Take project management away from govt agencies

Robert J. Cochrane, Former Strategic, Development Consultant, Asia Development Bank

As corruption shows no sign of abating under decentralization it is a gloomy picture indeed despite the best intentions of President Megawati Soekarnoputri's government. The World Bank, the Asia Development Bank, the International Monetary Fund and other agencies are stopping projects, and private democratic country based investors would rather deal with China, a communist country!

Then there is the recent situation with the Rp 144 trillion "problem" with Bank Indonesia, the momentary glimmer of hope with respect to the use of a foreign audit firm, and the subsequent dashing of that hope. Ministers have a very hard task to break the cycle of corruption, but drastic situations call for drastic solutions. As an old auditor, and still a current certified practicing accountant, who has worked as a consultant in aid in Indonesia, I offer the following suggestions:

* Take procurement and project management away from the ministries and into the private sector, and have the ministries involved only as project designers, and customers of a procuring/project management private firm.

It is at the procurement stage of projects that corruption starts, and it is completed in implementation by the same procuring "group" authorizing payment. At present, what we have in old auditing terms is a simple lack of control through poor separation of functions.

In effect in a directorate general one person can be the "Czar" in relation to aid project design / specification, procurement, implementation/ project management, and payment authorization. It is then easy to see why a ministry should be seen as one individual for control purposes.

Because very lowly paid ministry employees owe their "extra money" to the "Czar's" success, this "one person effect" in a directorate is real. It effectively comprises a set of many people in collusion.

Private firms should be appointed to carry out the procurement of services or goods, and then supervise the implementation by contractors. These firms must have credentials that are recognized by the international community as impeccable -- e.g. Price Waterhouse Coopers, KPMG, Ernst & Young. Contracts for "procurement and project management" should be for one year only. Each firm must be audited by a peer firm (e.g. PWC's by KPMG etc.).

* Scoring of procurements for the technical winner through panels selected by the private firm should not have any current members of the customer (ministry) on the voting panel. Panel members should be changed periodically within a process without notice.

This scoring, as at present can be easily twisted to suit a colluding contracting party, but if you continually change the panel members, and the organizers and controllers of the panel are non public servants who are paid a living wage (i.e. people like KPMG), then you have a much better chance of clean procurement than at present.

* In the modern corporate audit world it is taboo to have one individual control all the processes -- separate people handle all four of the above stages of a project.

By splitting the procurement, and project management / implementation away from ministries it dramatically improves control. It also gives the government someone to sue if things go wrong!

This control change will allow the ministries to be the visionaries and project owners, and to reduce staffing levels -- they can then pay their remaining staff better salaries, and the public can perhaps begin to expect these better paid public servants to serve them rather than serve themselves.

Corruption could be significantly reduced because the firms will employ well-paid people to be the project facilitators, and procure in a true and fair way.

Most importantly however this change would be seen as a great step forward by the aid providers and by investors -- and be a good first step in gaining some significant good publicity for the government.