance of the alternate offer. 

In addition to the 4 types of tenders as I illustrated above, to avoid corruption, all the sale of State land, concessions for toll road, water and electricity supply   must be open for competitive tender to get the best prices. 

I have to point out that there are many loopholes open for corruptions in granting the change of land use from agriculture land to building land, building density, re-zoning etc. The land value will increase many times if agriculture land is permitted to build houses. Land value will shoot through the roof if a row of single storey building is permitted to build a multi storey building such as a shopping mall, office block or condominium. 

I also like to point out that corruptions are often involved in granting concessions for toll road, water supply, electricity supply, import permits etc. 

Finally, if we want to reach the status of a highly developed nation, we must immediately implement the standards of economic good governance, accountability and transparency that come with it.  

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