Flawed procurement
There is nothing surprising about the uncovering of strong evidence of conspiracy among bidders and collusion between bidders and officials in the tendering of works for World Bank and Asian Development Bank-funded projects in Sulawesi and North Sumatra worth more than US$103 million.
The discovery of the rigged bidding process that was disclosed last week serves only to confirm the long-established perception of the Indonesian government as among the most corrupt in Asia. In fact, its utterly poor financial management and flawed procurement system, which is subject to systemic abuse and systematic irregularities, are two of the major factors that have built up such a notorious perception.
The Supreme Audit Agency's (BPK) audit of state budget implementation for the first semester of this fiscal year that coincidentally was unveiled last week also found hundreds of instances of irregularities involving Rp 6.4 trillion ($710 million) in spending. Last year, its auditors found irregularities involving Rp 36.5 trillion.
The striking difference in approach is that while the government chooses to simply ignore the findings and recommendations of BPK as it has done with most of the agency's previous audit reports, the World Bank and ADB acted immediately and firmly on the preliminary results of the fiduciary reviews made by their internal audit departments.
Just witness how the two multilateral aid agencies have been intolerant of irregularities or violations of budgetary and procurement procedures. Both abruptly stopped further disbursements of their loans to the projects on the two islands, until thorough investigations are completed, necessary corrections are made and those responsible for the suspected malfeasance are dealt with firmly to prevent recurrence of such wrongdoings.
However, BPK chairman Satrio B. Joedono has long been frustrated by the government's seeming limitless tolerance of breaches of procurement procedures and prudent financial management.
Over the past two decades, BPK has again and again discovered the same sorts of irregularities in the public financial management and public procurements, but the government has simply discarded the agency's findings and recommendations, while the agency is not vested with the authority to enforce the law.
A bill designed to correct this legal flaw has been stuck at the House of Representatives for almost two years, again indicating the government's lack of political resolve to develop good governance.
Had not the projects in Sulawesi and North Sumatra been funded by the two multilateral aid agencies or had the projects been inspected only the government, the kind of evidence of collusion that was uncovered by the World Bank and ADB internal audit units would have simply been cast aside as petty negligence that did not deserve further investigation.
Yet the findings of the World Bank-ADB review teams are mind- boggling because the subterfuges deployed by the bidders in their conspiracy were not so sophisticated as to escape the scrutiny of project management officials. Their tactics were instead so crude that they had been made effective only in collusion with officials.
Take for example the evidence of different bidding firms being owned by the same party and bidding for the same work contract or the similarities of bid proposals between the winning and losing bidders. In several cases, dozens of contractors bidding against each other on the same job shared the same address and same telephone numbers.
The review teams also found many cases whereby bid documents were missing, completion certificates were issued for incomplete works and contractors were allowed to change various items during work contract implementation. This simply indicated overarching collusions involving winning bidders, project management officials and supervisory consultants assigned to oversee the project implementation.
There were also many cases where contracts were not supported with proper documents, fund disbursements had been made based on claims written on plain pieces of paper without letterhead and heavy equipment was procured without proper invoices.
All these sorts of blatant collusive and questionable practices could only have occurred because the government procurement system is so disorganized and corrupt. Such large, multi-sector projects such as the urban and rural development works in Sulawesi and North Sumatra, let alone those using foreign loans, are subject to multilevel oversights spanning from the directorate general of urban and rural development in Jakarta and the project managers down to project management units in provincial and district towns and project implementation units for each project component.
The allegedly collusive procurements for the projects in Sulawesi and North Sumatra once again make it more imperative than ever for the government to review all its regulations on public procurement in light of developing an effective national public procurement system. After all, an effective procurement system and accountable financial management are key components of the anticorruption campaign to build good governance.