Games People Play
Games people play
(Views expressed are personal)
I had read this joke some years ago : the son informs his father that he wants to choose organized crime as a career. Without batting an eyelid, the father asks, “Which sector are you planning to join –the private or the government sector?” The son says he is yet to make up his mind. At this point, the father offers some advice, " Join the government sector, son, they never go to prison.” The joke is a little dated. Going to prison is no longer confined to the private sector. On the contrary, if you are a really big kahuna, odds are that you are more like stay out than in. Truth be told, there are crooks in every country, every business, every profession and every sector. Equally, there are honest and upright people both in the government and in the private sector. It is just that if you keep loopholes, people will take chances.
Why do examiners of books who focus only on the paper trail fail to uncover frauds? Because the really important clues are not in the books. It is like the strange incident of the dog at night that did not bark as Holmes observed. Let me share two common games that people play to commit frauds. I have named the first game the Vicious Quadrilateral. In this game, there are two players at first sight. But the game is played by four players. On paper, a government department, say, a certain Ministry places order on a PSU on a nomination basis without tender. This seems perfectly above board. Two arms of the government are dealing with each other. Surely, one government organization will not bribe another. Now,take a closer look. Let us say Ministry A is placing orders on PSU B. PSU B in turn is procuring from MNC C . MNC C is using an intermediary called Dalal D who is usually based outside India with access to offshore accounts. MNC C sells to Ministry A through PSU B with the help of D at an inflated price on a single source basis. Dalal D pays off decision-makers in Ministry A. In this charade, the basic tenets of competitive bidding and procurement are being violated. This game results in stealing the tax-payers’ money through organized and collusive fraud.
Much of government and PSU corruption trace their origin to the nomination rule. The nomination rule should be abolished .There should be a level playing field for domestic and foreign companies regardless of whether they are government-owned or privately-held. Such direct competition would dis-intermediate the middle man,unleash competition and discover the true price of a product or service through competitive bidding. In some of the holy cow establishments like the Ministry of Defence, it is high time that we unleashed competition and opened it to our best companies in the private sector. Placing an order on a PSU on a nomination basis does not guarantee the best outcome. Keeping the contracts “hush” “hush” does not enhance our national security, it damages us. In corrupt deals we may land up with guns that do not fire and yet we pay an arm and a leg for them.
The second commonly used ploy to vitiate fair principles of procurement is what I call Match Fixing. Suppose the government department or a PSU wants to procure aircrafts. Assume for the sake of simplicity there are only two large suppliers on the planet--- A and B. Both these companies are expected to bid. Let us say A fixes the decision-makers prior to the bid. It is announced that the basis of selection will be QCBS(Quality and Cost Based Selection). The technical score would be 80 and price score will be 20. Upto now the rules appear fair.The match-fixers now engage a technical committee consisting of loyalists and one or two academicians in aeronautical engineering. They tilt the score so much in favor of A that even though B may quote a much lower price, it will not win the contract.
I have actually seen rather reckless and daring examples of Match Fixing. In one case, the terms of procurement were QCBS with 80 for quality and 20 for price. Vendor A was awarded 79 out of 80 and Vendor B ,who was also a reputed supplier, was awarded 40 out of 80. Vendor A quoted Rs 600 crores and Vendor B quoted Rs 300 crores. According to the rules of QCBS, Vendor A will get a combined score of 89(79 for “quality” and 10 for “cost”) and Vendor B will get a combined score of 60 (40 for “quality” and full marks 20 for cost) and hopelessly lose the contract. In the instant case it does not matter how high Vendor A quotes or how low Vendor B bids. Even if Vendor B supplies or offers to deliver for free he will lose. The Technical Scores have been so severely manipulated in favor of Vendor A, Vendor B does not even have a snowball’s chance in hell. The best way to defeat this mode of fraud is to ensure that the process of technical scoring is fair and transparent. But if the umpires have been fixed, a second best alternative is to qualify three short-listed candidates who pass the technical evaluation and then expose them to open bidding.
The ingenuity applied by the corrupt has produced a plethora of fraudulent practices-recording all of them will fill an entire book. The pity is that the small fish are punished and the big ones escape. The American comedian captured this home truth, "Yes! Finally captured Martha Stewart. You know, with all the massive and almost unpunished fraud perpetrated on the American public by such companies as Enron, Global Crossing, Tyco and Adelphia we finally got the ringleader. Maybe now we can lower the nation's terror alert to periwinkle".