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Tuesday, May 21, 2024

The most loss incurring factor of Pakistani government organizations like PIA

Pakistani government institutions are ineffiecient in critical decision making, and this may be the prime reason that they are unable to make profits persistently

While I was Manager Hotel Contracts from 2012 to 2014 for PIA having had to manage 1700 Million Rupees worth of international contracts every year, I started to hold competition under Public Procurement Rules which were opposed by many airline executives especially line pilots on executive posts.

However, I kept firm and as I went deep into those rules, I started worrying for rules that made me more and more answerable instead of transparent and cost beneficial to the company.

PIA loses millions over indecision 

For example, a hotel won the tender without knowing, I contacted the hotel and asked them to further reduce their rates for getting the contract but ironically I was given a shut-up call by a procuring senior on the pretext that negotiations were not allowed under PPRA rules and in case of any deviation from rules a call by NAB was expected hence PIA lost another Rs. 12 million in annual cost in that particular case.

Read more: PIA incurs loss of Rs280 million after EU suspended flight operations

The dilemma is also proven by another case when an advertisement for procuring Boeing 737 aircraft was challenged on the plea that no brand can be mentioned under the rules and only the ‘capacity’ of the aircraft was allowed to be mentioned in the advertisement. Since PIA then had 70% of its technical support, HR skills, spare parts availability, etc Boeing specific, so getting other brands means new parts, new HR skills, new technical support leading to more cost.

These rules play the same role at ministries where Secretaries and other bureaucrats hardly use their professional judgment or discretion and are scared to sign procurement files for the fear of imminent audit objections later on.

Those responsible for procurement and contract implementation tend to be safe rather than sorry and a phenomenon has developed of enforcing procurement rules rather than using good judgment for a better outcome. So I preferred to resign from PIA rather than falling ill under constant stress.

Delay in critical decisions results in losses and less production

A countrywide picture shows that this lead to a dilemma engulfing 200 public sector companies with shorter supplies, lesser production, and more losses.

A couple of current examples are Nandipur Power Plant, Peshawar BRT, New Islamabad Airport, etc, which may have other reasons, but a delay in taking critical decisions has been the common factor among all of them, and the hesitant role of procuring officers prompted the already fewer vendors to become more powerful than the procuring company enabling the vendors to cling to the company for decades.

This hesitancy of procuring personnel is caused by “Fear of Discretion” a term originally coined by Steven Kelman in the 1990s.

Read more: The rise and fall of PIA; Has Imran Khan taken the right step?

In developed countries, Discretion is adopted because of supporting systems and culture of integrity while in under-developed countries “Fear of Discretion” by Procuring Officers prevails due to weak legal system and integrity issues while cultural and professional norms play the part. Moreover, the auditors also take a punitive approach to correct errant practices and officials, rather than a supportive approach to assist the organization for efficient sourcing.

A study by the World Bank reveals that “the compliance with procuring rules is becoming an objective in itself with fewer regards to needs”.

Therefore, what is the point in using judgment and inviting trouble in the future? Hence an enabling environment that does not penalize “Healthy Use of Discretion” is equally important, besides building a Cadre of Procurement Professionals and develop a Culture on Use of Discretion. Abolishing the provisions of “Personal Liability” in Public Procurement is required to be incorporated and the company is held responsible as the officer acts on part of the corporation.

Read more: 150 pilots at PIA have dubious licenses: Aviation Minister

Developing procuring officer’s capacity to take a more deliberate approach, and not convenience, under his fair conviction, and more importantly, his ability to say “No”, backed with data, if the decision is being enforced by some seniors under non-economic considerations only to regret later.

Mushtaq Jumma