Fixing Public Procurement in Lebanon

By Hani M Bathish

 

Public procurement is at the root of all waste and corruption, those who hold the authority to make the decisions of how, from whom, for how much and what goods and services to buy with public funds, are often responsible for the worst decisions that end up wasting billions of dollars in public money. When in the rare instances these people do their jobs right, no one knows about it. 

 

In Lebanon, during the brief tenure of former prime minister Hassan Diab, the Lebanese Parliament passed Public Procurement Law 244/2021 which was published in the official gazette in July 2021. International agencies and donors noted that the law was a major achievement along the long road towards reforming the Lebanese state. It was a thoroughly well-crafted piece of legislation that took one and half years to complete and is arguably among the best laws of public procurement in the world, including those found in many developed western countries. But few in Lebanon made much of a fuss about it at the time, as they were too busy with other catastrophes and the whole rotten edifice falling about their ears.

This week, on April 18, Parliament met, some say illegally, to legislate, keeping in mind that strictly speaking Parliament remains an electoral rather than a legislative body pending the election of a new president. But, regardless, MPs of a certain political track met in a plenary session to extend the terms in office of local and municipal councils in view of the difficulty in finding the money to pay for holding fresh municipal elections. Parliament also passed several amendments to Law 244/2021 in the same session. Sneaky, no?

 

Among the controversial amendments is lifting the requirement for the army and security forces to plan and publish their procurement needs, as well as lifting the requirement that thorough background checks must be done on all individuals suggested for membership in tender and delivery committees as submitted by public departments, ministries and municipalities. Before this amendment, all names considered for membership in these committees had to be referred to the Central Inspection Authority, the State Audit Authority and the Higher Disciplinary Committee to make sure none have any criminal convictions for bribery or financial malfeasance. The amended law says only that the Public Procurement Authority sets the standard for committee members to be selected and confirmed. That sounds like some may want to stuff these committees with reliable cronies to me.

 

So I asked former MP Yassin Jaber, who worked tirelessly on this law in parliamentary committee, for his thoughts on these amendments. He said that the issue wasn’t just with tendering public projects, it’s also with taking delivery of such projects when completed, making sure the state got what it paid for regarding the quality and quantity of material and the finished product. It may not have been the intention of legislators, he hinted, but the above amendment and others cast doubt as to seriousness of politicians to want to change the old ways of doing business. “You can lead a horse to water, but you can’t make him drink,” Jaber said.

 

Jaber also noted the way the amendments were “rushed” through parliament without giving MPs any time to discuss them in committee first. This, he said, goes against the spirit of the law itself, which was designed to increase transparency in the public tendering process and open the process up to international companies. In the old system, companies wishing to apply for public tenders were subject to “Tasneef” or ranking by the Ministry of Public Works and the Council for Development and Reconstruction. As a result of this closed system, only a proverbial handful of so called “ranked companies” could apply for public tenders. “We did away with that in the new law,” Jaber said.

 

And yet, through the back door, another amendment appears. An amendment to Article 7 of the law, introduces prerequisites for non-Lebanese companies wishing to take part in a public tenders. Such companies must first obtain a certificate of eligibility issued by the Ministry of Economy and Trade. Of course, this is required for a good reason (there always is). It is to make sure that the company is not in violation of the 1955 Israel Boycott Law. As to how decisions are reached regarding issuing or refusing to issue such certification and the mechanisms of publishing decisions or avenues of appeal, the amendment is silent. For many casual observers, this appears like a thinly veiled attempt to reintroduce “Tasneef” albeit in a different way.

 

The old tendering system created a bottleneck designed it seems to frustrate genuine applicants, and designed to serve the interests of a handful of preferiti, or favored companies. As a result, tenders often have to be redone because only one applicant submitted documents. In many instances contracts are awarded consensually. Jaber hinted that among the results of such a closed system is the appointment of a single supplier for years, as with Sonatrach, the sole fuel supplier to the state power utility for 15 years, until the fuel supplied was found to be not up to standard and the contract was ended.

 

Jaber said the public procurement law is one of three vital pieces of reform legislation that can build a better future by changing the way in which the state operates. The other two are a law ensuring the independence of the judiciary and a law governing the electricity sector in the country, a sector that has long been one of the major sources of waste.

 

And yet, despite law 244/2021 being an exceptional piece of legislation, it is hobbled by the fact that the Public Procurement Authority (PPA) is understaffed and operates a wholly inadequate online platform, not fit for purpose according to a report issued recently by the Bassil Fuleihan Institute at the Ministry of Finance.

 

The report said that a multi-donor fund administered by the World Bank had collected $570,000 in grant money to help the PPA launch an effective online platform. But it said that the government refused to accept the grant money, saying that it was up to the PPA alone to decide how to spend the money collected.

 

In addition, the law stipulates the establishment of an Objections Committee, the purpose of which is to receive complaints and grievances from participants in any public tendering process, instead of leaving the aggrieved party the sole recourse of going to court to resolve the issue. To date such a committee has not been established as the law requires.

 

One of the main reasons for an effective online platform is so that all parties concerned may learn of tenders the minute they are published. Jaber said that in the past, to restrict access to tenders they would be published in obscure newspapers at the bottom of the last page. With the new law, this is no longer the case. And similarly the results of each tender, to whom a project has been awarded, has to be published on the platform. 

 

So, despite apparent attempts to chip away at this exceptional law, perhaps the old ways are far behind us… one hopes at least.