Competition Commission of Pakistan issues opinion to address competition concerns in public procurement of electric power equipment

Islamabad, April 16, 2015 (PPI-OT): The Competition Commission of Pakistan (CCP) has issued an Opinion under Section 29 of the Competition Act, 2010 containing its recommendations in the matter of procurement of electrical equipment by the public sector procuring agencies to address recurring anti-competitive concerns regarding certain restrictive, exclusionary and discriminatory terms and conditions in tenders. The conditions, prima facie, denied a level playing field to the prospective bidders thus inhibiting competition from reaching its maximum potential. The Opinion follows an open hearing held on the matter on 17 February 2015.

The recommendations have been formulated to serve as a guideline for the procurement agencies while designing the tender documents to ensure that no clauses therein restrict or impede competition. CCP has sent the Opinion to all the stakeholders including the Ministry of Water and Power, WAPDA, NTDC, DISCOS, Ministry of Finance, Public Procurement Regulatory Authority, business undertakings, and international financial institutions for information and necessary action.

Following are the recommendations of CCP:

With regard to the issue of type-test reports, only generic and internationally known quality control checks should be applied at the bidding stage to allow for maximum participation of bidders. In relation to lumping of goods, arrangement of equipment in lots should be avoided. There should be no discrimination based on country of origin. Reference to a specific brand should be avoided; products should be defined through quality and performance standards.

There should be no lag between the announcement of a tender and availability of tender documents as lack of information only favours the existing suppliers.

Domestic price preference should be avoided as it rewards inefficiency.

Any changes that are brought about in the existing specifications for procurement of equipment must be carried out by technical experts and in a transparent fashion.

Fresh entry should be encouraged through educational order in the yearly procurements for new entrants. In addition, policy level changes may be approached to devise substitutes for prohibitively long educational orders.

It would be pertinent to mention that public procurement in Pakistan is valued at around 25-30% of the GDP. With such a large volume of public procurement, it is extremely crucial to protect against anti-competitive behaviour in the sector. Competition in the government\public procurement sector is essential to ensure that public money is used in an efficient and effective manner.

It goes without saying that the electric power sector is a very important economic sector, providing the essential input to almost all industrial and commercial activity. Competition and efficiency in the procurement activities in this sector will directly benefit the overall business climate and activities in the country, and contribute towards considerable savings to the public exchequer.

CCP has warned that if such measures are ignored and not carried out in earnest, they could lead to sub-optimal utilization of public funds, discourage growth of local industry, hamper foreign investment and consequently lead to an undesirable impact on national economy and public welfare. The procuring agencies, by means of this opinion, have thus been advised to devise an immediate action plan to address the concerns raised, failing which CCP would be moved to take action against such in accordance with law.

This action is the latest in a series of enforcement and advocacy efforts by CCP since the Federal Government appointed the Chairperson and a new Member in December 2014. It must be noted that since these appointments, CCP has conducted 13 hearings, issued 8 orders, given clearance to 16 mergers, granted 24 exemptions, and initiated 15 new investigations.

For more information, contact:
Asfandyar Khattak
Director (Media and Communications)
Competition Commission of Pakistan (CCP)
7th Floor South, ISE Towers,
55-B, Jinnah Avenue, Islamabad, Pakistan
Tel: +92-51-9100260-3, +92-51-9100256
Fax: +92-51-9100251

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