The Suresh Nanda Saga

While it is heartening that the move toward e-tendering has begun, it is
important to ensure that non-transparent practices are not carried out in the
garb of going electronic.

A much hyped e-tendering/e-procurement project is that of DGS&D. As per their
own record, it has taken DGS&D four years to implement the project, for which a
contract was awarded in November 2003 to a private company, C1, which was
supposed to have gained experience in this area by developing an e-tendering
system for the Andhra Pradesh government. In terms of security, even the most
basic security requirement of digital signatures was not implemented.

Till date, DGS&D has implemented only a rate-contract system for
e-tendering, and the so-called ad-hoc contracts or acceptance of tender was
not implemented in DGS&D even till last February. Furthermore, without going
through an open and proper tendering process, DGS&D has started promoting its
service provider, C1, by making it sign MoUs in the name of DGS&D with various
state governments and important central and defense organizations.

Under the MoUs, C1 offers the so-called ad-hoc system that has not even been
implemented in DGS&D. In other words, apart from the objectionable and
non-transparent manner in which DGS&D is promoting C1, which belongs to the
Suresh Nanda Group, a system which has not even been tried in DGS&D is being
offered to other government organizations in the name of DGS&D. Nanda is already
facing a CBI probe for his alleged role in the purchase of armored recovery
vehicles (ARVs), as the CBI alleged he had approached former Samata Party
treasurer RK Jain to stop the contract going in favor of PSP Bohemia of Czech
Republic whose bid for 87 ARVs was the lowest at Rs 247.75 crore.

The DGS&D and C1 saga is just an indication of a few negative aspects of the
way e-tendering has been carried out in India over the last six years. This is a
serious matter and needs detailed inquiry by competent people who are in no way
connected with previous projects where questions have been raised.

Hype Vs Reality

While looking into these affairs, lets not get bogged down by the
statistics of how many crores worth of e-tendering has been carried out under a
particular project as a measure of its reliability and transparency. The focus
should be on credibility and transparency of the e-tendering initiative and not
on the total worth of e-tendering carried out.

One handicap of the regulatory and vigilance authorities has been lack of
proper awareness and knowledge in this highly potential area. It is high time
the regulatory and vigilance bodies of the Indian government plugged this
loophole, so as to prevent scandals; and even if there are scandals, they can be
dealt with in a timely and proper manner.

As Jitendra Kohli, an innovator and global pioneer in e-tendering, says,
Merely adding an e before the word tendering does not automatically make
the tendering process better or more transparent than the manual tendering
process. Without proper checks in place, e-tendering can be worse than manual
tendering. Properly addressed e-tendering can bring in the much sought after
transparency and efficiency in public procurement.

Understanding the System

There can be many pitfalls in the electronic-tendering system. While some
are reflective of similar lacunae in a poorly managed manual system, there are
others that are peculiar to this system. It is extremely important to understand
these lacunae and suitably address them, otherwise the electronic system can be
worse than the manual system in terms of transparency. However, if the issues
are properly addressed through appropriate technical and procedural remedies,
the electronic system will be far more beneficial and transparent than the
manual system.

In the e-tendering system, encryption of bids is done in lieu of sealing,
which is done in the manual system. Where encryption of bids is done at the
database level, the possibility of data theft is high. Since in this case
encryption is not in the hands of the bidder, possibility exists for
surreptitious decryption (and re-encryption of the bid) with connivance of the
application-administrators and the buyer. A copy of the bid can be made just
before encryption at the database level and its storage (software programs may
be designed or surreptitiously embedded for this purpose).

E-tendering systems where final encryption of a bid is done using public key
infrastructure (PKI) are also prone to confidentiality breaches and other
problems.

Since the concerned government authorities have not applied their minds to
such possibilities, many unscrupulous vendors are conducting e-tendering with
the above methodology. As a result, many hyped e-tendering systems in state
governments, DGS&D, NIC, Railways, etc have a high degree of vulnerability.

Also, e-tendering systems which do not have the public online tender
opening facility, but allow online bid submission, have immense scope for fraud
and corruption.

The display of the results to the bidder on an overhead projection screen
cannot in itself be construed public online tender opening, as data could be
manipulated behind the scene before it is put up for display.

Over dependence on electronic audit-trail to check misuse would be a mistake.
It is not practical to refer to an audit trail for every activity of every
tender. Notwithstanding this, an electronic audit trail is a report. It can
be tampered with. One must keep in mind that audit trails are useful only as
additional supportive evidence when it comes to bid security.

The problem is further compounded by the absence of a proper security
culture among end users. Also, in the absence of a security culture and
computer-savviness, bids of users are often encrypted (electronically sealed) by
the service provider.

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